The Crisis of Democratic Capitalism | LSE Event

Good evening everyone and a very warm welcome to tonight's

event

, including our, I'm sure, a very large online audience, as well as those of you who are here in person. This is an

event

supported by. the Meridian Foundation and organized by the university's economics department. My name is Tim Besley and I am a member of the economics department and we are here tonight to celebrate but also to interrogate the ideas in Martin Wolf's new book, the

crisis

. of

democratic

capitalism

um, not in the little introduction, many of you will be avid readers of his columns in the Financial Times, as well as his uh uh extensive collection of books, um, but his main title is chief economic commentator at En financial times we have two excellent commentators who are going to respond to some of the ideas in Martin's book.

Diane Coyle, Bennett Professor of Public Policy at Cambridge, also has a very, very interesting career as a journalist and practicing economist. which now as an academic and, um, Jesse Norman, Deputy Minister of State for Hereford for decarbonisation and technology at the Department of Transport, but also as an author of books on Adam Smith, on Edmund Burke, and also with a PhD in philosophy, which is a bit of an unusual context for an MP, um, anyway, we're delighted to welcome you here. I'm going to invite Martin to the podium, he'll speak for about 20 uh 25 minutes, then we'll hear from the two respondents that we'll have. a little bit of conversation and then we'll talk about it uh we'll open it up to the floor for questions and more discussion so I'll leave you Martin and thank you for joining us so I'm surprised by the size of the audience the idea.

There are a lot of people online also makes it even more noticeable. I guess this is because of the title. In my experience, people really love to talk about crises and not about me. Let me let me explain to you what I'm going to do. It's a pretty big book, it's smaller than it was before the editors got to work very usefully, but it's a pretty big book and it contains a lot of different topics and ideas and in 25 minutes I can't cover them all, so , what I am going to do? In my speech, um uh, I basically focused on how I see the problem, what the

crisis

is and its nature, and the central idea that I have of how we are going to have to address it, um, but the discussion about political and institutional reforms, which en I think something much more open than one's own understanding of the crisis, to which there may be many different responses, will be left for later discussion or perhaps for some of you.

I hope many of you read it, so let me start with my analysis. of the crisis, actually perhaps explains that the book was conceived already in 2016. It took me a long time to work on the topic to my satisfaction to understand how we got to where we are, which was quite obvious by then, a collapse of some things that we took for granted about how democracy worked and how it would work in the future. I'm going to start with two quotes. I will tell you who the author of the first one was after he has given it to you.

It is clear then that the best association in a State is the one that operates through the middle people or the middle classes and also that those States in which the middle element is large and if possible stronger than the other two together with Those that the author refers to as the plutocrats, the aristocrats on the one hand and the very poor on the other, or at least stronger than any of them, have every possibility of having what is wrong. Oh, sorry, yes, I have to read it again. I'm not sure why that's not the case. this one yes, this is good, yes, that's it, no, it's okay, thanks, I haven't seen that page.

Hello guys, here we go, it is an experience of

democratic

energy. Well, one of the best. One of the most important themes of this book. Technology is destroying civilization. and I think we've seen a perfect demonstration, so what I was saying is that the best association in the state is the one that operates through the middle people and if the middle people, the middle class is stronger than either of them. aristocracy or uh the poor um or any rate stronger than any of them alone these states have every chance if it had been a well-administered democratic Constitution and this analysis comes from one of the two most important books on politics ever written and certainly about political democracy is Aristotle and the second quote, which I guess is a motto for me and my life and will probably completely infuriate everyone under 40 here, is um, but it explains how I think these things come from the Temple of Apollo at Delphi and it is Meriden, a weapon or never too much, in other words, a good society depends on balancing irreconcilable elements.

It is not possible to have a society in which you have everything that some people want without living in a permanent Civil War. That's my opinion. In 1937, my father left. Vienna to England on her own her immediate family miraculously managed to escape to Palestine in '39. her wider family was trapped in Poland and with the exception of one young girl died in the Holocaust in May 1940 my mother's father was a made Jew Fish Merchant himself hijacked a fishing boat to take his family to England as German armies crossed the Dutch border. He was one of nine brothers.

He asked his brothers and sisters to join him with his families. None came. His families also died in the Holocaust. I'm not sure of the figures but between 40 and 50 of my parents, aunts, uncles and cousins ​​were killed and this was of course a result of the collapse of the civilized order in the interwar years in Europe, there were many reasons for this , but without any doubt. In my opinion, and in that of many others, one of the main ones was economic calamities, including the devastating disaster of the Great Depression, and that, in fact, this awareness of the possibility of economic failure was one of the reasons why I first became interested in economics a long time ago and that is also why The topic of this book, which I started when Donald Trump became president of the US and we were caught up in the Trump campaign, Brexit, it matters to me personally, you cannot assume the stability of a civilized democracy, you simply cannot assume this, this does not mean that I am predicting the stability of a civilized democracy. 1930s, let me be quite clear, but don't assume that what you have will last, let me talk about what I call the Democratic recession, it's actually what Larry Diamonds, a very famous scholar of these issues of democracy and teachers, Stanford calls a liberal democracy a democracy. characterized by civil rights, the rule of law, and respect for both the rights of losers and the legitimacy of winners.

Fair elections determine who has power. Attempts by the head of government and state to subvert elections or manipulate the vote are treason, but that is clearly what Donald Trump tried to do both before and after last year's presidential election, he failed to do. Decent and brave people made sure that, but to this day, despite what recently happened in the midterm elections, Trump has largely continued to maintain the loyalty of his party's base, just look at the recent. Polls and it is perfectly possible that his successor could be worse because he is more ruthless and better organized, but Trump is not alone, but what is happening in the United States is clearly more important than any other country for its political significance.

Freedom in the world 2021 the last. That August issue of the Independent U.S. Watchdog Freedom House published in February reported a 15th consecutive year of decline in the health of liberal democracy around the world, hence the Democratic recession observed by Larry Diamond at the University of Stanford about 15 years ago is now surely By those standards, closer to a democratic depression, the decline that Freedom House points out has occurred in all regions of the world, including especially in the democracies that emerged after the end of the Cold War, but the most significant thing is that it is also observable in the central Western democracies and, above all, in the Western democracies.

The United States is the most important of them all, in fact, the country that surely saved democracy in the mid-20th century, so let me begin. I'm not going to go over all of these. This is the book. That's the quote I just gave you. This is a little Greek for you and I spend a lot of my life reading Greek, so this is the estimate, one of the most recent estimates from the end of the Trump presidency, of the relative quality of the major central democracies of the world. and 100 is almost perfect, so we can say that, in his opinion, there were several countries close to perfection.

The UK was far behind, but basically the US has been in a class of its own in terms of quality. I'm really bad, so that's where we are. From Freedom House's point of view, let's move on to the second question I want to discuss: Where does democratic

capitalism

come from? Where did the system we manage come from? Let me make it clear that when I talk about capitalism I only mean a market economy with private capital. ownership I don't want to get into a lot of semantics about what capitalism means, although that is discussed in the book based on a well-known database that goes back centuries.

The quality 4 database there were no democracies in the world as defined by 200. Years ago there were only oligarchies or monarchies, even where republican institutions existed, the right to vote was drastically restricted based on sex, race and wealth in the US In the US, for example, in 1800, according to One Source, the proportion of the adult population eligible to vote in 1800 was around six percent then, in the 19th century, the franchise began to expand and, through many conflicts and which I cannot speak about, universal suffrage, democracy finally emerged in fits and starts and encompassed approximately half of the world's countries in the 1990s, but in the West.

In the world of Europe, in North America and in some other places in the world, democracy by universal suffrage is about a hundred years old, that's a little bit longer, but it's only about 100 years old, so let me show you this graph that I think It's quite interesting. which shows what happened to democracy according to this Source over the last 200 or so, actually 140 years and I think it's actually a pretty fascinating picture and overall quite encouraging, so this shows the brown line on which I'm going to focus. in shows the proportion of countries in the world, not people, countries in the world that lived in democracies as defined by Quality Ford and that, although it is not a universal democracy that suffers, only a significant amount of democracy back in 1870, think that of The countries at that time were independent, remember that many were. in the empires there were about 10 they were in democracies that increased to 40 just after the first world which was a dramatic democratization in the interwar years there was a calamitous and colossal collapse, which I was referring to at the beginning of my lecture. after the war it increased a little to 30 percent, but a big part of the reason it didn't increase more is that there were many more countries and many of them became dictatorships, but then after the fall of the Union Soviet, there was a dramatic run if Unfortunately, I don't have data for 2010, but if we had it now it would probably have fallen to a little less than 50, so we are in decline, but not as dramatic.

I also put the relationship between world trade and GDP. which is a measure of how capitalist we were and the interesting thing is that there seems to be a correlation. The correlation I suggest is that we generally favor open trading when things are going well, when we are feeling optimistic, and when we are feeling optimistic. pessimistic and the economy is bad we close it that is what happened in the interwar years and what is starting to happen again so why did so many countries accept democratic principles? After all, this was an extraordinary revolution in the last two centuries, as we know very well that the normal way of structuring the economies and politics of a complex society has been for power to be married to wealth and wealth to be married to power;

In other words, the rich had all the power and the powerful had all the rich. Wealth was basically the way most societies were organized, including ours before the recent centrists, so the explanation for this transformation lies in the emergence of marriage based on liberal ideas and various other things of the What am I going to talk about? about between those very different partners a liberal economy and a democratic system of government I consider these two systems for the economy and the system of government I call them complementary opposites the market economy and democracy by universal suffrage share important things that they reject describe the hereditary status on which market capitalism is based The ideals of Free Work, individual effort,Rewards for merit and the rule of law cannot exist without the latter.

Democracy is based on the ideals of prior discussion and debate among citizens to make the law. Historically, the market economy brought urbanization, a very important, educated workforce, and a newly organized industrial working class as a potent political force that creates new parties and transforms politics around the world, in our world, so I maintain that markets protect democratic politics from excessive concentration of political power if the State owns and controls everything. It is almost impossible to run democratic politics in a society because there is no basis for doing so, but democratic politics protects markets from excessive concentration of market power while addressing the most disastrous consequences of markets for the majority of the population. people, and this then is the way in which market economies and liberal democracy are complementary but also fundamentally opposed to each other capitalism is inherently cosmopolitan the democratic state is of course territorial the market is an output domain of democracy that voice the market economy is egalitarian but potentially radically so that democracy is egalitarian is basicThe premise is that all people are equal.

Tensions will inevitably arise if the economy does not serve the interests of the majority. The sense of shared citizenship on which democracies depend will surely emerge. Fray and the populist demagogues. Populism is not necessarily lethal to democracy. It takes the form of justified, even very fruitful, hostility towards elites, but too often in the past and now it turns into hostility towards pluralism itself and pluralism. Pluralism is an inevitable and essential element in any true democracy of democratic society. It can then be transformed into advertising. dictatorship and ultimately a dictatorship to the core; Alternatively, the concentration of wealth in the market can lead to absolute plutocracy as wealth is transmuted into power and both dangers are very present today, so what has gone wrong in our democracies, I argue, is that large increases in inequality in The deteriorating prospects of many people, particularly former workers and important parts of the middle classes in central democracies, have played a crucial role in breaking down the foundations and legitimacy of our democracy, in particular, the emerging fear of downward mobility in stagnant economies has created status.

Anxiety and deep political cynicism have been deflected by clever propagandists. Intercultural and racial resentments. The rise of new media has clearly facilitated these trends, but in my opinion they have not created them. The big question is what has happened to create these concerns in the world. People and I maintain that the most important phenomenon in the world has been economic deindustrialization. Rising inequality and falling productivity growth are profoundly important transformations of our society in the recent past, so this shows the end of the dramatic decline in industrial participation. of industry in employment and with it, of course, a dramatic decline, as everyone knows, in the role of unions in our public life.

So the red column shows the industry's share of the labor force in 1970, the dark blue looks like black and The dark blue is the chair now and these are ranked by falls in the chair. You will be interested to see that the absolute drop in marketing industry share in the UK is the largest of these countries, which are the G7 plus Spain, the US and Incidentally, the UK is also the most unequal of the largest high-income democracies by standard OECD data and has also had some of the most potent populist policies. I doubt that's really an accident.

Another crucial complementary fact is that there has been a dramatic decline in the rate of productivity growth or a spurt of hourly output growth in our economies since the 1950s, 1960s and 1970s, with the 2010s being the last 10 years. particularly bad and, as you can see, UK productivity growth has slowed to truly negligible. levels since 2010, the only country that has done much worse than ours is Italy, so the combination of very low growth, a dramatic fall in the types of jobs that used to be created supported by industry and high inequality It has to keep economies stabilized, the legitimacy of our economies.

I think the political system, but through its impacts on people's lives, um Ragharam Rajan of the University of Chicago, a well-known figure, argued that easy credit on these trends, but which then exploded into the next big shock, well, the next big development which is the financial sector. crisis, the scale and visibility of the crisis quickly further destabilized people's sense of the legitimacy of both our democracy and our market system and these two graphs below will illustrate this. The crucial point of this graph is that it shows the deviation of Jesus in the relationship. the relative change in GDP per capita in the same economies, the G7 class, let's say seven more, uh, Spain, um, since 2007, relative to what would have happened if the 1992-2007 trend had continued and focus again on UK GDP in the future.

The 2021 numbers were more than 30 percent lower than they would have been if the pre-2007 trend had continued. Incidentally, it is the worst performance of GDP per capita and household disposable income in the UK since the early 1920s. Probably since the 19th century it is not surprising that governments are unable to raise revenue for the services they provide. people expect and many people are extremely dissatisfied with the state of politics and with the elites who are supposed to understand what they are. doing and we have obtained these results now, what does this mean then for our system, the relationship with democracy in the world today?

Well, there are two alternatives and we must think about what they could mean for us. Um Branca Milanovic in his analysis of this defined a contrast between our type of capitalism that he calls liberal and I call democratic and he opposes it to what he calls political capitalism. and I call authoritarian capitalism and there are basically two varieties here, one of them having very different implications for us, authoritarian capitalism. It's the kind of autocratic capitalism that I should say, it's the kind of thing that happens when a democratically elected politician, this is mainly what happens now, takes power for himself and his kotary replaces the people who run the central institutions of society with its own followers. he replaces the lawyers and judges and so on that he has appointed with his own followers and basically turns the state into a personal FIFA and this has been happening in many countries, the other Challenger is completely different, it is basically the Chinese system.

The bureaucratic system, the first Challenger, is not particularly effective, but it is the kind of direction some of our countries are at risk of taking. The other Challenger is a Chinese system that, despite its many obvious flaws, has managed to mobilize resources to achieve growth on a scale never seen before. anywhere else and become an economic superpower and in other dimensions within just predicates, such as liberal democracy, if we think that the less Western system faces two enormous dangers: one that, due to its loss of legitimacy, we will elect people who They will basically be prepared to hollow out the democratic system for their own personal purposes and I think that's what Trump represents.

The other possibility is that we fail so dramatically that we lose legitimacy in much of the world and China gains more and more power and influence in it, and I say this and add, incidentally, not coincidentally, that my book strongly defends the maintaining cooperation with China, so this brings me to the last thing I want to say about the challenge of renewal, which is the general theme of the second half of the 21st century. book I believe that the renewal of our democracy, our capital and our capitalism has to be animated by one overwhelming idea: that of shared citizenship and, therefore, the commitment to achieving the best possible outcome for the well-being of our citizens.

For democracy to work, we cannot think about ourselves. Only as individuals, as consumers, workers, businesses, rather than owners, etc., should we think of ourselves as citizens in a democratic political entity, and such citizenship should have predominant and free aspects, loyalty to democratic political and legal institutions and the values ​​of open debate and mutual tolerance. that they are underpinned by concern for the ability of fellow citizens to live before world life and the desire to create an economy that allows citizens to prosper and we have failed in these aspects and if we continue to fail our civilization in the way that we We have done We know that he may not survive.

I don't think we can do this by going back in time. We cannot reconstruct the Society of 50 or 60 years ago and in most respects we should not want to, but I still think some things clearly remain. the same human beings have to act both collectively and individually and acting in this way within a democracy means acting and thinking as citizens as the Greeks told us and if we do not do it democracy will fail thank you very much foreigners thank you very much Martin, so I will resort first to Diane Coyle, who will give us an answer, uh, and then to Jesse, thank you, thank you Martin, for the talk and the book.

I'm going to focus on the capitalism part that you talked about about assuming that that is the division of responsibilities between Jesse and I and um, you gave us the Macri clinic's overview of what has been happening. I do micro thinking. I think about the structure of markets and if you think about some of our most important industries in Lately we have a food industry that processes foods that make us obese and sick. We have a financial industry that takes money from us instead of making it for us. We have a pharmaceutical industry that needs people to be sick.

An extreme case has actually been killing people. We have a tech industry that has produced exactly what people said they didn't want it to do, which are substitutes for human creativity in art and music, etc., so I'm exaggerating a little, but you get the point, and In the US and the UK in particular, the living standards of many people, of many mediocre people, as Martin described them, have been steadily declining, not a recession, but a period of several years downward mobility for the first time. Since the dawn of the Industrial Revolution, what the late great Will Balmall used to call the free market innovation machine just isn't working right, and I don't know whether to describe it as broken or dishonest, but it's not working for people. and that is a big problem, we are also in the middle of two huge technological transitions towards a different energy base in our societies, away from fossil fuels and towards a completely different way of communication and interaction and all the consequences.

From that we have seen some of them directly political consequences and they are happening at the same time, they are what economists call general purpose technologies and when that type of disruption occurs, we use the word cliché, um, this fundamentally alters. the structure of the economy and society how value is added, how our resources are used and who keeps the value that is created and that always means conflicts of interest and therefore periods of those types of disruptions think In printing steam electricity, they are associated with social turbulence and that has always been the case because of this dispute over who gets the value, how it is distributed now.

I've known Martin for quite some time and I always used to think that he was incredibly pessimistic and I was an optimist. Optimistic in comparison, but I'm actually quite pessimistic now too. Ideas matter. I agree with that and the importance of the idea of ​​citizenship and not thinking that we can run an entire society as if we were individualistic profit or income maximizers and that is important and there are signs that that type of intellectual framework through the How we have governed our societies, particularly the US and UK for the last 40 years, is changing, so ideas matter, but any way I can think of to fix the market economy in ways that create profits broad-based for many people in ways that mean that the incredible innovations in AI that have happened in recent months bring benefits to everyone in society that start in every way I can think of start with political leadership that has a kind of strategic vision and we are in a country wheregets a new strategy every year, so how do we move from the broken system we have, which is breaking politics as well as economics and capitalism, to something that is more beneficial for everyone in society and restart that innovation machine.

There are signs now in the US that Joe Biden, President Biden, has a strategic vision and an industrial policy and is implementing it, but that is fragile. He wouldn't describe American politics as being in a healthy state. Right now the EU has taken on a new purpose with Brexit and is similarly inching towards a strategy but there is a conflict on the European continent so I don't know how well they will do and here in the United Kingdom. we've fallen behind so I think it's probably a good segue into the later intellectual past of the Hospital, which I'll try to deal with and thanks Martin.

I mean, what a passionate, brilliant book and how incredibly exciting it is to be talking about it with such a distinguished group and I mean such a distinguished institution, I mean, that's all I love, a good quote from Aristotle like the next man and a woman and, the last time I translated it, it may not have meant then. nothing too much, never too much and I don't think there's actually anything that would necessarily have been hostile to something being occasionally too much, but we know that when it comes to the status or the system or the institution, the Constitution or politics, then then never too much It's not just his recipe for a state, it's also his recipe for human well-being on an individual level, so let me give you another quote from Aristotle, which is that Aristotle says that humans are the only species capable of deliberating about their own species. self-government that is what distinguishes human beings, who are the only species capable of deliberating on their own self-government and that is why this invitation not only in this book but in general the challenge that Martin poses to all of us to think again about the The conditions of our own self-government are profoundly important and have the deepest possible philosophical and political roots.

Now I would say there is a risk. I think it's up to one cup in the room to be The Optimist, and since the other positions have been filled, I'm going to take that position here and I'm not going to be absurdly optimistic because I think a lot of Martin's diagnosis is spot on, but I would point out a couple of things, one is that we are operating in a world in which human beings have become surprisingly sentimental in the way they think about each other and the main thing about the world, its own history, is its future, its nations and I think there is a constant risk of seeing ideological changes everywhere and from that I often incorrectly think about the idea of ​​false consciousness if only these little people had not been seduced. by the ideological snake oil of the latest charlatans, then we would be doing the right thing and of course there are so many cases in which that is true that it is difficult not to be completely persuaded of that, but it is also possible to worry about whether the um the not the non-politicians, the interest-free oil, so to speak, or the latent unwitting possessors of snakes.

The elites have done a great job and that is a question we could ask ourselves and there is a rather embarrassing moment in the book. uh, where uh Martin talks about this idea of ​​um uh uh what you could call, I think he calls it uh, democratic liberators and I think that's a serious challenge. Our lives seem to come in strange ways, becoming less and less liberal in the cause of democracy. and why should it be so? Let me just say a couple of things. If we are deliberating about conditions or conscious of our own well-being, then we must pay serious attention to Martin's argument that liberal democracies rather than as if imprinted on their historic achievement in becoming free and capitalist. uh, they should perceive a latent ideological similarity in a common, a common characteristic that could give them some scope to link an international association in ways that have not yet been contemplated and, uh, recognize and perhaps in a more conscious way than they have done, I think that's true, but I also think it demands that we think even more deeply about the nature of the systems that we live in and let me give you a little bit.

For example, let's take the concept of a political party. Larry Diamond, a genius, in many ways thinks about these things, but his definition of oxy does not mention political parties. Political parties are a completely fundamental democracy, so it is arguable that Britain was pre-democratic to begin with. early 18th century um uh because you could change your government as a result of a change in public opinion and we didn't have political parties until the 1760s, but after that you could change your government in response to public opinion from a group of politicians that he had established a platform that you knew in some sense that you were voting for now.

I think it is a deeply democratic movement or a pre-democratic movement. We should know better than to get too hung up on the NOW essential aspects of universal suffrage. to understand the latent democratic instinct behind it and I think one of the reasons why this is important is because political parties serve multiple objectives. If you look at countries where we would broadly condemn what is so obvious about them, they are not. They lack universal suffrage, right? They lack political parties, they lack an alternative government and the political parties where they exist often do not function very well, so one of the things that Martin correctly diagnoses is what you could call adverse selection.

In political elites, you know why we don't get the politicians we want, but we only get those we voted for. That's possibly part of the reason, um, uh, uh, but also, of course, that in turn, so, uh. ties to a concern for the idea of ​​a constitution, so in the United States, where they revere the Constitution, the events of recent years have shown that the Constitution is deeply problematic and fragile simply because you can have a contested presidential election in the that the loser does not recognize the result and far from being something that, so to speak, a political entity can ignore, it is almost impossible to deal with now, that is an undisclosed and unimagined fragility in the US Constitution, an instrument that is revered in that country and but do we not care at all about the British constitution?

British constitutions played a decisive role in recent years. In case you haven't noticed, a prime minister who was getting too big for his boots was summarily executed last year and, um, most. uh uh the bloodiest political bloodbath possible and we had another one that tried to show what they were worth and it turned out to be um that was also insufficient and the Constitution took care of them so I think I would like a little more attention. about the functioning of parties outside the constitutions, the way we think about these issues and, uh, and the way they select them for Quality, because those things can also be rightly questioned and it is a paradox that we do not revere our constitution, Do we pay attention to it?

Do we think we have an American Constitution that is small? In fact, we have something radically different. We have an evolved Constitution. We love evolutionary science. We worry about her in politics, but she has served her purpose extraordinarily well. I could add a little more controversial, perhaps. in these contexts you have the idea of ​​passing the post first and if you don't like passing the post first, ask yourself if you would really like to see people with far-right or far-left views represented in Parliament with the airtime you get . In the age of modern media, I personally don't think it's a very good idea.

I recognize that it is a political view, but personally I don't believe it. If we're thinking in those terms, let me give you a final challenge that goes back to this point about legitimacy, which is at the heart of Martin's argument, of course, we must have politicians, of course, we must have political people in positions of power. , wherever they are, let them recognize that what used to be called the duties of the power they carried with them, that power itself is Israeli, he once said a trust, and therefore they should have their persons, their beings, their history, his past, his previous achievements before entering politics, referring to and reflecting a conception of the public. well-being, of course, that is absolutely correct, but let's frame the thought in a different way and ask the question uh Insight more controversial spirit what happens when some entity or how can turn out to be the most successful economy in the world, the economy that has included more people in history.

A despotic capitalist economy emerges from poverty faster than any other economy in history. What happens when your challenge is not simply having achieved it and the legitimacy that comes with it, but, although it is a non-proselytizing economy, I mean, of course, China or the political system is, however, a political system that is proposing deepening ideological threats to the Western order that Martin rightly celebrates, but what he is doing is denouncing waste, short-termism, inequality, uh, inexperienced guide of these Western democracies uh, he is promoting conceptions of the history of these democracies Westerners who paint them as brutally imperialist and colonial powers that have left nothing but good, nothing but evil in their wake, are redefining the idea of ​​the public good in terms of a long-term focus on public economic well-being regardless of what that that public can actually believe or want at a particular moment, all of which are aspects of the legitimation of the agreement, so if I had a concern about the book What we have here is that Martin perfectly diagnoses the concern about the delegitimization of the loss of popular consent and authority, but reflects inadequately on the serious challenge posed by China and its acolytes, bought, sold, traded and supported around the world because that I think is also a very serious threat to our country, thank you foreigners for answer, let me add my only question, a kind of paradox behind this: we live in an era where we have more education and educated people than in the history of the world. and particularly to the more educated people in the democracies that we want to defend and yet that does not seem to have been the case, of course we do not have a counterfactual, perhaps things would be worse, but there is an argument and it emerges in a variety In ways, not least in the case of Ann and in the death of Angus Eden's Despair, one of the biggest faults in modern democracies between those with and without education, is not an economic fault, there are a whole series of differences of attitude and other things that go hand in hand. with education there is a lack of deference in an earlier era um I was the first in my family as many people in the room went to college we had parents who believed that the educated elite were their hitters and that they should um up certain point, um, showing deference to education, now that some of those upstarts have become educated, we no longer believe in that and, in fact, we prefer to resent the behavior of the educated elites rather than defer to them and I wonder where does that play? talk about that, but I'm wondering if that influenced your story anyway um uh, but why didn't you respond a little bit to what you heard and then we'll open it up to that?

Well my reaction is basically obviously I was too optimistic, this book is my view on what's been happening and I'm an economist of a sort so I focus in detail on the things I know best but I added that I don't speak of parties. I don't talk much about technology and other forms of what I call obscene capitalism in the broad sense, but I agree that I cover so many topics that inevitably many of them are inappropriate V and I. m is complete and uh probably the thing I focused least on in the economy was exactly what Diana talks about, which is uh Diane I'm sorry uh was uh um the future waves of difficulties to face.

I look a lot at aging and uh and the associated change, it would have a lot to do with immigration and the politics and the economics of that, but I've tended to the view that there is a catastrophic problem which is big tech and the media and that There is a catastrophic problem looming that is AI and I talk a little about the first one, but I think it is very difficult and I am referring to the particular difficulties that we might want to nationalize these companies and turn them into public benefit companies, but they are not ours to nationalize and Americans will probably resist, and we won't be able to easily replace them either.

This is a very important point: there are now a large number of actors in the world economy that are not under our control and never will be because they are not ours and we will never be ours, this is really important if I talk about it a little bit, so I think Diana added some.very important questions about our future, and to what extent we can shape it. Things have really surprised me. that the people who supported the Brexit revolution thought they could control as a result of it, I'm sorry that it seemed absolutely obvious to me that nothing significant will be added to the things that we were able to control as a result of Brexit and all the things that they wanted to do, we could have done it anyway, so now, to Jesse's point, I think I haven't said enough about the parties, so I say something about it, about them, they are central to politics and, but I don't, I tend to be on the other side of the first-step position, but I'm open to persuasion that I have much more radical ideas than the ones you'll horrify and witness.

I think among this is probably my most radical idea in the book that we shouldn't have been influenced. for the Greeks we should have a Partial House of chambers of Parliament that is elected entirely by lot and discuss it later and uh because there is a problem with representation. I think that, um uh, but I think the questions of how you're going to change your political system. and the relative merits of different forms of constitutional structure are very, very important and I think Americans have very, very deep, big problems, not just as a result of the way the Constitution is set up in this way, but in some ways.

In terms of the extraordinary range of rights that have been attributed in recent decades to plutocrats for buying politics, I mean it is really a very, very big problem for any democracy, but they have nevertheless convincingly added to the challenges , I agree. with Jesse that in a very, very encouraging way we can throw overboard politicians who should never have been there in the first place. This is clear but it doesn't solve a really big problem. I think we have a range of economic and other policies. challenges in this country that no political force I see now seems willing and able to address at all and this is what I call the populist paradox, which is when politicians are selected based on the plausible stories they tell the people when they have lost trust in their elites, uh, they tend to this is a Latin American cycle, 10 Ben offer solutions that work or they don't offer solutions at all and the process is a cycle of disillusionment.

Now the final question you asked is interesting. I do. We discussed a lot about this profound change in our society that is associated with mass university education and that has essentially created, it seemed to me quite obvious now, a new class that has its own interests and a very strong feeling that it has not been treated well enough. . The most interesting thing about its emergence and its role in our society now is that it has clearly played a major role in shifting members of the former working class to the right and that is a problem that really is a problem now that we can discuss why that happened.

I've discussed it a little bit in the book, but I think it's an immensely important fact that left-wing parties are increasingly becoming, not the working-class parties that used to be their base, but the graduate parties, um, who are very happy with their position, either because the number of discontented people in our society is increasing, but they radically disagree on what makes them angry. Excellent, thank you very much, so what I'm going to do is open the floor, I'm sure. There will be a lot of questions and I will address them in groups of three and I and I ask you to be very brief when asking the questions, so I will ask one from each segment, so I will begin. uh down there at the end of the line if you could get the microphone up there and I'm going to take someone from the middle segment just watching to see maybe go down there and then we'll go there okay very good so far away and say hold it free, okay, here we go, hello, Mr.

Wolf, my name is Zach, I'm American, um, uh, what was I going to say from Nebraska if you know where it is, but um, I was going to say, so I was thinking like Before I came to LLC I was very involved in Republican politics, you talk about your solution about global citizenship, about participation in the global economy and I think to myself, I meant Global, I meant National, okay, forgive me, I heard Global, but my idea is what I was thinking to myself when I heard well, I thought I heard at least if you know a lot of the solutions to understanding how we interact in a global political economy, at least it doesn't solve very well with the people in my part of the United States Joined. of people who 75 Diamond won't vote for Trump will vote for anyone with an R after their name what's your message to people of that persuasion who, for better or worse, are really concerned about the idea of ​​a larger global system and interconnected okay next question let's move on so we can Max uh max there was one stand up front here yeah thank you okay most people in the world have an unprecedented ability to access information uh connect each other Yes, get organized and that seems good, right? then we'll take one from down here and then we'll come right back for another round.

Hello, one of the most interesting ideas that Martin mentioned in a book and the discussion about it was the idea that interest payments should not continue. The loan should not be tax deductible now, that seems to me a purely administrative idea that could be proposed by any government and yet it is as likely as nationalizing the banks tomorrow, so where can the impetus for new ideas come from? , even pragmatic like the labor party would run a mile from where it would come in handy, so we have what do you say to the Republicans at the Nebraska Department of Information interest payments on clothing, so actually thank you very much for the first question because it shows how bad it was.

In explaining this, I had a really controversial view, which I thought a lot of people here would find a really controversial and offensive view, which is that democracy is about citizenship of a place, that's what it means and , therefore, democracy is, in some fundamental respect, exclusive, not inclusive, it excludes non-citizens. and I talked about this at Lane, it doesn't mean that you don't have responsibilities to the rest of the world and it certainly doesn't mean that it makes sense to embrace all the communications trade and everything else with the rest of the world, but the policy has to be focused is a necessary condition for this to work to convince the body politic that what politicians are doing will improve their well-being in relevant respects.

One can debate what that means for that basic core idea that the politics of a democratic society is deeply local. it seems inescapable because we're not going to have a global sensitivity now, which creates very deep questions that several people here will no doubt raise, well, then how do they relate to each other? I have a whole chapter on that and I'm not going to go into that, but let me be very clear, my problem with Trump and the Republicans is that I don't think they're going to do anything with the vast majority of the sentences you're talking about, so I think there are disadvantages, they are a scam, but of course people don't agree with those information revolutions.

I think the information revolutions are absolutely wonderful. Yes they are information and of course there are deep questions about what can be done to handle this. but I'm a little worried about algorithmic systems that are designed to spread things not because they are true but because they will get the most response from users and they have already realized that nothing does it better than Anger, that's a problem, is a problem, finally I have many technocratic solutions of the type you mentioned. I'm very interested in land taxes, as you know. I think all tax havens should be closed tomorrow and all taxes attributed to them.

Havens simply should not be recognized. The idea that the intellectual property of major companies is actually located in the Cayman Islands is absurd. All of this could change overnight. There is no difficulty in this regard. The reason you should find out where they know what's wonderful. story um when they told me this so this may be false when the treasury privatized their building and leased it back to themselves the money they paid went to an offshore entity that didn't pay taxes now that even almost that's something like that. real almost perfect example of total insanity and my book has a lot of that kind and we could stop all that nonsense for tomorrow um uh uh and we could change our planning laws and we could do many, many other things so I'm getting into um productive uh productive productive what Carl appears great, the professor here called it um uh um social um gradual social engineering.

I think of a lot of things like that that we can do without getting consent to do whatever it takes. transform our society into something else and politics could just focus on that, those things will go somewhere, of course, for the reasons I already mentioned, there are huge pressure groups against any of these changes, so we are stuck, so Who's listening, Sharon, can you give us? send us a question online please. Well, I have one from Ian Oakley. citizen of the world since the 1980s. Income and wealth inequalities in Western democracies have increased enormously. Surely this is what has undermined Democratic legitimacy in recent years throughout the West.

Alright, now that I have I have to go um let me let me see uh let's go for one this side just pick one on Randomness your kids thank you how much this message resonates outside of the United States and Europe we're taking the risk even if what Diane was suggesting a new protectionist industrial policy. We could end up in what the high representative of EU foreign policy said: the peaceful garden surrounded by the jungle. And that wouldn't be a solution for most of the world in any way, okay? I'll move on to the question and I have to go through there and then we'll come back to Martin.

An institution or an agent working in democratic systems should act as a kind of intermediary or something that can help us facilitate the movement towards citizens and it is particularly interesting to hear it, even, of course, since we are represented by panelists from education, politics and media, financial times, thank you, okay, inequality is a very complex idea and I only look at some aspects of it, um, wealth income, and I'm not even talking about gender and everything else, however, the statistics They are reasonably clear and this is an important point for me: the extent of the change in inequality varied quite a bit across countries and varied just as much in terms of changes in the previous situation. -redistribution uh uh inequality and the changes in the post redistribution of inequality and one of the reasons why I think this is important is that this showed that even though all of these economies were globalized in some way, they open the results to its citizens very, very considerably um and in particular, the US clearly had the greatest increasing inequality of the highest level at any income.

I won't go to riches, but it's true there too, in the UK, because of what happened to the AGS, it's mostly in a sort of second rank. So the inequality story is very subtle and means there are more political options than we think. By the way, it's because I don't believe, and I have an argument, that trade in goods in particular was a dominant force in increasing inequality. I'm not going to come out because that's what I'm in favor of protecting, which I think is very problematic, this ties into this fundamental issue that's been raised, is that this is all about us and Europe, well , for me, it's definitely not the um, if we can start.

I don't have a debate about the inflation reduction law and what everything else means, but I don't have any big problem if industrial countries like the United States or Europe accelerate the green transition by using government money. I mean it seems like a perfectly reasonable thing to do in an emergency, but since the goal of this transition is to address climate change around the world and a lot has been written about this, we're not going to accomplish much on our own if we don't make sure it happens. the same everywhere. I mean this is one of those cases where being a rational national citizen where I discuss these issues at every stage has to include being rationally globalist because the world is affecting us, so the idea of ​​sort of a way to address this issue is to say, well, we are concerned about our citizens, so nothing that happens in the rest of the world matters and we are going to ignore it, which obviously trolling is crazy and I think there are many there are many subtle issues that we have to discuss the final question, well, you raised this issue, what does it mean to be a citizen in a modern democracy?

Well, there are a couple of interesting ideas here, one of them I talked about the selection of the parliament chamber, there is aInteresting set of ideas about popular juries that have worked remarkably well in certain contexts. The best example I could find was the use of a citizen jury to address and ultimately resolve the abortion issue in Ireland. It is a very important example. Bring in the common people to discuss things. and I've been thinking no, it's not in the book and it's incredibly dangerous. Well, the Swiss do these referendums quite well and it is part of what makes them modern technological citizens.

We could do quite a few things like that, but I've seen people like Jesse and I'm getting more and more suspicious at this point. I think maybe overlooking people like Jesse, though not Jesse, wouldn't be a bad thing and we could consider getting a pin using opinion over the internet. and everything else as a way to get a real sense of what people want and care about, so maybe we should be more imaginative about the way new technologies can allow people to feel that part of the discussion about policies, although I am fully aware of the problems that that would also create, but I think we should be a little more imaginative about these things than we have been and it is part of the agenda that I think we now need to address to revive our politics very good another one online Sharon sorry ok here's one from Duncan Reed who is a visitor to LSC.

Democratic capitalism has undermined itself by not distributing the rewards of capitalism quite well, yeah, you know, that's very simple, obviously, it's obvious, well, I mean, I guess it's not. only the legitimate right rewards, but you can reasonably argue how wealth can be taxed, but in my opinion, it is also the problem, and I have a lot about that, that some of the rewards are not legitimate, which I think is even more. problematic for the system, uh, in the sense that they are the result of what Jesse's hero, Adam Smith, regardless of his not entirely legitimate business behavior, and businesses have to operate within surely one of his most deep within the context of what is considered morally and legitimate and if you lose that and they are seen as thieves then you lose the system, okay, we have it if you just come out and I'll scream when you get to write, okay, go on, go on, go on , continue with that row there.

If you pass, thank you. You mentioned low productivity and low revenue growth over the last 10 to 15 years. Have politicians failed us or simply run out of ideas? I missed the last part of your question. Politicians have failed us or simply run for office. Out of ideas, I want to address why you do that now because I think it's both, but it's also really difficult, so I'm not going to have a long discussion about why this happened, but one of them is pretty obvious. things we want to do, but I think as we know them, I'm going to leave aside now the AI ​​revolution of what it might mean, I don't know, but as things are now, we have economies and I talked about that.

Largely, it's really not going to be easy for them to replicate the kind of productivity growth that we had in the past. This will not be the case if the energy revolution proposed by my friend Nick Stern is carried out on a massive scale. to dramatically reduce energy costs and I'm still not convinced that this is the case, tell me I'm wrong and, uh, but if that doesn't happen, I think the productivity growth in our societies will be really exciting, but they could have made. done much better and if they had wanted to do things better they would have had to change a number of policies, some of which would have been quite difficult to do.

For example, the United Kingdom has the lowest investment rate in the Western world. Basically it is true, we are not going to grow faster if we do not invest more, if we are going to invest more, given that we already have a huge current account deficit, we will almost certainly have to increase savings in this society and increase savings in the society means we have to reduce someone's consumption, no government wants to contemplate the kind of policies that would be necessary if we wanted to reduce society's consumption by a significant amount of three or four percentage points of GDP, which is £100 billion, so there are things that could be done, but they are difficult, can I add a sentence?

Yeah, I was going to say I want to move on and then yeah, I promise, okay, so I think this ties into the previous question about why the fruits of capitalism aren't delivering results for people. and they fail to deliver productivity because they are amazing ideas and innovations. There was an article published a while ago. Our new ideas are becoming harder to find and the answer is no, they are not high, they are everywhere. the place where what is not happening is not marketed or converted into products that serve ordinary people, give them benefits and pay people higher incomes and that is where the machine is failing, it has nothing to do with ideas Jesse, I don't know about you.

Have a final reflection on everything you have heard. Well, I mean there's so much interest that it would be hard to start and stop, but let me tell you a couple of quick things, so why don't you go back to your question about education, so why have we actually been educated, for so to speak, the decline has accelerated in the elites and, um, the growth of restaurants, um? I think the reason is that we fundamentally misunderstand the concept of reason, okay, we think of human beings as being rational animals that choose their ends, using consulting, I don't think that's true, I think David Hume is right and Dan Sperber, more recently, reason is a slave to the passions and its function is really to explain why. you were right all along, whatever decision we made and I think I certainly quote it well, well, I'm very glad to know that I don't know how wise you are, but let me say that I apologize, um, uh, uh.

So that's called the question of what is a rational citizen, but I can tell you what a national citizen is, it's not a corporation, so one of the big parts of the modernist book is where it talks about how corporations have dissociated themselves from the public. well as public welfare and this again I think supports some of the points I was making and you know, it's not just a question of CEO pay, which has increased dramatically in multiples over the last 20 or 30 years, but also is that the old idea which was actually unusual, the original idea of ​​a corporation is essentially a public entity with always an eye on the public purpose.

It's been lost and that's a tragedy actually because it not only leads to bad outcomes, but it also leads. to a progressive delegitimization of corporate behavior as such, but I don't think that any sane person thinks that we are going to have a good story to tell about the recovery of democratic capitalism, that does not involve a story about how we can achieve it. for corporations to invest more sensibly and intelligently than they are doing right now and you know the other part of that story is obviously not just the way corporations have obtained rights for political purposes in the United States, but the way in which, um, the financialization of this economy in the United Kingdom and, in fact, I fear that the sad news of the American economy, which traditionally had a pretty good balance between Main Street and Wall Street, has accelerated, for which a lot of the story here is about that and that in turn feeds the rent, uh, the rent that captures the rent. extractive economics which Martin hinted at earlier when he talked about Adam Smith excellent well I'm very happy to close things with apologies to those who may come in with their questions there are many of you and I apologize again um but my job is to finish is to thank Jesse Diane and particularly Martin, go out and buy the book, there will be an opportunity for you to do so, please do not come to the front because Martin has to leave to go to his book signing table for those of you, who es Keen, you can have a signed copy, but you'll have to go out pretty quickly to get to that position, so don't come and lock in the results overseas.