« The Weeds

The global class war

2020-06-02

Barron's economics commentary Matt Klein explains what's really behind international trade conflicts

Guest:

Matthew C. Klein (@M_C_Klein) Senior Writer, Barrons and author of Trade Wars Are Class Wars

Host:

Matthew Yglesias (@mattyglesias), Senior correspondent, Vox

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This is an unofficial transcript meant for reference. Accuracy is not guaranteed.
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INDIGO Ag Dotcom, Slash, Reechoed, hey! We're bringing back the sort of weeds interview shows effort for a special this week. I am, I guess today that climb his is a red for bad friends and is also the co author of this really cool new book is called trade. Wars are classical,
We have a conversation we delve into sort of the thesis of that book. What the US, China, economic relationship, is really about, and then we get to really nerd out on some of my personal favorite subject about the economic structure of Germany and the functioning of the European Union, how we should think about that at the very end we get into the origins of World WAR one. So it's a lot of fun stuff that can take your mind off of some of the current pandemic problems and I think you're really going to enjoy hello. Welcome to another episode of the weeds on the box media podcast network, I'm Matthew, Glacius, my guest today, Matt Klein is economics. Commentation
at barons and also, more importantly, for our purposes of the author or a rat co author, I guess of a great new book- is called trade. Wars are class wars and the thesis of the book. I like a book with a good title like this, because the thesis of the book is that we should understand trade wars as class wars right. That's right! That's right! Thank you very yeah nicely showered until later, to cash. That out right, I mean, I guess sort of conventional way to think about. This is that trade policy is a realm of international competition, and so Donald Trump, Has he likes to make things really explicit? He will talk all the time about we're, not winning in trade. Or I'm gonna change things and we're gonna win in trade and then more so Stockaded people wouldn't talk like that, but you have this whole. Apparatus of trade negotiations
and they will say, China made a concession or the United States made a concession as if the countries are people with unitary interests- and maybe it's not quite so crude is Trump puts it. With winners and losers, maybe we can find a mutually beneficial arrangement, but it's still a question of like state versus state and your project in this book really is to sort of crack open the state structures and see that we have. As you know, if you think about anything other than trade and economic policy is a contestation of interests inside countries an trade should be seen in that light. That's right. In general. What one of the things I think as enshrined in the book is that trade you know it's, and consider to be a sort of different unique element of economics. But really it's just thing it goes on within countries spills across.
Borders is all the same mechanism, so you're thinking about trade is being some magically different or better or worse. It is, I think, you know the first error that people make and then, as you were saying, the other problem is that thinking of countries as a unit of analysis- and I think sort of for for economics. What why people think about countries? Because countries are like that's where statistics come from our national agencies and even when they add things up globally, the IMF will go to national agencies before this just add to get in get world output or whatever, so it's very natural to think of it at the country level, but you're. The whole point of our book is that really it's? What's going on within countries as much more entertaining relevant for understanding? You know winning and losing from train? and this is you know, a sort of out of in part, like a fragment of how economics is taught right, that you should give in this. They got a closed economy model and it was like you pretend that there's no such thing as trade, and you talk about how a country's economy my work and then there's like a trade chapter and annually.
But but with the real world doesn't function that way, like trade is very embedded into our daily lives right. You dont like do it right, bashaw thing we like and now I'm doing some tree, do you just buy stuff? and some of it is the main foreign country right I mean, I think, one of the things that that's interesting relating to that is that you know the way economics talks about trade. You were to go too far than in the other direction, which is that you know the rest. Why trade is generally considered good and beneficial. Is that it's about expense, markets eyes. What is actually write, em in which we talk about this a bit in the book and that's right, you're, more consumers, more remorse customers more competition to producers and that's all these productivity benefits you associate with trade. That's a bill say: trade is good, but one of the things we won't to talk about it. That's not. The only way to think about trade is also equally relevant. The trade allows you no other things, transmitted across our borders, basically basically call savings. You call excess production, whatever you can call financial bubbles but like whether it's good or bad,
sort of the other element of its not just creating a larger market size about. I should the transmission of production from one place to another in ways that can be either good. Bad, and you know that's really a big focus of our book as well right, so I guess The main case of this that has been on people's minds before coroner virus and- and I think well, what we emerge is that the United States runs large trade deficit with China. I mean globally. We do, but especially with China and with some their asian countries and one way of thinking about there's like that. The Trump way, as he says, like ah they're, taking three hundred billion dollars from us and economics. Class way, you're supposed to say, is like no ha ha like it's good, because We are getting all this stuff and it's good to get stuff. The purpose of an economy is to have stuff, so we're glad that the China sense
stuff, but in those same classes at least as as I was taught them, you would be told things that don't seem true of the real world like that. These imbalances won't persist for a very long time. Right. Where is the real world like we ve, been running this deficit with China? For a very long period, yeah, I mean, I think part of the assumption is that in the real been in the class is that the trade deficits are being financed by profit seeking investors who would only be allowing Americans to spend more than they earn, which monetary deficit is because their worthwhile investments to be made in the United States and their higher returns to be had from investing in. In? U S projects, then projects elsewhere in the world. And if that were true, then you know then yes ever the winner right. It makes sense, it would make sense in that world for the EU
We haven't really gives us. We would be better off because our investment returns up that that investing in United States would make everyone. Of both the US and globally, because the foreign investors would earn nice returns, we'd end up with more stuff longer, and it's ok, that we have this deficit and that sort of the standard model, and that sometimes true there are such the world. What has happened in the past? One of my favorite examples in the book is people don't really know about now is: is Korea right. South Korea has been running trade surpluses for a very long time is more than twenty years. This point so peoples and of associated as this permanent trade surplus countries, but up until ninety six, ninety eight. They ve been running trade as ever since independence from Japan, and that was fine that help them. From what essentially was the poorest country in the world after the end of green war into a country that now has gdp per capita comparable to France, so that clearly extremely well for them. So inherently wrong trade deficits. The problem. If you have treated houses that are not being driven by mere profit. Maxims
investors actually looking for the best returns but other reasons, and that in that Situation, which will you haven't united States, you just have a lot of money coming in and set a financing worthwhile projects, and we really need to be doing you just having recently crowding out other things in the the US, it basically means we're word producing less ourselves that we could be doing, and so, where does it originate from right, The korean example, this textbook kind of stuff right. It's like Korea had some good policies, but they were very poor so that growth rate was good. So people wanted to invest in Korea, so they had a trade deficit and you know eventually goes away, but it's it's like South Korea's really happy economic development Success story, but so it in the current imbalances in the? U s. What? Where does it? Where does it really come from most of the other half of the title? The book, which is it comes from class conflict, essentially that you have particular situations in China and in Germany, particularly but also in other countries as well, where income
purchasing power have been redistributed from the vast majority If people who would spend it towards entities that would not spend the Penn said they save it, so it's either the super rich or its company's or companies owned by Super8. You know that the particular distinction doesn't really matter that much but we are because they not buying goods and services which create jobs either locally or in other countries. That would export things to that country they just by financial assets. That could be no. You treasury bonds could be stocks, it could be, whatever, but the point is their essentially buying claim. On other people who knew need money to invest, which again fine. If people actually need money to invest, but if they dont than you have essentially the two main things that have happened in the rich countries over the past thirty which is very, very low, interest rates and bubbles. That's What happens if it's not a good to invest? The need to invest in things are done right, so we shall money, just sort of piles up and up and up in a country that you know
some places like you can just go there and you can see it like that they have really little houses swayed does like not much buildings or factories, and they like they need investment right it to build things or you might have some good. Opportunities and and the money flows into that? But what you seen in the United States is kind of you know like this is like him. Sure advanced country, our populations and growing very fast. We have a lot of buildings and things answer, you ve had this very, very low interest rate regime and lot of. I guess you might call it like what you're saying bubbles is like, like efforts to fight to find some angles write to you, gonna put the money and a lot of instability. But why does this happen on the chinese side like what? Why don't chinese people have more money and by more stuff, so socially, that's reflection of their political system in their political economy and industry
through in the book basics, by the time you get one of the reactions to the nineteen eighty So the ninety eight, as you have a big liberalization, the end now dies dungeon comes in and you have first time and basically a century in China chance where people are at peace and the government is an actively trying to screw them over and you get rapid growth and wrap proactive increases, but There are issues in terms of imbalances between the rural economy and the urban industrial economy. You had. One of the consequences of that is very rapidly. Increasing food prices that leads to unrest is again a late nineteen eighties, part of that and rest translates into the pro democracy movement, which also is in a separate, but also related, insofar as there is discontent theirs of opening? Maybe we can ask for more things and and that all falls apart quite violently and the people coming to power after that are saying: okay, well, clearly, the exact system. We had in the eightys was problematic so
The initial response to roll back the economic liberalization, well it all you have. Basically I mean it didn't. Look. Like a recession in the sense that GDP was still growing but relative to what it had been doing. You have a massive drop, so it's effectively downturn like eighty, nine and ninety, and then do you have uses. This is an opportunity. Get back into power. Could eat lost, influenced the consequence of the pro democracy movement? He comes back end with southern tour am says, weird, to do two things. One we're gonna maintain our absolute political grip moroccan They can be sent ruler, any alternative source of power, but also we're gonna get we go along with us by promoting extremely rapid economic growth, nor no matter how way these. We can do that, especially when you're in a relatively poor country, which China was. It I'm still poor country, but at that point in extremely poor and underdeveloped, is you just invest as much because really any investment are going to do, whether it's infrastructure or housing or manufacturing facilities, or whatever it's probably going to end up creating a lot of value. And how do you invest quick
how'd. You get a lot of vessel, but one thing is news: attract foreign investment, which is something that they actually did anything that they did. Was essentially say. Well, we're going to battle take resources from people who would be spending that answer of consumption goods services like things than normal people, want and will take resources from them in and give that to businesses and governments and so and local government entities, so they can do on their their behalf and a very old model- and it works- you no more or less what look I'm under circumstances, and I guess we're pretty well on the foreign investment somewhere in the sense that foreign investments attracted in part, because chinese workers were extremely, paid relative to workers elsewhere, assessments that wages were lower, wages have always been lower and place like Sub Saharan Africa. Nomadic Azra places like that, but you don't see. In fact rooms at the reason is that wage, it women, wages relative to productivity and enshrine on the government's illicit we're going to make that extremely low. Unions are outlawed? Things like that? You have a very low
large, relatively compliant rural migrant workforce. People came from the countryside, the cities, but they dont of any legal rights there. So that new things like that. The best part of it, then they also did things I well when I can really how much pollution regulation for a long time. So, if you're thinking about the something urged in that's an attack by sigmoidal subsidize things like construction costs or electricity costs, so that All those things like that'll help attract foreign investment and on top of that, the chinese banking system for very long time, the way worked essentially was if you a safer and finally, really only one option, which was you put your money in a bank deposit by the bank deposit, would be paid extremely low interest rates relative to serve underline economic growth, and it would basically take it. Your people, so that they could offer very low interest rates to preferred borrowers now. The banks, would do well because they still got to spread between the deposits in their loans, but the borrowers did really well because
they were able to borrow at rates lower they come across. It can always your pay. Those loans is very cheap and then the savers got screwed because they were getting vaseline underpaid, eventually that change. So then you have more options. Housing became a thing that people could buy, starting the two thousands and there's been some liberalization interest rate since then, but that that was a huge transfer, wealth and my call author, this, is really the unexplained stuff you. This was saying this is worth. You know several percentage points of chinese GDP transferred from household savers, to businesses every year as a consequence, so we haven't serve story and three parts. He awaited say it's: a suppression of wages in urban manufacturing economy and the suppression of consumption, as he have high savings, were eight and then it's this sort of savings in monopolization of savings opportunities, so that you, the the typical savour, is earning a very low return and write your generating through all three of these things, a kind of an investment boots. So GDP is growing.
Alive and a typical persons living standards also go up during this period, but by less than you sort of, then you might think by just looking at that. The headlines That's right! It's one of those situations where you know is a rising tide lifts all boats, a veritable chinese worker and you're living standards are going up in a six percent a year. You think that's great, of course, if the average person in the chinese economies. Living stance is going up by ten percent a year and that averages driven by people, the very top end whose living standard I ve, no twenty percent a year- thirty percent here than like. Obviously the six percent doesn't look good, but if you don't have that, since the prospectus experienced great- and you know compared to the compared to the century, before of war, civil war revolution, all that other stuff famine right, you're, not going to complain too much. So That is a situation where the disk this this sort of political action we can work well. The problem is you pass a certain point and then the investments you're doing aren't Nostra creating such values they perform. That's your start getting into other
problems with Ruth starting the two thousand. So this is, I think you know what you are saying is reform innocent when it when a country is desperately poor, Raven is very little physical capital, then it's like almost anything you can invest in is a good project Friday. Might it may not be optimal some kind of sense, but like it's good like guinea, more houses, anymore offices, anymore roads, you just any more of everything and then the richer. You GAD, the less true that become swayed the more important it is that your investments be close to some kind of theoretical optimum ness, because there's like plenty of generic stuff lying around and that sort of becomes the that that China is right that they, you keep having the sort of capital intensive investment led. Economy, and it can look very impressive if you just kind of like suit by a year ago. That's that what a cool new stuff they ve got better,
You kind of look under the hood in law is as useful as is really what people need. Right I mean even litigant stricken because sometimes, even if like it does seem use was recently given, look well but like what else could they have had rain? We're talking about a country word obviously there very nice Party, the Beijing or song I place like Longo, but me to the country is still Can we poor now about half the people still live in these rural areas? is there that are quite bore me this better than it was obviously but again Could I say when you see- their buildings, building these empty, empty apartment blocks and of like inner Mongo lawyer or you have these subway lines that are built out and like marshland, we're nobody lives in others, Second tier cities, you think, is that really the best use and especially in a society where you know little bit off track, but they dont really have unemployment insurance system for most people when it, basically because so the people who work in the cities of rural people who came from the countryside, because people can
countryside aren't eligible for unemployment or basically all of them. Aren't the unemployment system. Essentially, you can go back. Go back to your village and be a is farmer Is that a good way to run it? I mean they think numerous rather the well, but I mean that seems like there. There is room for improvement. There thing but I mean, I think I think the welfare state point is is key right, because this is sort of that, at least to me was like that. The take over your Bugsy, these kind of win win right there, like what the typical American really needs from China is the same thing at the table, Chinese person needs from China and that's to say this is a middle income. Countries now is our rich, but it is a poor and it should have like of something like a regular welfare state where people get unemployment insurance or they get retirement benefits, or they can see.
Doktor right. It's not like it's not as called a show and photos to tourists like here's. A doctor's office in some random village. You probably wouldn't go too is like less impressive than a maglev train, but like people, people need that kind of stuff, and that would support like Americans could sell things to people if they had. You no more basic income stands exactly amulets service, also too You don't want to make it. The book is that when people talk about China's high national savings right that you know what are the misconceptions as it's, because you imagine like chinese households, every other very unique drivers, chinese workers ready to steam? Their consumption and other squarely means away like a thought were really what's happening, mostly what's happening, suggest workers aren't earning any money in the furniture like they're earning much less than I sold so by certified definition that the money is going to people who do save entities. That's part of the book, the other part about those who said that workers decent that workers, regular people are saving is often because
Does the social safety NET in China is so poor that they have to a lot of money in the bank to compensate the things like there isn't really a good old age insurance is not really a good health insurance system in their there aren't these things exist, but not very good. The unemployment rate system is not very good. Have to be compensating for yourself to essentially use self insurance to compensate for the lack of social insurance, and so I guess at one of the sort of mega themes of the book, as if you had better social insurance and overall consumption can rise. I can we d better. Let me stands for everyone, not just in their country, but globally. That's the sort of a general theme, applies a China Plaza States is well quite frankly why a No, I mean that's it sort of like completely different perspective from the kind of global car So so I wanted a break here in and then talk about talk by Germany everything you know of hours in the day, to get everything done, it might be because you're missing out on three of them,
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m e r C, why c o r p s dot org? So the EU will you mention is set at the beginning, but the sort of other you know big case in in your book is Germany. That's the other big surplus production come country, their exporting are all kinds of stuff and and you have it. I think I m weeds listeners probably have like a pretty positive impression of Germany, a lot of people in sort of U S. Progressive politics have gotten excited about Germany. In recent years, we ve had some some folks on talking about Germany's strong labour unions stuff, like that in this evidently
I, like Germany, there's a lot of nice stuff there, but it's it's an interesting situation like they are exporting incredible amounts of stuff to the world, and if I have asked them like german politicians, what like? What are you doing here like? Why? Don't you just be richer and also like, whilst not our fault, that our products are so good I think that's a really big misunderstanding on their part, one of things you don't just to get back where you started with. Aren't a lot of things in Germany that are good and I think other countries could have learned from including United States. But I think it's really interesting in the movie holly. The book is at the direction of changed over the past thirty years is like globule really appreciate an enthusiast and some other european countries as well. We can focus on Black Sea, Sweden, Denmark, for example, but this-
what's happening. Germany is that relative to where it was its much less friendly as a place for workers, then in thirty years ago, relative to where it was, the quality of infrastructure and quality of government. Investment in public goods is much much much worse than it was thirty years ago or further back, and you put those things together did let levelled inequality both before in attacks and transfers and then after tax and transfers. In terms of quality, the welfare state things all these things have changed pretty dramatically in Germany in a direction that american readers would find familiar. If you didn't say that it was germany- and where the puzzle is top of the book is actually. If they have given to Germany, given american friends. Likewise the? U S, not more like Germany, certain ways, that's a whole chapter, but in Germany and in the thing that isn't like. Why do they export so much what their exports actually do? So Grow the global economy you're for better or worse a basically, they have a whole sweet
companies that make things that people in the rest of the world want a certain amount and as long as the rest, the world is growing, those companies will be fine selling things. The real interesting story in Germany is imports. And that's the reason why they have a surplus? Is exports minus imports so If you look at the 90s vs 2000s, which is really sort of the striking cart. No comparison for me is in the 90s. Germany basically had balance of trade was a slight trade deficit. The base of the bells- and this is during the reunification and like it wasn't a good time for Germany which, by this it was, it, was a pretty big economic slowdown. There's initial boom, after reunification than it was a long or short, recession, slow growth, but then he had like low tech bubble, their anyhow. Nevertheless, through this whole period, more less balanced trade. What happens after two thousand is Imports and exports both slow down a lot, so imports and exports manufactured goods are both growing about, like nine percent or so in the nineties. On average a year in the two, thousands thousand exports goes down the valley
growth. It's a big slow down exports, that's not a big export boom for them, but imports growth slows down to like three percent roughly, and so that suddenly gives You pick him down so by time you get to the mid 2000s you in a situation where there is a huge trade surplus where previously they're not- and you Know- is that a sign of german competitiveness. Side of the date did even increased their market share within within Europe, not really meal a tiny bit, but not compared to like the Czech Republic and I mean the basically was flat so that the- here that they somehow or doing something phenomenally successor with their exports is not really something conditional on water Wade it's a very very frustrating conversation with german political leads, because you try to have a conversation with them. That's about trade balances and they, insist at least one I've talked to them and having a conversation, that's about gross exports and the Just not the same thing
right, I mean any any country, Germany, or a medium sized country had been any country that is both prosperous and small. Like Finland or Denmark did you have to export a ton of shed because you have to Port, a ton of shit because you'd like a little rinkitink can you know, use united this always somewhat stuff you gonna make in Finland saying specializations. Tunisia, exports right and that's fine. That's that's why we have trade right in general, but then this is separate question of balances right, which is ok, bye people want to buy. Siemens is things people want to buy Volkswagen's like that's great, so then you aren't money and you're supposed to go by other staff, but the Germans have really squeezed their domestic purchases of things and in general, and read this as like we're in economic superstar,.
Right, even as sort of normal people's living standards. I mean they're high right. Germany is a rich country, but they're stagnant. I mean the other way I mean. What's crazy is even if you like talk to some people Jimmy like the sort of more sophisticated argument for justifying this, as we know, surpluses and the problematic, but the thing is we're an aging society and we're slow growing. So we need to accumulate foreign assets, to provide for our country collectively in retirement and think okay, but then why you keep losing money on your foreign investments back I mean that's. That's like the other. Crazy thing is it makes sense if returns outside of Germany or so much better than returns in Germany, at least on the return. Neely asset investments they make. But that's not what happened? they basically send money abroad and the latest keep losing it consistently you know, you can only one way of looking at those there. Others look as one way of looking at this just say: ok, look at all all of the sort of cumulative trade surpluses that they ve had
and how the translate that should translate to how much their buying Broughton ass its moral chemicals current account surpluses. But you know in Germany is pretty much the centre then say: ok overtime, That's you know x, number of chilean euros that David they ve been spending to buy stuff by foreign assets and then you say: ok well how much, as their overall, your net foreign ass a position change and turns out, like the thirty percent less than that back. So let me, If, though, also automatically, but of course we can point to a specific things I bought a lot of. You knows stupid sub, prime bonds, that by a lot of stuff in Greece it is blew up. I mean a lot of other individual things. We can point it, but it's like this is clearly no one spoke. From this. There are no better off we're, not better off, like my to stop doing that. In any event, we give you alluded to this, but there's this of starvation on some level of domestic infrastructure investment that you know- and I think this can surprise. People because you know you gotTa Munich and the SBA is really cool and its is really good, but there was all built in the seventies game which is guy like that
what's good about infrastructure. It lasts a long time right. The New York Subway is like a million years old and still more or less runs but they're not doing why you might think a country could be doing with sort of accumulated surpluses which is creating some kind of useful public goods that would cause that's another. It's not saving court unquote, but it's like away that a country can safeguard its economic future is by accumulating tangible, useful things, and not just financial, the automotive sector? The best kind of saving is to have useful things because financial savings you're, getting claims on other people's production in yours,
into a a government or buying stock in a company or you're lending instant mortgage whatever like, but that asset that you bought only as valuable. If the people you give the money to are able to use the money you gave them to do something. For in the real world. You know. Ultimately, it all comes back to productive investments and physical capital or intellectual capital. Things like that that's, ultimately, that's ultimately of all these things have their value come from, and yours right. If the alternative is we're going to know if you're to The greek government have the bill, the Athenian Metro system, which is very nice. I mean ok, fine, but if you're, gonna or or by german summaries Minnesota, your lending yourself, but you know same time, intercepted geared to talk by the german infrastructure problem. If you take german infrastructure government investments bending you subtract depreciation or the other estimate of depreciation, essentially, like all things getting breaking down a new dynamic required maintenance, it's been negative,
for twenty years, so things it has been getting worse and this is showing up in a real practical example. So, for example, german broadband speeds are basically among the slowest in all of Europe, not just westerner, but Europe as a whole, which is pretty bad. You know you think in the modern Digital you want to have internet that works in Germany? It's quite poor. You have roads that are just breaking down. You have bridges that go across the Ryan that people can't use so they have to reroute. Through local streets, and so they they run on diesel and polluting the air or people live and going much more slowly. All these sort of practical basic things that their trains, trains, increasing them or accidents or slow down. I mean all these things that we think of that are just you know, it's so obvious that the amount of valued create if you spent now now be so much greater than it costs, especially given the fact that interest rates in Germany have been literally negative for quite a while and before and after Branson they've been
it is for me a decades and yet there just not doing this, and this is an incredibly wasteful, like you have to think that the EU can say you're saying for the future, but, like you must think of the tradition of the german economy. Just gonna be negative forever to not justify doing these investments during my them except end its its Reciprocal I mean because obviously I mean I think I have a letter- negative Sally Hazy, impressions of of Europe, but like the passenger trains situation in Germany, while its compares favourably to the United States is substandard by european metrics. It's it's that the much worse than France or ITALY Spain, as some of the qualities deteriorating and, unlike in the United States, the geography is very favourable. Germany has a lot of medium sized cities there, not that far apart.
Right, you could do a lot of things. People would use fast. Trains can connecting there that their different cities- and you know if you had bridges that worked. If you had broadband speeds that are fast, that would generate the kind. We cannot make growth prospects that they are instead telling you well. We have to accumulate these foreign savings because our growth prospects are so bad, but, like the growth prospects are bad because they're not date, they have he's like good global brands right, but they're not laying the groundwork for a real economic future. Yet that actually right yeah. Essentially, the train point is it was good in the right, but then, if you don't update it forty years or whatever. Then it's not going to take you'll be lucky if it mostly still work, but it certainly not going to be good in comparison, and it might not even be good in absolute terms. So that's the same. So their problem is sort of writ large, I never know exactly what to think about their city. It always
me as a kind of weird defeatism that has wafted over the german political class. But what's the class war angle here because that's that's that's your team here sure so they're a couple things some one is that in this cut back and government investment essentially was. Think of it a sort of partly reaction to the costs of reunification, so In EAST Germany was absorbed into West Germany, there was initially a lot of optimism that you essentially These are Germans been apart from us, but not that far apart from us. No, hopefully, if we can give good managerial skills are good technology, and a good political institutions, though quickly converge everyone's gonna go out, returns emigrates, basically its massive benefiting from as a free lunch, but like we're gonna have a madman, wealth creation.
Ass the gospel slice, unlike huge ketchup growth, in other words, how big is the former GDR inside twenty five percent of the country. They are telling a quarter. The population of the total yeah. So they were hoping for like a really happy yeah right and basically it didn't work out their way and our companies it and work out the way, and there was a degree you bungling on the part of the west. There was also just like Things were a lot worse than I thought there going to be so I mean this is actually pay That kind of thing very recently, this basically after you know we're in the books inside it, but essentially that, like the it wasn't actually random sample who was on the east and the west side of the border ass there had been an open border for a while, both like during world. To itself then immediately after so he strode up. So essentially whoever was left behind or people much more likely to be sympathetic to sort of the soviet project, and so that means that you can read also
the things that happened. You combine that with the fact that forty five years under that kind of system and anyhow, that's that's one element of it, but he it didn't work out as well, and then you have a situation where is sort of the permanent welfare transfers from West EAST, particularly the southwest, which is really the rich part of the country, which is the Munich Utgard Area Frankfurt. True that you and you have people who are there like. I don't want to tell my texts. Bureaus, go, go to type text with marks. Go to these people, so you have this push forward. You know what they would call you no sense of social security reform. That led lead ultimately lead to under what was essentially a left wing government is, incidentally, to cuts and unemployment benefits and cuts in sort of cuts in health benefits all about like this all sorts of welfare cuts across the board. So this is this is when I'm sure that's right in early two thousand, that's right and you'll see. If you google, this is called the the hearts for reforms. Fred, yes, the ESA. Basically, this named
After peer hearts was guys actually the head of HR at Volkswagen and when hard Schroder was the minister president of the state of get this lower. Saxony, I think, is where it was, I believe, which is where Volkswagen is based in Boksburg they knew each other and the basically in came ninety. He they worked together to do this, save jobs, basic pickets, fur saving jobs, which was very common throughout the ninety. Nine is part of the economics, so you want to go back and further before became government policy. You had the situation of german companies just firing people and cutting hours and union membership. Plunges I mean, communities- are much stronger in Germany there are new states by the rail, a bar to Germany's own standards, like unions, have just collapsed. Union membership has fallen by about, I think half, since the early ninetys, I'm not mistaken, and you know the share its some there's been some reversion sense, but basically, between, like nineteen,
between early nineties and two thousand and seven, which is really extreme We have a situation where the share of national income going to investors, capital versus labor. It's just this massive one way: trip and there's a period busily in the two thousands that same period were Germany's trade surplus widens massively were. Basically, they get a surplus in that surplus wines massively as imports artist. Incredibly sluggish. That period is consistent with a period were the shit. The growth of german national income is like seventy percent of that goes to investors, verses workers, which is crazy, because investors are not, in a particular large shared population of more than a larger income, but they ve they capture. Nor will we share the group, but that trend. Also the ninety S as well, and you see massive, not offshoring, but moving companies. A lot of production moves to Eastern Central Eastern Europe because it's cheaper and cheaper in the sense, workers being underpayment multiply, shared, speak german sort of historical reasons owes a great deal for these companies. I guess there had been a hope originated. These Germany would have in theirs
these things, but again this what a bundle, the transition that it didn't work out way. So this is like jobs European Jab, Slovakia and checking that rights can break around I can buy Skoda just say, I saw that basically out, that's exactly right and me, this happens on a massive scale, and workers are really hosed during this period and then it becomes Sunday. Official policy in two thousand forest service, like a thing happening, companies learned yet if the thousands and the thought unemployment is really bad at bit bad in the nineties, we like, how can we reduce unemployment, and so this was well. If everyone does get ways cuts or end, we can't unemployment benefits. The peaceful people have to work. Then we can reduce unemployment, back, which, I guess you could say, is a good example serve, be letting a bad target behind your policy gales seal hitting the target, but I'm into and so essentially, what happens? Is that, like all these former, you know manufacturing workers and in their thirties? they have had lost their jobs and they get job without happens is basically people who were in their fifties, who
who had lost jobs and like they're, just going to live off unemployment until they hit retirement age which run them in that long. They now have to. Some really low paid jobs like cleaning, lady or simply- and that's like. Basically, what happens at the massive increase in german employment is part time: employment for people just below retirement age at Lowood, jobs, which you know is that a jobs miracle that you the export address of Europe. Now I mean, is it better? There was a form- and I guess you argue about that. I don't think is obviously the case, people to timed and think it was the case. You know the German as part of Europe, The European Union all countries a survey of the number of people at risk of poverty who are working and in Germany that shared is actually spite after these reform and it still elevated compared a lot of other european countries were snooping. Addressing you think, be Germany's pierce. This success on penalty. Why and then this sort of exports itself outward right.
It works in the sense of it. It hits the target the unemployment rate becomes low, because if you, you have a rich, highly productive society and you suppress wages, people will get Dobbs doing something, but by definition, if, if your whole economic growth strategy is happy, are being underpaid relative to their production. Somebody else has to consume the production, because the underpaid people can't so this becomes the german surplus. Then you have these deficits in much of the rest of Europe and then you obviously there's a financial but now the Germans are running around saying. Well, everybody should run their government this way right and that this is going to be the strategy for Greece and for Spain and for Portugal, and everyone should pay workers less than their productivity and export to some
else. There is a complete intellectual disaster. Inland policy disaster in the interested highlight what you were saying. If Germany had been closed economy, if they didn't have export, and they tried the strategy would have been incredibly self defeating because you just would have been hurting your own customers. Companies wouldn't have been able to sell more, they would have sold the last and you would have had this. Downward spiral, but is permanently lower level of economic activity, everyone's worse off the reason why they're able to sort of get away with it? And this is why you know we talked about how trade allows. You know unequal societies to essentially dump their problems elsewhere and, in some ways perpetuates in a quality inn in somebody's size is precisely because they were able to export elsewhere, that they were able to find customers for their products that were outside of Jeremy that weren't facing these problems. So
relatively speaking, Spain, France, ITALY, were actually kind of a gal tearing it and they certainly in terms of the direction of change rate of what happened in Germany, and that's why you had no right of response in those countries prior to two thousand eight and then, as you say, you have the crisis. And Germany seems to do relatively well, largely because their exporters in a sense, lucky that, though they had been selling submarines to the greek government, the rig military than they are able to switch the Agora levels, which does Industrial machinery to China and they managed to well enough. The Volga, like everyone, can do best course that doesnt work This is trying to start slowing down just going to happen. If you know actually before you know the thing we've been thinking about it before, as the book was here before the book came out with the best was like the interesting thing. What you saw in twenty eighteen, two thousand and nineteen is that is China's coming back and its domestic investment going back early in the conversation you know trying to cut back and wasteful stupid things. That's going to hurt. Jeremy, does porcelain, then, head back to add to what we've been seeing, what we're saying
no different thing, but you know a strategy that makes you pecially vulnerable the situations elsewhere, but Germany, either they understood that at some level I didn't care and so delighted with really believe believe. They're really believe that it worked lockable in other european countries also believe that's the way to go. I mean this there's of love. Cooperation among of the equivalent elite classes in places like Spain, ITALY and Greece, and Where the thing are you actually we wish we could do these things. Do we ve never been able to get away with it before and now we have this opportunity, and I mean you can look a lot of what happened to your crisis. It says partly reflection that there were either always was this base of people who wanted to pull off these kinds of institutional changes that they saw happen Germany. This could get away with it, but now you have to have an opportunity to do so in Germany, since I tell him to do so, they negotiate these treaties and what are the open? What does the basically magnifies german?
the german problem for the world into european prompt the world as my party and its out. Yet you know I mean this is that that the trade versus class right, but it's it's convenient for everyone involved in orchestrating this. To have it? Be understood that will Germany is being mean to Spain or, while Spain is asking for charity from Germany when actually it's a economic model that is beneficial to the owners of german company use is trying to get a similar economic model created in Spain, which will be beneficial to the owners of spanish company, is an because you can buy stocks international boundaries, in some cases, even obvious that the owners of german companies, the under spanish companies, are different people and, in many cases, right.
I am sure that some overlap. So it's you. You are widening the circle of like an investor dominated economic model and then also pushing out the boundaries of like Germany, exports to the rest of Europe or Germany, plus a few other. Smaller countries too. Now, like all of Europe is gonna be, was a dumping, but counting on consumers elsewhere to be the customers for these products, because you're not paying people money and that's a guess. America's role in the global January read anything yet That's just emphasizes it. You know you dont monies that were dumping. I'm ok, we're done he's in the book, but I mean. The model they have for their country's literally would not work if they couldn't sell abroad. It actually requires it.
And you know that's not to say that we should use sanction them on trade in order to force them to have their own in domestic rail So, I'm sure someone Cobb without its inclusion. I thought that private, the best friend about it, but it is an issue that their their model depends and sort of her. You know parasitic relationship with customers elsewhere If those customers obviously need and can afford their products, that's one thing, but if, if not, then it doesn't know, then it makes our one. Ultimately worse often
You know I'm in Spain as relation to Spain is often the current one of the countries that she held up as a model for having taken on the lessons of the crisis and having learned from Germany and when you see happen in Spain. So first of all the job, security and labour contracts in Spain or much worse, they were for unemployment is still very high and they sent that has gone down. It's mostly because you have the kind of low in part time, unprotected jobs that you saw grow new behind german drop growth and inequality is gonna. Bloodstained men like the written, Spain have been fine. You know this is therefore not just been harmed as a consequence, a low. So I know that I think many ways is one way of seeing the lesson of the world, let's lesser, taking a break and talk about how how you solve everything, if you having trouble meeting your goals, focusing work, if you have feelings, stressed you're having trouble sleeping better help is here for you it's It is self help class and sought a crisis line. Better help is sick,
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The European Union has this kind of Currency Union without without a fiscal authority which puts the member states under this kind of objective pressures you you have. China is like an authoritarian regime like they don't care. What we say on this podcast or by chinese people thank cared Emmy. You see what's happening in Hong Kong right amusing. There come indifferent in a lot of ways. You got America. We've got our own sort of set of problems, even as we act as the world's consumer, like what would you do? Donald Trump calls you up or Joe like what's there was the plan is requesting. As you look, the question is it: Miss India that America should be leading a response to this and, to a certain extent I'm not sure I mean there are things that the EU can do. Most things are sort of destructive and the sense of like
since the models elsewhere only possible because they can access export markets. The one thing that Europe could do is say: no actually can actually export market But that would also be destructive thing. That's my solve the underlying problem. I mean it. Basically, these forces are back on societies. Where has it, and maybe you can hope that they would never formed themselves under economic pressure, but you know that might not happen. Imps might make it worse off. So I mean the ideal solution in the way we phrases in the book that you really want to have the places that are creating these gluts and creating this under consumption through economic structure. You want them to fix them, so that means there plenty of things that can be done. Gyroplane things can be done and in Germany, specifically in Europe, more generally, that would be like by far than the first choice, and that would make everyone better off in practice. How did it happen? I mean it. China, not democracy, here, that the positive spin is that. Lot of, if you read the official statements of chinese leaders have said they. Basically endorse a lot of things that we recommend now sort of the pest
MR interpretations. They can say that for a long time it has happened yet so they're probably other things that are preventing them with ear. They don't take it seriously or they're, just institutional constraints that prevent people at the top mash imposing their will lower down. That's it you're saying there did the official doc and say we're going to try to increase domestic consumption and have a more consumption led growth. The matter at all and that's great Reggie, like literally, if you just read those tomorrow, you be like this amazing they read mats bug, But if you realise that the documents have said that for ten years you might start to get skeptical, right. I mean even more than just saying that consumption should be leading growth. They eat go further and actually allow the specific recommendations we have about you, for example, one things we talk earlier, is that a lot of workers and cities are rural migrants. I don't have the same. Legal rights are basically you pay taxes and the local social crew system, which provides for education, health care. But then you can actually acts as an education health care. When you live there,
you'll, be recognised as an issue that will to fix a date. They want to have some kinds of changes in the way you know labour own company relationships can work. They talk about the war, improve the nature of the unemployment insurance system in the healthcare system. They talk about how they want to improve environmental regularly and there are lots of things that point you and there's something, so they actually have done me. The have improved your compared to where was fifteen years ago. Actually, health insurance is higher compared with fifteen years ago Environmental protection is better. There are certain things that they have been moving in the right direction of those names. It's just that has been enough and they also don't allow the big thing so they d get. It makes you wonder at a big part that you can point to his well. You know, despite sorted look from the outside. Actually, a lot of power is devolved to the provincial government, and things like TAT said serve hard, but but still
as you said, the pessimistic Internation is why, if they all keep saying this they've been saying it quite frankly, even before the financial crisis, two thousand and eight they're like still happen. So a lot of things have gotten worse in some way. So that's a big issue. I mean I more hope for Europe, because Europe's democracy, but the problem there is that, it's so tough argumentative people are at their heads around no, I mean- and even now Europe struck me as as as closer to a conceptual issue. Right I mean I, I have hoped for Europe, sometimes because the official government documents like I say this kind of stuff. You know like that they haven't traditionally, as though it's gonna. Well, maybe you could just taught them into ride like made me from baby boy, would think about really, and we have seen this kind of re of of appropriate. The french and german governments together, put together amateur, really understand it, but is like some kind of proposal for like an EU level, we're gonna borrow some money and spend it on helping with the dead
the pandemic, which is like, I don't know, that's the heads of government in one or one like some money to Hell better in a pandemic, but it's the first time that we ve seen in taking that kind of like responsibility for a fiscal problem up to that breast Love that's right, an end today, I think. Actually, the European Commission in Brussels, basically home in their own version of this plan, and exactly the idea is that, instead of having each country borrow to pay to deal with relief from the virus. You have the European Commission as a whole borrow and then distribute aid accordingly, sufferings but like Germany, might have the easiest time borrowing. But it's who has done a relatively well and actually combating the virus and is relative fortunate than you know. They have to worry about the absence of a tourist season. Greece actually, no reason really for the unluckiest country. This whole thing because they actually were very aggressive early on in stoping the virus. They haven't, had really any cases or death for the most part like it's been remarkably successful, but they're still still, it depends right, they
depend on summer, tourism, and it doesn't matter if there if no one else can go there. So that's enough Gallagher pervert example of one to be nice. If they could borrow some of the bar on their behalf. That is a lawyer, credit radiant and help them out, and the ideas actually seems too you're doing that and the amounts are talking only now are stolen the low and relative the scale. A problem is hundreds of billions of euros which has a lot of money but like compared to a hit. That's in the trillions of euros, you know, but it could get scaled up. That's the hope I mean you're getting back like the overall structural problem in Europe has had and basically still has but might soon be fixed. If this is, as you know, the postman occasion is that governments are always on. There and if something bad happens, you're choices are essentially default. Go through. Someone like Greece did good
ITALY did we're. Basically, you had an elected Democrat elected government. Just get kicked out by you know a couple of the social, your local central bank in Ecp. What happened two thousand and eleven with Bruce going to and play some Mario Monti, you know or Usm dorm a semester can pain, but you just cut things yourself, because that's what happened in the Baltics and her evil person might look at this experience that we don't want to have that happen to us, and so we're just going to structurally run things where the government We too tight, but least we'd have to worry about selling blowing on their face, because you don't want to go through any though scenarios and you see that is way across the board. This is also what happened is that we have the asian financial crisis in Asia its. Why career
we talked about care early having trade debits until ninety seven. Ninety eight, then they had the age of financial crisis. I said nope nope we're not doing that again and they've had surpluses every since, and China looks what happens. Indonesia, where Suharto is kicked out after decades of power, because it's like no we're not gonna do that and this rapes in Europe. So after the european crisis, governments and across the board we're just going to run things really tightly, it's not going to be, and the problem is you do that? I collective level everyone does it it's just this massive massive, under investment taxes being too high, wages are too low and by everyone says worse off, and they could fix that by having if there were confidence. That is something bad happened. They weren't completely on their own that actually, like the European Commission or some other equivalent ended, he could borrow on their behalf. The easy be European Central Bank would stand behind that debt. They can be like a normal country might assent normal economic zone and the things will be a lot better for them, and that would make them much better off knows make the world a better off and so be encouraging news that unite near the point. You is that, maybe they're going in that direction. Right I mean it seems like even
If the amount of money involved is not, you know equal to that to the scale The challenge is a sort of a point of principle right that I reckon there is there at least might be a european budget function and having some the European Commission. It does have a budget, but the way it is Now is it that it's a contributory scheme? It's like our breath, the articles of confederation, where each member state like forwards a certain amount of money based on I don't know what the formula is exactly
and then the commission does whatever, and this would be a switch to more like how the contemporary american government does, where the highest unit is like the boss, borrower and the central bank which controls the currency, stands behind the central government debts. And then you know, because whatever these are like longstanding, stable, democratic societies, we trust the date that they can. They can we pay money, although the the what they think is we pause about this whole thing is that I do feel like it gets Germans back into their heads space, where people are asking them to like help out. You know these profligate southern Europeans when I do think the main thing that you were asking Germans to do is to help themselves out like it, helps other people as a secondary consequence right, but like the car.
Or of this, isn't that we want German, the savings of wealthy german people to be transferred to portuguese people. If we wanted to be transferred to german peep right, I've ever had actually right now, and you know it has been moment in time? Maybe want a little bit of both but right in general, but in general, that's right- and you know well this address that I don't know- I mean one of the That's interesting as an enemy mission is a little bit in the book. Is that the big shifts sort of in the german private sector, in terms of you know, wealth going from workers to companies, and so for that was really a story from you know.
How about you that seventy eight and what happens since that? Essentially things start to improve their, what sort of a general rebalancing within the private sector economy. But I was more than offset by the changes in german fiscal policy in terms of the government's taxes and spending and nearly there change or constitutional Mesa make it impossible to borrow, and so, even though there actually was some more some encouraging bits of news in terms of the way wages, the distribution between wages in profits and things like that that had been swamped by government policy. So at this point, if common policy is changing, that might be I'm not to say enough maybe you don't incredibly helpful in terms of the overall the overall next year, and I think what I was saying. I think it's like battlefields minds if they, if they don't know it, but the am that the nominal yield on german bonds is negative all across the distribution right. So
You can think about it in different ways in terms of like what would you ideally like to see the government do, but it's almost like a caricature of egg people who are like what we should run the government like a business and its equal. Why should you like a yes, like the government? Has an army and police and like they can make people pay more in taxes than they receive in services but like? Why would why would you want to do? right, what is the purpose and like if I've been reading recently a book about the in conquest of England, as they also did this right like having over run the country with their foreign nights. They established a system in which they taxed people a lot more for no reason, and that was so the like conquering baron I could have big castles, but is it is a democracy right so either to spend this money on something or take a car tax, because taxes are really high, then you're I mean.
To think that German, like a business analogy, a little more seriously like like at least in the EU, this business school? The standard advice, as you want to have your credit rating b b b b would have was like just enough above junk. Did you get that sort of thing? or investor base, but like as low as possible, not barring a few to sort of meeting money on the table during the repression. And then, of course, a further than the business goes apples and you use that barring capacity or war to shareholders which democracy would be the citizens. So you know Actually. This is a really good example. Germany should run itself like a german government, would benefit tremendously in german people would benefit reminiscent running like a business and might save you. Hoping to do nothing it you think, of the citizens as shareholders, then again like it's, it's going well, I can have a party right, you ve gotta, yet a lever up do the special dividend. Red and also you to invest and assets that you haven't been. You know maintaining, because you know the sort of blinkered view about you want to maintain surpluses at all times means that you're just leaving a lot of money on the table by not taking advantage of worthwhile investment opportunities,
and I think you know what we touch on this before, but I think that sort of the funding civilization of thinking about like how you secured the future is that of so pernicious right that, like as a house, I think I'm a person right. It makes a lot of sense for me to save for the future by like having assets in accounts like I have some stuff in my house, but at a certain point, it's like why don't want like a giant stack of physical commodities? You be annoying, it's way more convenient to have money, but a country actually does need, like tangible assets, more than money, because countries are big their important problems that can only be solved at a kind of infrastructural level, and that's how you that's, how you do it like your central government having a big bank account is not useful to people compared to having you know. Well,
Katy Population or like a bridge that gets you where you wanna, go yeah, I'm an area hundreds at the thinking about like a household is wrong. I think I'll over this and this was my mother- my barberess actually like. If governments really follow things the weight real businesses did, they would behave lot more like we think would be Propriate, because I said they invest a lot more in the physial infrastructure, they'd be a lot less afraid of. You know definitely It's a! U no sort of nobody like ok, you're, cashflows negative, because you're here for your free actual negative, because you're doing a lot of cap acts like nobody would necessarily judge negatively for that, I'm a decentralized what it would be if you're running a budget deficit invested worthwhile infrastructure nets, you know The sort of they have in many ways take the household perspective, the extreme as well. We, the german government, enough it's bad of any debt, everything we have. Credit, our debt, although you know, if you ve, got a credit card that borrowing negative illustrates obviously properly treated differently and the credit card, we borrow twenty percent so again like enough, about this in a servant. Logical way, as I think it's great things, much more ideological than anything else and
which is too bad, I mean the Good NEWS. Is that maybe that can be changed. But I don't know I mean even The good news, you're talkin before the common borrowing- it is good. Is the fact that its back by Germany and France, ITALY and Spain, together when they like the four countries, basely never be anything, have historically an economic policy. That's very encouraging, but he's not some countries are saying they don't want to do it like. Sweden was a Denmark, Denmark, Austria and the Netherlands solar, hold frugal fora I say nobody wanted is where it will only lend money, but we should say we. We focused a lot on and Germany, because Germany is so much bigger than the Netherlands, but in terms of the sort of like any logical spirit of Europe, it's actually the little or countries are there. Gabriel worse and the dutch particular are like maniacal yeah. The duty base is more german than the Germans in terms of like the stereotypes anyway, yeah and some of it seem to me to be that, like this
the smaller. You are right them, worse since the kind of basic model of Well, we don't need to worry if the numbers add up because we can export like, right. It makes more sense right, like what Ireland does does not impact the global economy, because it's dont are protected, it's just you know it's a little like the Netherlands is let all right. Germany is big, thou and, like then, Germany plus Sweden, lend Austria like that there really be greater than that diamond problem, is that is that the countries be eccentric if they want to and it sort of their own business, but as an agglomeration. This is like a really big block of our posterity countries and its problem globally, Yemen, the things I think that, as there are a lot of germ policymaker to think baseless, see themselves in isolation is a small to medium country in a big world which, in the, if you think of all of it,
he's of Europe behave in the same way and then you think of them ass, one country's, he said like Europe is the second largest economy in the world. Is not China, its Europe. Europe is a little the EU has been by lot. So if a country, that's almost seems in economic bloc, is almost the same size, the? U S, all behave in a certain way and in this way that's a great mass of massive problems, the rest, the world and in a dead. Yet they think that its finest It's a failure of thinking and understanding how numbers add up. Essentially, it was already creating a problem within Europe beforehand, and then you suddenly create in many ways you want to understand Europe, Europe as a whole developed in this massive surplus for the rest of the world. The reason it wasn't a problem before to thousand and eight is because you had these big surpluses in Germany and the Netherlands. Sweden, and they were absorbed internally by Spain, in particular Greece, Ireland and then all those other countries stop doing that like they couldn't do it anymore. Basically, the Germans told you know another uneasy beans over some liquid,
and you know there wasn't any offsetting change so, basically, its massive change, like the actual big change, since you know two thousand eight, was that all the countries that had been running dresses in Europe stopped some of them now actually have quite large surpluses. I mean right now who knows but, like you know we had a clear european and large surpluses, Spain, ITALY and so forth, and you know that is a massive effect. If Countries such as Germany, the Netherlands, aren't adjusting all which they weren't, unlike the overall effect agreed on the global economy, is huge and that's what happened so before I let you go, I liked ass people are gonna say: is there anything you you wish? I asked you about her anything you, you gotta, get off your chest. Why we're here? I think wanting it interesting that we talk about a bit. The book is that sometimes, inequality and ends of concentration in common spending can be helpful. A little bit one, how China, but as a sort of worth, highlighting this that it's not as if
certainly true now is probably true in general, more often than not that you know these unequal distribution of income leads to under consumption. Under investment is problems generally, but there are situations where if your economy is running,
full till you know that really is any spare capacity to invest, but you know their investments to be made. The only way you can you can make it happen is some combination of imports from abroad, which can be very helpful and in reducing consumption domestically, which generally means you know, increasing inequality in some way with its concentrating income in the government, which people, I think was increasing inequality, but I think, is useful, dress or you know, increasing turquoise or the private sector's latin in industrial, stable, invest. We haven't living abroad that a long time. I don't know if we ever well in our lifetime, but like that has happened in the past. Is it's a common feature of of a lot of industrialization stories historically and I think, is very useful as a framework for understanding that knew how the distribution income affects growth. You reasoning in terms of what is this,
investment needs are, and you know what kind of world and whether the economy is running at full capacity or not right, so to say that it's not it's not like. These is ideas come totally from nowhere right like there are real development success stories that are yet are that are based on this. It's just that we move to a point in time. He is a question. The aggregations wade is like to the world as a whole. Now has too much too many places trying to sort of accumulating this in this in algerian way, no actual yet whether well we're gonna detour. Yet you mentioned this in your email, but that this is a sort of classic of like old time scholarship under the Pre war, one economy, right
is the idea that you had these imperial blocks and they were incredibly inequality, a in and the industrialists slight, thereby wanted to sell stuff to somebody, but they also didn't want to pay people more, and there was the sort of basis of of class. All economic and even geopolitical competition is accolades. I'm in mother sort of the person who wrote the epoch grafter book and we saw him the introduction and local elsewhere as got him John Hobson, who is a in english economist and social critic, and he wrote this book called imperialism. And it was at some basically, the whole organ of the book than imperialism is stupid, is unnecessary and and and crucially, not only is it a moral and so forth? Are it's bad for people in the imperialist countries? and his argument is amazing, reading it now, because it just fits in basically just quoted at length and just change. A few facts- and you get our book in some ways, but it's that you know you have a situation where the spending
how are so concentrated more people who aren't spending on goods and services, they want to invest in things, but there's no point investing domestically because the worker in young people who live there. I can't afford to buy the thing, so you not going to build more factories, so you have to go abroad, and get people there to buy your stuff and that's where imperialism comes from essentially and was the world of the late. You know one thousand hundred early nineteen hundreds- and you know that world has reappeared in various forms after NEO. Since then, in some ways you could think of you know obviously loud differences, way has been so amazing thing at the: U S essentially functioning as an imperial colony in terms of its economic role in the global system of all from other countries, and you know what that's like everybody Exactly think, don't want to take take the analogy to to literally we haven't been.
But but immediately. I think it's like Hobson's basic point that, like this relationship right, that the colonise or in the colony had back then was not actually beneficial to the typical member, the colonizing society and I think that cuts across a lot of sort of notions, people. Let leftwing people, pick up about sort of how in here some function. I it's weeks to an older version of left wing thought right, which he read the Imperial Prize it sort of marks is, was that the imperial project was a global method of class suppression rather than a construction of a useful racial hierarchy. That was helping the English working class that it was hurting. Almost everybody to create this kind of industrialist led, economical
order right and thats the you know: cut class war versus trade, war or Unity imperial war bags echo right and that sort of that. The message here is okay, fantastic Matt, Klein Economics commentator at barons. The book is trade, wars or class wars. It's great. I recommend you pick it up think about some problems that have nothing to do with infectious diseases really enjoy yourself. Thank you so much for joining me thanks as always to our producer jumped down. Thank you very much for everyone, and the weeds will be back on Friday.
Transcript generated on 2021-05-19.