RANA FOROOHAR AND MARK BLYTH - How Deep Will the Depression Get?

Rana Foroohar, Financial Times columnist and author (Don’t Be Evil: How Big Tech Betrayed Its Founding Principles), and Mark Blyth, political economist and author (Angrynomics), join Paul Jay for a wide-ranging conversation about the deepening depression, inequality, and China. On theAnalysis.news podcast.



Paul Jay
Hi, I’m Paul Jay and welcome to theAnalysis.news podcast. Don’t forget; we need you to
click the donate button if you haven’t already because, without your support, we can’t do this.

So after the shit show debate and the ongoing warnings of a second or even third wave of
the pandemic, I’m left with some questions.

First of all, does the shit show debate reflect an even more profound problem with the U. S.
economy and political structures? Two, the financial and tech elites, how are they
responding to the campaign, the debate? Have they bailed on the maniac or just doubling
down on the Senate? How deep and how long will the recession, depression go? It looks like
there could be more lockdowns. Four, if there is another full lockdown, which many scientists
are saying will be necessary to contain the second, third wave, what, if any, are the limits of
how much money the Fed can pump into the economy? What are the economic limits? What
are the political limits? Six, how serious is the split over the new Fed money? Does Wall
Street want a big new stimulus package? Are there really serious concerns about the U.S.
dollar? And finally, seven, if we have time to get to it, is Wall Street getting the danger of the
climate crisis? Will they do anything about it? Will they accept the government intervening in
a serious way with regulations and massive investments in green infrastructure, including
phasing out fossil fuel, not just relying on carbon capture, which is mostly what the Biden
plan is about.

Now, joining me to break this down, our two guests that are not only brilliant analysts of all
this, but they also have unique access to the minds of the lords of Wall Street.

First of all, Rana Foroohar, who is a business columnist and an associate editor at the
Financial Times. She’s also CNN’s global economic analyst. And her books include ‘Makers
and Takers: The Rise of Finance in the Fall of American Business’ and ‘Don’t Be Evil: How
Big Tech Betrayed Its Founding Principles,’ and returning Mark Blyth is a political economist
at Brown University. He researches the causes of stability and change in the economy. And
as he told me, why people continue to believe stupid economic ideas despite buckets of
evidence to the contrary.

So first, Rana, let me ask you. So first of all, your reaction to the debate and the bigger
question, what does this tell us about the disarray in American politics, and why is there? Is
there something going on in the U.S. economy and basic political structures that kind of give
rise to this craziness?

Rana Faroohar
Well, thank you, Paul, for having me, and first, let me tune my earpiece so I can hear the
Lords of Finance speaking to me. I was stunned by the debate. I mean, on one level, at the

most surface level, the debate was just kind of this toxic mud-slinging wrestling match.
You’ve likened it to Trump’s debating style in general to pro wrestling. I think that’s true. But I
guess I would take a step back and say, all right, how did we get to a place where, frankly,
anybody watching would be as embarrassed as I was to be an American, although thankfully
I have dual passports, he’s a symptom.

I mean, we cannot forget that. He’s certainly done a lot of horrible things that I’m sure will
dive into. But he’s a symptom of what I consider to be a problem in the political economy in
the U.S. that’s been going on in its current form, really for 40 years. I would peg that as the
neoliberal shift, the Reagan Thatcher revolution, the sort of movement to privatization of
everything, but more particularly to the embracing of a kind of globalization and economic
paradigm that holds the capital so that labor and goods can all move freely and equally
across the world. Well, capital can do that. Money can do that. Big companies can do that.
People and goods can’t do that so easily. And that’s one of the reasons why we got many of
the things that helped to bring Donald Trump to office: the hollowing out of the Rust Belt, the
embrace of a set of neoliberal economic principles by both sides of the aisle. There was not
a lot of air, as I wrote in my first book, between certain policies around trade and financial
regulation within the Clinton administration, as there was during the Reagan period.

There’s a kind of a sense that both sides of the aisle had sold out the American working
class; that’s leading up to 2016. You have this con man in the form of Trump coming in, and
he really does it to my mind; he’s the perfect Melville con man character because he takes
this sort of felt experience that people do have of hypocrisy on both sides of the political
aisle. Then it just wraps it in this sort of welter of lies and somehow presents himself as an

Well, four years on, we see just how much of an entitled insider he is, and I think that the gig
is up. I think The New York Times tax revelations put him under a lot of pressure. I think
what you saw in that debate was a man cracking, and I’ll stop there and let Mark take over.
There’s a lot more to say.

Paul Jay
Go ahead, Mark.

Mark Blyth
I’m not sure I have anything to add to that. I pretty much agree with all of that. What would I
add to this? So, first of all, let me fess up. I never watch the debates.

Rana Faroohar
Lucky you.

Mark Blyth
Something Nassim Taleb taught me years and years and years ago was if anything truly
important happens, don’t watch the T.V. or read the newspapers. Three people will tell you

all about it in excruciating detail the minute you wake up. That’s exactly what happened. So
once I learned this, I said I’m not watching this anymore.

But nonetheless, let me put a little gloss on what Rana has said there. There was a RAND
report. Now RAND isn’t exactly bleeding heart liberals, as we know. They did a report about
ten days ago that said, if you kept all the taxes, the birthplace of 1980 and all the regulations
and all those bad things we’ve gotten done away with, there wouldn’t have been a huge
siphoning to the top. Now we know this, but they put a dollar figure on it. The dollar figure
was 50 trillion dollars of wealth that were being generated and handed effectively to maybe
the top 3 percent of the country. That is the biggest transfer of wealth in history. That’s what
has gone on.

Now behind there’s something else alive, and this is something that Rana gets into in her
book on tech, is that if you look across industries, profits are becoming more concentrated,
particularly in certain sectors. And the rest of the economy, in a sense, lives off the crumbs
of the contracts of these giant firms, which is why in part, we have so few good jobs being
developed, so many people working multiple jobs, the explosion of part-time contract
platform labor, etc.

Now, why do I mention all of this is as a gloss? Because ultimately, the real puzzle of the
debates is why he still has 40 percent. And he has 40 percent because, unfortunately, the
future is not going to be kind to the left behind. He identified that constituency in 2015 and
said, I am your voice. He then seamlessly went down to the border towns, called everyone a
rapist and a murderer, and assembled another coalition and bolted that together. But for the
people, who we have ourselves said, you definitely got sold out by neoliberalism. Yes, you
definitely got screwed by your corporate elites, etc. It’s not as if it’s going to get any better,
whether it’s through the green transition if it ever happens, whether it’s through the fact that
manufacturing jobs are disappearing everywhere. They’re not coming back.

So in a sense, what he’s doing is he’s doubling down on the only base he’s got, and they’re
doubling down on him. And that is all about mobilization and anger and generating the anger
and keeping it going. And if necessary, and this is the important part, chucking the system
over a bridge in order to safeguard that result.

Paul Jay
Rana, go ahead.

Rana Faroohar
Well, it’s interesting. I agree with much of what Mark said. I guess I feel just almost for the
sake of argument; I’m going to be a little more optimistic and say that I have been actually
impressed with the way in which Biden, not that he was able to get any of this across in the
debate, but I know talking to policymakers, the way he’s been able to bring a pretty wide
variety of people under the tent in such a way that I do feel economically that folks within the

Democratic Party on very different sides of issues are starting to talk to each other in ways
that they weren’t before.

So you still have that kind of Summers Rubin center of the party in these conversations. But
you also have Jared Bernstein, and you have Heather Bouchet. You have a lot of people
that are certainly farther to the left and have different ideas. I’ve also been impressed with
how Biden has started, and this is very nascent still, I think it’s important he started to kind of
connect some of the parts of the party that are more concerned traditionally with identity and
some that are more concerned about class and labor. This has been a big dividing point for
Democrats. You’ve had a new and exciting generation of, say, millennial socialist politicians
like the AOCs of the World, that they’re kind of interested in the economy. They know
something bad’s going down, but really, identity is their thing. They’re communicating with
their own social media followings along those lines. There’s a lot about race and gender. To
me, that’s always been a sideshow and a distraction for the Democratic Party. Not that there
aren’t issues of race to be talked about, but the real action is in class. But of course, that’s
harder traditionally for the Democratic Party to get at because they have the same big
corporate donors, not always the same, but many of the same big corporate donors as the
Right, and you have the legacy of the Clintonian wing of the party that really didn’t want to go

Now you see Biden taking something like the idea of a Green New Deal, which came out of
AOCs part of the campaign. But instead of just going off and doing it alone as she did or with
the environmental wing of the party, he’s bringing labor under the tent. He’s talking to the
AFL-CIO and saying, all right, how could we potentially get coal miners involved in retrofitting
solar panels? Now, I know this stuff all sounds very spiffy and snazzy, and it’s hard to do. I
don’t want to underplay that, but I think just the way in which I start to see these aspects of
the party coming together is a little bit of a cause for optimism for me.

Paul Jay
Well, just to throw in a little less cause for optimism, and in some ways, maybe in other
ways, it is. But it seems to me this is more a tactical alliance to defeat Trump and that there
are really far greater and more profound differences in the different sections of the party, that
everyone is just deciding to be more or less quiet about for now.

Like even if you take Biden’s climate plan. I went through it with Robert Pollin the Economist,
and it’s really something when you really dig into what he’s proposing, it’s all based on
carbon capture, not reducing the use of fossil fuel except very modestly in terms of auto
carbon emissions, which is not nothing, but it’s not going to get us where we need to get to.
The reliance on a very unproven science of carbon capture and very little to almost no talk of
phasing out fossil fuel. There’s talk of phasing out fossil fuel subsidies, but not phasing out
fossil fuel.

So it seems to me that there’s certainly a possibility for a real debate, assuming Biden wins
with these different sections of the party. But I think the differences are pretty profound when
it comes down to what the actual policy is going to be about. Mark, what do you make?
Mark Blyth
So let me put up sort of a middle course between these two points. My question to Rana
would be this. I agree with what you just said, but the key thing to me is, are they talking
outside of the party, and are people listening?

So I’ll give you a piece of annex data. I got a couple of friends who are tradesmen, and I
would identify them by telling you which trade. But I say to them, how many of your buddies
you know want to vote Democrat? And he looked at me, and we both start laughing. And I
said why? Why is that? He says, you know what Democrats mean to me? This is a direct
quote, Black lives, Trans rights, and the environment.

Rana Faroohar

Mark Blyth
They don’t give a shit about people like me. That is how this is perceived. Now, this goes to
the heart of this sort of decarbonization very, very narrow road that Biden is trying to
negotiate. The Democrats, in general, are trying to negotiate.

We have to take a fundamental reality here that there are at least 13 states in the union:
starting with Alaska going south down through New Mexico and up in Louisiana, going up to
West Virginia, where the transportation, refinement, and otherwise processing of carbon is
what they do. In order to actually execute any type of decarbonization strategy, you’re going
to have to bribe the living hell out of every one of those states.

Paul Jay
Which is what they should do.

Mark Blyth
Funny way of doing it. Instead of what we do, internal politics and the party determined that
we talk about the just transition, and we mustn’t reward these carbon polluters. Well, you
have to deal with the fact that if you don’t actually get some of them on board, you’re never
going to win another election.

Rana Faroohar
I’m so glad that you made that point, Mark, because I hear that, too. I had an interesting trip
about a year and a half ago around the Carolinas looking at supply chains and textiles there.
I met a number of small and midsize sort of private business owners, a number of workers, a
lot of white workers in the agricultural industry there. You know, honorable people couldn’t
stand Trump as a person, particularly those that identify with military or veterans at all but
voted for him. Why? Because they understand the hypocrisy of what the Democratic sell has
been since the 90s, which is basically OK, China, if you let us give you banking services, we

will send you all of our manufacturing jobs and outsource our innovation ecosystem to you.
It’s amazing how clear how someone working in a cotton gin is on that point.

I do think that Democrats still have a long way to go at getting ‘woke’ to those issues as
‘woke’ as they are too some other issues. But I also think that there are two things that are
going to work, again, not immediately, but over the long haul in making that transition; one is
that COVID-19 has basically just put on steroids all of the problems of neoliberalism because
we talked about this myth that capital goods and people can all travel equally across
borders. Well, we know capital can jump. Well, in the digital economy, data is the new oil. It’s
the resource that everything is driven by. It can go across borders even more easily than
capital. We are in the middle of time warping a transition into the digital economy that we
kind of knew was going to take about 15, 20 years. We’re now going to wake up in 2 to 5
years, all that disruption that we’ve all been talking about in previous podcasts and saying,
well, in about ten years, X, Y, and Z will happen. That’s going to happen. And here’s what it’s
going to look like.

Sure, there’s a bunch of new businesses that are going to be formed out of this. They’re
going to need fewer people, and they’re going to invest less. That means we’re going to get
a jobless recovery, and I put recovery in quotation marks, of a sort that is going to be entirely
new. The basic math is the U.S. is a 70 percent consumer spending economy. We have had
a problem with middle-class income stagnation for 20 years. We’ve had a problem with
working-class income stagnation for over 40 years. That’s going to be put on steroids. I think
that that is going to create the kind of alliances that, interestingly, you already see forming in
the Black Lives Matter movement.

One of the reasons I’ll tell you that my white upper-middle-class daughter is out there
marching in those protests is not just because she’s concerned about racial justice, which
she is, but she’s concerned about her own economic future. And this is a privileged child.
But she’s looking out and saying, oh, my God, what kind of college debt am I going to have?
What’s the labor market going to look like? What are humans going to be able to do as
opposed to robots? And I think that all that just got sped up in a way that is going to push
some of these transitions.

Paul Jay

Mark Blyth
I agree, and I’ll push it even further. The digital transition is absolutely underway, and we
see this in the geopolitics of the moment. We spoke about it a couple of years ago at tech
conferences. We called it the splinter web. You either have a payments platform, or you
don’t. You either have a way of protecting your data, or you don’t. What we see now is
particularly the E.U.’s response. They finally woke up to the fact that they don’t have any
digital platforms at scale; they’re massively behind. They’re selling 20th-century products like
diesel engines. The world no longer wants them. And what are they doing? They’re doing
data protection. It’s a protectionist move. We are basically about to sue our big corporates.

Why? Because we’re disciplining them. China has already created the Great Firewall in the
East and has corralled their companies. So the world splits up into these smaller areas, and
it’s much easier for the right rather than the left to weaponize this as a kind of nationalist and
geopolitical struggle of which this is a part. There’s a very 19th-century rendition of this
whereby the container of hopes for civil protection always lies with the nation-state. And the
weakness that neoliberalism has always had is assumed a subject and a set of interests that
moves beyond the nation-state and has never really happened and is now, in a way,
happening in such a way that it is creating both those alliances that you’re talking about. But
it’s also creating a kind of very dangerous nationalist revisionism at the same time.

Paul Jay
In the 1930s, in the midst of deep depression and the sort of the unraveling of capitalism as
it was in 1920, 1930, and all the things that went into the crash, there were kind of two
possible ways that elites would respond. And much of the European elite and much of the
American elite wanted some form of authoritarianism, fascism, and to suppress the
resistance and rebellion amongst the workers and other parts of the population that were
dispossessed by the crisis. Or you had an alternative, which was mostly in the U.S., FDR,
New Deal, and such.

Biden claims he wants to be the most progressive administration since FDR. I don’t see that
in what he’s really proposing as a policy. But that said, where are the American elites on
this? The financial, the tech elites? These are really smart people. Frankly, they’re a lot
smarter, I think, than their counterparts in the 1930s’. They’re very informed. The leading
ones got there because they were the best, at more or less what they do, even if what they
do is not so good. But they’re smart.

Do they get that this is not the same kind? This isn’t just about a business cycle; this is about
several existential problems: climate, from the tech side, like a jobless recovery. This is big-
time when we’re talking out 10, 20, 30 years where A.I. and robots may go; this pandemic is
far from over, and it’s probably one of many more to come.

There needs to be a real shift in how power is exercised, the role government plays. And I
was reading BlackRock. I follow BlackRock a lot.

We got Larry Fink talking about climate change, and he’s very aware of the threat of climate.
But the obvious conclusion from everything Larry and BlackRock say about climate is that
you need serious government intervention. But that’s the one thing they don’t want.
Rana Faroohar
Well, you’re getting at something really important, and this drives me crazy, frankly. I wrote a
column about how in the context of education, which seems tangential but is actually
connected to what you’re saying about climate change. Corporations are always kvetching
that, oh, we need the government to train up a better 21st-century workforce, and then we

could create jobs. Oh, we need the government to do something about climate, and then
we’ll have certainty, and we can invest.

Guess what? You’ve been cutting the tax share of the government, of the public sector by
offshoring and optimizing, as they say, taxes in a global race to the bottom as the private
sector has gained power and wealth relative to the public sector for four decades now. So
you have tied the hands of the politicians. You decimated the middle class, which would
elect better politicians. So here we are. So I absolutely hate that hypocrisy. I think it’s
egregious when business leaders complain in that way. I always try and turn the point
around if I’m on T.V. and ask them about taxes and how much they pay.

But to go back to your first point about do the elites get it? Yeah, they absolutely get it. And
let me give you a couple of examples. They get it, and they think they’re going to be able to
weather the storm.

You know, Eric Schmidt, former chairman of Google, wrote a book with the head of his think
tank a few years back. And the book, basically, reading between the lines, said, you know
what, they try to put a sunny slogan on it. But the message was technology, this tech
revolution we’re going through, which is as Niall Ferguson has written, it’s kind of like the
advent of the printing press. It makes things better ultimately, but you get 150 years of
religious wars before that. That’s what Schmidt said in his book with Jared Cohen. He said,
look, tech’s going to make things better in the long run, but in the short run, things are going
to be really crazy. There’s going to be huge nationalism, conflict. They didn’t come out and
quite say it this way, but this was the upshot. But the idea was in their minds that the biggest
companies, the Googles, the Facebook’s, the Buydo’s, the Alibaba’s had become so big that
they were like the East India Company now. They are sort of sovereign international states
that float above the nation-state, as Mark was pointing out, and that they actually kind of
formed their own consensus. You know, you’ve got the Washington consensus, maybe the
Beijing consensus. We don’t quite know what that is yet. And then you got the Facebook
consensus and the elites essentially, I think, believed that these corporations now have so
much control and big tech does have way more control even than big finance did because it
can actually influence our behavioral patterns because of surveillance, capitalism, and
algorithmic behavioral manipulation.

They have so much control that they believe that they can move the levers now and simply
weather the storm and come out to the other side of it. So that’s where they are.

Paul Jay
There’s really no wall anymore or distance between big finance and big tech, is there?

Rana Faroohar

Paul Jay I mean, big tech is financial lies, and more so if you look at who owns big tech, it’s
essentially the big financial institutions who are the biggest shareholders other than some
individuals that helped start the things.

Rana Faroohar
Well, I think it’s a little deeper even than cross-shareholding because the biggest three
shareholders in Google are still the top Googlers, Larry Page, Sergey Brin, and Eric

But what I think is so interesting is I think about it in terms of information asymmetry. So you
go way back to Adam Smith, the father of modern capitalism, and he would have said that in
order for any market system to function properly and fairly, you need to have an
understanding on both sides from buyers and sellers of what the transaction actually is.

Well, as we well know from the great financial crisis and any number of debacles before that,
most of the time, when you’re dealing with a big financial institution, they’ve got more
information than you. That’s why they’re always winning; like the casino, the house always
wins. Well, put that again on steroids in the era of big tech, because the major tech
companies, as of yet, except in small ways, in places like France or Australia that are
insisting on algorithmic auditing, they have total control of the black box in which the
transactions in our increasingly digital world live. We don’t even know what we’re buying and
selling. I mean, I’m giving data, and I have no idea what I’m getting back for it. I think I’m
getting something free in quotation marks, a surge, the ability to do some silly social platform
media thing. But what am I giving up? A whole hell of a lot. And it’s more when it gets
combined with other people’s data.

Paul Jay
Mark, where do you think the preponderance of financial and big tech elites are on this
election campaign? And how much control do they have in the outcome?

Mark Blyth
Well, again, I’m not going to differ very much from what Rana just said at all. I’m not going to
quote Smith. I’ll quote Keynes. Didn’t Eric Schmit ever read Keynes? In the long run, we’re
all dead. The long-run is a succession of short runs, which, if they are shitty enough, ends
up, it sums to a not long run. So that’s an incredibly dangerous way to think about it.

I’ll tell you a little story I used to do when I did finance conferences with big finance. You
have 25 of them in the room, all of a sudden big money in the room and I would say the
following, talking about politicians and the quality of political capital, it’s gone down over
time, and that’s a big problem level. And it’s all right.

So how many of you folks would let the people that you run countries by funding them run
money and your firm, and they would all burst out laughing. Then when the laughter died
down, I would say, and now you can tell me what’s funny about that because ultimately your

firms are dependent on the governments of those countries, the policies that they provide.
And it was almost a moment of shame where they went, oh shit.

This points to something that are Marxist colleagues have known for the longest time. While
it’s rational for any individual capitalist to maximize their short-run interests, it’s collectively
suicidal if they all do. There is no ideal collective capitalist looking in the long run, no matter
how big you are. Your most rational strategy is to grab what you can because you don’t
control enough to make sure that you can dictate the final outcome. So that leads to this
general suboptimality of choices, which manifests itself in everything from taxes to green to
decarbonization across a whole series of areas.

Are they aware of this? Yes, they are. They all understand perfectly well. Do they have a
solution? Yes, they do. Basically, the government should step up, and that’s never going to
be allowed to happen.

Rana Faroohar
Indeed. It’s fascinating. Just to turn it to the markets for a minute, I think that’s why there’s
this weird bizarro world where essentially 50 percent of the biggest players in the global
markets are in gold, and the other 50 percent is in stocks. Well, what is that about? Gold is,
we basically think the world’s falling apart, and it is going to be the 1930s, again. We think
that central bankers can keep this party going a little bit longer, and we’re going to stay here
until the music has almost stopped playing. And it’s just fascinating that there’s nothing in
between right now.

Mark Blyth
Yeah, that’s a really great observation. That’s exactly right.

Paul Jay
If there is a bigger necessary lockdown, if the pandemic isn’t, well, first of all, the depression
is already pretty deep and not recovering that quickly. But the scientists I’m reading,
epidemiologists and such think that we’re really at the beginning of another big wave that
might even be worse than the previous one. Even Foushee has said that. Some are saying if
Biden’s president is what’s put to him, the only way of really dealing with this is maybe
another two-month national shutdown and mask regulation, and such.

How much financial support can the Fed do? Right now, politics is kind of paralyzed, but how
big can it go? Are there limits, economic limits to how much money the Fed can pump into
the economy? What are the political limits that we might see now? They might change, I
guess, depending on the outcome of the election. Mark, you go first.

Mark Blyth
It’s not that I’m a science skeptic on this, but I think that what we tend to do is take whatever
the public health authorities say at a given moment and project it forward—forgetting that
basically everyone revises their opinion on what’s going on every two weeks. So I don’t think
that that’s a good thing. The most interesting thing for me just now is the fact that Andy

Haldane, who’s the chief economist of the Bank of England, and all-round very smart
person, is actually very bullish on the recovery for a host of reasons, in contrast to most of
the people around them.

Another really interesting one is the data from Sweden. Sweden has picked up in the U.S.
press either to show that we all need to wear masks or, alternatively, to show that you don’t
need to wear masks. If you actually look at what they’re doing and what’s happening, it is
very interesting. Their death rates are down to the single digits and are not moving. There’s
no big spike in death, but there is in infections. This makes perfect sense. If you think that
the goal of a virus is to replicate, it can’t be too deadly. They tend to attenuate that effects
over time, which is why they could become sort of endogenous to the population and survive
in a less deadly form. So I’m very hesitant to say this is what’s going to happen, and that’s
what’s going to happen because if we took honestly snapshots of what was the consensus
every month since March, the plot charts coming out, that would be massively different all
over the place.

So with that in mind, is there any limit to what the Fed can do? Well, almost 60 percent of
invoicing and 50 percent of global reserves are in dollars, so long as the German and other
export-led trade models depend upon the recycling of dollar amounts to the bond markets of
the United States. So long as interest rates are at a 700 year low, which seems to not be an
aberration, but the real sort of mean revolution in the system, so long as we can’t generate
inflation to save our lives because we’ve basically created hyper flexibility in labor markets
and product markets on a global scale, then sure, yeah you can just continue.

I mean, you really can. I mean, Sebastian Mallaby has a piece of this in Foreign Affairs. It
was two years ago he called it the era of magic money, and I think that he’s right. I actually
have a piece coming out saying why he’s right, but he’s not entirely right because a lot of this
has to do with the Fed essentially giving markets of free option every 7 to 10 years and
making the problem worse. But nonetheless, can we continue to do this? Absolutely, we
totally can do this, so long as there’s no inflation in the system, and you’re not going to get a
very high spike in interest rates. And I can’t imagine why you would see either of those. Then
you’re going to continue to do this, which is part of the reason why half the market is in gold
because that’s a perfectly rational response to low inflation, low rate world that you think is

Rana Faroohar
Yeah, 100 percent. It’s so interesting. Two things to say in response to Mark. First of all, if
Andy Haldane believes that I’m inclined to believe it, too. I think he’s the smartest
policymaker around. I can already see the signs of a second wave in New York. I don’t know
how it’s going to play out. And so I’m going to hold off on making a judgment call about that.
But let me say a little bit about central banks and what they can and can’t do.

I think that if we had a Biden administration, for example, and you had him immediately
reaching across the aisle, reaching across the ocean, kind of repairing some of our

relationships with allies, basically rolling back some of the really stupid stuff that Trump has
done and also rolling out some kind of reasonable fiscal plan to get us over the next 1 to 2-
year hump of COVID, whatever it is in the U.S., then I think that central banks can probably
do a lot. Because you have to realize that it’s somewhat about trust and the good faith of the
U.S. government and the dollar. When you have Trump, that goes way down; when you
have a trade war with China in which we don’t have Germany and other European allies that
have the same concerns on board, then that goes way down. I think that if we have a volatile
environment, then you’ve got maybe five years for the dollar to have all the privileges of
being the global currency. I think if you had smarter governance, you might have another 15
years of being able to have those privileges.

But make no mistake, and this is where I think Americans in particular sometimes get a little
arrogant. We always have these conversations like it’s just about what we want to do. China
has its own plan. It’s got its own grand plan, industrial policy. It’s rolling out digital RNB. It’s
got its own sort of trade route that it’s trying to develop. It’s got its own relationships that it’s
developing with Middle Eastern oil producers, weakening the dollar oil peg. Europe may
come together. The euro may become some kind of more attractive alternative. All these
things are now in flux. So you have this, these vectors that have nothing to do with what’s
happening in the White House. And I think ultimately that will weaken the dollar relative to
other currencies. And ultimately, I don’t think that’s a bad thing because one of the reasons
that we have the dysfunction that we do is that the dollar has this exorbitant privilege and
allows us to behave incredibly badly in terms of debt. Wouldn’t be a bad thing to crack that. I
kind of hope it doesn’t happen in 2 to 5 years in some disorderly way.

Paul Jay
There’s one truth, I think if one accepts the science, and I think most rational people do,
there’s nothing more threatening to human society right now than the climate crisis. And with
very few years left, apparently to deal with, we’re no doubt hitting 1.5°C; we’re beyond not
hitting it. We’re maybe beyond not hitting 2°C degrees warming above pre-industrial
averages. And scientists are saying that if things keep going the way, they are by the end of
the century, we could not only be hitting 4°C, but there are recent predictions of even 7°C
degrees. I mean, that’s an unlivable earth. Even as you approach 2°C and 3°C degrees,
much of the people living in the south have to head north, whether the people of the north
want to build walls or not.

The extent of the crisis is critical, and most people who follow anything know, I don’t see any
solution to this without US-China collaboration. It’s not going to happen through contention if
there aren’t some serious global agreements on climate and not done in the context and
atmosphere of the kind of rhetoric and threats that are going on now. China isn’t going to
respond because of threats. As much as Trump’s anti-China hysteria, even Steve Bannon,
who I believe is probably still in Trump’s ear, has actually called for military confrontation in
the South China Sea.

Richard Haas from Foreign Affairs had an article recently where he says that the United
States should give up its ambiguity on Taiwan and outright say that if China were ever to use

military action towards Taiwan, that the United States will respond militarily. Most people I’ve
talked to that know people like Larry Wilkerson and others don’t believe it’s true that the
United States actually would provoke because every war game they’ve ever played,
Wilkerson says, ends a nuclear war. They’ve never played a war game that starts
conventional and doesn’t end nuclear.

But all that being said, there’s no way to deal with climate without collaboration. And one
thing that concerns me about Biden, again, reading his climate plan, his plan for reducing
fossil fuel subsidies by governments, which he says he’ll do in the United States, but is to
give the belt and road initiative countries an alternative form of financing, and in other words,
to fight China over these alliances that China is building. Whether that’s a good idea for
those countries or not, that’s a separate issue, but it’s all couched into this virulent anti-China

So what are the underpinnings of this rivalry? Some people argue this because it justifies
massive military expenditure, which I think there’s a truth too. But is there more going on?
Why is there this such underlying rivalry, which seems like it’s going to make it impossible to
collaborate on climate?
Rana Faroohar
I can jump in on that. I think that there was a belief in foreign policy circles and in economic
circles that once China opened up and once they were brought into the WTO and the
traditional structures, Bretton Woods structures, etc., that they would become more
prosperous and move towards liberal democracy.

I frankly haven’t been in and out of China for the last 20 years; I never really saw that as a
possibility. I just think it’s really quite arrogant. I mean, old country, 5000, 6000 years of
civilization, with its own ideas about things. So I was always curious that there weren’t more
CEOs and asset managers, and there were certainly military tacticians that would have
sounded the alarm and have but saying, you know what, if it doesn’t go that way, what if
basically at some point China decides it is independent of Western technology, it can run its
own supply chains. It is a single giant market, much like the U.S. in the World War Two
period, that can go it alone. Then what?

Well, here we are. I think China would have given another 5 to 10 years before it made its
move. But Trump kind of threw the bomb in the middle of the big hypocrisy of the one world
two systems paradigm. So now we have decoupling that’s not just on the U.S. side, but very
much on the Chinese side.

I had a fascinating conversation actually a couple of years ago with Kaifa Lee, who is a big
Chinese venture capitalist. He helped start Google China. And he said, we hope this doesn’t
happen in the best Chinese investment community, but we are prepared for there to be
decoupling, and we believe that it will be easier for China to make up what it still needs

within the supply chain and innovation ecosystem, which is not much. I mean, it kind of owns
a lot of that ecosystem right now. Just slap Chinese consumer brands on the top of it. Then it
will be for America and the Western world to rebuild its entire supply chain because we kept
the brands and all the I.P.s, but we didn’t keep that kind of manufacturing ecosystem. The
military is obviously very worried about that. COVID has exposed the vulnerability of supply
chains. So we’re going there no matter what. I do not think that the whole Council on Foreign
Relations can get a big super committee together and come up with a set of agreements on
climate change that China and the U.S. can agree with. That’s not going to happen.

Here’s where I am somewhat optimistic. I think that it is possible for the world to become
more regionalized, maybe a tripolar world: U.S., China, and Europe, with kind of different
strengths and ecosystems to coexist. And in that model, I would look for optimism around
climate change to come more from innovation, maybe state-driven innovation. China has
done so much on wind and solar. I think if we did in the U.S. and Europe is doing this to a
certain extent, did a big push to incentivize research and development and five, six, or seven
areas of technology, including cleantech, we could probably do a lot.

One small example is vertical farming. You probably never heard of this, but it’s about to be
huge. This is basically the idea of growing food on walls that are controlled in minute ways
by light and temperature. It means you don’t have to ship vegetables across the country and
have them lose 50 percent of their weight, which was water anyway, and have a bunch of
emissions. I’m looking for things like that. When I think about climate change, I’m not looking
for some big new grand bargain.

Paul Jay

Mark Blyth
So let’s put a couple of things on the table. The background assumption here, whether you
like Biden’s climate policy or it’s going to amount to more than a hill of beans, is that he’s
allowed to win. And it’s not far from clear for me, and this is the case. Because the tweeter in
chief, if he loses, will continue to mobilize, delegitimate, fractionalize and polarize this
country. With a set of forces that we’ve begun this shot by identifying have been 30, 40
years in the making.

So it’s not clear that you’re going to get a Biden victory or even the United States basically
emerges from the next 12 months as a kind of credible and stable place to invest. Now, what
the United States has done to make its money over the past 30 years was basically to invest
in the protection of intellectual property rights, and by some estimates, about 80 percent of
the value in global supply chains occurs directly to U.S. companies. A famous example
being you make a 700 dollar iPhone in China, but 50 bucks of the value remain in China,
and the rest basically is remitted not to California, but to a series of tax havens. But
nonetheless, most of it goes back to the American side.

So that’s why you invest in American stocks because they grow faster, because of the IPR
control. What is it that China wants to do? It wants to develop. It wants to become rich. What
does that mean? That means it’s coming for the IPRs.

So there’s a real conflict of interest between these two, if you will, global business models.

Paul Jay
Hang on a sec. Say it again in a little easier way to get.

Mark Blyth
For the past 30 years, American firms have been globalizing, integrating, using global supply
chains, moving stuff to China. But how you really make money is through the protection of
their intellectual property rights. Think about Apple suing Samsung all the time. Think about
the fact that when Apple sees a competitor, or Google sees a competitor, and it buys it. It
doesn’t like the competition. This gives them huge profit margins and also means they
capture most of the value in these big global supply chains.

And the way you protect this is with legal protections. Now, at the end of the day, China
wants to develop. China wants to be rich. China basically doesn’t really care that much
about those legal protections and goes out of its way to either buy tech, acquire tech, steal
tech, spy on tech, paints concerns at universities in the United States about PRC, Chinese
army representatives, and labs and so on and so forth. So not all of this is hysteria.

There is a direct threat to the American business model, which is heavily dependent upon
global supply chains and the protection of their intellectual property rights. This spells
through to American capitalism were at large because the reason you want to buy American
stocks is that American stock markets grow faster than everyone else. Why? Because they
have the companies that have these intellectual property rights that make the outsized
profits. China is a direct threat to that. So. there is conflict built into the system.

In terms of cooperation, China will cooperate with the E.U. If the United States continues to
fractionalize politically. And now it’s just basically a kind of quasi damage autocracy that
refuses to accept basic science on climate change. The world has already moved on in
many ways. There will be exactly those types of state-backed investments and very large
scale projects that will take place in China on the E.U. and possibly between and across
them. And they will not be the ones that reap the returns on those new assets, and those
new inventions, and those new intellectual property rights that everyone needs to deal with
the already big effects of global warming.

One example of how to think about this inclosing again, going back to these little finance
talks, I would do from time to time. I would always say to financial audiences; I don’t
understand why you folks don’t invest everything in green tech. And I would get these
answers; we don’t know, it’s incomplete, the government is exposing us to the risk, it’s too

big, etc.. And I would say that you don’t understand, this is what bankers call a free option.
And this is the one contract that you want.

Here’s how it works. If you don’t invest and it doesn’t work, you still die. If you invest half of
what you’ve got wisely and one thing works, and that helps, you’re going to make more
money than God. If everybody collectively thinks the same way, then we might just get out of
this mess. But if you only look after your own interest, you are guaranteeing your own
extinction. And again, it’s that collective action problem at the base of capitalism. What’s
rational for any one firm to do or one company to do, it’s oftentimes collectively disastrous.
And that’s what’s going on.

Paul Jay
Well, that’s a pretty good place to end, unless you want to add something, Rana?

Rana Faroohar
No, I think that’s perfect.

Mark Blyth
Do we have anything good to say? Come on, is there any light at the end of the tunnel?

Paul Jay
Yeah, go ahead.

Rana Faroohar
Yeah, actually, that’s good.

Mark Blyth
I mean, I’m huge on hydrogen. Who knew hydrogen was finally going to pay off? The E.U.
put in, I think, 12 billion into hydrolyzers. Right. The Russians are all over this. They can use
their pipelines to pipe blue hydrogen all the way to Western Europe.

Paul Jay
We need to do this again because the thing I’m about to say, in some ways, starts a whole
new conversation. But Mark instigated this. This contradiction that you’re talking about, how
it makes sense for individual tech and finance companies to pursue their short term
interests, but it’s giving rise to chaos otherwise, which in normal times, I guess you could say
there’d be time to evolve out of it. But given the time frame of climate, there’s just no time.
There needs to be something dramatic and radical quickly. If the U.S. descends into the
worst-case scenario, I guess we’re screwed. We will be hitting 2°C and 3°C degrees, and I
guess we’ll have to see what that looks like.

But I think what you’re describing, Mark, is a kind of consciousness, a conclusion that’s really
growing and it expresses itself. The pandemic is showing the advantages to the public health
care system that’s run by the government. Certainly, if you compare the pandemic results in
Canada to the United States, The public health care system has been significantly better
than the American. It’s pointing to socialistic solutions everywhere you look.

I mean, that’s really what the New Deal was. It strengthened the socialistic characteristics of
the capitalist economy. And of course, the right despises this because they think any
strengthening of those characteristics wakes people up to the advantages of it, which means
people may say, well, we don’t just want public health care, we maybe we should have
public banking, and that can go on from there. So I think we need to do another podcast
about this. But Ranna, why don’t you conclude for us?

Rana Faroohar
Well, you know, I would just build on what you said. I do think that that’s another podcast. In
the way I think of it is that there tend to be economic pendulum shifts every half-century or
so, give or take. And we had a pendulum shift. If you look at the period leading up to the
1929 market crash in the 30s’, that period in which the ten years or so before actually from
the Spanish flu to 1929, OK, you had the Spanish flu first and then the market crash. We had
a market crash and then the coronavirus. But that, ten years was similar and that you had
basically underlying problems that then central bankers papered over with debt. There was a
huge asset bubble. There was a lot of technological change, shifting labor markets,
demographic change, urbanization, lots of moving pieces. You eventually got a debt bubble,
a market crash, the 30s’. And then from the 30s to the 70s, you had kind of another
pendulum shift where there was a movement away from private sector power. There were
certain curbs. You got the Glass-Steagall regulations. You know, these are sweeping
generalizations, but they’re basically true. And you had the public sector getting more power.
You had labor getting more power. That was over, as we know, with the Reagan Thatcher
revolution in the 80s. And then we go pendulum shifting, and we get Trump, perhaps as the
apex of all of that.

I think we are now in another pendulum shift. And I think that many of the things that we’ve
been talking about could come to pass. And even though there are some big challenges,
some big dangers, I think that it’s possible that with the right tweaks and incentives, we could
get a shift finally between capital and labor. We could get a shift between the private sector
and the public sector. We could see a conversation moving from consumers to more talk
about citizens. I think all those things are possible and we should come back and talk about

Paul Jay
And all those things are possible. If there isn’t some kind of Trump coup, assuming Biden
actually wins the election, which sounds like he’s going to win the election. I should say it
sounds like he’s going to win the vote. It’s not clear he’s going to win the election. Anyway,
thank you both very much, and let’s schedule another one soon. Thank you, Rana.

Rana Faroohar
Thanks to you both. Mark, you’re a rock star. Thanks for having us, Paul.

Mark Blyth
Micro celebrity, that’s the term.

Paul Jay
And thank you for joining us on theAnalysis.News podcast.


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  1. unreadable transcript

    “Well, again, I’m not going to differ very much from what Rana just said at all. I’m not going to quote Smith. I’ll quote, Cains. Didn’t Eric Schmit ever read Cains, in the long run, we’re all dead. The long-run is a succession of short runs, which, if they are shitty enough, ends up, it sums to a not long run. So that’s an incredibly dangerous way to think about it.

    To me. Although I’ll tell you a little story, I used to do when I did finance conferences with big finance. And so you know you have 25 of them in the room, all of a sudden the big money in the room and I would say the following, talking about politicians and the quality of political capital, it’s gone down over time, and that’s a big problem level. And it’s all right.

    So how many of you folks would let the people that you run countries by funding them run money and your firm, and they would all burst out laughing? And then when the laughter died down, I would say, and now you can tell me what’s funny about that because ultimately your firms are dependent on the governments of those countries, the policies that they provide. And it was almost a moment of shame where they went. Oh, and this points to something that are Marxists colleagues have known for the longest time that while it’s irrational for any individual capitalist to maximize their short-run interests, it’s collectively suicidal. If the older there is no ideal collective looking at the long run, no matter how big you are, you’re most rational strategy is to grab what you can because you don’t control enough to make sure that you can dictate the final outcome. So that leads to this general suboptimally of choices which manifests itself in everything from taxes to green to decarbonisation across a whole series of areas.”

    1. Do you mean Cains of Cains & Abel’s? A fine department store, but they went out of business before Sears & Roebuck’s. You knew, when you bought something from Cains’, it would last; even ten years’ later, if there were a problem, they would make it good. Too bad they are gone. Those days are gone forever!

  2. Outstanding. Makes the political “debate” we have witnessed so far in the US this fall look like grammar school hand raising – informed of course by the Right’s densifying ideology of forty years and the Democratic middle’s hope they can muddle through, pleasing all factions and seeing “bi-partisanship” just now on the horizon. It’s on the horizon alright, just look at the raids in Michigan to head off a “coup.” And worse.

    Should be played for the entire nation.

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