Trump’s Coup, Biden’s Dilemma, and the Chinese Challenge – Foroohar and Blyth

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Rana Foroohar (Financial Times) and Marc Blyth (Angrynomics) join Paul Jay to discuss the crazy and dangerous decline of the American Empire, on theAnalysis.news podcast.

Paul Jay

Hi, I’m Paul Jay. Welcome to theAnalysis.news podcast. Please don’t forget the donate button at the top of the Web page.

The coronavirus’ second wave in the U.S. and Europe threatens wider closures of the economy and a stalled recovery. The political system in the US seems even more chaotic as President Trump is threatening a coup against the election results as he changes the civilian leadership of the military. And, of course, the stock markets continue to soar in spite of it all.

Well, the official motto of the United States is, “In God we trust,” which was actually passed under Eisenhower, I learned today. It seems to be, at least for the financial elites, “In the Fed we trust.” As crazy as it all seems, there seems to be an underlying faith that all will return to normal. And of course, the normal, as Mark Blyth has said, means paradise for the investor class.

Now joining us to discuss these current and crazy times are Rana Foroohar, who’s a business columnist and 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 and the Fall of American Business and Don’t Be Evil: How Big Tech Betrayed Its Founding Principles. And also, Mark Blyth, who’s a political economist at Brown University and he researches the causes of stability and change in the economy. And as he says — and I’m going to keep doing this every time I introduce them just because I like it — “why people continue to believe stupid economic ideas despite buckets of evidence to the contrary.” Thanks very much for joining me right now.

So, Mark, I’m going to start with you this time. First of all, how seriously do you take the Trump drama going on here? I mean, you think he’s serious or this is all about keeping the attention on him as he prepares for his new media empire or whatever comes next? And why no panic from the financial elites or the markets?

Mark Blyth

That’s three big questions. I honestly don’t know what’s going on because every story you can tell is plausible. It may just be he’s looking for an exit. It may be the case that he owes a Cayman Island-fronted company for which we can’t identify the beneficial owner $140 million out of $800 million in debts apparently outstanding coming due in the next four years. He has no income stream, so it’s perfectly plausible that this is all just, basically, rile up the base and get the TV contract and $100 million for the book, etc., etc.

But there’s another way of looking at this, which is essentially, this is how Central Asian dictators manage transitions. So, what you do is you saw it months before discrediting the opposition and discrediting the vote because it’s probably going to go against you. You do this quite, quite obviously. And then the minute it goes against you, you come out and say, “See, I told you: fraud, fraud, fraud, fraud, fraud. You’ve also got a coterie that have joined you — a lot of family members because it’s basically a kleptocracy — and they all join in together. They’ve all done slightly dodgy things, which collectively, you know, if other people get in will turn into very dodgy things and you could well end up in jail. And people like that do not go to jail.

So, there is another very plausible narrative of, “No, no, he’s really serious.” Essentially, what he’s trying to do is get to the point where you either create a kind of faithless electors crisis. You get one Republican state that refuses to certify. You then do the hail-mary pass up to the Supreme Court and you see where you go from there. And even if that doesn’t work, you’ve got even more time to suck 60 percent of the money out of the PAC you just set up so that you can actually pay Igor back the debts in the Cayman Islands. [Laughter.] So, either of those work. You know, take your pick. How serious is it? This is the United States, for God’s sake. We don’t do this crap.

Rana Foroohar

I don’t know why you’re defaming Igor, Mark, or choosing a Russian name. Really, really.

Mark Blyth

I know: “There’s no collusion. There’s just connection.” [Laughter.]

OK, now, this is United States, right? I volunteered to become a citizen of this place. I am one of the few people who actually pays taxes. And what are you doing, right? This is ridiculous. This is absurd. This is literally banana republic stuff. Stop this. Grow up.

Now, the last thing I’ll say on this is, of course, the Democrats, as usual, are bringing a butter knife to a gunfight. [Laughter.] They’re all, like, “The norms! The norms! No, no. He’ll go. Don’t worry; he’ll go.” How long have these people been misreading this guy? Right. No, no: this is more serious than we think.

Rana Foroohar

Yeah.

Mark Blyth

But whether it plays out to its full extent, well, we will know because we’re all in the slow-moving coup d’état.

Rana Foroohar

I’ve heard three interesting things from three people who I think have a little wisdom on this topic. So, Tony Schwartz, who co-wrote The Art of the Deal with Trump and has, of course, just completely, you know, turned against him and is trying to redeem himself. He said the other day, “You cannot overestimate this guy’s strategy in terms of figuring out how to monetize and brand events.” And that’s exactly what’s happening here. It’s a coup, but it’s sort of a “brand coup.” I mean, it’s I think that it’s actually going to be — I think you’re absolutely right that it’s about, what is the next platform? What is the next, you know, the television show, the new venture that he’s going to be able to capitalize on because of all this. The other thing I heard was from Maggie Haberman, The New York Times reporter, who is, of course, very tight, and is going to do a book about all this. And she said something interesting. She said, you know, people don’t understand that for him, it’s all about the show. It’s about watching how the show is going to end. And so, there’s this bizarre combination of things that seem entirely diabolical — and I agree pretty much with what Mark is saying — but also a sense that it’s all reality TV, you know, that he could he could go away. I mean, he may well turn into a pumpkin on Jan 20th. He’ll turn up somewhere else. Don’t worry. He will. But there is a kind of reality-unreality element to it, which I — I have always found that fascinating. I mean, you see it in TV as a medium. You see it with the Kardashians. I mean, this is this is who he is as a president, that kind of real-unreal aspect of things.

I do think, though, that it’s interesting what a gulf, what a hole he leaves in the Republican Party. And that’s what’s so interesting. Where does the Republican Party go from here? Because, you know, the people who voted for him, they’re not going to vote for Mitt Romney. There’s maybe some of the economic nationalists like your Portmans or Hawleys or Rubios could capture some of that vote. Possibly some libertarians would go with Rand Paul. But there’s a big hole in the Republican Party where this guy was, is. And how that gets filled is going to be very interesting to see.

Paul Jay

Yeah, I think it’s what he learned from professional wrestling. When you’re standing in the middle of the of the ring and there’s 85,000 people watching — it’s also an actor’s call the “be-moment.” It’s what you do in between your lines, and you need to get everybody focused on you for that moment. So, he just has to act like this is a real coup, even though I don’t think it can be successful. I don’t think he thinks it could be successful, but he’s still the story and he just won’t become irrelevant on January 20th. He will still be the story because he’ll have something in the works that will be about him again.

Rana Foroohar

I kind of thought that he might try and flee the country because, of course, you know, I mean, there is the possibility of jail. But I was talking to a lefty politico source of mine in D.C. and he’s like, “Well, we can’t let him leave the country.” And I said, “Well, what does thatmean?”

Paul Jay

Well, he’d have to get Florida to extradite him to New York. [Laughter.] I don’t know. I don’t think Florida would extradite him to New York.

Rana Foroohar

I was like, “I’m wondering, are you talking about what happened to Epstein is going to happen?” [Laughter.] I don’t know. Anyway.

Paul Jay

And so, Mark — go ahead; jump in.

Mark Blyth

There’s one [unintelligible] on that one, which is the following: 70 percent of Republicans are now convinced that the elections have been stolen. It’s very hard to undo that damage. If this were just about him — it’s just him and, sure, whatever; that’s it. So, there’s an incredible corruption of the system, which he has encouraged and is definitely part of.

And to go back to the idea of the hole in the party, I agree with that, but I would push it further: he is the party. If you think about the way the Georgia senators are behaving, Perdue and Loeffler, essentially, you’ve got someone [i.e., Perdue] who should have been struck off for basically moving a portfolio because of private information over Covid, who still manages to get close to being re-elected. And the two of them have got nothing without Trump. If he gives them “this,” they’re good; if he goes “that,” they’re down. So, the whole party is absolutely being dragged along. I do get worried about the kind of, if you will, the institutional inertia that gets built here. Because if there’s a leadership vacuum and he is also the base in terms of that mobilization, then this goes on without him. Right? It pushes on in that direction, that politics, or moves that way.

Paul Jay

I think it might be in Trump’s interest for the Republicans to lose the two Senate seats in Georgia, because if the Senate is controlled by the Republicans, Mitch McConnell becomes the story, not Trump, whereas if it’s a Democratic-controlled Senate, Trump is the leader of the opposition, the extra-parliamentary leader of the opposition with his media empire. I don’t know that Trump actually gives a damn about anything other than, he needs to remain the issue.

Let’s jump in a bit in terms of what you’re hearing from the financial elites and so on. Apparently, the preponderance of Wall Street money went to Biden and then there was the sub-story that they were hoping to have a Republican Senate to go along with a President Biden. It looks like they’re probably going to get what they wanted. Is that what you were hearing, Rana? And how do they feel about the current situation?

Rana Foroohar

Yeah, the Biden camp was very, very strategic in terms of trying to be middle-of-the-road enough that they could pull away some of those moderate Republicans, the financier types. I think it’s going to be interesting to see what happens now. There’s so much signaling going on. It’s fascinating in terms of who is getting what positions and how it’s going to play out. What I understand is that Biden himself, as a man, as a person, is much more progressive and would like to make much more systemic change: financial reform, green stimulus, reconnecting Wall Street to Main Street.

And you can see that there are some appointments — Gary Gensler, for example, former CFTC [Commodities Futures Trading Commission] chair, who’s now the chief financial advisor for the president-elect. He’s an interesting guy. He was a former Goldman Sachs guy, but also a big-deal reformer. He used to be part of the Bob Rubin camp, but really had a come-to-Jesus moment after the financial crisis and did some really good things at CFTC and I think could do more. In fact, he’s been up at MIT looking into things like decentralized technologies, crypto currencies, linking community banking to high-tech apps. That’s pretty interesting to me.

On where tech is going to go, that’s a big question for financiers. Is Big Tech going to get regulated? And the jury’s very much out. Biden’s bringing in some of the old Obama team who was very friendly with Google. I mean, Google was the number one lobbyist in and out of the Obama White House.

But, again, it goes to, is Biden, the man, going to be making decisions or will the party operatives around him have more weight? I think particularly given disinformation around his son and sort of the way in which he got chewed up by the whole social-media/Facebook machine, I think he may be tougher on tech than we would expect, given some of the appointees. That will then, of course, have an effect on the markets, because 40 percent of the value — 42 percent, actually, at the moment of the value of the S&P is just a handful of Big Tech stocks. They create thirteen percent of all jobs. That is the exact divide that we know needs to be bridged. But doing it is going to require really pissing off some big-deal lobbyists.

Mark Blyth

Another side to the tech story which came out of the election, of course, was Uber spending $200 million in California.

Rana Foroohar

Yes.

Mark Blyth

So, we get used to the idea that Google is a problem because Google dominates searches and the algorithms do this, that, and the next thing. Then we get Facebook, because it weaponizes this information. And then, Twitter is this, etc. And Uber was getting a pass for a while. What’s just happened in California is that for $200 million, a company just got to write its own labor law.

Rana Foroohar

Yes.

Mark Blyth

Right? So, basically, the state of California has ceded authority to structure its own labor markets to a corporation. And this is getting no commentary whatsoever. This is huge. So, the Democrats are, “Oh, fifteen dollars an hour minimum wage!” Mmm, marvelous, right? You just allowed a corporation to take California’s labor markets and restructure them according to their own terms. What are you going to do about that?

I think that Rana is right, that there is a more progressive impulse in there, and I think that what we’re seeing, or we’re going to see, I think, are more examples of Big-Tech overreach, almost daring them [i.e., anyone in government willing to regulate them], putting their hands in the fire to see how far they can go. And at some point, they may get the fingers burned.

Rana Foroohar

It’s interesting, too, because it starts to — I’ll just say one more thing, Paul — the Big Tech conversation starts to intersect with the foreign policy conversation, because one of the first things I expect that Biden will do once he gets the Covid emergency and the domestic situation under control (when there’s a vaccine) is get on a plane, go to Europe, make nice with allies that Trump has alienated — and in particular, the Germans — around Chinese tech and trade issues. Because, you know, the one-world/two-systems problem is going to remain with us. It’s very clear.

It was interesting: the week before the election, the Chinese plenary [i.e., the annual convention of the full Central Committee of the Communist Party] was actually putting out statements about their plan for 2035. (Of course, they actually think beyond a year.) And it was all about independence, not only from Western technology, but Western supply chains: an entire vision for a ring-fenced ecosystem. Europe has its own issues with how tech and trade are going to work and be governed. I think that we have this tripolar world.

But really, if the US is going to go it alone, as China pulls away — and we haven’t even gotten into the potential for digital RMB [i.e., digital renminbi, the digital representation of China’s official currency] in the post-dollar world — Biden is going to need to make nice with Europe. There’s going to need to be some kind of alliance about what the twenty-first century digital economy is going to look like. How is it going to be governed? Are we going to let a handful of giant Silicon Valley companies run everything? The Europeans hope not. And they’re sort of betting on this idea of what they’re calling a “digital Mittelstand,” referring to these small and mid-sized family-owned companies, a lot of them in Germany, that have been world-beaters in the industrial economy. But can they make the leap to digital? It’s a very messy world, and we’re going to need allies. And so, I think that if we could get a transatlantic tech and trade deal and do a little bit of bartering, that would really help put pressure on the big tech firms.

Paul Jay

BlackRock had a research report out a few months ago which says the rivalry between US and China is going to intensify no matter who the next president is. And it says that countries are going to be asked to choose sides. The United States is going to try to make countries choose sides between the United States and China. And it’s interesting: in Biden’s climate plan, one of his big points of emphasis on fossil fuel subsidies is that they’re going to pressure countries that have signed on to the Chinese Belt-and-Road Initiative to come over to American financing instead, and as part of that agreement will be to lower fossil fuel subsidies. But it was linked to the issue of rivalry with China, not to the issue of just lowering fossil fuel subsidies.

Rana Foroohar

Everything’s going to get linked to China, I think, in the future.

Mark Blyth

But if you’re trying to link it to Germany, you’re going to have a problem. And the problem is the following. They are going to be the unreliable partner.

Rana Foroohar

That’s a good point.

Mark Blyth

Because they’re completely conflicted. Take, for example, the scandal over the Volkswagen factory [in China] that supposedly allowed the use of forced labor and the mealy-mouthed apology by the CFO — by the CEO, I should say. Why is this the case? Because their thirteen other factories and entire growth model was based upon basically selling cars to China, and diesel cars, at that. They’re nowhere with electrics.

The notion of a digital Mittelstand is one of those just brilliant EU inventions — [Loud laughter from Foroohar] — which makes no sense whatsoever because ultimately all of these are winner-takes-all technologies. That’s just what happens. You can have two or three or five [competitors] and you end up with one. And the Americans have developed those technologies for the English-speaking world, which is the digital world that the West operates on.

So, in a weird way, it almost would have been better if Trump had won, because if Trump had won the Europeans just have to get serious about what they’re doing, because they would be threatened on two sides. With Biden coming on board, they think that they can go back to play nice with the Americans while getting their gas from Russia, and then play nicey-nicey with China while talking a good game on NATO. And they probably will be able to do that. That’s the worst of all worlds for both the United States and for Europe.

Rana Foroohar

You know, I think that’s a very strong argument. But I will say — and I am laughing about, yes, digital Mittelstand is one of those things that you can imagine being cooked up in Brussels and then the paperwork translating into nineteen languages.

But here’s the thing: for Germany in particular, exports are the thing. And if Google comes in with, say, Nest (you know, its smart home device), financial services, healthcare, and starts to basically grab data in the Internet of Things in the B2B [i.e., the business-to-business transactions] world in which Europe has had a really robust economy — as you point out, Germany sells a lot of stuff to the Chinese — then that actually starts to really get them where they live. And I do think that they know that they’re between a rock and a hard place. I mean, they know that they’ve got to rethink, get in the digital game, and become more competitive. And so, that’s the one thing that I think is a little bit different.

The other thing is, all right, you’ve got the Googles and the Facebooks and the Amazons being amazing consumer brands. Will they be able to make that leap into business and industry, which is — not to get too wonky, but it’s very particular, a lot of the data functions, the way sensors are used. I mean, it is sort of a different game. 

But there’s no doubt that it’s a tripolar world. Europe’s going to feel a lot of pressure from both China and the US. And I think what’s going to happen is certain parts of Europe, like Greece and Italy, are going to get kind of pulled into the Chinese orbit and then maybe other countries — certainly the U.K., possibly parts of the [unintelligible] — will stick more with the US.

Paul Jay

OK, I’m going to just switch gears a bit here. So, let’s go back to the US. Let’s assume that the Republicans do control the Senate. What can Biden do, Mark, through executive order? And to what extent can the Fed, which seems to be pushing the boundaries of what the Fed is supposed to be doing or has been doing in this pandemic crisis — 

Mark Blyth

Well, given that Rana’s written a wonderful article on executive orders under a Democratic —

Paul Jay

To what extent can Biden work with the Fed, if the Senate simply won’t pass it?

Mark Blyth

No, no, no, no. But let me go for the Fed. I want to talk about the Fed, right?

Rana Foroohar

Yeah.

Paul Jay

So, here’s the thing. So, [Lael] Brainard, yesterday, one of the Fed governors — actually on the 9th — came out with a statement that finally acknowledged the first step of a two-step. And the first step is this: that climate change causes financial risk because what it risks is massive, sudden mispricing, right? The next step on this is what of every other central bank in the green central-bank network [The Network of Central Banks and Supervisors for Greening the Financial System (NGFS)] has already accepted: that the financial system, by basically allowing carbon firms to issue debt, is actually a cause of climate risk. Now, it’s too early for the United States to admit that, but they know. And this is just stage one.

Paul Jay

Explain this issue of why carbon producers issuing debt is such a risk.

Mark Blyth

So, we have a Covid crisis. Energy prices collapse. You have tradable bonds in the bond market. You are an energy company. Fed comes in and puts a floor under the price of all bonds, including your bonds, without making any differentiation between bonds that are carbon-neutral, carbon-positive, and carbon-negative. So, basically, you’re subsidizing the very thing that you’re trying to control, which is carbon risk. So, the British government, the Bank of England, has come out and said, “In two years’ time, we’re going to have a whole new framework where we go way beyond ESG — environmental and social goal standards — and what we’re going to do is actually give you proper metrics so we can say, this is a good bond, this is a bad bond, and this is a terrible bond. And we’re going to shift our monetary policy accordingly.

And the story behind all this is very straightforward. Back in the 1970s, there was an idea that politicians, it was some kind of — to quote Adam Tooze [a British historian] on this — anti-democratic conservative fantasy that all politicians were essentially socialists, and if you didn’t control them, they would spend us into hell. It turned out that that was complete nonsense, and you don’t need heroic central bankers standing against the masses because there was a huge anti-inflationary constituency in mass publics. So, you’re pushing on an open door. Now, we killed the inflation we’ve been so worried about thirty years ago; we’ve discovered this time and time again since the financial crisis. And the problem the central banks have now is rather than politicians doing too much, they do too little of anything that is important in terms of multigenerational thinking or investment.

So, they have reinterpreted their mandate to be, “Well, if we need to be the guard rails against bad behavior, then this is the new bad behavior. We’re going to basically take this role on and push it as fast as we can.” And what we saw with Brainard’s speech the other day was, I think, the opening salvo of the Fed moving in the same direction as the Bank of England and the ECB [European Central Bank] on green policy. And this, over the Biden administration, is going to be hugely consequential regardless of what happens in the Senate.

Rana Foroohar

That’s really interesting. Now, one thing before I answer the question about executive orders, Paul, I want to just amplify something in what Mark is saying, which is that oftentimes, and this was certainly true in the Trump administration, governments will try and push policy in a certain direction. Like, Trump had his trade war, right? And he was all about [trade] deficits with China. Well, he did things with tariffs and with trade, but he didn’t think about the financial system within that. The financial system itself wasn’t curbed.

So, I’m so interested in what you’re saying about how the Fed comes in and you put a floor under bonds, both good and bad, carbon-neutral, not carbon-neutral. That’s exactly where we are right now. That’s why Trump’s trade war actually didn’t get anywhere. And in fact, the deficit situation, from his perspective, is worse than it was when he started because he also did tax cuts. But companies could still move capital wherever they wanted. They basically just moved it around in a sort of a shell game to places where it was most tax-efficient and used whatever they had to bring back to the US on share buybacks. And so, things have to get integrated, which is, I think what you’re sort of saying, Mark. Policy has to be integrated across central banking, across the real economy. I mean, that is a big lift, and that’s what has to happen.

But to your point about what Biden can do [via executive orders], he can actually do a fair bit on trade. He can also leverage the power of the federal government, which I think is really interesting. He could make some statements — going back to Mark’s point about how California has just ceded its labor policy to Uber. Well, you know, Biden could say, “You know what? We’re not going to do any federal contracts as part of green stimulus or CARES act without union labor.” Or: “We’re not going to do it if the environmental standards are not at a certain level.” You know, he can start to say, “Buy America [i.e., the Buy America Act of 1982] is a powerful tool in the arsenal. And if you’re going to be part of that, you have to abide by x, y, and z standards.” That’s a very important thing, not just in sheer economic terms, but in sort of political messaging terms.

Paul Jay

Mark, can he, in cooperation with the Fed, actually finance a Green New Deal? Like, if there isn’t this [congressionally funded] big green infrastructure project — and I must say a green infrastructure project that isn’t just financialized for its own sake, but is actually effective. (I mean, I actually don’t care if it gets financialized if it’s effective. The problem is usually the two don’t go together.)

Can the Fed break some of the bounds of what it’s supposed to do if the Senate is completely obstructionist? I mean, the climate situation should have already been declared a national emergency. Can the Fed loan money to some big infrastructure enterprise that’s either set up by executive order or even something that already exists that just gets repurposed?

Mark Blyth

There is nothing in principle to stop them doing this. In fact, the ECB is already given us a model with what are called their “Teltros,” or TLTRO [i.e., targeted longer-term refinancing operations] loans. And they also have something very useful called dual interest rates. So, they could basically, if they decide, say, OK, any company that wants to build green infrastructure, we’ll give you a 30-year loan at minus-three [i.e., at a negative-three rate of interest]. That means even if you’re making one percent in a zero-inflation environment, you’re making four [percent in] real [dollars].

So, that’s huge, right, just in terms of profit margins? You can do this, but then this makes the central bank, if you will, the giant enterprise investor. And you can see that happening in Europe, where their tradition of cooperation amongst banks, etc. with industrial projects is much bigger than it is in the United States with its capital markets and traditional hands-off role of the state. In principle, there’s nothing to stop them doing this.

In practice, it would be much easier if Congress just thought it was a good idea. But the problem there is — a really simple way to think about this election, and I’ve just written a piece on this which I’ll be happy to send you and anybody who wants it; it’s called “The Death of the Carbon Coalition.” If you look at all the states that vote red, they’re the ones where you have the most room for carbon taxes. Why? Because their business model is usually heavily embrocated in the destruction, refinement, transportation, and end-use of carbon products. So, if you’re basically saying, “I’m going to phase out oil; we’re moving away from fossil fuels,” you’ve got these green coasts where 70 percent of GVA [i.e., gross value added, or, the rough size of a region’s contribution to GDP, gross domestic product] is made in the country and you’ve got these red states where it’s 30 percent. They’re based on carbon. And you’re saying, well, shouldn’t the Congress just move on this? Well, the bit of Congress that’s in control with such a minority of the population are completely indebted to a carbon model. And what we are talking about, and what the Fed is thinking about, is basically a mortal threat to their livelihood.

Rana Foroohar

You know, it’s interesting, too, because I was speaking to a couple of union folks about the Green New Deal issues and they said, “You know, we’re watching very carefully to see whether labor standards are really going to be up to snuff here.” Why does the average coal miner or steelworker not vote for these sorts of plans? Well, because fossil fuel jobs pay about 40 percent above the median wage and clean-tech jobs are, like, a couple of dollars above your average US wage, but they’re really not very high.

And going back to foreign policy, there’s a great and ugly irony here, which is that one of the reasons clean-tech jobs are paid so poorly compared to fossil fuels is that they’re non-unionized and they’re outsourced from Europe to the US. We are the emerging market in this case. A lot of the big Scandinavian wind producers, German solar producers, you know, they have to abide by much higher labor standards at home. So, they outsource these jobs to us and then pay far less. That’s another thing that we need to lock down in any kind of a new trade deal with Europe.

Paul Jay

But if you had the Fed playing this role, what about this idea of a just transition? I mean, why should fossil fuel workers bear the burden of something that the whole society has profited from — “whole society;” obviously in a very unequal way. Is it really that much money to keep paying fossil fuel workers what they’re being paid until they transition to equally paid jobs?

I looked at it with Bob Pollin, the economist. He looked at Pennsylvania. I think it’s 123,000 workers in Pennsylvania who are involved directly in the fossil fuel business. Of course, there’s an indirect [involvement]. But people making the kind of wages you’re talking about. I mean, that’s not very many people to subsidize for a while. Mark, I mean, couldn’t the Fed just include that in part of this green investment?

Mark Blyth

It could. But what you’re also doing is something that deeply identifies, particularly in this moment, with political identity. You’re saying to people, “You are redundant.” You’re saying, “What you’re doing is toxic, what you’re doing is harmful, you are not contributing positively to a society, you need to be regulated out of existence.” That’s a hard sell. You have to be very careful in how you do this.

A better way to frame it is from the 1930s. After the Agricultural Adjustment Act, there was a new deal that involved business and labor but there was also one that brought in farmers. And the basic deal was that cities and urban areas were going to pay more for food. That was going to be the cross-subsidy that made the rural environment stable through the post-war period. So, we need to come to some other type of accommodation which explicitly addresses this. If you’re talking about a just transition, it’s not what activists in cities think.  A just transition is, you make Oklahoma and West Virginia ground zero for your activism in terms of your investment. You make sure that you basically transit there at the highest possible level, and you create a demonstration effect for those red states that this is not their end; this is a new beginning that we’re all sharing.

So far, we have been completely unable to do this.

Paul Jay

Yeah, I was kind of surprised that Biden didn’t make more of an issue of just transition in the election campaign, especially in Pennsylvania. But on the other hand, if you do that, you have to really come out and say you’re phasing out fossil fuel, which he kind of just blurted out at the end of one debate and didn’t really want to say at all.

Rana Foroohar

You know, it’s very sharp that you caught that. I caught that point, too, and I thought that was a missed opportunity, big time. But, you know, these things are — I mean, look, the way we’re talking. These are complicated topics. Just the amount of discussion about Fed policy right now. It’s not something that’s so easy to message on the campaign trail. And I think he was right ultimately to make this a referendum on Donald Trump and Covid. 

In fact, the best thing I heard him say was at a rally in Wisconsin where he really pinpointed what a con man Trump is. This idea that OK, yeah, he can speak to the people. And Biden is, like, you know, I grew up with guys like Donald Trump my whole life. They’ve never seen a suburb. They thought that they could just do whatever they want and get away with it because their dad had money. I mean, he just pinpointed the guy as a con man. That was the right thing to do to get elected. Everything else can come after.

Paul Jay

I was hoping he would actually start calling him “Don the Con” in the debates, but he was too dignified to do that, I suppose.

Rana Foroohar

I know.

Paul Jay

So, how deep does this crisis get? That’s the same question I asked the first time, Mark. But now the second wave is now here, and we’re not even fully in it as the cold weather hasn’t really shown up yet. On the radio today, I’m hearing various doctors saying it looks like there needs to be more shut downs. We’ve heard that when Biden actually takes power, one of the first things he may have to do is a really serious national closing down of large parts of the economy. It’s either going to be scientifically necessary or not. It’s looking like it will be. But, again, can’t the Fed create more subsidies for people and less asset protection, perhaps?

Mark Blyth

If we start with the Fed, we start with the simple fact that their pipes, their plumbing goes to Wall Street. It doesn’t go to Main Street.

Rana Foroohar

Yeah.

Mark Blyth

Fiscal policy is meant to go to Main Street. And that’s basically ad hoc, at best. In terms of Covid and pending all on Trump, well, the Belgian numbers are much worse than the American numbers now. And so is most of Europe. Britain’s a disaster. Scotland not so much, but England certainly is. And the short story is, we are very forgetful creatures, because back in March, I distinctly remember all of those experts who study this stuff saying, right, here is how this is going to go: it’s going to be a really crappy through the summer, then it will lay off a bit. Then the big one’s coming in the winter, and then we might get lucky and get a vaccine and get out of it after that. It’s pretty much on course.

Rana Foroohar

Yes, that’s right.

Mark Blyth

Why are we surprised by any of this? This is exactly what we were told would happen.

Rana Foroohar

Yeah, a hundred percent. If I step way back — I completely agree with what Mark just said. I think we’re going to see a major culling, certainly of small businesses, probably some cascading corporate debt after the winter, because, you know, a lot of the firepower is gone. It’s unclear if there’s a Republican Senate how much of a fiscal package you’re going to be able to get through. So, let’s assume another deep recession.

But then stand back from that. And going to what Mark says, when we get out the other side, how do you fix things? Well, the Fed can’t really change reality on Main Street. It’s like we’re all stuck in this magical thinking that we’ve been in really since the 1980s, which is the time that trend interest rates started going down, down, down, down, down. And politicians of both stripes, Reagan/Bush but also the Clintonian Democrats, basically decided that they didn’t want to deal with guns and butter debates. They wanted to have the markets make the tough, tough decisions between different interest groups and who to prioritize. So, that’s what happened, and the Fed took over. Because interest rates were so high, we had a long way to go down, so we were able to have that kind of financialized economy. Also, we were helped by the fact that the US was globalizing at that time. Foreign capital was coming in. There were all of these factors that allowed this sort of saccharine economy to continue that was completely based on asset bubbles rather than on Main Street innovation.

I have thought for some time that we were at the end of that. I mean, I wrote my book about this in 2016. I kind of thought we were going to see it popping then. We definitely got a few more years. Now, how long do we have now? That’s the big question. I mean, you started a while back, Paul, by asking where investors are. I think I said this the last time we were on, but there’s basically two bets in the market right now. And they’re either on stocks or gold. On stocks, the bet is, yeah, the Fed can keep this party going a little while longer. And gold is, like, holy hell, we are headed towards being Zimbabwe. The dollar is going to be devalued. China is going to decouple much faster than we think it will, aided by digital currency, which is something that I’m watching very closely. In some ways, it’s the most important external factor in all of this.

I was fascinated by the way the Communist Party sort of slapping Jack Ma around regarding the Alibaba — the Ant IPO. So, Alibaba is, of course, Jack Ma’s [holding] company of which Ant Financial [now Ant Group] is a part. It’s sort of a combination of Amazon and Google; an “e-tailer” [a play on “retailer”] content provider in China. And they were supposed to do an IPO and Jack Ma kind of went out and got a bit too big for his britches and was criticizing the party’s financial system. And they said, well, hold up, let’s step back a bit. Let’s see about this IPO.

It was such an interesting message. It said two things. First of all, it said that in China, government is in charge, unlike in the US where markets are in charge. But it also said Ant Financial is going to be a very through which trade will happen via the Belt and Road trade routes, this new Chinese internal system of supply chains and the new coalition of countries that are orienting towards China.

And this is already happening. I mean, you’ve got tiny little mom-and-pop retailers in the middle of China that can sell to big European companies via digital currency de-linked from the dollar. That could change things really, really quickly. And that will then have an impact on what not only Joe Biden, but what any future administration can do. The US still enjoys this exorbitant and at this point unfounded dollar privilege. And I think that that will change dramatically. I’m going to be conservative and say sometime between the next five and fifteen years. But it could be quicker.

Paul Jay

You say in the United States, markets are in charge. But markets mean big, massive financial monopolies and tech monopolies. It’s not, like, some spontaneous markets. We’re talking real people running big institutions.

Rana Foroohar

Yes, absolutely. But we’re talking about a system that is fueled by easy money that is supplied by the Fed and increasingly may be supplied by Fed and Treasury together. Now, OK, investors tend to not like that kind of collaboration because it often doesn’t end well. Countries print money — Weimar Germany — they print money when they’re trying to do things to paper over problems.

Now, I want to say I would love, love, love it if Joe Biden could somehow bring together this coalition to do what, essentially, we did in the ’50s and ’60s, investing in internet technology, or a hundred years ago investing in railroads, where the public sector goes in and sort of seeds ground and says, hey, this is the new New Thing. We’re going to we’re going to push into green technology because we know that decarbonizing the economy is the way to create real Main Street growth. We’re going to change our whole economy. We’re going to put union guys to work retrofitting windows. We’re going to invest in R&D around clean tech and connect it with quantum computing and all kinds of things. If that could happen, I think that would be an amazing thing. But there’s a big risk that you just end up getting more debt and it’s unproductive. I hope that’s not the case. But if it is, given everything else that’s happening in the world — if Europe pulls together and the euro becomes a more important reserve currency, China goes its own way — then the dollar doesn’t get to stand alone so much anymore. And then debt starts to matter more for the US and that has political consequences. Mark, would you agree?

Mark Blyth

I would agree with that. I think that’s a very plausible scenario, and I’m basically a dollar bull in this, but mainly for the following reason. For all the deficits that are in the world, there has to be surpluses, and the surplus countries have to hold dollars. And so long as China can’t internationalize its currency, which is why it’s pulling in, why it’s trying to be this very large quasi-autarkic economy, then there’s nothing for anyone else to hold at a sufficient level. And the Europeans thus far seem to lack the ambition to basically make the euro that type of instrument.

It’s also doubtful — if they can’t manage transfers within the eurozone, becoming a global liquidity pump becomes very difficult for them. They can’t run those deficits the way the Americans can. The Germans will freak out if they have to run deficits on that scale. So, there’s the question of what you swap into, and that’s the main thing that keeps the system going. And there’s no doubt that the digital currency, the central bank-run money in China is incredibly important, not just for surveillance, but for decoupling. I think that’s exactly right.

But what saves the dollar is the natural experiment that the Chinese ran in 2015 when they basically tried to lift controls a little bit and nearly a trillion dollars went — whoosh! — right out of the country. Thereby telling the upper-level administration, you better be a bit more authoritarian because your own investor class would rather live in Vancouver, Seattle, or Australia than anywhere in your own country.

This is what I say to the “gold bugs” that I encounter from time to time. At the end of the day, you’re going to have to turn your gold into money. And you know deep down inside, it’s not going to be renminbi.

Rana Foroohar

[Laughing.] That’s interesting. I mean, that’s a very plausible story. And it’s fascinating because as much as I could believe the story I just told, I could also believe what you just told, which I think says we’re at a big pendulum shift in the world order because I agree that I can’t imagine putting my gold holdings, which are significant, into RMB.

But you know what? If I lived in Shenzhen, I might. You know? I think that there’s a whole new world out there that simply is not oriented towards the US.

Mark Blyth

And as the US increasingly orients toward itself, it doesn’t do what China is doing. It’s not basically trying to invest in itself to boost itself up, to have a very high level of sustainable domestic consumption and also go down a green path. I mean, it’s very significant that Xi has said, we are going to go carbon-neutral, because the Communist Party doesn’t come out and say stuff like that to then not live up to it.

Rana Foroohar

That’s right, that’s right.

Mark Blyth

They never do that stuff. Absolutely.

Rana Foroohar

Yeah.

Mark Blyth

So, this is basically saying to the United States, you guys, you’re going to go down your own particular little plughole if you’re not careful. We’re over here doing our own stuff. Let’s see who follows.

Paul Jay

And if that’s the case, and countries are going to have to choose what side they’re on — and I’m not so sure they really have to but that being said — most of the population of the world gets the climate emergency here. And if China is the one that’s actually leading the way to a carbon-neutral economy and the United States is still paralyzed, at best, and at worst, in 2024 back into climate denial again…

Rana Foroohar

Hundred percent. It’s all about that. And you can say this in so many areas. 5G: the Chinese have for 15 years, 20 years been slowly, methodically taking positions on these wonky standard-setting boards that nobody cared about until they did. And now the whole architecture of 5G, which is basically what’s going to grow the planet and help make decarbonization a reality, is going to be a Chinese-led position. It is incredible.

Just as a side note, I remember being in China over a decade ago and just the rapidity with which things can happen if a policy change is implemented there. For some reason, they decided to get rid of plastic bags, you know, like, the little bodega plastic-type bag.

Mark Blyth

Yeah.

Rana Foroohar

I’m telling you, within 48 hours you couldn’t find a plastic bag in the country. I mean, it was it was incredible.

Paul Jay

Mark, I know you guys got to go, so you get the final word, Mark. Whatever you want.

Mark Blyth

Let’s try to bring it back to Covid and let’s bring it back to the election, and the point made earlier about capacity, if you will. I think a lot of this comes down to the fact that we spent forty years not just making the economy more unequal and more fragile — and this speaks to 70 percent of Republicans believing that the election’s been stolen, at least according to some polls. We’ve really exhausted that kind of “social capital” that comes with well-functioning societies. And there are certain countries in the world, usually small open economies that are quite rich, who manage to do this quite well — mainly because you can’t take the costs of adjustment and shove them onto someone else because the place is too damn small. That’s it. There’s no one to pass the buck to, in a sense.

And what worries me is that we know enter into a world with a climate emergency coming down, whereby the choice for big countries is either a kind of dysfunction and a kind of fragility — the “fragilizing” of their government’s capacity and just an inability to get stuff done — and an angry politics that results versus the Xi solution, which I am not a fan of, which is essentially, you will all be monitored. We will do this, and everyone will jump in 48 hours — and if you don’t, there are serious costs. This is not a fun thing to do either.

Rana Foroohar

Yeah.

Mark Blyth

And then throw it in the middle of all that, if I’m a member of the global investor class — yeah; if only.

Rana Foroohar

[Laughs.]

Mark Blyth

If I were a member of the global investor class, where would I want to go with this? Can I have courts and freedom and all the stuff that I like about the Western system, which allows liquidity and safety and security for my officers? Or do I want something that actually worksthat I’m willing to surrender a lot of those values for? And that’s where that pendulum is.

Rana Foroohar

You know, I’ll just say one thing, Mark, which I think that, Paul, you’ll get a kick out of. The global investor class is so decoupled from what’s happening on the ground. A story that happened to me recently sort of speaks to this. I’m in the process of getting ready to auction my third book, which is about the post-neoliberal world. I was talking to a source about it. And you were mentioning, Mark, that you’re the only person paying taxes. I’m the second “only person” paying taxes. My source was saying, “What a great idea! You know, you should really talk to your agent about whether there’s a way to offshore your advance because then you won’t have to take the 50 percent tax hit in New York.” And I’m, like, this is a book about the post-neoliberal world. [Laughter.] Like, what? What?

Mark Blyth

At that point, honestly, you should have said to him, “My book is called Why You Should Pay Taxes.” [Laughter.]

Rana Foroohar

It’s like, oh, I need to lie down. I’ve got to lie down.

Paul Jay

All right, Rana, Mark. Thanks very much. Let’s do it again soon.

Mark Blyth

Absolutely.

Rana Foroohar

Thanks so much.

Paul Jay

And thank you for joining us on theAnalysis.news podcast.