The Munk Debates Podcast - Munk Members-Only Pod: Episode 42

Episode Date: October 22, 2021

This is a sample of the Munk Members-Only Podcast. The program provides listeners with a focused, half-hour masterclass on the big issues, events and trends driving news and current events. The show features Janice Gross Stein, the founding director of the Munk School of Global Affairs and bestselling author, in conversation with Rudyard Griffiths, Chair and moderator of the Munk Debates. This week's Munk Members podcast explores two topics in the news. First, why are the major advanced economies of the world stimulating asset prices, spending their way into wartime levels of debt but not taxing to raise public revenues to offset the extraordinary costs they have incurred to respond to the pandemic? Is this in any way a serious, sustainable strategy to create stable, equitable and long term economic growth? If not, why have we become so unserious when it comes running our economies and government, and what are potential risks of our current lassie fair approach? And, second, we look ahead to the COP26 meetings starting in Glasgow this weekend. Is the potential for a breakthrough on climate change mitigation over before the conference has started now that China's Xi is signaling that he is unlikely at attend? How much longer are voters in democracies going to tolerate a political class that talks a good game on targets and the need for collective action but seems unwilling or unable to deliver on a substantive agenda that effects real and last change? To access the full length episode consider becoming a Munk Member. Membership is free. Simply log on to www.munkdebates.com/membership to register. Under your membership profile page you will find a link to listen to the full length editions of Munk Members Podcast. If you like what the Munk Debates is all about consider becoming a Supporting Member. For as little as $9.99 monthly you receive unlimited access to our 10+ year library of great debates in HD video, a free Munk Debates book, monthly newsletter, ticketing privileges at our live and online events and a charitable tax receipt (for Canadian residents). To explore you Munk Membership options visit www.munkdebates.com/membership. This podcast is a project of the Munk Debates, a Canadian charitable organization dedicated to fostering civil and substantive public dialogue. More information at www.munkdebates.com.Become a Munk Donor ($50 annually) to get 72-hour advanced access to the full length editions of Friday Focus and Munk Dialogues. Go to www.munkdebates.com to sign up. Hosted on Acast. See acast.com/privacy for more information.

Hi, Monk podcast listeners. The following is a sample of the Monk members-only podcast. To access the full-length edition of this episode and all of our regular Monk members-only podcasts, go to our website, www.W.munkdebates.com and register for membership. Membership is free, and it's available for you right now at www.munkdebates.com. Hope you enjoy the program. Hello, Monk members. Redyard Griffiths here, your host and moderator. Welcome to this, our regular Friday Monk members-only podcast. This is the half-hour program where we dig into the big issues and ideas in the news.

We look at the trends and events shaping our world. And as our guide on every program, we're so exceedingly fortunate to have Janice Gross Stein. She's the founding director of the Monk School of Global Affairs, internationally renowned scholar and author, and she's all ours for the next 30 men. It's Janice, great to be in dialogue with you. And great to be here with you, Redyard, and with Monk members. A number of topics that I want us to focus on this week.

And there's so much going on. Let me try to group a few things together. So let's go a little bit meta on this podcast. We're three big, I don't know, events, signposts for me this week that kind of raise a set of questions I'd like. like to kind of pose to you about how we're thinking about our economy, how we're thinking about this post-COVID phase in terms of, you know, creating opportunity and let's face it, more opportunity for disadvantaged groups for lower income households and families. I was struck by the following. One, we had somewhat jaw-dropping stories out of the United States

about the U.S. Central Bank, Chairman Powell, very important regional bank chiefs of the Fed network across the United States, trading reports now coming out, trading on their own personal accounts at the height of the crisis, and really, in some cases, throughout 2020. And if you just think of one group that has so-called insider information, that would be the group. Add to that, the U.S. Congress, kind of following the example of the Canadian government in the spring 2021 budget and seemingly telegraphing that they're not going to be proceeding with individual and corporate tax hikes to pay for all this extraordinary deficit spending that's going on, And then the final data point to kind of add to this set of kind of signposts that struck me this week is continuing inflation numbers that suggests that this narrative around transitory inflation is increasingly being challenged by the facts on the ground.

So, Janice, putting that all together, I'm left to this feeling of a kind of an unsuriousness on the part of our leaders and maybe on the part of our culture on the part of all of us about this moment and about what it demands and about what it requires for us to move forward in a way that is serious, sophisticated, and addresses the post-COVID needs of all of society. How do you link these stories together? And are we now deeply unserious about this economic moment that we find ourselves? said. Let me say on a mega basis first, Rudyard, politics often gets in the way of what those of us outside would like to see in terms of a coherent rational strategy. It's not for nothing that people say all politics is local. So if we talk about these three stories, the first I think in many ways

is both the easiest to understand in the worst, that when you have governors of federal banks who are trading securities, at the same time as they are making decisions about rates, there's just a fundamental conflict of interest. It goes beyond insider knowledge or insider trading. These people are responsible. for big, mega decisions about the direction of the economy,

which influences every sector. So to say that the individual securities they were trading were not affected, it's just frankly nonsense. There should be an iron-clad rule against governors, owning anything it should all be in a blind trust. Why would we do that for cabinet ministers? Why do we have increasingly strict conflict of, interest rules, and we don't apply these to governors of banks, to central bankers.

So this is a kind of, I agree with you, jaw-dropping story. What's interesting is that it has come out, and a test of seriousness, to me, will there be a change in regulations here that prohibit any central banker from actively trading in anything while they're in that role as central banker? If you don't want to pay that price, don't be a central bank. As simple as that, right? And so, you know, there's always, for me, a little bit of optimism. This stuff is now out in the press.

There's a reason all this is out. That's got to change. Let's come to the second issue, which Congress refusing to raise taxes. Now, why is that one happening? Because there is a mega fight going on right now over the future of Biden's big legislation packages, two of them. The infrastructure bill and the, what you might call the social infrastructure bill, which actually is addressed exactly to the people you talked about.

The people who benefit most from that second legislative package will be marginalized communities, people have been hardest hit by COVID, people who, even before COVID were not doing well as the inequality gas. growth. Now, Biden is doing, frankly, what every competent president has done. And the last competent president was Linda Johnson, who understood how the legislative machinery works. You know, Barack Obama did not understand. Trump did not understand. They didn't come out of that. Biden actually does. And he's horse trading. He's got to make a deal here, Roger, to get that legislation through. So what's coming out? Tax hikes, number one, gone in an effort to get the support of the more conservative Democrats. Two, the next thing that's going to come out are probably

the single most important piece of legislation on climate change. The third thing that's going, going on is a free college education in the first two years. Those are gone in an attempt to reduce the size of the package. So the big megastroids, story here, what's more important? To get this legislation through on physical and social infrastructure, cut by 50% of the original ask, although the original ask was huge, and not do it by direct taxation, not fund this by direct taxation. I get the sausage-making politics. It's just, it's as we saw in Canada with the spring budget. It's this, to me, this dangerous kind of moment that we're in, where the ultra wealthy, the proverbial 0.01%, get soaring asset prices fueled by central bank

intervention, endless intervention, endless bond buying, suppressing rates, meaning there is no alternative other than equities because there's nothing for you in bonds, but losing money because with inflation, your returns are negative. So the ultra-rich are taken care of by monetary policy, and then we have fiscal largesse on a level that we've only seen in wartime, really have to go back to the Second World War to see governments spending this amount. And then guess what? At the end of the day, in Canada, the United States, Europe, and elsewhere, nobody pays for it. It's all free.

There's no higher taxes on the 1% on corporations to actually make these programs sustainable. Because as great as these programs are, and I agree, they're hugely important, especially in the United States, which has so much. in inequality, the issue is that we are going to have a debt crisis. The levels of entitlements in these societies already before introducing these programs were unsustainable. So no one is being serious, Janice. That's my point.

It's magical thinking. It's having your cake and eating it too. And I guess it feels good. I guess everyone's happy. Everyone's got something. we've made the grand bargain, which is, again, soaring asset prices for the people that own the assets, which is understandably a small segment of society owns the majority of capital. And then all the rest of society gets direct cash payments, free pharma care, free dental care.

And guess what? They don't pay for it either. No one pays for anything. It's just not serious. It's childlike. It's immature. It's unserious because. contrary to new monetary theory, there is no free lunch. There is no free lunch. And when you pass legislation to build, for example, physical infrastructure, we don't talk about that. We talk about

the social infrastructure. But if you actually look at Canada and the United States, we have the most degraded physical infrastructure. We have not invested since the 1960s in improving our infrastructure. Go spend time in Montreal, okay? And look at the bridges that connect that island and then go to Beijing and look at five new subway systems and six new ringroads and ask yourself who's got third world infrastructure, who's got first world infrastructure. So these are almost no choice investments. The unsurious part doesn't start now, Roger. It started 40 years ago when we began to live off infrastructure, which we did both social and physical and we did not invest in.

So you're right that there is no real reckoning. There's no, there's no accountant here who's met. There just isn't, and you're right about that. Here's the other version of the story, though, when we finally upgrade our digital and physical infrastructure, when we finally get some money out the door. to improve educational opportunities for that part of the population that hasn't really had that opportunity. There is the possibility, that's all, but there is the possibility of significant increases in productivity in the U.S. economy. Productivity's been dragging.

Right. So you're balancing. We hope for a herd of golden unicorns to summit the horizon based on, you know, a wish and a prayer. Janice. I mean, it's not a wish in a prayer, Roger. I think historically it is. I mean, there's a lot of arguments that all the technology that's so transformative to our lives has had some amazing effects in certain specific industries regarding productivity, but overall the trend in society, unless we're going to have some amazing breakthrough, cold fusion, I don't know, unlimited geothermal energy, you know, some kind of new Einstein,

moment, you know, the long-term future. But anyway, I don't want to go down that rabbit hole, because I want to ask, just before we go to next topic, I want to ask you another question about this. But if you want to add something else, go right ahead. Yeah, just before you go to the next question, let's look back for one moment at what happened after World War II, incredible spending, incredible spending by governments.

Very different demographics. Yeah, very different demographics, but incredible spending. and you come out of World War II and nobody's paying for it yet there's huge debt and you have this astonishing productivity gain which inaugurates

really 30 years where inequality dropped so the big dance in all the public choices invest her first and hope for big productivity gains or pay down and hope that you don't delay

those opportunities which is that the inequality, unfortunately, only declines when one of the horsemen of the apocalypse rides in. War, pandemic, on this case not, but generally you need these leveling events, which are not achieved through some kind of rational approach by society that understands the self-harm of inequality and acts against it. We have never done that. We as a species may be programmed not to do that. So again, it's not that I'm in any way against what Biden is doing with this spending, because you're right, especially the United States as compared to Canada. Those groups really have been neglected now for a generation. But just the unsurisiness of so much of our conversation about how we actually achieve these goals in meaningful, lasting ways.

Because there is an entitlement crisis coming. There is a debt crisis coming. there is a crisis in a sense in the economic order that we're now subsisting on, which is entirely debt-fueled, low taxes, again, feels great. I love it, you love it. Everyone loves it. Everyone gets something. But at the end of the day, we know that this just doesn't work over the long term. And I guess crisis, maybe that's it. Maybe that's my final point is ultimately, unfortunately, we have to have to, have a crisis and a crisis forces change because we're incapable of getting out in front of

these things to do the necessary hard things now to prevent that crisis from happening. Let me just take what you've just said now, Rodger, and use it to explain why there's so much emphasis in the United States by this government on investment, I'll call an investment, rather than spending, and so little concern about that. If you want to talk about a crisis, the United States is before probably this most serious threat to its democratic future, and that is top of mind for many people. It is, in fact, I'll say it like it is, the nightmare of a second Trump presidency starting in 2024. Much of this is driven by fear of that crisis, that if there is not investments,

which gives something to the Trump voters who are, frankly, in many, many cases, not all by far, but in many, many cases, the ones who have been mostly downwardly mobile for the last 20 years. You're right that there are some groups of society benefited enormously, many if not. But you look at those classic Trump voters, they have been on a down escalator of social mobility for the last 20 years. So if you ask yourself, if these kinds of social investments and physical investments,

you know, the infrastructure bill is going to create well-paying jobs for people who actually work with their hands and build stuff. Those are the people who haven't been able to get those kinds of jobs.

If you ask yourself, for those investments timely, now, before an election in 2024, I think that a lot of this is actually strategic and anticipatory in order to prevent the next crisis. When we come back from this break, we've got a topic for you that kicks off this Sunday and is going to grip the world. I think it grip a lot of media reporting next week. So we'll get Janice's thoughts on that.

I'm Roger Griffith. You're listening to the Monk Members Only Podcast back in a moment. You've been listening to a sample of the Monk Members Only podcast. To access the rest of the episode, consider. become a member. Membership is free and available at www. monk debates.com. Once you've joined as a member, go to your membership profile to access the rest of this episode and all of our monk members podcasts. Thanks for listening.