Capitalisn’t: Rethinking (Neo)liberalism?

Bethany: Happy summer to all of our Capitalisn’t listeners. Some of you may have noticed a trend in our last few episodes. Luigi and I have been trying to interrogate, from a variety of angles, one of the most fundamental questions in capitalism today: did neoliberalism get it right or wrong?

We spoke with Glenn Hubbard, the former Bush administration economist and Columbia dean, whose new book, The Wall and the Bridge, is mostly a defense of neoliberalism. We spoke with Oren Cass, the executive director of American Compass, which is trying to define a new conservative ideology in the wake of what he and others view as neoliberalism’s failure. And we spoke with Francis Fukuyama, whose new book, Liberalism and Its Discontents, is a broader look at what liberalism itself is and isn’t.

But Luigi and I felt like we hadn’t yet come to a satisfactory conclusion or given our own comprehensive views on the question. So, on this episode, we’re going to do one big capital-is, -isn’t segment. Is neoliberalism a capital-is, or a capitalisn’t?

I’m Bethany McLean.

Phil Donahue: Did you ever have a moment of doubt about capitalism and whether greed’s a good idea?

Luigi: And I’m Luigi Zingales.

Bernie Sanders: We have socialism for the very rich, rugged individualism for the poor.

Bethany: And this is Capitalisn’t, a podcast about what is working in capitalism.

Milton Friedman: First of all, tell me, is there some society you know that doesn’t run on greed?

Luigi: And, most importantly, what isn’t.

Warren Buffett: We ought to do better by the people that get left behind. I don’t think we should kill the capitalist system in the process.

Luigi: What I would like to do, because there is so much confusion . . . and one of the things I appreciated about Francis Fukuyama is that he defined things to begin with. So, I think we should define some of the terms, in my view, to distinguish between the version of liberalism that is mostly political—that is what Fukuyama was talking about—from the economic component that now goes by the term neoliberalism. I don’t know whether this is a good term or not, but that is the one that Hubbard was trying to defend, and Oren Cass was trying to criticize.

I saw a definition of neoliberalism given by a Marxist author, David Harvey, which I think is quite agreeable. It is a philosophy where human well-being can best be advanced by liberating individual entrepreneurial freedoms and skills within an institutional framework characterized by strong property rights, free markets, and free trade. But I’m happy to define neoliberalism in the narrow sense, where basically, you’re saying you can trade without restrictions, and markets have very few rules. That was the version of liberalism or economic liberalism that prevailed from 1990 to at least 2007.

Bethany: And do you think it was the global financial crisis that was the first crack in the neoliberal economic foundation? And perhaps saying neoliberal and economic is redundant, because neoliberal may imply economic. But was that the first crack in the foundation of it, or would you point to something earlier?

Luigi: I think the financial crisis was a major awakening issue. But after that is the realization that the promise of neoliberalism that we were going to bring better prosperity for everyone was failing. This is the time when the fact that you didn’t see a rise in real wages for the median white male worker for 40 or 50 years started to become an important factor that people started to focus on. The promise of a better future was not shared by the majority of Americans.

Bethany: We can see the evidence that it failed in the sense that its promises were not borne out. Do you have a clear answer as to why it failed, as to what fundamentally, philosophically, is wrong with the idea of neoliberalism, with the ideas embodied in neoliberalism? Why doesn’t it work?

Luigi: I will distinguish between two versions or two problems. One is, if you take neoliberalism in the most extreme form, where you say there should be no regulation, and you believe that markets self-correct perfectly, and blah, blah, blah, I think that is blatantly false and not particularly interesting to discuss.

So, let’s take a more interesting question, which is, even if you intervene properly—you regulate, you try to make sure that markets work relatively well—what is not guaranteed in the system is that everybody within your politically defined nation is going to benefit from prosperity. And obviously the neoliberalists never said that, for example, free trade will benefit everybody. But the idea was, oh, the benefits are large enough that you can redistribute and make sure that everybody will benefit. And that is the premise under which NAFTA was approved back in 1993, whenever it was. And I think there were some small attempts to do some redistribution, but very, very small.

And the major, in my view, mistake that was made at the beginning of the 2000s was to let China enter the WTO without some form of soft landing. Because the aspect that I don’t think is emphasized enough is that, historically, we have seen a major shift from manufacturing to the service sector. But this has always been in relative terms, not in absolute terms, until the beginning of the 2000s. So, if the share of employment in manufacturing is dropping, but the number of people working in manufacturing doesn’t drop, it means that the child of an autoworker is going to become a webmaster, which is something relatively easy to do with a decent educational system—and we can come back to how decent the educational system is. But let’s assume a decent educational system.

Now, it’s very different if you start from 20 million manufacturing jobs, and you go down to 13 million manufacturing jobs. This is the absolute number dropping, which means you have to take a 45-, 50-year-old autoworker and transform him into a nurse or into a webmaster, and that is extremely, extremely hard. And nobody at the time thought about this. And everybody, including myself, is to blame, even if I’m not a trade economist, et cetera. But I wasn’t there pounding my fist and saying, “We should pay more attention to this.” That was a major mistake. We should have put some sand in the gears of liberalization to allow a smooth landing rather than an abrupt shift.

Bethany: Some of this does speak to the importance of intersectional debates, in the sense that if we had recognized the interplay between a failing educational system and neoliberalism, then maybe things would have been different. Because we were relying on an educational system that no longer existed to be able to take the child of the autoworker and make them into the webmaster in a way that our educational system, our public-school educational system, was no longer, in many places, capable of doing. And so, that’s one part of the problem.

And then, sociologically speaking, I think we also didn’t recognize the way in which poverty very quickly becomes ingrained. In other words, that if that child of the autoworker is going to a failing public school and living in a family that is mired in poverty, that that, in and of itself, is going to be enough to change the debate or to change the face of neoliberalism.

Luigi: Yeah. I think that the problem of elimination of jobs . . . In general, we think that, oh, we destroy old jobs and the economy naturally creates new ones. And I tend to believe that, on average, that is true. But there is the problem of speed, and in particular, the problem of adaptation of human conditions. And it is easier to move from some jobs to others than from some other job to others.

I think that when Italy became more of a manufacturing power, immediately after World War II, there was a lot of shedding of workers from agriculture, but they found immediate occupation in manufacturing. Why? Because the set of skills was fairly similar. And so, there was a massive migration, and it wasn’t perfect, but it was not as devastating as what we have seen in the Midwest in the last 20 years.

Bethany: I think it’s a failure to recognize . . . just back to my point, it speaks to the importance of being able to think outside of your own narrow field. Because this speaks to the importance of a broader sociological understanding of the impact that changes are going to have and how they may spill out in different ways, in a way that we’re often not accustomed to thinking. And paying attention to what’s happening on the ground. Because if you had paid attention to what’s happening on the ground instead of being immersed in the theory of neoliberalism, then you probably would have seen a long time ago that things were not playing out as they were supposed to, and people did.

I do think, though . . . I worry a little bit that by focusing exclusively—well, we have so far in this conversation—on how neoliberalism went wrong that we are letting liberalism off the hook a little bit, too. Because one of the things I took away from our conversations about liberalism, particularly Fukuyama’s book, is that the system of ideas as it was were never implemented in the real world. The philosophy was different than the implementation. The philosophy applied to white wealthy men for a period of time, but it didn’t apply to people of color, it didn’t apply to women. So, it was enacted in a way that wasn’t commensurate with its philosophical ideals.

And so, I think that while the concept of liberalism may be very ideal in many ways, the way in which it’s been implemented through history has, in many ways, been an abdication of some of the fundamental precepts of liberalism.

Luigi: Yeah. But I’m a little bit more optimistic on that front, because you can’t expect any idea to be implemented perfectly, especially at the beginning, and the change so far has been in the right direction. When liberalism was introduced, it was not even all white men. It was only the ones that owned some property or were educated. But then it was extended to all men, and then to women, and then to people of different colors. In that sense, I see progress. I see a good direction.

My concern is the fact that liberalism is not able to provide you a sense of nation and belonging. A liberal system needs a nation-state to enforce certain rights, but it is not a theory of a nation. And if we really take it seriously, the biggest contradiction . . . if you take it seriously, then we should have one person, one vote in the entire world, right? But no one in their right frame of mind, especially if you’re born in the United States, thinks that you want to implement one share, one vote over the entire world.

Then the question is, who is in and who is out? And the liberal attitude is everybody can get in and out. We are open to immigration. There is no restriction. But that is, first of all, not feasible. We’re not ready to have a billion people in the United States tomorrow. But, two, if you have free entry, you can’t really promise a minimum decent level to your citizens. So, either you have a social contract that also includes some safety net, or what it means to be a citizen. But then if you have a social contract and have a safety net, you cannot have free entry, because it will attract everybody in the world. It will make the system not sustainable.

So, you need to somehow decide whether you have a liberal world in which everybody is a citizen of the world, but there is no safety net, and there is no redistribution whatsoever, or there is a sense of a nation. But if there is a sense of a nation, number one, what is the boundary? And, number two, you need to enforce those boundaries. You should stop letting people in, or at least massively restrict entry, and at some level, maybe even restrict trade.

Bethany: Yeah. It seems to me, there’s a more fundamental philosophical question underneath what you’re asking, which is, does a belief in the kind of liberalism that you’re describing require a belief in meritocracy? And if you’ve started to question whether a true meritocracy can ever exist, can you actually embrace the kind of liberal world order that you’re describing? Because if we agree that the grounds of competition are themselves unfair, which some of our critics of meritocracy have, then that pure version of liberalism, even if it were workable, is still not, can still never, live up to the ideal. But you may disagree with that framing.

Luigi: I’m actually more radical than you say. Even if you don’t touch the issue of meritocracy and how fair meritocracy is and equality of starting point, et cetera, the question is, there is risk involved. If you want to provide some safety net for workers, what does it mean, what does it imply, to be an American versus a Nigerian? Do I get some benefit just for the sake of being American or not? And if the answer is, if I don’t have any benefit, then why should I participate in the social contract? And if I have some benefits, it means that the people in Nigeria probably don’t have the same benefits, so it means some discrimination, that we’re not all the same, and being American is worth more than being Nigerian.

Bethany: I hear you and understood that. I meant that there was also another fundamental question to be asked around that. And I think the two questions side by side are both real challenges to the implementation of liberalism.

But one of the things I was thinking about as I tried to think through this and as to what the solution should be is, embrace the messy. Back to your point that the real problems with all of this began when it looked like liberalism had won, when there were challenges to it, when there was messiness, the system actually did better. And perhaps if we embrace these contradictions in the implementation of liberalism, of free markets, embracing the messy may be the way forward.

And I was thinking, when I looked back, there was a great essay by Martin Wolf, a wonderful FT writer, about what was going wrong in this era of crises. And he had pointed back to 1944 when these two books were published by immigrants from Vienna, one, The Road to Serfdom by Hayek, arguing against the oncoming tide of socialism. And the other, The Great Transformation, which I didn’t know, by Karl Polanyi, basically arguing that this tide of socialism was the inescapable result of the 19th-century free market. And that’s why I had said that this debate . . . although the circumstances around it had been very different, but this debate does go back a very long time. What we’re living through now, it’s new in the crises that are bringing us to this point, but the debate itself is not new.

And so, I was thinking that the messiness was actually a key to the way forward, and the idea that pure philosophies are dangerous when you try to enact them, practically speaking. Does that make sense?

Luigi: It does. But I think there is also something else which is quite important, and I think is not fully appreciated, is that the period that the French called Les Trente Glorieuses, The 30 Glorious Years, that go basically from ’45 to ’75, had been glorious for Western Europe, not for the rest of the world. To some extent, in the immediate aftermath of World War II, particularly American workers, but even European workers, at some level, were in a particular privileged position. Not only did they emerge as the winners of the war, they had superior technology. But also, the only places where you could do business safely were basically the United States and maybe a couple of countries in Western Europe. Even my own country, Italy, was at risk of becoming a communist country, and so was France. So many people were afraid of making a massive investment in those countries. And so, you were in a moment in which you have superior technology, a superior organizational form, and a workforce that was massively more educated than the rest of the world.

The United States pioneered mandatory high school in the early part of the 20th century. By 1945, if I remember correctly, something like 43 percent of the workforce had a high-school education. In Italy, there was still a significant portion of the population that was illiterate, not to mention the rest of the world. You had this convergence of factors that made educated American workers a scarce factor that was earning a rent. And that rent is basically what created the middle class, what created the success of the ’40s and ’50s and ’60s.

What happened afterwards is that the rest of the world caught up. And first was the rest of the Western world, but then it was the rest of the world at large. The Soviet bloc collapsed, China caught up, and today, you can safely invest in Vietnam, a place that, until relatively recently, we were bombing like crazy.

That really opened up the world to American investment and made American workers more disposable at the same time in which our educational system was getting worse, and everybody else’s educational system was getting tremendously better. Again, China in 1945 was massively illiterate. China today has, on average, a basic education that is probably better than in the United States. And so, the non-college-educated American worker was at the top of the world in 1945, and I wouldn’t say is at the bottom of world today but is in the middle of the pack, probably below the middle of the pack in the grand scheme of things in the world.

While at the same time, the upper echelon of American society is doing great. Why? Because they are not only at the top of the United States, they’re literally at the top of the world. And everybody reads the New York Times, everybody reads American books, everybody listens to American songs, and you keep going. And so, if I am a great singer in America, I make a bazillion, versus only the millions I was making 50 years ago.

So, this is as globalization has really dramatically reduced the payoff for average Americans and enriched beyond a reasonable level the upper end of the distribution.

Bethany: Are you arguing that liberalism never worked? In other words, when I say that my way forward would be an embrace of a messy form of key liberal concepts, are you arguing for something more radical than that, that it never worked, that it was only an accident of timing and history, that it appeared to work for a period of time, or an accident of where you happen to be situated on this curve? Or are you not arguing that? Or are you arguing that perhaps this crisis in liberalism, in neoliberalism, is from the perspective of the American worker, and that if we looked someplace else, like China, like India, we might see something else? And so that perhaps, our idea of a crisis is also rooted in time and perspective?

Luigi: Something in between, probably. From the perspective of these developing countries, the last 40 years have been great. The problem is, it’s not been great for the entire nation of the United States. There has not been enough redistribution to make everybody better off.

And so, what is colliding, in my view, is a global system without boundaries with an electoral system, or a nation-state, with very clear boundaries. This is what Dani Rodrik, an economist, claimed is the trilemma, that you cannot have, at the same time, a free-market system—at least a free-trade system—democracy, and a nation-state, and you have to give up one of the three.

Bethany: Hm. Do you think that’s true, that you have to give up one of the three?

Luigi: I fear it is true. I wish it were not. But I think that what I’ve seen recently is that that’s probably the case.

Bethany: Huh. But does it have to be that extreme? Back to my concept that you could embrace the messy . . . Maybe messy is the wrong way to describe it. The less than pure. Do you have to give up on these concepts, or can you embrace . . . Now I’m sounding like Glenn Hubbard, “I want to build bridges.” Can you build bridges so that you can still have these concepts in place while having a greater appreciation, a greater ability, to recognize the ways in which the economic impacts may be playing out in ways you don’t anticipate and fixing that? Or do you think the fundamental philosophical issue here is belief in one’s own nation and belief in one’s own country—same thing, sorry—and that that’s going to fray inevitably under a liberal world order?

Luigi: I don’t see a substitute for the nation-state. And so, we need to have nation-states. And I would like to live in a democracy. And so, it’s necessary to have some form of safety net and the national state. And I think that having complete free capital and labor movement and trade really undermines the ability to have these national policies, and then that really puts at risk the democratic system. So, I would like to have all three, but if I have to give up something, I would give up the total free mobility of goods and capital.

Bethany: But then we have to distinguish between what a country can do with redistribution inside itself versus what a country might want to do on the notion of free trade with other countries. Because then it does seem to me that if you really restrict free trade with other countries and have tariffs in place and penalize other countries, that you are creating an unsafe world. And making an unsafe world, in the end, is the most damaging thing you can possibly do. So maybe that does argue then for a policy of redistribution within one’s own country, rather than a policy of trying to close national borders. Does that make sense?

Luigi: Yeah. I want to be very clear. There’s no part of me that wants to close national borders. The issue is, the definition of free trade has shifted from let’s not put up barriers to, basically, let’s have trade policy run by multinationals.

I don’t know if you know, but the TTP Agreement, Trans-Pacific Trade Agreement, when America was in it, included some provisions that would make it easy for multinationals to sue national governments and force them to do what they wanted. And it was only when the US got off that train that they dropped that, and they made actually it a better trade deal.

My fear is that neoliberalism has basically captured some terms, made them a slogan, and changed the substance. When you say free trade, we interpret it as you shouldn’t put up unjustified barriers, but in fact, now it is, let’s have large multinationals decide what is allowed, what is not. When you say free market, instead of having a competitive market, we say we let companies decide what to do, and so on and so forth. So, it has really transformed a world that was procompetitive market into a probusiness proposition with very, very negative distributional consequences.

Bethany: That’s really interesting. And maybe I’ll go back to where we started this conversation, which is, it really is all in the definitions. And maybe part of what would help us move forward is to be very, very clear, when you say free trade, what it is that you mean.

It’s also, there really is no such thing. Because even “free trade” is preconditioned. Free to whom? And free in what respect, in that part of what’s gone wrong with the United States and China is the different rules in both countries. The US has respect for intellectual property, China has not. The US has had basic standards in place for workers, China has not. In that case, there’s no such thing as what’s free trade when the criteria that each country is using is so radically different.

Maybe part of the solution or part of the way forward is to be very, very clear definitionally about what we mean and what the framework is that this is based on.

Luigi: And I think this is where the triumph of liberalism after the fall of the Berlin Wall intoxicated us all and made it easier for people to push some ideas to the extreme without the public noticing. Under the banner or under the flag of “we’re all liberal now,” we went to excesses that would have been challenged in a more dialectic, struggling world.

Bethany: It’s interesting, because liberalism, as Fukuyama pointed out, was fomented in a period of intense discomfort, intense conflict. And the fear I have after reading his book is that it can only find its way forward in another period of intense discord, that it needs that to be reforged. But what you’re saying is interesting because it also points to the opposite, which is that a period of lack of challenge and of seeming economic well-being has also been very dangerous for the idea itself. So, there’s this odd juxtaposition, in that time of great challenge in the world has been a time where liberalism has found its footing. And a time of seeming ease in the world, in many ways, was a time where liberalism lost its mooring.

Luigi: I think there is no alternative to political liberalism, or at least the alternatives are much, much worse than what is out there. The question is, can political liberalism survive without better support from the economic system? There is a line of thought of people that you can have a liberal democracy regardless of what kind of economy you run, and I think that that’s not true. If you have extreme inequality, it’s very hard to support a liberal democratic system.

I actually recently visited Tunisia. There is an enormous amount of income inequality in Tunisia, and you see the people that are from the upper class who say, “Oh, but we would like to have a Western democracy system,” blah, blah, blah, blah, blah. But then they don’t want to pay taxes to support this Western democracy system. You can’t have the peace and tranquility of Germany or Sweden, and the income inequality of Brazil.

And the United States is the best example. I always joke that it takes a Latin American economy to have a Latin American president. And I think that most Americans thought that in Latin America, they had Latin American presidents just because they were from Latin America. That’s not true. The moment you have the same level of inequality, you end up having the same quality of presidents. The fundamental question is, how should our economy change in order to make sure that a liberal democracy is supported politically?

Bethany: But that’s the extent of the irony, the extent to which neoliberalism has undermined the fundamental tenets of liberalism, that one doesn’t translate to the other. That in order to create liberation for all people, which is the most fundamental tenet of liberalism, that you need an economic system that is more inclusive and that offers support to a broad range of people so that you can really liberate everybody.

Often, the practical realities have been the opposite of that, that a system meant to liberate everyone has actually been based on the enslavement at times of some, and then the economic servitude in modern times of another set of people. And that one part of the path forward is both acknowledging the failings in the past, but also very explicitly making sure that our new definitions include inclusiveness, both philosophically and practically speaking.

Luigi: And the question is, how to do it? Because one group of people thinks that the solution is to guarantee some minimum income to everybody. It’s a form of pacification, and it reminds me very much of the Roman emperors that were distributing free bread and circus shows in order to keep everybody at bay. What we need is to guarantee everybody a real shot at the American Dream. Otherwise, you don’t feel you belong. I think that that’s really the problem, and we are moving more and more in a direction where these chances are so small that people don’t want to play the game.

Bethany: My father, who will hopefully listen to this episode, will like the fact that you invoked Rome, because he thinks that nothing is new under the sun, and that we are slowly, maybe not so slowly anymore, but inevitably, following the course of Rome, and that’s a really interesting analogy as well.

This is an aside: I’ve always been a little bit suspicious of the idea of universal basic income, because a lot of the supporters come out of Silicon Valley. And of course, I think in my conspiracy-oriented little brain that they would like nothing more than to have a giant swath of the population with nothing but time on their hands and disposable income to spend glued in front of their devices. I could write a good dystopic fantasy novel based on that.

But yes, I think, though I’m not sure this gets us any closer to an answer, in that giving everyone a really legitimate shot at the American Dream is a really fraught and difficult proposition in and of itself. And how you do that, the question of how you do that, opens up a whole ‘nother can of proverbial worms.

Luigi: Yeah. But the other thing that, really, the discussion with you made me realize is that if we have a system with all the formal rules in place, that all these formal rules are, let’s say unbiased, de facto, that system will be massively biased in favor of the wealthier. So, the system needs to be designed with a little bit of populism in mind in order to offset the natural bias toward the wealthy in the implementation.

I think it was Jefferson who said that you need a revolution every so many years in order to bring things back to where they were. I think that there is an element of truth in that. I think that we need some populism to rebalance the system. And if the system is too imbalanced, you’re going to have a very nasty form of populism. But if you have the right dose at the right time, you keep the system balanced.

What the conversation with you led me to think is that we do need to rethink liberalism at the foundation. Neoliberalism is a refreshing of old liberalism without rethinking, and that’s what I think is unsustainable today. But a rethinking of what are the trade-offs, what are the choices, in the framework of individual freedom and limiting excessive government, but also limiting the excess of private power.

I think you know that there is a tradition, in continental European tradition it is called oder liberalism, that sees markets as a creation of a legal infrastructure. And so, you need rules to create markets, so they’re very keen on antitrust, for example, and they’re very keen on protecting against private power.

One of the big mistakes, in my view, of neoliberalism is that it has really attacked the state, and vilified the state to the extreme, and idealized the private sector to the extreme. And while I’m the last one to be enamored with the state, state capacity is essential for the workings of any government. And we have seen during the pandemic how important that is. And, two, private power, especially when it becomes a private monopoly, is even worse than a public monopoly. In those situations, you need the power of the state to fight the excessive power of the private sector.

Bethany: Yeah. I guess that’s another example of what I would call the messiness. As we’ve said on different podcasts, the key idea ingrained in the American Constitution is that you need conflict between powers, and you need a conflict between the state and private enterprise. You need both to be powerful so that they can offset each other’s weaknesses. And if you have the absolute power of government, that corrupts absolutely. If you have the absolute power of private business, that corrupts absolutely. And in recent decades, we’ve been tending toward the absolute power of private business, and that corrupts.

And so, I think maybe one of the things we’re striving toward is, what’s the right balance? And a lot of our conversations have gotten at this in an oblique way, but what’s the right balance between the government and private business? And how do you ensure that that balance is not only right to begin with but remains right going forward? And so, the issue is, how do you safeguard the balance?

Luigi: I think it’s a dynamic process. I don’t think that you can set rules in place that will work all the time. You need to have the fluctuation of a democratic endorsement. I think that this is where democracy is very important, because when the majority of people feel that the pendulum has swung too much in one direction, they’re going to help bring it to the center, and vice versa. I am of the view that in the ’70s, the pendulum may have gone too much in the direction of centralization, regulation, et cetera. But certainly, now it has gone too much in the opposite direction, and we need to try to bring it to the center.

Bethany: I also think that there needs to be more recognition of how theories are working in practice. And I think that’s not appealing to many theoreticians, because it’s much more appealing to lay out the theory and then not look at the real-world evidence of how the theory is playing out. And I think if we had had more focus on this, then we would have realized—and some people did—but we would have realized a long time ago, been forced to realize that neoliberalism wasn’t working in the ways that its adherents had said that it was. And I think it’s human nature to want your philosophy to be right and then not to want to brook any interference with the purity of your philosophical ideal. But the reality is that charting a good way forward requires an intersection between philosophy and reality.

The way I’ve thought about this in business terms is that we tend to celebrate visionaries and not give that much credit to those who can execute. And in reality, the world depends on those who can execute the practical implementation of the idea. And that’s, I think, what we need more focus on as we think about the systems that we live by. What’s the vision, but then also, what’s the practical implementation of that idea? And how is the practical implementation of that idea backing up the vision, and how is it saying, “Huh, this vision maybe isn’t all it was cracked up to be”?

Luigi: Speaking of new philosophical ideas, we heard relatively little that was new. One idea that was new and interesting is the Oren Cass idea to basically value labor more, factor that into our policy analysis. However, when I pushed him to deliver some policy implications that did not regard China . . . It was clear that he hated China, wanted to be at war with China. But let’s take China out of the picture for a moment. What were the big policy ideas outside of China? Ignore the environment, was that the message? I didn’t get a lot.

Bethany: I think everybody struggles. I mean, I’m a journalist, so what I excel at is diagnosing the problem and telling you why it all went wrong. I, and I think a lot of people, struggle with, then what precisely do you do to make it better in the future? So, I want to knock some of our guests for not having more clarity on what you do to make it better in the future, but I recognize that I, myself, don’t either.

I mean, if I were king and queen for a day, and had an unlimited amount of money to spend, and could get in and adjust attitudes and minds, and if I could do anything, if the genie could appear out of the bottle and then I could get three wishes, my first and biggest one would be to fix the educational system.

Luigi: Actually, I don’t disagree that this is the long-term solution. But I think we are not going to get there unless we change our democracy, and we’re not going to change our democracy unless we change the system of financing.

What has changed dramatically over the years in the United States has been the influence of money in politics. That’s the reason why the interests of a lot of ordinary people are completely ignored, because they don’t count. If you think about all the Republicans that were anti-free trade, until Trump, they never got represented by anybody. Why? Because the people who had the money were deciding who was the more viable candidate. And if you express any opinion anti-free trade, you will not go to the second round. So, it was like a necessity to be pro-free trade.

And I’m not saying that being pro-free trade is bad. I’m just saying that this is an example of the distortion. If we don’t fix those distortions, I don’t think we can fix anything else, including education. Because, honestly, one of the big problems with education is the way it is financed. And if we don’t have a better voting system, we’re not going to fix that, either.

Bethany: Speaking of financing things, I guess if I could start with—it’s not necessarily smaller, but perhaps a less grand goal than fixing education. And this is more of a question than it is a solution, to rethink the role of debt in our economy. Because my bias is to believe that the growth in consumer credit has also exacerbated inequality, even though the promise has always been the opposite, that the extension of credit will enable those at the low end of the socioeconomic spectrum to catch up. And God forbid, you do anything to interfere with people’s access to credit. But I often think, as it was in the financial crisis, that that’s a deceptive way of selling people credit they can’t afford, and further marginalizing people. And I think we should do some episodes on the role of debt in our society, and where its promise has been fulfilled and where it has actually just been a means of economic subjugation.

Luigi: I think that what we should do is launch this idea that we should have a new liberalism that is different from neoliberalism.

Bethany: What would you call it? I don’t think we can call it new liberalism. How about Bethany-Luigi liberalism?

Luigi: I don’t think that will catch on. I have a suspicion that maybe if you say Bethany liberalism, it sounds better, but the Luigi component sounds too much like a pizza place.