0:02

The economist that we're going to interview

0:04

today, Clara Matei, she's got this great

0:07

new book out called Capital Order, How

0:09

Economists Invented Austerity and Paved the Way

0:11

to Fascism. The project is to look

0:14

at history in order to get a

0:16

better grasp of what is happening around

0:18

us. And a key word to understand

0:20

what is happening around us is indeed

0:22

austerity. When we are talking about

0:24

trickle-down economics, she's talking about austerity. I guess

0:27

we'll get into that. From

0:33

the home offices of Civic Ventures in

0:35

downtown Seattle, this is Pitchfork Economics with

0:38

Nick Hanauer, the best place to get

0:40

the truth about who gets what and why. I'm

0:49

Nick Hanauer, founder of Civic Ventures.

0:52

I'm David Goldstein, senior fellow

0:54

at Civic Ventures. You

1:01

know, Nick, I've been having to

1:04

get up really early to do

1:06

these podcasts recently because the past

1:08

couple months, you've been in

1:10

London, which is eight hours ahead. So as

1:13

an employee, as a wage earner,

1:15

you have compelled me to get

1:18

up early and do my work. You've

1:20

had to get up at 830 in the morning.

1:25

It's so exploitive. I agree. I

1:28

agree. It's just so

1:30

horrible. You're

1:32

exploiting me because,

1:35

you know, I need this job

1:39

so I can pay for my

1:41

dog's kibble. Well,

1:44

the economist that we're going to interview today,

1:48

Clara Maté, who's an associate professor of

1:50

economics at the New School for Social

1:53

Research, is going to be

1:55

very, very sympathetic to your whining because

1:57

she's got this great new book out called Capital Order.

2:00

how economists invented austerity and paved the

2:02

way to fascism. And a central part

2:04

of her argument is that austerity

2:07

is a strategy for

2:09

making working people

2:12

such as yourself precarious

2:14

so that you cannot, you don't

2:16

have the power to advocate for

2:18

a better set of

2:20

circumstances. And she

2:23

uses a really interesting political analysis to,

2:25

you know, to sort of explore this.

2:28

And it would be really interesting to talk to

2:30

her because I think a lot in a lot

2:32

of ways when we are talking about trickle down

2:34

economics, she's talking about austerity. I guess we'll get

2:36

into that. But in any case, why don't we

2:39

chat with Clara? My

2:44

name is Clara Matei. I'm associate

2:46

professor in the economics department at

2:48

the New School for Social Research.

2:51

I've published the book called

2:53

The Capital Order, How Economists

2:55

Invented Austerity and Paved the

2:58

Way to Fascism. It

3:00

is quite a radical book, but it

3:02

speaks to the time we're in, in

3:04

which there is space for alternative readings

3:07

of history, given that I did win

3:10

the prize of the American

3:12

Historical Association. It

3:14

was one of the books of the year

3:16

on the Financial Times, and it's getting translated

3:18

in over 12 languages. So I'm

3:20

very happy. That's great. Super

3:23

cool. Yeah, you

3:25

hit a sweet spot for me, Clara,

3:27

because I love that intersection of economics

3:29

and history. Economic

3:32

history, that's my sweet spot.

3:35

Before we get to the book, can you

3:37

define austerity for us? Because

3:40

you have a pretty broad definition that's

3:43

really worth unpacking. Thank

3:45

you. The project is

3:48

to look at history in

3:50

order to get a better grasp

3:52

of what is happening around us.

3:55

And a key word to understand what

3:57

is happening around us is indeed austerity,

3:59

which is... a concept that not

4:01

many people use, and when they do

4:03

use it, they usually use it in

4:05

a very limited and

4:07

quite apolitical way. But

4:10

what I want to show is how

4:12

austerity really shapes our lives fundamentally and

4:14

daily, and how we need to understand

4:17

it much more broadly as

4:19

the tool the governments use

4:21

to manage the economy, and

4:24

especially to shift resources away

4:26

from working people in

4:28

favor of savers' investors, so

4:31

that for the majority, life becomes

4:33

more precarious. And

4:35

this means that we become more

4:37

market dependent, and thus we are

4:39

more vulnerable in having to accept

4:41

worse working conditions, which is ultimately

4:43

the basis of how our capitalist

4:46

economy works. So in

4:48

the book, I see how austerity operates

4:50

as a trinity of policies. There

4:52

is fiscal austerity. Civil

4:55

austerity is normally understood as

4:57

cuts in the budget and

4:59

increases in taxes. I

5:01

show how this definition, which is

5:03

the favorite definition of economists normally

5:06

and the one that is used

5:08

in the, if one looks at

5:11

the dictionary, is very limited, because

5:13

it looks at the whole and

5:15

tells you nothing about the winners

5:17

and the losers of austerity. So

5:19

rather than look at budget cuts

5:21

in general, what one has to

5:24

focus on is cuts in social

5:26

expenditures, so cuts in public housing,

5:28

in schooling, in health care, in

5:30

transport, all of those services that

5:32

normal people use to go about

5:34

their daily lives in favor of

5:36

the state spending towards, for example,

5:38

subsidizing private industry, towards paying for

5:40

the war effort, towards de-risking asset

5:42

managers who run the economy. So

5:45

what we see here is not

5:47

about whether the state spends or

5:49

not. It's where the state spends.

5:51

And this is why we can

5:53

figure out that also in the

5:55

United States today, we can

5:57

see that austerity happens even if

5:59

the... budget as such is not decreasing,

6:01

and we are spending lots of money, as

6:03

we know, on war effort

6:06

that is putting a lot of money

6:08

in the pockets of the

6:10

few who invest in the

6:12

military-industrial complex. So this

6:14

is one part of fiscal austerity.

6:16

Then we have taxation. Again, it's

6:18

not about increasing taxes in general.

6:21

It's about increasing taxes on the

6:23

people. So it's regressive taxation, increasing,

6:25

for example, consumption taxes, while

6:27

we are cutting structurally taxes on

6:29

the rich. We know that in

6:31

this country we have an allergy

6:34

for taxing capital, for taxing inheritance,

6:36

for taxing all forms

6:38

of accumulated wealth. And

6:40

this is what austerity is about. It's

6:42

again about shifting resources away from the

6:44

people and incentivizing the few. This

6:47

fiscal austerity goes hand in hand with

6:49

monetary austerity. And monetary austerity is what

6:51

we are quite used to hearing when

6:54

we look at the news or read

6:56

the newspaper, because it's been all about

6:58

interest rate hikes lately. And

7:00

interest rate hikes appear as this neutral thing

7:03

experts do on the Fed and so distant

7:05

from us. But what I want to show

7:07

is that actually increases in interest rate mean

7:11

that you are making borrowing

7:13

more expensive, which has two

7:15

consequences. The first more immediate is

7:17

as working-class consumers who have a

7:19

hard time getting to the end of the

7:22

month, borrowing money becomes more

7:24

expensive. But it's even worse

7:27

because it hits us as workers, because

7:29

what interest rates going up do

7:31

is slow down the economy. We very

7:33

well know that the reason why the

7:35

Fed needs to increase interest rates is

7:37

indeed to impact the labor market. If

7:39

you slow down the economy, there's less

7:42

job openings, there's actually firings, and the

7:44

unemployment level goes up. More

7:46

unemployment means greater disciplinary

7:49

power over working people who again

7:51

are in competition with one another

7:53

and will have to accept lower

7:56

wages. And this will defeat organized

7:58

labor right now. We see in the the United States,

8:00

there's lots of mobilization, of course, monetary

8:02

austerity works to defeat these

8:05

wins that workers are

8:07

getting. And finally, we

8:09

have industrial austerity, which is

8:11

about the state directly intervening

8:14

to curb the bargain power of the workers by

8:16

privatizing, so firing public employees and

8:18

setting them off in

8:20

the private competition, deregulating labor, making

8:22

it more precarious, and ultimately, forms

8:24

of also wage suppression. And this

8:26

trinity works together. So what I

8:29

show is how they actually operate

8:31

to reinforce one another. And once

8:33

more, the message is that fiscal

8:35

and monetary issues, which we think

8:37

to be something so much

8:39

separate from us really hit

8:41

us deeply, primarily as workers.

8:43

And it also hits our capacity

8:46

to imagine alternative societies in which to

8:48

live in. So it's

8:50

super interesting, I would say that we're

8:53

substantially in agreement with the basic thrust

8:55

of your argument, we here tend to

8:57

think of it of the problem in

8:59

a slightly different way, and characterize it

9:01

in a slightly different way, what you

9:03

call austerity, we in many ways call

9:05

trickle down economics, because it's just

9:07

sort of the popular instantiation of

9:10

it. You know, what you did is

9:12

tried to tease out the history of

9:14

this, using England and Italy

9:17

as examples. Can you tell us what

9:19

you learned from that analysis? What

9:21

you learned from the analysis of

9:23

history is that austerity acts as

9:26

a very powerful weapon, especially

9:28

moments when there is demand

9:30

from the general public for

9:33

social and economic transformation. So

9:35

what you see again is that austerity, unfortunately,

9:38

cannot be reduced to a policy mistake from

9:40

the part of the legislator. And

9:42

this is actually, unfortunately, weakness of

9:44

a lot of Keynesian analysis is

9:47

to reduce austerity to a policy

9:49

mistake. Austerity, unfortunately, is extremely successful

9:52

in operating to disempower our

9:55

imagination for how to organize society in

9:57

a more democratic in a way that

9:59

actually satisfies and fulfills our

10:01

needs and instead in

10:04

favor of a society that

10:06

is meant to fulfill

10:08

the priorities of capital accumulation.

10:10

So this is the first

10:12

thing we learned is that in 1919 it

10:15

was a moment in which there was extreme

10:17

demands for a real radical

10:19

change of the fundamentals of

10:21

our economy and especially the

10:23

objective was to challenge wage relations.

10:25

So again the fact that

10:28

our society is based on the relation

10:30

of exploitation meaning that very

10:32

simply that the workers produce

10:34

much more value than the value they

10:36

put in their pockets at the end

10:39

of the month and this is indeed

10:41

according to classical political

10:43

economy analysis which I

10:45

participate in this is

10:48

the fundamental element for

10:50

economic growth under capitalism. So it was

10:52

after the First World War that actually

10:54

wage relations were challenged in favor of

10:57

forms of actually democratic management of

10:59

production and distribution in which workers

11:01

would have a central role in

11:04

actually running their own activity and

11:07

in knowing where the output of their

11:09

labor went. So I look

11:11

at the cases of workers councils in

11:13

Italy with Antonio Gramsci who's a big

11:16

big name in the idea

11:18

of actually cultivating novel institutions

11:21

and of course all of the

11:23

cases in Britain with the guild

11:25

socialist forms of workers management and

11:28

austerity there we see emerges really as

11:30

a very very powerful way for

11:33

experts siding with the governments to

11:35

say I'm sorry what you're doing is completely

11:37

impossible we want to reimpose the capital order

11:39

as we know it and again I stress

11:42

the title of the book is the capital

11:44

order to show that we tend to think

11:46

of our economy as like the only economy

11:49

possible and is a very again neutral object

11:52

out there that we just have to accept what

11:54

I want to show is actually our economy is

11:56

based a capital as

11:58

money presupposes the

12:01

capital order as the social relation of

12:03

subordination of the majority. And

12:05

so what we see is that

12:07

historically, economists sided with Benito Mussolini

12:09

in Italy with the first founding

12:12

father of fascism in Italy. But

12:15

not only they found other ways

12:17

to implement austerity that were quite

12:19

authoritarian. In Britain, they went with

12:22

independent central banks, which is

12:24

something that we take for granted,

12:26

but history shows us that actually,

12:28

for example, central bank independence was

12:31

a very, very important battle for

12:33

economists in order to safeguard the

12:35

economic sphere away from people that actually wanted

12:37

to participate in economic decisions. It was the

12:39

best way to tell them, I'm sorry, this

12:41

is a sphere that does not belong to

12:44

you. We will take decisions. And

12:46

of course, maybe we can get into it later,

12:48

the point that austerity

12:50

policies require very sturdy

12:53

economic justification. And what I show historically

12:55

is that the type of theory we

12:57

take for granted today, you could call

13:00

it trickle-dine economics if you like, has

13:02

a precise history, which is a history

13:04

that is deeply connected with the class

13:07

struggle of the time

13:09

in which indeed this neoclassical framework was

13:11

emerging. And what you

13:13

see is that it was emerging,

13:15

not presenting itself as pure economics,

13:18

as something completely above parts, but

13:20

really disguising, and

13:23

not even so much disguising, this profound

13:25

classist attitude of having actually to

13:27

discipline and to tame working people

13:30

who are indeed demanding greater say in how

13:33

to run the economy. I see

13:35

attention at the heart of

13:37

your thesis, which is that austerity

13:41

is a tool for protecting the

13:43

owners of capital, capital and

13:45

their owners. On the other hand,

13:48

it doesn't necessarily preserve capitalism. We

13:51

saw in the United States during the

13:54

New Deal and of course in Europe

13:56

as well, in the three decades following

13:58

World War II. too, there was a

14:01

treaty between labor and capital, and

14:03

there was this general

14:06

societal agreement that

14:08

we needed a social welfare

14:10

state in order to fend

14:12

off, protect capitalism, market

14:15

capitalism from the

14:17

threat of communism and perhaps a

14:20

return of fascism.

14:23

Is austerity ultimately

14:26

self-defeating for

14:28

capitalism? So thank you. I

14:31

think this is a very, very important point is

14:33

that I think austerity exposes

14:35

how our economic system, namely

14:38

capitalism, is not a system

14:40

with a vision, not

14:42

a system with a long-term vision, but

14:44

it is a system that has immediate

14:47

priorities. And the first priority

14:49

is indeed to make sure that people

14:51

go to work. Every day for

14:53

who age? And this seems stupid, but

14:56

we see even in this moment as

14:58

we speak that it is a fear

15:00

of legislators and experts that

15:02

potentially people start thinking that

15:04

they don't want or don't

15:06

have to go to work for low wage.

15:08

The great resignation was really a problem. And

15:10

this is like part of the fact that

15:13

this does indeed increase the bargaining power of

15:15

those who do go to work. That

15:17

creates the sense by which actually the priority

15:20

of our system is to

15:22

stabilize wage relations. So I would say

15:24

that it's a system without a vision, but

15:26

it is also a system in which there

15:28

are priorities. And that is the first priority

15:30

because it is indeed the fundamental of the

15:32

system. So that is the first

15:35

point is that whatever it

15:37

takes to ensure

15:39

that wage relation. And after the first World

15:41

War, what we saw was that a moment

15:43

actually I think in a way similar

15:45

to today, of course, much more radicalized in

15:47

which people were in a

15:49

moment of greater bargaining power.

15:52

So could indeed push against

15:55

this wage relation. The priority there was

15:57

indeed to make sure that that didn't

15:59

fall apart. And it was a priority that

16:01

also Keynes had, right? Keynes did indeed in my book to

16:03

show that actually in 1919, 1920, the fear of Keynes was

16:08

the breakdown of the only possible

16:10

civilization that he could imagine, which

16:13

was bourgeois capitalist civilization, right? So

16:15

that was the priority. Now,

16:17

as you say, in the long

16:19

run, austerity, I do think, shows

16:21

how in general capitalism is

16:24

quite a self-defeating system. If by

16:26

self-defeating we mean that ultimately the

16:28

contradiction between the detachment, between

16:31

the objective of maintaining profit

16:33

rates high and maintaining the

16:36

profit motive alive with respect

16:38

to actually the satisfaction of

16:40

people's needs and ecological, for

16:43

example, requirements to sustain

16:45

us as humans, there is clearly

16:47

a detachment there, right? And so

16:49

we do see that ultimately the

16:52

driver of austerity is not allowing

16:54

us to think

16:56

creatively about the

16:58

issues that will ultimately potentially

17:00

destroy us as humans.

17:03

And I think you see this also very clearly

17:05

in the fact that the IMF has constantly imposed

17:08

austerity programs on

17:10

south of the globe countries, and these

17:12

south of the globe countries are now

17:14

defaulting on their debt, right? And this

17:16

is ultimately a moment in

17:18

which there is a clear tension, as you

17:20

were pointing out, between

17:23

the need to enforce the wage

17:25

relations and the priority of capital

17:27

accumulation, and in

17:29

a way, what are human necessities

17:32

of survival, and

17:35

actually really like physical

17:37

survival. So definitely, I think

17:39

austerity exposes, the thesis that I would like

17:41

to propose is that austerity is not a

17:44

bug in capitalism, it's quite structural to it.

17:46

This is why I'm now writing a second

17:48

book on the golden age of capitalism after

17:51

the Second World War. But

17:53

if you start thinking of austerity

17:55

as indeed a feature of capitalism,

17:57

this does two things. One,

18:00

it avoids the kind of fake

18:02

understanding that we can imagine the

18:04

state as being against the market,

18:07

right? This idea by which our

18:09

society is either market or the

18:11

state. Actually you see that the

18:13

state under capitalism actively intervenes to

18:15

fortify to protect the market. But

18:17

two, what this does

18:19

is ultimately to tell you

18:21

that if austerity has no

18:23

interest in the long run

18:26

maintenance of humans alive, this

18:28

is true of capitalism also, right? So

18:30

it exposes why we really should get

18:32

more imaginative about how to organize

18:34

our society. You know, one of the

18:37

things that you mentioned was that

18:39

austerity requires a

18:42

pretty elaborate economic justification.

18:45

And in our own work, we

18:47

don't just run a podcast, we're also political

18:50

activists and do policy work

18:52

and intervene. As

18:55

the country went into

18:58

the pandemic, the central goal of

19:01

our team at Civic Ventures was

19:03

to head off austerity

19:05

in the state of Washington, which

19:07

is where we operate and what

19:09

had happened before in other downturns,

19:11

although not as clear. And

19:14

so we mobilized to try to

19:16

kill the idea that the

19:18

best approach for the state would be

19:20

an austerity budget, which by the way

19:23

we call just trickle down economics in

19:25

budget form, right? It's just another

19:27

way of making rich people richer and everybody else

19:29

poorer. And we did it

19:31

very successfully actually. And

19:34

I think we can take a lot of credit

19:36

for not letting the state slip

19:38

into that old terrible habit. But

19:41

mostly by demonstrating that

19:43

it's the opposite of

19:46

an austerity budget is actually the opposite of what

19:48

you want to do if you want to sustain

19:50

your economy in a downturn, the

19:53

worst possible thing you can do

19:55

from an economic perspective. And

19:57

that carried the day and I think we're better

19:59

off as a consequence of it. So

20:01

can you explain a little bit more

20:03

about what the usual economic justifications are

20:06

for austerity and how that's played out

20:08

in the past and is playing out

20:10

now? Perhaps before I

20:12

do that, I could comment on what

20:15

you said. I think the power of

20:17

focusing on austerity capitalism

20:19

is that it gives a,

20:21

it emphasizes how our economic

20:24

system is primarily based on

20:26

compulsion, right? How austerity ultimately

20:28

is a way to repress people's

20:31

livelihood in order to compel them

20:33

to maintain their conditions as wage workers. And

20:36

I think this is very important because in

20:38

a way, trick or dime economics, which is

20:40

a perfect way of saying it, I think

20:42

though, perhaps doesn't stress enough this

20:45

element again of a fact

20:47

that there is, it's not

20:49

that anything is spontaneous here.

20:51

There's actually a public intervention

20:53

to shift resources away

20:55

from people in the hands of the few.

20:57

And this creates a sense by which the

20:59

market is not at all the domain of

21:01

freedom, right? We need to overcome the idea

21:03

that there is something as freedom of choice

21:05

in our economy. And this, I think is

21:08

why stressing the compulsion element, the

21:10

economic compulsion, which is typical of

21:13

our system is so, so important. So

21:15

what is the economics behind

21:17

austerity? That is very

21:20

important because I think it

21:22

again exposes how- Well, I mean, can

21:24

we just come back to that? I mean, I just

21:26

want to push on that a little bit.

21:28

I mean, for as long as humans have

21:30

had societies, people have been compelled to work

21:33

from our earliest days as hominids. You

21:37

didn't work, you didn't eat, you didn't eat, you didn't

21:39

live. So a compulsion

21:42

to work is

21:44

not an invention of capitalism.

21:46

Now, I'm in violent agreement with

21:48

you that by impoverishing the

21:51

majority of citizens, by for example,

21:53

suppressing the 50 years of wage

21:55

suppression we've just lived with through

21:57

the neoliberal era in the United

21:59

States. It's a way

22:01

of depowering working people and making

22:03

it harder for them to advocate for

22:06

their own interests. It's

22:08

a way of making it harder for them

22:10

to participate in the political process, all of

22:13

that stuff I'm totally in sync with you

22:15

on. But to be clear,

22:17

there is no existing arrangement either now

22:19

or in the history of planet Earth

22:22

where people weren't pretty compelled to

22:24

take action to improve their

22:26

circumstances. So surely

22:28

we could draw a distinction

22:31

between exploitation and

22:33

the necessity of engaging

22:36

in moving your

22:38

own circumstances and the circumstances of

22:41

your family and community forward. Yes,

22:43

definitely. And I think that's the key part, right?

22:45

Is that indeed what happens

22:48

is that for how

22:50

we study the

22:52

history of humanity, the

22:54

way that a lot of history has

22:57

been done is to conceal

22:59

what is the historical specificity of

23:01

capitalism, right? And there's a lot

23:04

of effort in people like Ellen

23:06

Minskenwood, for example, that

23:08

is, of course, a scholar of

23:10

Marx, who really wants to stress

23:12

we need to figure out what

23:14

is specific of our socioeconomic system,

23:16

because otherwise we end up internalizing

23:18

the sense of the end of

23:20

history by which capitalism ultimately

23:23

has always been and always will

23:25

be because somehow it has nothing

23:27

specific to it. It's just an

23:29

evolution of who we are as humans, right? So

23:32

perhaps it's important to stress that what I

23:34

meant is, of course, any

23:36

human has to work. And that's actually

23:39

the first part of Marxian analysis is

23:41

the idea that economics should be about historical

23:43

life processes, because actually what matters

23:45

for us is our life

23:48

experience. And as life experience, the first

23:50

thing is to indeed make sure

23:52

that you can make a living. But

23:54

the point is that the type of

23:56

economic compulsion that is specific to capitalism

23:58

is an economic compulsion. by which

24:00

we are not agents anymore of

24:03

our work, right? It's very different.

24:05

The fact that economists use the

24:07

example of Robinson-Cruisway has been widely

24:09

criticized by Marx as a typical

24:11

form of bourgeois ideology because here

24:13

the idea is Robinson-Cruisway has nothing

24:15

to do with how actually we

24:18

live under capitalism because

24:20

Robinson was someone that was

24:22

indeed eating his own food

24:25

and using the products of his own

24:27

labor, right? Well, in

24:29

our society, what happens is that we are

24:31

compelled to go work, to get a job.

24:34

It doesn't matter what job we do, right? The

24:37

idea is that we need to just

24:39

get a job because what we need

24:41

is money in our paycheck in order

24:43

to actually consume the basic things we

24:46

need to survive. So this is what

24:48

happens is that under capitalism, we are

24:50

compelled to go sell our capacity to

24:52

work and then we are not in

24:54

control. And this is the reality

24:56

for the majority of people in the

24:58

planet. We are not able to control the

25:01

activity of our labor nor the output of

25:03

our labor. And this is indeed the

25:05

key of economic growth under capitalism because

25:07

it's the output that we don't control

25:09

that is actually surplus value which is

25:11

what keeps the system going

25:14

and why capital accumulation happened in the

25:16

first place, right? So this for me

25:18

is very, very important is that sure in

25:20

any society people have to work to exist,

25:22

of course but the fact that we in

25:25

our society have lost agency over

25:27

the production of our material

25:30

resources is what matters to say,

25:32

listen, capitalism is fundamentally a non-democratic

25:34

system. It is compatible with what

25:37

we could say, electoral democracy, but

25:39

this doesn't mean that it is

25:41

compatible with actual democracy in the

25:44

workplace, right? And this is exactly

25:46

the point that in moments in

25:48

which people start demanding for greater

25:51

democracy in the workplace meaning greater

25:53

rights, meaning greater agency meaning actually

25:55

potentially having a say over the

25:58

output and how the world. works.

26:00

This is moments in which

26:02

austerity needs to come back

26:04

with a vengeance and is

26:06

wielded very powerfully

26:08

to impede these alternatives

26:10

to our economic system from emerging. Okay.

26:14

Can I ask a clarifying

26:16

question? Yes. So just

26:18

to reiterate, I think both Goldie

26:20

and I would be in agreement with you that one

26:25

of the principal challenges of

26:28

modern capitalism is

26:31

that it certainly lasts

26:33

40 or 50 years is

26:35

that we have restructured our

26:37

policy frameworks in ways that

26:40

have shifted power from working

26:42

people to the extent that they had

26:44

any more to capital.

26:47

And as a consequence, a

26:50

greater and greater share of the

26:52

value created by the society is

26:54

captured by a diminishingly small group

26:57

of people at the very tippy top, right?

26:59

This is the story of the last 50

27:01

years of neoliberalism. And that in

27:04

order to fix this system, we have to find

27:06

a way to re-empower

27:10

working people so that

27:12

they can make a bigger and

27:14

better claim on the value created

27:16

by the society. And our view

27:18

is that there's about a $2.5

27:20

trillion swing at minimum over

27:23

the last per year from

27:26

working people to capital that at

27:28

a minimum we should try to

27:30

reverse. That policy success from our

27:32

point of view would be to

27:35

pre-distribute about $2.5 trillion a year from the

27:37

owners of capital to working people

27:40

in the United States. It's a lot of money

27:42

per family per year. But

27:44

that is very different from

27:46

a democratically organized

27:49

workplace because a

27:51

democratically organized workplace will

27:54

fail. There are no

27:56

examples on planet earth of democratically

27:58

organized workplaces that that can compete

28:01

with hierarchical organizations

28:03

because hierarchical organizations are

28:06

infinitely more nimble than democratic

28:09

ones. So are you talking

28:11

about the former or the latter? And

28:13

now, of course, I mean I just want to

28:15

say that it's not just the money that

28:17

counts in relationship between capital and labor. It's

28:19

how well you're treated at work and the

28:21

hours you work and if –

28:23

like all the things, right? There

28:25

are so many ways in which a job that

28:28

is well compensated could still be awful

28:30

and exploitive. But anyway, I just –

28:33

can you respond to that? Yes.

28:36

So, see, there's

28:38

lots to be said here. I'm

28:40

trying to figure out what

28:42

to prioritize. Just

28:45

remind yourself how conflicted Nick is as

28:47

somebody who is one of those capitalists

28:49

at the top who

28:52

is very self-conscious about how much

28:55

misery he's imposing on the rest

28:57

of us. Well,

29:01

so I think this is

29:03

the power of historical analysis

29:05

is that really it tries

29:07

to debunk the idea by

29:09

which anything that is not

29:11

hierarchical relations of production fails.

29:14

And I think actually the first

29:16

part of the book, the first

29:18

part of my capital order is

29:21

really about giving voice to these

29:23

experiments and of course, though, showing

29:25

how the difficulty is to survive,

29:27

indeed, under the pressure of

29:29

the elites trying to re-impose what for them

29:32

is the system that best works to

29:35

increase the profit rate. So, the question is

29:37

failure according to what criterion

29:40

of course is the criterion is

29:42

greater capital accumulation. Capitalism

29:44

has done pretty well in that. The point

29:46

is that if we consider like actually

29:49

human needs potentially as the benchmark

29:51

that economists don't use, then

29:56

failure would start rethinking

29:58

our concept of failure. But I think. what

30:00

really is interesting here is also to realize

30:02

that any type of push, even

30:04

just the more, the more

30:06

moderate push for greater benefits in the

30:08

workplace without wanting to challenge the wage

30:11

relation itself, right, comes as a form

30:13

of class struggle, right? So this is

30:15

what I think is important is that

30:18

historical political economy can have us realize

30:20

that the economy is not

30:22

something that is, again, an object

30:24

of neutral analysis, it

30:27

is all about social relation, political

30:29

relation and class relations. So

30:31

this is super important, right? So any

30:33

thing you want to do, also your

30:35

proposals that were very important in order

30:37

to push back against the austerity mechanisms

30:40

come out of political pressure, right? And

30:42

so the point is, how is it

30:44

that you provide people with greater agency

30:46

and understanding what are the potentials that

30:49

are out there? And I think history

30:51

really helps in this, while at the

30:53

same time, it's also very important to

30:55

see how economics as a discipline has

30:57

played the role to completely

31:00

forestall our political imagination to

31:02

give us a sense by which anything that

31:04

is not capitalism is due to failure. And

31:06

to give us a sense that capitalism isn't

31:08

really even a thing, because it's just the

31:10

world. And there's no

31:12

other possible no best possible

31:14

world, or like better than

31:17

the capitalism world. And so this, I think is

31:19

what I tried to expose in my work is

31:21

that if we look at the origins of the

31:23

type of textbook economics that we take for granted

31:26

as students of economics today, and the

31:28

type of economics that is even taught in high

31:30

school, yeah, right, this type of

31:32

economics that is ultimately

31:34

in its methodological roots

31:37

disempowering of our political

31:39

imagination, because it is all based on

31:41

the idea that we are all homo

31:44

economic as we are all rational economic

31:46

agents, that the market is meant to

31:48

actually maximize our choices

31:50

in our utility, you see there is a

31:53

complete subversion of what the market actually is,

31:55

because in a tradition, you would say, No,

31:57

the market is not the space for action.

32:00

fulfillment of people's needs, it's actually

32:02

the place where capitalists fight for

32:04

the realization of profits. So

32:06

you see how there was a completely different

32:09

analysis that can come out if you

32:11

take history seriously. And

32:13

this is exactly what I try to show

32:15

is that the type of economics that we

32:17

think is neutral and that thus we accept

32:19

as, you know, okay, it's a bitter pill,

32:21

we have to increase interest rates, it's the

32:23

best, the only way to fight inflation, we

32:25

have to cut social expenditures, there is no

32:27

money. Tell us this rhetoric that we hear

32:30

over and over again and that we accept

32:32

as given by experts. This we need to

32:34

rethink and history helps us reveal

32:37

that actually it is a profoundly

32:39

classic project to take away power

32:41

from people. Yes. And

32:43

if I could just say on this, Claire,

32:46

we're in violent agreement. I mean, nothing is

32:48

more maddening to me than the idea that

32:50

the way, by the way, we do not have

32:52

inflation, we have higher prices as a consequence of

32:55

a global supply chain shock. Education

32:57

is a different thing than that. So raising

32:59

interest rates is effectively the opposite of what

33:01

you should do to address that problem. But

33:04

put that aside, the idea that the only

33:06

way that we can, you know, help the

33:09

economy is to throw millions and millions of

33:11

families out of work in

33:13

order to crater the economic system to

33:15

bring prices down is just such

33:18

an abomination when you could just

33:20

as easily say, let's take the

33:22

trillion dollars a year in stock

33:24

buybacks corporations are doing and redistribute

33:27

it to people in the form

33:29

of wages. Right? Like

33:31

those are alternatives to addressing

33:34

the issue of prices. So

33:36

this, this I think raises a

33:38

very simple two part question, Clara.

33:41

One is, is there any

33:44

historical evidence that

33:46

the claims of austerity

33:48

proponents have ever

33:51

been delivered that, you

33:53

know, we've had lots of natural

33:55

experiments with different countries going

33:59

different paths. has austerity

34:01

ever delivered more than the

34:03

opposite and to i

34:06

think i know the answer but if it hasn't

34:09

are the economist the austerity

34:11

economists. Are they on

34:13

the level i mean are

34:15

they were or do they

34:17

actually believe what they're selling i

34:19

do think that this is what's

34:21

very interesting is not to reduce

34:24

everything to bad intentions right actually

34:26

what is much more. fascinating

34:28

yes, yes, scary is the. Point

34:31

that the people the experts that tell you

34:33

that we have to increase interest rate they

34:35

truly believe in the power

34:37

of their models right and in their

34:39

truth of their models so also I

34:42

think this uncovers a whole. Whole

34:45

aspect of which I tried to

34:47

teach my students, which is all about what is

34:49

the self understanding of the

34:51

economist in his role as X right

34:54

and the idea that ultimately the expert

34:56

has the. The authority

34:58

to dominate society and to

35:00

impose sacrifice on others obviously

35:02

never on himself because he's. The

35:07

fact that he has the power to impose sacrifice

35:09

another in the name of

35:11

fixing the economy, this is

35:14

something that is violet is

35:16

classes and we need to understand it as

35:18

such because I agree with you that the

35:21

problem here just take inflation. One

35:23

of the very important ways in which economists

35:25

go about their capacity to kind of dumb

35:27

us all is to give us a sense

35:30

by which they're only doing economics and there's

35:32

nothing political here right and so this is

35:34

part of what i show is actually that

35:36

austerity functions well when you're able to be

35:39

politicized. Quote unquote the economics here

35:41

so inflation for example is taken as

35:43

a purely economic phenomenon but anyone knows.

35:46

Including someone like kane that inflation

35:48

is typically something that you

35:51

understand how the political and economic cannot

35:53

be separable for two reasons what is

35:55

that the reason why there are increases

35:58

in prices is not an automatic. like

36:00

deterministic fact, it comes out of

36:03

the political choice of

36:05

those who actually run production,

36:07

the large corporations that decide to

36:10

actively increase prices, right? Price increases

36:12

are decisions taken by the

36:14

large corporations that actually have

36:16

an impact on global prices.

36:18

So this is the first thing is

36:20

that again, it's not, it's something that

36:23

happens through people and through decisions that

36:25

come from those who have the power

36:27

over the economy and over production, because

36:29

they actually lead that. Two, inflation

36:31

is fundamentally a political problem also

36:33

because it gets people pissed off,

36:36

right? So what is problematic for

36:38

economists is the fact that one

36:40

is inflationary moments are usually moments

36:42

of deeper political and social

36:44

contestation. People go in the streets, people

36:46

strike more, people get fed up and

36:48

do not believe that our system is

36:50

the only and best possible system anymore,

36:52

right? There's a breakdown of the dominant

36:55

ideology, if you like it as a

36:57

moment of breakdown. What are

36:59

the priorities here? The priorities are not too much

37:01

about explaining the real reason why prices are

37:03

going up right now. As you

37:05

were pointing out, Nick, right? Like that we should

37:07

understand why is it prices are going up. And

37:10

there's a lot of research that shows that it's

37:12

actually the huge profit margins that are

37:14

driving it, right? So again,

37:17

how political that is, because again, it's

37:19

a decision from the part of large

37:21

corporations to do that to get more

37:23

profits. But instead of thinking about the

37:25

actual cause of inflation, economists are all

37:27

about the solution. And guess what? The

37:29

solution is a solution that immediately goes

37:32

to what their priority is, which again,

37:34

I think is making sure

37:36

that labor relations don't get messed

37:38

up by inflationary pressures, right? We need

37:40

to make sure that people lose their

37:43

jobs so that the labor market is

37:45

less tight, meaning that people lose their

37:47

bargaining power. So again, I think if

37:49

we see, I look at what

37:51

happened in 1920 in Britain, and it exactly the

37:53

same thing that is happening now, even if in

37:56

1920, they were much more

37:58

successful. Indeed, if you look at the data, soon

38:00

as they induced the recession, a recession

38:02

was a short-term cost for a much

38:04

more structural gain, which is that of

38:07

securing industrial peace. And

38:09

this, I think, is ultimately the same reasoning

38:11

that is happening now in the heads of

38:13

the experts. And again, it's not because of

38:15

bad intentions that their models tell them. The

38:18

deep reality of capitalism, which is the

38:20

system works when people are

38:22

taped and accept worse working conditions. This

38:24

is when the system works, unfortunately.

38:26

All of this reflects a mindset.

38:29

Again, which we call – trickle down

38:31

– economics or neoliberalism or whatever it

38:34

is that I think most economists sort

38:36

of intuitively accept as real is that

38:38

anything good that happens to rich people

38:41

or corporations is an

38:43

unalloyed good. There's no

38:45

profit margin too high, no

38:48

bonus too high. But anything good

38:50

that happens to people at the

38:52

bottom or middle of the economic

38:55

distribution, in any of those

38:57

cases, we must affirmatively prove that doing something

38:59

for those folks will create no harm.

39:01

Right? It's just this wacky

39:03

– There's always a big trade-off now. Yeah, yeah. There's

39:06

always this crazy upside-down

39:09

view of what's important and

39:11

how the economy works. And I mean, we're

39:13

talking about the same thing. This is just

39:15

the central problem of

39:17

how economists conceive

39:19

of how the world works

39:21

and cause and effect right now. And

39:24

it is what's making everybody so

39:26

angry and crazy. Yes. So,

39:28

Claire, it's been fascinating. A couple of

39:31

final questions. So the first, the benevolent

39:33

dictator question. If you were

39:35

in charge of the world, what

39:37

would you do? I would make sure

39:40

that everyone had at least a home

39:42

to live in and food

39:44

on their table and that war would

39:46

stop, which is clearly something that capitalism

39:48

cannot deliver in its current form. Neither

39:50

of those three objectives are happening right

39:52

now. And so, yes, that's what I would

39:54

say. But if you

39:56

house, feed, clothe everybody. body

40:00

and eliminate war, you're only going to

40:02

hurt the people you're trying to help.

40:05

That's what I've been told. Absolutely.

40:08

Absolutely. And going back to

40:10

the point we were making before, I think

40:12

this is why history is useful because if

40:14

you remain trapped in the logic of economists,

40:16

they might even persuade you, right?

40:18

So instead, if you expose what

40:21

they do concretely in order to

40:23

maintain their power, for example, fighting

40:25

with Benito Mussolini fascism and

40:28

actually supporting torture and beating

40:30

a political

40:33

opposition in the name of their economic models,

40:35

there's where I think this is something that

40:37

could actually be empowering for people because they

40:39

feel, okay, then we could have our say

40:41

and not leave it to the expert. And

40:43

I think this is really important. And

40:46

one final question is, why do you do this work? Exactly

40:49

for what I just said. I do

40:51

this work because I really believe that

40:53

there's so much more space for democratic

40:55

participation in how we run our society

40:57

and that there's so much demand for

40:59

this. There's eagerness. I was just in

41:02

Sweden the other day, a country that

41:04

we think of as social democracy, and

41:06

they've been tormented by austerity since the

41:08

90s. And

41:10

when you tell people that actually they shouldn't just

41:12

leave it in the hands of the expert

41:14

and they should take charge and understand how

41:17

our economic system works and understand how

41:19

they could improve it, that actually

41:21

institutions can change, that our economic

41:23

system can really change. They

41:26

people really, really feel strong

41:29

and feel motivated to participate in

41:31

changing our world. And I'm just

41:33

giving my small contribution through scholarship

41:36

that tries to accelerate these social

41:38

transformations. I'm surprised to hear

41:40

that you're not doing this work because you

41:42

are compelled to earn a

41:45

wage to pay for your food and housing.

41:47

Well, I'm compelled. That's

41:50

also true, but that part of compulsion I

41:52

satisfied by my teaching task,

41:55

which I ultimately I know we are

41:58

in a better situation because I actually like my job.

42:00

But definitely I feel a lot of compulsion from my

42:02

institutions in the sense of I have a lot of

42:04

duties that go beyond the

42:06

research. Well thank

42:09

you very much for joining us today.

42:11

Clara, super fun. Congratulations

42:14

on the new book and best

42:16

of luck to you. Thank you so much. Talk

42:18

soon. Well

42:22

Goldie Clara is really smart and

42:25

like you I'm sure I'm very sympathetic to

42:27

lots of our arguments. I think some of

42:29

it may be a bridge too far for

42:32

me. Right, as

42:34

you know I'm a

42:36

little more sympathetic because

42:39

well not a Marxist.

42:42

I have a lot more

42:44

sympathies towards the this sort

42:46

of class analysis than

42:48

you do. I'm also

42:51

a lot less protective of the capitalist

42:53

order because it hasn't worked as well

42:55

for me as it has for

42:57

you. You

43:00

know you and I have been spent

43:02

the last five years together whatever is

43:04

writing a book which seeks to demolish

43:06

capitalism. So we're in violent you know

43:08

like we're in agreement with Clara that

43:10

capitalism as it exists has

43:12

to go. It had its role in human

43:14

societies I think for the last hundred or

43:16

two hundred years but it

43:19

no longer is up

43:21

to the challenge. The challenge

43:23

of inequality, the challenge of

43:25

climate change, the challenge of

43:27

the coming demographic transition. You

43:29

know capitalism is insufficient

43:33

to deal with the great problems

43:35

modern societies face and has to

43:37

go. Right, you know part of

43:39

her thesis is this idea that

43:42

capitalism presents itself as inevitable. That

43:44

this is the end of history

43:46

that the market capitalism is the

43:49

only system and all we can do is

43:51

figure out how to preserve it and

43:54

you know that's her thesis that

43:56

they use austerity to to preserve

43:58

this order by disempowering

44:00

workers to the point where they

44:02

really can't fight back against it.

44:06

I think Nick, what's interesting to me

44:08

is that there is so

44:10

much overlap in her

44:12

description of austerity, her

44:15

definition of austerity and our

44:17

definition of trickle-down economics, which

44:19

by the way, when we

44:21

started this almost 10 years

44:23

ago, nine and a half years ago, and

44:25

we started working together, we

44:27

had some pushback from

44:29

allies because we were using

44:32

an expansive definition of trickle-down.

44:34

Correct. That's right. A

44:36

lot of people thought of trickle-down as only on

44:38

the tax side. That's right. Tax cuts for the

44:40

rich. You cut taxes for the rich and the

44:43

economy will grow and the benefits will trickle

44:45

down to everybody. And we

44:47

used this trinity, just like

44:50

she did. Right. Yeah.

44:52

That's right. Yeah. So,

44:55

the tax cut for the rich, it's deregulation

44:57

of the powerful and

44:59

it's wage suppression for everybody

45:01

else. Yeah. And

45:03

that aligns very well with

45:05

her breaking down of that

45:08

fiscal austerity, which

45:10

is both cutting back spending

45:12

and shifting the tax

45:14

burden from the wealthy to everybody

45:16

else, that monetary

45:19

austerity, which is what we're seeing

45:21

now with the higher interest rates,

45:23

which are explicitly meant to drive

45:25

up unemployment. We've talked about that

45:27

many times. Yeah. That

45:29

what the Federal Reserve is trying to do is

45:31

put people out of work so

45:33

as to drive down wages so they won't

45:35

have that inflationary pressure

45:38

on the wage side. And

45:40

what she says, that industrial austerity,

45:43

which is this direct intervention or

45:45

often lack of intervention by the

45:48

state in terms of regulating the

45:50

workplace. So really, in

45:52

a way, we've described the

45:54

same thing, but you and I, we

45:56

haven't really thought about it in terms

45:59

of... being explicitly

46:01

an austerity. Yeah,

46:04

although austerity to us

46:06

is just trickle down in budget form. Anyway,

46:08

really interesting conversation with Clara.

46:11

Again, all these efforts are on

46:13

the right track. I'm not

46:15

sure if I would go all the way to where

46:17

she is, but our own work

46:20

takes us a long way

46:23

there, right? Right. We

46:26

recommend you read her book, The Capital

46:28

Order, How Economists Invented Austerity and Paved

46:30

the Way to Fascism. There is a

46:32

link in the show notes, and of

46:35

course you can buy

46:37

it at your local independent bookstore

46:39

or from that, the capital order

46:42

itself, that big online monopoly. This

46:49

book, Economics, is produced by Civic Ventures. If you

46:51

like the show, make sure to subscribe, rate, and

46:53

review us wherever you get your podcasts. Find

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us on Twitter and Facebook at Civic

46:58

Action and Nick Hanauer. Follow our writing

47:00

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47:02

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47:04

at Pitchfork Economics. As always, from

47:06

our team at Civic Ventures, thanks for listening.

47:10

See you next week.