The New Yorker Radio Hour - How Donald Trump Is Trying to Rewrite the Rules of Capitalism

Episode Date: May 6, 2025

For a long time, Republicans and many Democrats espoused some version of free-trade economics that would have been familiar to Adam Smith. But Donald Trump breaks radically with that tradition, embracing a form of protectionism that resulted in his extremely broad and chaotic tariff proposals, which tanked markets and deepened the fear of a global recession. John Cassidy writes The New Yorker’s The Financial Page column, and he’s been covering economics for the magazine since 1995. His new book, “Capitalism and Its Critics: A History,” takes a long view of these debates, and breaks down some of the arguments that have shaped the U.S.’s current economic reality. “Capitalism itself has put its worst face forward in the last twenty or thirty years through the growth of huge monopolies which seem completely beyond any public control or accountability,” Cassidy tells David Remnick. “And young people—they look at capitalism and the economy through the prism of environmentalism now in a way that they didn’t in our generation.” New Yorker Radio Hour listeners, we want to hear from you.  We have a few questions about the show and how you listen to it. The survey takes about twenty minutes, and your feedback will help us make our podcast better.  Take the survey here.

This is The New Yorker Radio Hour, a co-production of WNYC Studios and The New Yorker. This is the New Yorker Radio Hour. I'm David Remnick. For decades, economic arguments in this country, in the broadest sense, we're usually over taxes and spending. But for a long time, Republicans and most Democrats alike have been in favor of free trade, the idea that the global flow of goods and services should be as open as possible for the sake of growth and efficiency. Even if it hurt some workers, the prevailing economic wisdom was that free trade was a necessary aspect of capitalism. Now, this was and has always been contentious. Unions of fought agreements like NAFTA. Critics say that the globalized economy led to deindustrialization in much of the country, and that deindustrialization, as we know, gave real fuel to Donald Trump's populism.

Trump has been a longtime proponent of tariffs, and he seems to relish the prospect of a major trade war with the Chinese. Those positions reach their fruition with his highly chaotic tariff rollout recently, which, of course, tanked the stock market and put us near the brink of a global recession. Even many Trump voters have told pollsters that they disapprove of this tariff policy.

At least it's chaotic nature. A new book by John Cassidy, our staff writer, takes a long view of these debates. It's called capitalism and its critics, a history. Cassidy has been covering economics for the New Yorker for a long time, and he writes our weekly column called The Financial Page. Now, John, I think most people in America think of capitalism almost as the eternal, natural, natural order of the universe somehow like the weather. But it has a real beginning, and that's where you start your book.

So how did capitalism start and what did it replace? Yeah, I mean, that's actually a pretty complicated question. of the book which I've written about is industrial capitalism. And we do have a start date for that. It's usually dated to about 1770 in England in the cotton industry where a series of inventions led to the rise of the factory system. Now, that arose on top of another system of capitalism, which was called mercantile capitalism. What's the difference? Well, it's actually very timely. Prior to Adam Smith and prior to 1770, the government and the economy were pretty much intertwined, a bit like they are now under Trump.

Protectionism was the order of the day. I mean, Britain and Holland were the sort of empires in the 17th and 18th centuries, and they fought wars over it. They basically were competing for the colonial trade, the spice islands in what is now Indonesia, the trade in India, cottons, all sorts of goods came from the east.

Adam Smith, of course, is often thought to be the godfather of capitalism, the philosopher of the free market, but you cite him as a critic of capitalism. Right, right. Now, there's a bit of a conceit there because, of course, you know,

Adam Smith is the hero to a lot of capitalists and conservatives. So I remember when I used to be a correspondent in Washington covering the White House in the late 80s, people used to walk. The Reaganites all walked around where their Adam Smith pins on. Right.

Trump people wouldn't do that? I don't think so. Not most of them. I mean, they reject some of the, you know, protectionism is it. Adam's Trump. wrote the wealth of nations to critique the mercantile system that we just mentioned and basically defend free trade. He said that protectionism was harmful. It led to corruption. You had these huge

corrupt companies like the East India Company, which was actually bailed out by the British government. So in his time, Adam Smith was a critic of the existing form of capitalism at the time, mercantile capitalism. And what compelled Adam Smith to come along and defend free trade. Was it purely technological invention? It's a very good question. Number one, he said that, you know, we depend on other people for our livelihoods, basically, you know, you depend on the butcher to provide you with food, you depend on the tailor to, you know, to clothe you, etc. And he said the market is this mechanism which sort of coordinates all these different forms of economic activity efficiently. And, uh, if this competition also fairly because things sell for pretty much the cost that they're the cost of producing them with a little profit margin. But, you know, you don't, Adam Smith didn't have Google and, you know, sort of Amazon.com to contend with. But that's the thing he critiqued as the godfather of capitalism. It's largely with monopoly power, isn't it?

No, exactly. He viewed the great colonial companies. They were actual monopolies. They had monopoly grants from the government. So a lot of government ministers invested in the East India Company, so it was sort of crony capitalism. It wasn't, you know, again, very contemporary. At the moment, the monopoly aspect is, you know, front and center. At some points, you know, in the 2008 crisis, this instability question was, you know, his front and center.

That was front and center when, you know, Marx and Engels were around thinking that financial blowups in New York or, you know, going to end capitalism. When you look back on your reading of Marx, which began when you were very young and you've been thinking about Marx for a long time, early on and in both of our careers at the New Yorker, you wrote a terrific piece about Karl Marx, and not for the last time either. What did Karl Marx and Frederick Engels get right in your view and whatnot? I take two things from them, basic things. Number one, the Communist Manifesto was the first book about globalization. You know, they have these great ringing phrases about the bourgeois going to the ends of the earth and, you know, destroy it every all that is holy as profaned.

It's a global system which sort of rips up everything in its path. And, you know, I think that is a very profound and correct analysis. The Marxism, if you boil it down to one sentence, classical Marxism, is that the most important dividing society is between the people who own property and the people who don't. ownership of property is dominated by the capitalist, especially industrial capital. Workers have only got their, the only thing they have to sell is their labor. They have nothing to lose but their chains in the famous phrase. I'm speaking with the New Yorkers John Cassidy, more in a moment. And what about now? We've seen in recent years, starting when Bernie Sanders was running for president, polls that showed declining support for capitalism in really significant ways. So, John, what would you see? is happening? Well, I think what's happened is, you know, capitalism itself has, you know, put its worst face forward in the last 20 or 30 years through the growth of huge monopolies, which seem

completely beyond any public control or accountability, and young people, they look through the capitalism and the economy through the prism of environmentalism now in a way that they didn't in our generation. But at the same time, there's one socialist senator, Bernie Sanders, and he draws big crowds, What is his position in the Democratic Party firmament, the American firmament at this point? Bernie always calls himself a socialist. But his view of socialism, unless I'm very much mistaken, I've interviewed him a lot of times, I haven't seen him, you know, recommending nationalization of the means of production.

Right. What Bernie's in favor of, higher taxes on the rich, control over monopolies, public health care, public education. That to me is, you know, Keynesian social democracy, in the European context anyway. But in the U.S., there's always been such a sort of mythology surrounding the free market

and the sort of small business man. Why is that particular to the United States? What are the roots of the resistance in the United States as opposed to Europe to social democracy, as you describe it? To some extent, the American economy for a long time did live up to that. There was the idea in the US. There was more social mobility in the US

than there was in Europe. And people really did think that with hard work they could get ahead and do well for themselves. I remember first, when I first came to the US and I realized that quite a lot of sort of working class, what you'd call middle class people, have second homes. There were all these modest cottages out in Montauk

where what I would call working class people, people went for the summer. Now, of course, they can't afford it now, but no, we're talking 30, 40 years ago. So I think, you know, there was some material basis for the American idea that, you know, there was American exceptionalism. This was a land of opportunity. And obviously, a lot of people still believe that, especially a lot of immigrants. The more cynical sort of leftist take on it would be that, well, of course, because it's always been manufactured consent, America's always been dominated by the capitalists. They've always owned all the media. there's never been a proper left-wing movement here to take them on.

So I've got a bit of sympathy for that. I've got a bit of sympathy for both views on that. I'm sort of agnostic as to which one is sort of wins. I mean, I grew up in the sort of British, English, British Keynesian tradition. John Maynard Keynes. John Maynard Keynes. And the Keynesian tradition from the economist John Maynard Keynes. What is that?

What's the tradition in the history of capitalism? Keynesian to me means, the phrase I use in the book, is managed capitalism. It's a capitalist system, but you manage it in various ways. Number one, the original crux of Keynesianism, you need the government to boost demand in times of slumps. So, Keynesian stimulus policies. But it's not just that. Keynesianism also involved a whole series of attempts

to manage the financial sector, for example. It was a social bargain, basically. The capitalists were allowed to continue to own companies. There's still quite a lot of inequality. but in return, there were this whole set of social guarantees on employment insurance and national health service, which Bismarck started at first of all, but then was put into effect.

But you're describing as more European than America. That is, but even in the US, even in the US, the New Deal was a form of managed capitalism. The reason why I've become more sympathetic to the Marxist or ultra-left view in less 30 years or so is because that managed capitalism was basically disintegrated, not completely disintegrated, but it's been, you know, it's been massively on the defensive.

How would you describe that? It's because the diminution of labor unions, the growth of monopolies, the increase in radical income disparities. Yeah, I mean, there's a whole, the car worker in Detroit, if he's put on a level of playing field with the car worker in India or China who earns, you know, a tenth of the salary, really can't compete. Now in the car industry, governments have always intervened. The car industry has always seen as too important to leave to the market.

But, you know, the clothing industry, for example, the US used to have a huge textile industry. That basically went away in the 80s and 90s. And then China came along, the China shock in the early O's. And that was, you know, that's basically an unprecedented shock. And economists, a lot of American economists, you know, took a long time to recognize that. But even the people who supported unrestricted free trade, I think now recognize that the China shock, you know, was huge and did a lot of damage to industrial areas and, you know, has given a boost to populism, including Trumpian populism.

Now you have exactly that Trumpian populism. And at the center of White House policy to combat globalization, to combat deindustrialization is the use of high tariffs. And Trump rolled this policy out, seemingly fairly chaotically. What is the theoretical impulse behind it? Why is Donald Trump so pro-tariff as he has been for decades? Right. That's a very good question. So the man himself, why is he so anti-free trade and protection? It seems to go back to the 80s in Japan and when Japanese car companies were first coming in here.

I think he just sees it in terms of a sort of businessman that, You know, we're giving them our valuable markets and that's always bad. You know, it's like letting a rival casino set up next to his. He shouldn't be allowed. Beyond him, there's always been this debate about, you know, how far protectionism is justified. I mean, America in its early decade, century, was a protectionist country. The argument is that when you don't have any industry and you're trying to build it up, you are justified in providing temporary protection for yourself.

that doesn't justify slapping tariffs on everything. Trump's argument seems to be that all trade is bad. He's not just saying we have to counter unfair trade or we have to defend

our infant industries such as they are. Is there a logic to that? No, no. I mean, that was the basis of his... It's just emotional. It seems to be.

It's instinctual, I would say, on his... So where do you see this policy of Trump's going? He's yanked back certain measures because he saw the market's tanking.

Right. And yet it seems one of the great own goals in the history of policy. Even though the MAGA movement portrays itself as, you know, a movement for workers and a lot of the foot soldiers are, you know, around the country, it's still a Republican Party.

And a Republican Party is still a party of business. And I didn't think it was going to be sustainable to have a Republican Party. government introducing blanket tariffs because it damages so many businesses and the markets are going to hate it. I think he thought he could take some pain but when it came to it, it didn't.

I mean, that's the great irony here. The Chinese have shown that, you know, they're willing to take more pain than we are. They can withstand a tariff war because they're a single-party totalitarian state. Yeah, there's no public opinion is not playing a big part. Public opinion is not particularly highly rated.

And Z doesn't really intimidate. about the stock market that much either. If Trump is going to tariff all America's major trading partners, this gives China an opportunity to sort of make, you know, outreaches to Europe and Asia and the global south and sort of replace the U.S. in various parts of the world. John, there's a tension inside the Trump administration where economics are concerned. You've got the economic nationalism of the kind of Steve Bannon wing. And then you have Trump himself in some ways, and you've got, you know, somebody like the Treasury Secretary or of the Commerce Secretary who are big-time capitalists. They're not economic nationalist,

strictly speaking. What will prevail in the administration? Is it Bannon or Besson, I guess it would be the Treasury Secretary? The Treasury Secretary now is the sort of, you know, the representative of Wall Street, although he hasn't been doing until recently he wasn't doing a great job even defending Wall Street's interest. I think Trump is always going to end up straddling the two. I think he emotionally and instinctually is very much on the banon, ultra-protectionism, economic nationalism side of things. But I think as we've seen in the last few weeks, with the whole tariff fiasco, there isn't a political coalition inside the Republican Party to support that over the long term. And Trump himself is not willing to take the political,

that comes along with that. Once the stock market starts crashing or falling sharply, once the banker start calling up and saying, Mr. President, the bond market's going berserk, you have to do something. Once the opinion poll numbers start falling, he backs off. And once inflation starts rising and recession kicks in. Right. I'm afraid it looks like to me we're going, we're sort of condemned to just continuing chaos with him sort of rotating between the two wings. And I think Well, all we can, all we can guaranteed is more instability and chaos. On that splendid note, John Cassidy, thanks so much. Thank you.

Capitalism and its critics, a history. That's the title of John Cassidy's new book, and you can find Cassidy writing on the economy every week in his column, the financial page at new yorker.com. And of course, you can always subscribe to the New Yorker there as well at New Yorker.com. I'm David Remnick. That's our program for today. Thanks for listening. See you next time. The New Yorker Radio Hour is a co-production of WNYC Studios and The New Yorker. Our theme music was composed and performed by Merrill Garbus of Tune Arts, with additional music by Louis Mitchell.

This episode was produced by Max Bolton, Adam Howard, David Krasnow, Jeffrey Masters, Louis Mitchell, Jared Paul, and Ursula Summer, with guidance from Emily Boutin and assistance from Michael May, David Gable, Alex Barish, Victor Gwan, and Alejandra Deccett. And we had additional help this week from Jake Loomis. The New Yorker Radio Hour is supported in part by the Cherina Endowment Fund.