mark blyth | Open Source with Christopher Lydon

Podcast • September 15, 2016

What Would Keynes Do?

This election has been about everything but the economy, stupid (according to John Harwood of The New York Times). Americans are split right down the middle—48 to 48—on which candidate will handle money matters better; ...

This election has been about everything but the economy, stupid (according to John Harwood of The New York Times). Americans are split right down the middle—48 to 48—on which candidate will handle money matters better; instead the wedge issues are tolerance, territory, immigration, constitutional rights, political (and factual) correctness. Why is that?

There are a lot of theories bouncing around this week, and we imagine them all overlooked by John Maynard Keynes, the economic wizard behind the Bretton Woods world order and the boom years between 1930 and 1970. He may have been the last genius of economics who also understood human life, in all its excesses and “animal spirits.” What would his keen mind have brought to a moment with so much ambiguity?

1. We’re on the comeback.

Harwood argued last Thursday that the lukewarm economy gives neither side an advantage: the Obama recovery was neither strong enough to gloat over nor weak enough to attack.

But early this week, a Census survey of economic indicators revealed that in fact, 2015 looked like a historic uptick: median household income rose 5.2%, the biggest jump since 1967. 3.5 million Americans climbed out of poverty; unemployment dropped to 4.9%, half its post-crash high. All three stock indexes have hit record highs, and more than half of Americans say the economy seems “good”—there’s genuine relief in the air.

2. But we’re still a long way from “morning in America.”

Yet 60% of Americans still think the country’s headed in the wrong direction. The median wage may be up this year, but it’s still below its balmy 1999 high. The body is recovering, but the collective psychology is still anxious and depressed. When people look in their wallets—or toward their futures—they feel shortchanged and blame Washington.

Our guest, the protest journalist Sarah Jaffe, calls attention to the people who are really still feeling the squeeze—of anti-Keynesian austerity and casino capitalism, for example—in her new book, Necessary Trouble. It’s a chronicle of people on the march against punitive student debt, foreclosures, and slashed public budgets—and for moving the conversation forward.

3. Growth may be ending.

Heavy-hitting economists like Larry Summers have started to worry aloud about “secular stagnation”: a period in which growth itself may slow—or stop—in our Energizer-bunny economy. What would that mean for the American dream, which depends on rising wages buying more and better goods at cheaper prices?

4. But our minds are changing, too.

A radical shift that the new bipartisan consensus emerging in the candidates: that signing onto NAFTA, letting infrastructure languish, and cutting spending was a mistake—in short, that the government still has a stimulating role to play in the American economy.

To make the case, our good friend Mark Blyth—the Brown University political economist whose magisterial book Austerity: The History of a Dangerous Idea lowered the hammer on the false promise of cut budgets. Mike Konczal, one of the big-thinking financial reformers and fellows at the Roosevelt Institute, will make the case that this fraught election might be concealing a new and healthy economic consensus.

Finally, Lord Robert Skidelsky paints us a portrait of Keynes himself, as a cosmopolitan elite who nonetheless empathized with those out of work and on the dole. Keynes is the kind of economist we wish we still had around, offering not only timely economic prescriptions (extend global financial regulation, double down on government infrastructure spending, experiment with basic income plans), but also a model—of a holistic, cross-disciplinary, concerned mind:

The master-economist must possess a rare combination of gifts …. He must be mathematician, historian, statesman, philosopher—in some degree. He must understand symbols and speak in words. He must contemplate the particular, in terms of the general, and touch abstract and concrete in the same flight of thought. He must study the present in the light of the past for the purposes of the future. No part of man’s nature or his institutions must be entirely outside his regard. He must be purposeful and disinterested in a simultaneous mood, as aloof and incorruptible as an artist, yet sometimes as near to earth as a politician.

Podcast • June 18, 2013

Mark Blyth (9) : On the Dead End of Austerity

The Great Gatsby is out as a film again. Go see it! Think about it. Basically you have this tiny elite. How many yachts can they buy, right? They have all the goddam cash. And ...

The Great Gatsby is out as a film again. Go see it! Think about it. Basically you have this tiny elite. How many yachts can they buy, right? They have all the goddam cash. And they don’t need to invest in a recession because they can live off the interest on their investments, so they’re fine. Everybody else is screwed if they don’t have investments. They can’t consume enough because of the wage skew. We’re back to where we were in the Twenties and Thirties.

Political economist Mark Blyth, with Chris Lydon. June, 2013.

Mark Blyth, the butcher’s son from Dundee, is sounding off again in the Scottish pub where we all belong — if you want the news of wealth in our time deciphered, and if you can listen as fast as Mark Blyth talks. The authority of his brash gab is reinforced by the reviews hither and yon of his pithy new treatise from Oxford on the false doctrine of the day: Austerity: The History of a Dangerous Idea. That idea he’s been bashing in our conversations for almost three years now is the doctrine (rampant in official Europe, fashionable in the US) that governments can shrink their way out of debt by slashing their public budgets. Professor Blyth’s counter here is that it’s government’s job to grow the economy and the taxes that will service the debt.

Not the least of what’s new in Mark Blyth’s book is the argument that austerity (not inflation) was the proximate cause of Naziism in Germany in the Thirties — also of Japanese expansionism in the same period that led to World War 2. So there may be a grim warning in his evocation of Scott Fitzgerald’s Gatsby and the Jazz Age.

In the class-divided skies of British Airways nowadays he sees another flash of where we’re going:

I fly a lot on British Airways, which now has four classes in its planes when you go trans-Atlantic. It’s the medieval class structure brought back to life. At the very front of the plane where you turn left instead of right as you come in the nose — first class! — that’s the Aristocrats. They’re the ones you never get to see. Literally, the Lords and Ladies. Then, when you turn right, you go through all these flat lie-down beds. These are the trans-Atlantic Knights of the Financial Nobility. Then you get past that to Premium Economy, which is like the Serfs with Money — you notice that’s a very small section of the plane. And then: one third of the air frame has two thirds of the passengers. Cattle. Cargo. Self-loading. Everybody else. It’s a bit like the societies we’ve built for ourselves. And until the people — not at the bottom but the ones in the middle, the ones whose voices matter the most in politics — say: you know what? I just can’t afford $50,000 a year for whatever Ivy League or non-Ivy League university my kids gets into. How am I going to do this? Let’s say you earned $150,000 a year… That’s a lot of money — it’s three times the median income. You’ve got a chunk of change, but you still have to eat. Let’s say you save $40,000 of that. That’s still not enough for one year of college. And you won’t get financial aid because you’re making $150,000. I know professors who can’t send their kids to these schools. And that’s if they have one. What if they have two? So when that constituency starts to say: hang on a minute; there’s something seriously wrong here. That’s when you’ll begin to see change.

Mark Blyth’s argument here is drawn from life — that is, from his own:

Let’s go back to my experience. My mother died when I was very young, and I was raised by my paternal grand-mother. Basically all we had was her state retirement pension and occasional handouts from my manual-worker father, who was a butcher; and that was usually in the form of in-kind: bits of dead things were dropped off at the house on a Friday. And we made our way through. I went to school with holes in my shoes. So then I got to university and all the rest of it. I did this with all these state-funded ladders of achievement. Schools worked. If you were smart enough you got in. There were grants available. You didn’t have to have complete financial records. You did not have to go miles into debt to do this, and that was that. People say to me: good for you, but someone had to pay for that; basically you’re taking from others and enjoying yourself. Well, my answer is: you gotta be kidding me. Do you know the taxes I pay now? Suppose I hadn’t exactly advantaged myself through the education system. Suppose I’d stayed in Dundee. Well, I probably would have been in the military which is a huge tax loss. Or I’d have been in jail, which is very expensive. Or I’d have been a marginal worker, and I’d have paid very little taxes into the public purse. Instead of which I come over here and as somebody who’s done pretty well I pay a lot more taxes over my lifetime than I ever took out of the welfare expense.

This stuff pays for itself. It creates an equal society. It creates the possibility of mobility. It creates the idea, the ideal and also the belief that it’s possible to succeed. And we are dangerously close to creating a world where those ladders of mobility and that belief — that all-important belief that’s critical to the germination of capitalism — is going away. We have a winner-takes-all society where those who can opt out and those who are left behind do what they must. That is what worries me. That is where the scary politics start.

Mark Blyth in conversation with Chris Lydon. June, 2013.

Podcast • October 17, 2011

Mark Blyth (6): Going to school on “Occupy Wall St.”

Click to listen to Chris’ conversation with Mark Blyth (20 minutes, 8 mb mp3) I arrived in the States twenty years ago, to the month. When I look at the wealth and income distribution in ...

Click to listen to Chris’ conversation with Mark Blyth (20 minutes, 8 mb mp3)

I arrived in the States twenty years ago, to the month. When I look at the wealth and income distribution in the United States today, I’m looking at Mexico in the 1970s and Brazil in the 1960s. This is not America. This is not a land of opportunity. You can’t talk about opportunity when 60 percent of the population can’t afford to go to college, where the costs of basically a middle-class education far outstrip the resources of the average family; when you have 54-million people living, in a family of four, on less than $22,314 a year; and meanwhile, the top one percent have trebled their share of income…

Mark Blyth with Chris Lydon at the Watson Institute

Mark Blyth, political economist and ever the argumentative Scot, has gone humble before the Wall Street protest. He and we should be learning from the crowd in Zuccotti Park — and in Boston’s Dewey Square — just what people have discovered from their own experience, their own anxiety.

There’s a crisis of income growth in this country that’s papered over by credit. That’s why there’s $56-billion in student loan debt. That’s why there’s $14-trillion in mortgage debt. That’s why there’s more than $1-trillion in home equity lines of credit outstanding. Because people have been borrowing against an uncertain future to finance an ever more expensive present. At the same time income has stagnated. Let’s be clear. When you adjust wages for prices, when you look at the real wage, it’s stagnant for 40 percent of the population; and for the next 20 percent of the population it’s barely edged up over 25 years. Meanwhile the top one percent has increased its share from the late 1970s, from 9 percent of national income to 24 percent just now. You can’t say these things are not causally related… Economically, inequality is a bad thing. You don’t even need to make a moral argument. You don’t have to mention the word justice once. More equal societies grow faster. They’re better…”

It turns out that Americans have more reverence for “fairness” than for equality. We’re not Sweden, and perhaps just as well, Mark Blyth allows. “But we get out of shape when we realize that the risks are being socialized and the profits are being privatized. And that’s what’s happening on Wall Street… “

Podcast • September 6, 2011

Mark Blyth (5): Sovereigns, Citizens and Suckers

Click to listen to Chris’ conversation with Mark Blyth (28 minutes, 14 mb mp3) Mark Blyth is back in the pub, just in time, talking trash again and taking some credit. He’s the political economist ...

Click to listen to Chris’ conversation with Mark Blyth (28 minutes, 14 mb mp3)

Mark Blyth is back in the pub, just in time, talking trash again and taking some credit. He’s the political economist who doesn’t mince words, even when he’s writing for fellow professionals. At Triple Crisis, for example, the other day: “The European sovereign debt crisis is little more than a huge ‘bait and switch,’ perpetrated on the publics of Europe, by their governments, on behalf of their banks…”

In the Scots vernacular, he is reminding us (and the Tea Party) not just that our humongous public debt is a gift of the private sector and the bailed-out banks, since 2008, but also that much the bigger piece of the general debt crisis today is the household debt that’s nearly doubled in the US in the last decade: i.e. underwater mortgages and credit card debt. So are we looking at a “Japan decade” of de-leveraging (paying down debt) and very slow growth?

Hold on. Have you been to Japan lately? It’s a pretty nice place. That decade of ‘helpless stagnation’ is actually okay: Japan’s got more modern infrastructure than we have by a factor of twelve. It’s got better educational outcomes, people live longer. So let’s put this into perspective: it means that you don’t have absurd growth and a housing bubble, it means that you don’t go back to people betting their entire fortune on an internet stock. We stop the casino, we chill out for a while, we pay back some debt. It’s probably a good idea. But we’re not going to do that if we slash the government budgets at the same time that we’re all trying to save the private. You can’t do both.

Mark Blyth with Chris Lydon at the Watson Institute, Brown University

Podcast • March 24, 2011

Mark Blyth (3): The Black Swan of Cairo

Mark Blyth, the know-it-all professor with the Sean Connery delivery, is back in the pub tonight, and not a moment to soon. When the political economy of energy is screaming red-alert, from Japan melting to Libya’s oilfield civil war, cheerful chatter from a certified political economist can sound like music. Let’s just forget that Mark Blyth, on our last round, told us that austerity would be our nightmare in 2011. And let’s remember it was Mark Blyth’s friend Nassim Nicholas Taleb who cautioned us almost a year ago that we seem to have entered the Age of the Black Swan — a black swan (think: BP oil blowout in the Gulf of Mexico) being an unimaginable event with big consequences and its own impervious mythology of cause and effect. The social service of black swans is to remind us that fragility is a main mark of global systems. In conversation at the Watson Institute, Mark Blyth is generously scooping himself from an article he and Mr. Taleb have co-authored for the magazine Foreign Affairs.

Let’s not get too bent out of shape about it, because complex systems, when they’re tightly coupled, are Black-Swan prone. And if all the volatility in the mix gets packed and shoved under the carpet, so to speak, then they become prone to these explosions. We also have a remarkable capacity to bounce back. Let’s think about what happened with Japan. You had the Trifecta from hell: first you have an earthquake at 9.0, so let’s follow up with a tsunami, and then a nuclear accident. What happens? Global stock markets fall off a cliff. A week later, they’re back. And the Japanese look like they might actually just pull this off. Why? Because they are a very technologically advanced society. Because they’ve got more experience with nuclear energy than anyone else. And because we got lucky. Let’s face facts, it could have been a lot worse. Now what is the lesson that we’re going to take from that? Being humans we’ll probably learn too much, which is to say, “Well, that shows that nuclear power is safe.” No it’s not. We got a sixty year track record. We’ve been lucky so far, but that doesn’t mean we’re not turkeys looking for Thanksgiving once again.

So we become more tightly coupled, there will be more Black Swan events, but our capacity to bounce back is always there… But you don’t want to get in a position whereby what you’re saying is don’t touch anything ever, don’t try anything ever, because it will end up creating some kind of downstream consequence you can’t calculate. Some of those consequences might be good.

Let me give you an example of this. A long time ago, back in the nineteenth century–before they had a fully formed notion of how diseases were transmitted through bacteria and viruses, etc.–there was a theory of disease that said it traveled on the wind, it was smell. And it was the stench that really made you sick. Hence why the Victorians were always running out to get “good air” and go out into the countryside and all that sort of stuff. Now, they were completely wrong. But one of the things that they did, because they were obsessed with smell, was to build sewers. Now that was exactly the right thing to do, had you had the proper theory of disease. So on the wrong theory, they got the smell and literally got the shit off the streets and put it all underground. And in doing so, they made the biggest advance in public health ever, for all the wrong reasons. Sometimes, nonlinearities work out in a really good way.

Mark Blyth in conversation with Chris Lydon at Brown University, March 22, 2011.