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Speaker 1: Bloomberg Audio Studios, Podcasts, Radio News.

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Speaker 2: Hello and welcome to another episode of the Odd Lots Podcast.

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Speaker 2: I'm Joe Wisenthal.

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Speaker 3: And I'm Tracy Alloway.

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Speaker 2: Tracy, spending cuts in the air these days.

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Speaker 3: You could say that it's a vibe shift. It's a

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Speaker 3: vibe Yeah.

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Speaker 4: Sure.

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Speaker 3: So under the Trump administration, obviously there is a stated

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Speaker 3: ambition to reduce spending and make the government more efficient overall.

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Speaker 2: Yeah, Scott Besten, I think he has something the three

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Speaker 2: three three plan part of it. I think he wants

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Speaker 2: three percent growth, three percent more oil production, and then

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Speaker 2: three percent deficit. And I think deficits are around six

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Speaker 2: percent currently, which is really high by historic standards, especially

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Speaker 2: because we're at what four point one percent unemployment. Usually,

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Speaker 2: when the economy is running this hot or this tight,

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Speaker 2: you don't expect to see deficits this large at in

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Speaker 2: rates as high as they are. There does seem to

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Speaker 2: be this impulse for better or worse, and other people

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Speaker 2: can be the judge of that to cut spending. But

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Speaker 2: on the other hand, it's very difficult.

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Speaker 3: Wait, why do you say that, Because early in my

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Speaker 3: career there was the Eurozone cross and I think there

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Speaker 3: was some austerity imposed in places like Greece ultimately, so

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Speaker 3: why do you say it's difficult?

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Speaker 2: So, actually, there's two things here, and I think there's

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Speaker 2: really apt and I think this is a fascinating question

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Speaker 2: in its own right, which is, why is it that

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Speaker 2: in two thousand and nine twenty ten, in the aftermath

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Speaker 2: of the Great Financial Crisis, when we had widespread unemployment,

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Speaker 2: why was the appetite for austerity so high then at

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Speaker 2: a time when there was so little aggregate demand, And

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Speaker 2: now at a time when you know, obviously inflation has

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Speaker 2: been running hot and so forth, why does it seem

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Speaker 2: more difficult? That in itself is a fascinating question. But

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Speaker 2: I guess what I would say to answer your question specifically,

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Speaker 2: is that anytime people talk about cuts, there is not

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Speaker 2: a ton of discretionary spending in the US government budget.

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Speaker 2: There's the entitlement, social Security, Medicare, Medicaid, and then there's defense,

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Speaker 2: which there's usually not much political appetite to cut, and

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Speaker 2: then when you have left over, it's hard to move

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Speaker 2: the dial. And so the theory is that if you

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Speaker 2: actually want to move the dial on spending and deficits,

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Speaker 2: you have to like cut into some areas you have

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Speaker 2: to break promises perhaps that you've made to various constituencies

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Speaker 2: like senior right.

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Speaker 3: Ultimately you're inflicting pain on someone, and at least in

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Speaker 3: democratic governments, because it's all about a numbers game. It's

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Speaker 3: all about getting votes. That would be a bad thing.

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Speaker 2: Well, we have to then talk about how do the

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Speaker 2: stars align if you actually want to meaningfully cut spending,

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Speaker 2: how does that actually happen. How do democratically elected government

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Speaker 2: sort of build the political capacity to inflict pain perhaps

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Speaker 2: on groups that obviously have some stature. We really do

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Speaker 2: have the perfect guest. We are going to be speaking

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Speaker 2: with Fritz Bartel. He is an assistant professor of International

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Speaker 2: Affairs at the Bush School at Texas A and M.

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Speaker 2: And he is the author of the book came out

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Speaker 2: in twenty twenty two, The Triumph of Broken Promises, the

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Speaker 2: End of the Cold War and the Rise of Neoliberalism,

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Speaker 2: And it's kind of about exactly this topic, how governments

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Speaker 2: break promises. So, Professor Bartel, thank you so much for

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Speaker 2: coming on odd LATS.

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Speaker 4: Thanks so much for having me.

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Speaker 2: Your book is really interesting because you talk about this

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Speaker 2: sort of resource constraints and spending constraints in the US,

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Speaker 2: the UK, and the Soviet Union. All of it was

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Speaker 2: sort of building up to a head in the late

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Speaker 2: nineteen seventies early eighties. Before reading your book, that hadn't

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Speaker 2: clicked to me that all the different economies were sort

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Speaker 2: of facing the same stresses at the same time. What

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Speaker 2: was going on that suddenly around the world governments felt

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Speaker 2: this impulse like we have to cut we have to

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Speaker 2: constrain ourselves.

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Speaker 4: Yeah, So, I guess the short answer is that the

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Speaker 4: kind of post World War two economic boom had run

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Speaker 4: aground in the nineteen seventies. Obviously, there was the kind

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Speaker 4: of birth of stagflation. There was a decline in productivity

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Speaker 4: growth across Western economies, the Soviet economy, and the Eastern

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Speaker 4: Bloc more generally, the Communist Block had run into the

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Speaker 4: end of their growth model. Kind of this hyper industrialization

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Speaker 4: growth model had started to produce fewer and fewer results.

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Speaker 4: So in both the Eastern Bloc, the Communist world, and

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Speaker 4: the West, the growth model, one largely based on kind

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Speaker 4: of industrialization, certainly based on cheap energy resources, had started

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Speaker 4: to run aground roughly at similar kind of moments in

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Speaker 4: the early nineteen seventies, and then these crises that kind

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Speaker 4: of came to define the nineteen seventies, the energy shock

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Speaker 4: of nineteen seventy three again in nineteen seventy nine. The

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Speaker 4: monetary confusion and shocks of the nineteen seventies also spurred

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Speaker 4: a great deal of inflation and crisis across the world.

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Speaker 4: And so in both East and West, the societies had

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Speaker 4: largely concluded that they did not have the resources to

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Speaker 4: meet the commitments that they previously had made to their constituencies,

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Speaker 4: or at least that's how it became framed and understood.

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Speaker 3: So you mentioned commitments, What exactly were the commitments or

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Speaker 3: the promises that different governments had made to their citizens,

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Speaker 3: Because you know, I think about America and obviously in

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Speaker 3: the nineteen fifties nineteen sixties there was the American dream

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Speaker 3: of a nice house in the suburbs and a car

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Speaker 3: and two point four children or whatever it was. And

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Speaker 3: then in the East, I think there was a promise

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Speaker 3: of economic growth. Maybe the emphasis was more on equality

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Speaker 3: of economic growth versus just pure economic growth.

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Speaker 4: Yeah. So I think, as I defined in the book,

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Speaker 4: this kind of politics of making promises took different shapes

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Speaker 4: in the West and the East. The West had more

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Speaker 4: abundance from the start, and certainly creating abundance was at

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Speaker 4: the core of what democratic capitalism was all about, but

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Speaker 4: it wasn't particularly because the West was in this Cold War.

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Speaker 4: You couldn't just be about creating abundance. There had to

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Speaker 4: be some sense of limiting inequality at the very least,

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Speaker 4: and so Western states, not universally and not necessarily with

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Speaker 4: all of their conviction, but they supported labor unions to

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Speaker 4: a much greater degree than they would subsequently, they created

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Speaker 4: broad welfare states that invested in cradle to grave type

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Speaker 4: of state intervention. They largely secured for at least large

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Speaker 4: segments of their population income security, security, full employee. Even

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Speaker 4: the commitment to full employment was a kind of post

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Speaker 4: war novelty that governments could actually make credible. And in

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Speaker 4: the East it took something, you know, it was a

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Speaker 4: slightly different shape, but there were similar kinds of promises

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Speaker 4: made that your workday would get shorter, your even intergenerational

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Speaker 4: upward mobility would increase, you had access to housing. All

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Speaker 4: of these always very incompletely fulfilled, but they were kind

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Speaker 4: of making progress incredibly in the eyes of their populations,

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Speaker 4: making more progress towards a future of both material abundance

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Speaker 4: and some form of equality, not full on equality, certainly

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Speaker 4: much more in communists or state social societies, equality was

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Speaker 4: held in higher regard, but also very much in the West.

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Speaker 4: You kind of couldn't come out just as fully comfortable

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Speaker 4: with the levels of inequality that we've reached by today's standards.

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Speaker 4: So this search for both abundance and some measure of

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Speaker 4: equality was there in both the West and the East.

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Speaker 2: You know, it's funny, Like, obviously I think today we

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Speaker 2: think of the Soviet Union's economic model as sort of

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Speaker 2: having been a basket case and a disaster, But for

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Speaker 2: many years they were actually they were growing, their industrializing,

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Speaker 2: They had rapid growth, something that I hadn't realized until

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Speaker 2: I read your book. And maybe we're skipping ahead a

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Speaker 2: little bit here in the story, but even like in

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Speaker 2: Western financial markets, there was sort of an obsession with

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Speaker 2: like Eastern Bloc debt, Like it was an exciting trade

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Speaker 2: to lend to some of the communist countries in the East,

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Speaker 2: and like financial analysts were like really excited about these investments.

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Speaker 4: Yeah, and I don't know that we can really pin

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Speaker 4: that necessarily on their growth processure per se, But Western

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Speaker 4: bankers definitely believed that the communist world had a nice

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Speaker 4: recipe for making secure loans. So if things were to

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Speaker 4: come to a crisis, it was believed that authoritarianism was

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Speaker 4: going to be very good imposing these kinds of cuts

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Speaker 4: at imposing discipline and breaking promises. And in the background

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Speaker 4: the Soviet economy itself, in the background of a country

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Speaker 4: like Poland or Hungary or East Germany, the Soviet economy

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Speaker 4: was sitting there, as they literally called it, an umbrella,

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Speaker 4: an economic and financial umbrella over the rest of the

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Speaker 4: Eastern Bloc, where if any of these countries ran into

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Speaker 4: financial difficulties, it was assumed that the Soviet Union would

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Speaker 4: kind of come to their financial rescue, would bail them

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Speaker 4: out and in the end pay off their debts. And

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Speaker 4: it turned out that that wasn't the case by the

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Speaker 4: nineteen eighties, but in the nineteen seventies in particular, that

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Speaker 4: was a very popular view in the Western financial press.

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Speaker 3: Explain how we got from the nineteen seventies where Russia,

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Speaker 3: you know, is kind of impressive at least to Western

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Speaker 3: investors and analysts, to the nineteen eighties where it's unable

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Speaker 3: to do what it had promised to some of its allies.

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Speaker 4: Yeah, so you know, it's largely a story of oil

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Speaker 4: and natural gas kind of coming into the nineteen seventies,

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Speaker 4: the Soviet Union has found significant oil reserves in and

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Speaker 4: western Siberia. It's started to develop those reserves over the

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Speaker 4: course of the nineteen sixties, and by the nineteen seventies

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Speaker 4: it's coming online, so to speak, as an energy superpower.

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Speaker 4: At the same time that world markets are creating multiple

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Speaker 4: crises that send the price of oil and natural gas

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Speaker 4: through the roof, and so throughout the nineteen seventies it

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Speaker 4: looks like the Soviet Union, and in fact it does

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Speaker 4: have all of this energy wealth at its disposal. And

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Speaker 4: then the nineteen eighties come and the kind of fortunes reversed. So,

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Speaker 4: you know, when prices go up, people start to look

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Speaker 4: for more supply. They find energy in places like the

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Speaker 4: North Sea. They start to develop much more energy supply.

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Speaker 4: Western countries have done not a great job, but they've

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Speaker 4: done something to create more energy of fission economies, and

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Speaker 4: so the forces of supply and demands start to send

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Speaker 4: the price of oil in the nineteen eighties on a

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Speaker 4: downward trend, pinpointed by a couple of particular moments like

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Speaker 4: nineteen eighty five, where it really significantly collapses, and the

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Speaker 4: Soviet Union itself finds that it's much more difficult to

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Speaker 4: produce the growth in its energy sector that it had

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Speaker 4: produced in the nineteen sixties in the nineteen seventies, and

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Speaker 4: so these two forces, a kind of plateau in production

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Speaker 4: and the collapse in price, all of a sudden leave

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Speaker 4: the Soviet Bloc as a whole looking much less economically

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Speaker 4: powerful by the even the middle of the nineteen eighties

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Speaker 4: than it was, let's say, in the late nineteen seventies.

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Speaker 2: When we were talking about the intro and you sort

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Speaker 2: of alluded to it when you were talking about the

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Speaker 2: Umbrella and this belief in the West that well, you know,

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Speaker 2: the Soviet Union is authoritarian, essentially planned economy. They don't

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Speaker 2: have to pander to voters, and therefore one might think

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Speaker 2: that that's a more politically conducive environment for cutting spending

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Speaker 2: or making difficult decisions. I'm curious the answer why that

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Speaker 2: didn't turn out to be the case. Yes, as part

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Speaker 2: of the story is that, well, maybe the promises to

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Speaker 2: their own citizens could be taken for granted, that these

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Speaker 2: other satellite countries East Germany, Poland, et cetera. They have

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Speaker 2: no obligation to stick with the Eastern Bloc if they're

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Speaker 2: not getting that support anymore from the Soviet Union. But

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Speaker 2: why don't you sort of explain why that authoritarian ease

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Speaker 2: didn't end up working out.

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Speaker 4: Yeah, so it kind of corresponding to this belief in

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Speaker 4: the West that authoritarians would be good at breaking promises,

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Speaker 4: those same people and many others believe that democracies would

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Speaker 4: be very bad at breaking promises, because, as you mentioned,

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Speaker 4: the intro would seem to make sense that if you're

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Speaker 4: trying to get elected, it's just not in your interest

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Speaker 4: to try to break promises to your own citizens. The

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Speaker 4: turn of the nineteen eighties, both events in the United

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Speaker 4: States and Great Britain and events in the Eastern Bloc

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Speaker 4: suggest that this might not be true, and in fact,

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Speaker 4: democratic elections and the kind of legitimacy that it bestows

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Speaker 4: on governments, at least that it did bestow in the past,

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Speaker 4: we can talk about whether or not that's still true.

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Speaker 4: In the nineteen eighties, it turned out that democracy and

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Speaker 4: competitive elections provided a sense of legitimacy that made the

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Speaker 4: let's say, the sales pitch of breaking promises more credible

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Speaker 4: in the eyes of Western populations than it turned out

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Speaker 4: to be in communist societies. So the specific case that

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Speaker 4: I think is probably most illustrative is Poland in the

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Speaker 4: early nineteen eighties. People will probably know, or if they're

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Speaker 4: old enough, remember the Polish labor union Solidarity, it's famous leader,

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Speaker 4: Left Bowensa. It's born in the summer of nineteen eighty

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Speaker 4: precisely because the Polish government tries to increase consumer prices

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Speaker 4: basically which in communist societies was one of the foundational

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Speaker 4: promises that had been made to the population, we will

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Speaker 4: keep your basic basket of goods the price of those

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Speaker 4: goods very stable. They try to increase the in order

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Speaker 4: to repay their debts, partially in order to solve some

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Speaker 4: of their financial problems, and people openly revolt because they

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Speaker 4: don't trust that their government, that the state's socialist state,

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Speaker 4: is essentially telling them the truth that you need to

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Speaker 4: go to the people to break these promises to get

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Speaker 4: some sacrifice from them in order to repay debts. That's

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Speaker 4: not a credible and legitimate claiming in the eyes of

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Speaker 4: Polish society. In contrast, when someone like Paul Volker in

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Speaker 4: the United States says essentially that the United States needs

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Speaker 4: to go through a very painful recession in order to

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Speaker 4: fix the problem of inflation that had come to define

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Speaker 4: the United States over the course of the nineteen seventies.

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Speaker 4: Lots of people are unhappy about that. He gets death threats,

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Speaker 4: there's protests, he's on the cover of Time magazine. He's

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Speaker 4: kind of public enemy number one in a sense. But

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Speaker 4: it does not result in a kind of full blown

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Speaker 4: revolt against the system as it did in the Eastern Bloc.

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Speaker 3: And so the.

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Speaker 4: Legitimacy that democracy itself bestowed on Western States turns out

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Speaker 4: to be the mechanism, I think, by which they were

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Speaker 4: able to break promises to their people, whereas in the

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Speaker 4: Eastern Bloc authoritarianism proved to be very weak at this

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Speaker 4: task because the only thing people had come to expect

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Speaker 4: from their government, they didn't have any political role in it.

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Speaker 4: The only thing they'd come to expect was some kind

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Speaker 4: of material improvement year over year, meager though it was,

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Speaker 4: and that was lacking in the Eastern Bloc.

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Speaker 3: Can you say more about this, maybe in the context

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Speaker 3: of Ronald Reagan, because I think that would be a

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Speaker 3: good example of I guess the role of free elections

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Speaker 3: and competition between political candidates in basically letting the population,

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Speaker 3: like let some of their frustration out right. It's kind

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Speaker 3: of like, Okay, the current politicians have failed to keep

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Speaker 3: their promise, and so we are willing to try anything,

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Speaker 3: even if it means short term pain in order to

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Speaker 3: get what we want again.

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Speaker 4: Yeah, So Reagan is a kind of quintessential figure for

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Speaker 4: this turn. He's not a political outsider necessarily, certainly on

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Speaker 4: the level of Trump in the nineteen seventies, but he

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Speaker 4: does come to DC wins the nineteen eighty election with

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Speaker 4: a distinctly different message. Right. He famously says in his

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Speaker 4: inaugural a dress in nineteen eighty one, government is not

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Speaker 4: the solution to the problem. It is the problem. And

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Speaker 4: that kind of message, which is already one that is

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Speaker 4: then conducive to breaking promises because it's redefined the state

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Speaker 4: as the problem itself. The popular mandate that he has

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Speaker 4: by winning the nineteen eighty election, in turn, gives him,

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Speaker 4: I guess the term would be more political capital and

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Speaker 4: certainly more receptivity even from his enemies or from his

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Speaker 4: political enemies to accept the policies that he then enacts.

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Speaker 4: So I think that's one of the key factors is, yes,

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Speaker 4: he has certain people who agree with many people who

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Speaker 4: agree with him, but even those who disagree with him

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Speaker 4: work within the bounds of the system where they accept. Again,

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Speaker 4: this is where it gets a little different in the

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Speaker 4: recent years. They accept the outcome of the election right,

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Speaker 4: and they view the process itself by which this was

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Speaker 4: decided as legitimate. And so he's not particularly successful, and

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Speaker 4: he and his team are not particularly successful in cutting spending,

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Speaker 4: in particular in breaking promises. Much more of that in

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Speaker 4: the US case comes from the federal Reserve. But he

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Speaker 4: dramatically alters the rhetorical landscape of the United States, and

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Speaker 4: does so by bringing this movement from outside Washington, DC

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Speaker 4: and redefining what the kind of terms of the debate

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Speaker 4: will be. In the nineteen eighties.

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Speaker 2: You make a compelling argument that at least, you know

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Speaker 2: forty something years ago that something about the democratic system

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Speaker 2: was more conducive to cutting spending. But a you know,

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Speaker 2: a lot of the sort of austerity that was imposed

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Speaker 2: in the US came more from the FED rather than

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Speaker 2: actual spending cuts. And of course we know that deficits

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Speaker 2: actually widened quite a bit, so it sort of relied

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Speaker 2: on the fact that we sort of have this sort

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Speaker 2: of outside of government undemocratic enforcer in the form of

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Speaker 2: the Federal Reserve. But then also the UK example, which,

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Speaker 2: as your book lays out, you know, there was fights

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Speaker 2: with the coal miners and maybe you can explain that,

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Speaker 2: but it like, ultimately what allowed Margaret Thatcher to have

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Speaker 2: the political capital to cut was the Falkland Islands War

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Speaker 2: in nineteen eighty two, which gave her a burst and popularity, which, okay,

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Speaker 2: maybe that allowed for some breaking promises, but sort of

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Speaker 2: a I don't know, dirus x mockin like does not

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Speaker 2: sound like a great triumph of like, oh, this is

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Speaker 2: the democratic process working smoothly with the mandate.

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Speaker 4: No, and I don't think it's ever a let's say,

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Speaker 4: clean and easy process. And Reagan was one of those

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Speaker 4: elected I guess with that most in his mandate. Thatcher

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Speaker 4: another one, And even those who were elected with spending

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Speaker 4: cuts as part of their mandate found it a very

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Speaker 4: difficult thing to actually enact. So in Thatcher's case, yes,

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Speaker 4: cutting spending is an important part of what she does.

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Speaker 4: They also have a whole series of state owned industries

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Speaker 4: that they're trying to either close down or privatize, and

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Speaker 4: the coal miners of Great Britain are the ones who

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Speaker 4: ultimately try to fight back against this, and Thatcher, I argue,

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Speaker 4: I think, partially because of the kind of legitimacy that

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Speaker 4: democracy bestows upon her, doesn't end up with British society

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Speaker 4: in full revolt against her.

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Speaker 1: Right.

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Speaker 4: So I compare in the book the course of the

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Speaker 4: minor strike in Great Britain versus the course of solidarity

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Speaker 4: in Poland. Solidarity starts as a strike among workers and

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Speaker 4: builds out into a kind of society wide revolt against

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Speaker 4: the state socialist system, whereas the miners in the UK,

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Speaker 4: for a series of contingent but also I think structural reasons,

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Speaker 4: they are unable to form a broader coalition that would

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Speaker 4: ultimately thwart Thatcher's action, and so the strike fails. Ultimately,

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Speaker 4: the coal industry in the UK declines throughout the nineteen eighties,

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Speaker 4: and I think it is the kind of democratic system,

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Speaker 4: the legitimacy of the system itself, that allows this process

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Speaker 4: to unfold. So, for instance, Thatcher in this period is

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Speaker 4: a very divisive figure. Her approval ratings are something in

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Speaker 4: the range of forty five percent, But the police who

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Speaker 4: are kind of carrying out her actions and doing the

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Speaker 4: actual work to break up the minor strike have an

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Speaker 4: approval rating somewhere in the ninety two to ninety three

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Speaker 4: percent rank. So the state itself is deemed to be legitimate,

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Speaker 4: even if the politician who is enacting these policies is

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Speaker 4: still a highly divisive figure. And that's the kind of

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Speaker 4: deep legitimacy that democratic states had in this period and

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Speaker 4: that state socialist countries did not have, I think is

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Speaker 4: what ultimately produced the break or allowed the process of

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Speaker 4: breaking promises to go ahead in the United States and

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Speaker 4: the Western world more broadly.

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Speaker 3: The sort of distinction between politics and the economy.

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Speaker 4: I guess, well, that's a whole nother yes, I mean,

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Speaker 4: that's another way by which states, particularly capitalist states, have

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Speaker 4: found ways to break promises, is to shift responsibility for

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Speaker 4: social and economic outcomes from the government itself to the market. Right. So,

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Speaker 4: even processes of privatization, although technically a change in ownership,

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Speaker 4: were also the kind of consequences of those were often

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Speaker 4: downsizing unemployment, things like that. Right, So you've shifted responsibility

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Speaker 4: over to the marketplace. Over to this realm called the economy,

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Speaker 4: and then the negative social consequences that stem from that

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Speaker 4: process of privatization appear to be the product of the market.

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Speaker 4: They appear to be the product of the economy rather

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Speaker 4: than a political decision itself. And so that distinction, Yeah,

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Speaker 4: the politics versus economy distinction is a fundamentally important one

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Speaker 4: for how and why capitalist societies work.

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Speaker 3: So Gorbachev has a famous quote. I think it's something

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Speaker 3: like politics always follows the economy, not vice versa. And

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Speaker 3: you actually you mentioned that in your book, but I'd

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Speaker 3: be curious to get your take about the relationship between

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Speaker 3: politics and the economy and which one has the most

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Speaker 3: influence on the other.

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Speaker 4: Yeah. So I've wrestled with this for quite a long

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Speaker 4: time as I was writing this book, and I don't

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Speaker 4: think I have a categorical answer. I think it can

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Speaker 4: be different things in different moments. Generally speaking, I do

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Speaker 4: think that political economy, the economic forces of our world

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Speaker 4: of the late twentieth century, did provide let's say, windows

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Speaker 4: of opening windows of possibility and also closed other possibilities

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Speaker 4: in the realm of politics. So if you take something

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Speaker 4: like supply side economics in the United States on its

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Speaker 4: face in terms of whether or not it actually could

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Speaker 4: have succeeded on its own terms. The idea that you

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Speaker 4: cut taxes, you'll un leash economic growth and it will

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Speaker 4: essentially pay for itself. That idea has continuously been disproven,

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Speaker 4: and yet it continues to exist in US political discourse,

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Speaker 4: largely because the United States has been able to borrow

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Speaker 4: more money than anyone from the nineteen eighties onwards thought possible.

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Speaker 4: And so I think political ideas and political formations, political movements,

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Speaker 4: their life span and their popularity and then their moments

403
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Speaker 4: of coming to an end, do kind of have an

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Speaker 4: economic underpinning that makes them possible or not?

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Speaker 2: You know, I'm curious this book came out I think

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Speaker 2: twenty twenty two, during the peak of the recent inflation wave.

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Speaker 2: When you wrote it, I mean, I imagine you know, this

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Speaker 2: is years and years of research in your career, but

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Speaker 2: how much were you thinking about the present day. And

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Speaker 2: I recognize you keep sort of hinting at well, maybe

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Speaker 2: democratic governments in the West don't have the same perceived

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Speaker 2: legitimacy to do unpopular things, or to do things at all.

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Speaker 2: But I'm curious, like, as you were writing, how much

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Speaker 2: you were thinking about, like this is a lesson for

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Speaker 2: contemporary times.

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Speaker 4: Yeah, it was part of it, certainly as the book

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Speaker 4: came out. So when did the FED start hiking? That

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Speaker 4: you two would probably know better was.

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Speaker 2: That the first was in March twenty twenty two.

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Speaker 4: Yeah, so it was about to come out. And I

421
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Speaker 4: think had that happened much more as I was writing

422
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Speaker 4: it and researching it, I think the book may have

423
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Speaker 4: taken a different shape. Basically, it took on a new

424
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Speaker 4: kind of resonance as the book was about to come out.

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Speaker 4: As I was crafting it, it wasn't so much. I

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Speaker 4: guess the present day analogy, the present day comparison I

427
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Speaker 4: was making was how the United States was able to

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Speaker 4: exist with a system of political economy that didn't seem

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Speaker 4: to me to be sustainable in the sense of everything

430
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Speaker 4: I had thought I learned about economics, and I was

431
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Speaker 4: not a PhD in economics or anything, but four decades

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Speaker 4: of current accounts deficits and budget deficits many times had

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Speaker 4: been it had been predicted that this type of system,

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Speaker 4: this type of arrangement, could not go on and would

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Speaker 4: one day come to an end. And yet all of

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Speaker 4: those predictions have continuously been pushed back or been to

437
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Speaker 4: this point come to fruition. And so I was trying

438
00:26:02,240 --> 00:26:05,200
Speaker 4: to find the origins in one way of at least

439
00:26:05,200 --> 00:26:07,200
Speaker 4: for the part about the United States in the book,

440
00:26:07,520 --> 00:26:11,000
Speaker 4: trying to find the origins of where that political economic

441
00:26:11,320 --> 00:26:14,479
Speaker 4: arrangement came from. And it turned out to have its

442
00:26:14,520 --> 00:26:17,320
Speaker 4: origins at least I think in the early nineteen eighties,

443
00:26:17,359 --> 00:26:22,040
Speaker 4: with the combination of Vulgar and Reagan. So yeah, I

444
00:26:22,080 --> 00:26:24,439
Speaker 4: didn't go in search of a kind of recipe of

445
00:26:24,440 --> 00:26:27,320
Speaker 4: how do you go about breaking promises, because I ultimately

446
00:26:27,320 --> 00:26:31,119
Speaker 4: don't think the contemporary world is one where more of

447
00:26:31,119 --> 00:26:34,400
Speaker 4: breaking promises is a solution to anything, but more how

448
00:26:34,440 --> 00:26:37,639
Speaker 4: the United States as a political economic system arrived at

449
00:26:37,680 --> 00:26:52,160
Speaker 4: the arrangement that it has had for the past four decades.

450
00:26:55,480 --> 00:26:58,000
Speaker 3: This reminds me, actually, I wanted to ask you about

451
00:26:58,040 --> 00:27:01,760
Speaker 3: the actual research ss of writing a book like this,

452
00:27:02,000 --> 00:27:04,359
Speaker 3: because I read on the back that you did a

453
00:27:04,400 --> 00:27:07,760
Speaker 3: bunch of new archival research. What was that like? What

454
00:27:07,760 --> 00:27:08,439
Speaker 3: did you find?

455
00:27:08,880 --> 00:27:12,280
Speaker 4: Well? It was fascinating at every turn. So I started

456
00:27:12,280 --> 00:27:15,200
Speaker 4: in Washington, d C. I went to spend a year

457
00:27:15,240 --> 00:27:17,920
Speaker 4: in East German archives, which I think are the best

458
00:27:18,080 --> 00:27:20,040
Speaker 4: kind of archives you can have because there's no more

459
00:27:20,080 --> 00:27:24,439
Speaker 4: state left to defendance in secrets. And then spent a

460
00:27:24,520 --> 00:27:27,199
Speaker 4: summer in Russia as well, before the war in Ukraine,

461
00:27:27,960 --> 00:27:30,119
Speaker 4: or at least the twenty twenty two next step of

462
00:27:30,160 --> 00:27:32,960
Speaker 4: the war in Ukraine. So at every turn right, I

463
00:27:33,080 --> 00:27:35,240
Speaker 4: started with a view of the Cold War. I began

464
00:27:35,320 --> 00:27:38,600
Speaker 4: this project once I learned that when the Berlin Wall

465
00:27:38,640 --> 00:27:41,000
Speaker 4: came down, the East Block was ninety billion dollars in

466
00:27:41,040 --> 00:27:43,720
Speaker 4: debt to the West, and that didn't make any sense

467
00:27:43,760 --> 00:27:46,120
Speaker 4: to me. It didn't seem to accord with our understanding

468
00:27:46,160 --> 00:27:48,760
Speaker 4: of what the Cold War was, at least from an

469
00:27:48,800 --> 00:27:51,480
Speaker 4: economic point of view, where these two sides were supposed

470
00:27:51,520 --> 00:27:55,600
Speaker 4: to be relatively independent of each other. And then once

471
00:27:55,640 --> 00:27:58,760
Speaker 4: you get into the archives, whether it's in DC at

472
00:27:58,760 --> 00:28:02,479
Speaker 4: the IMF, whether it's in Berlin at the East German Archives,

473
00:28:02,560 --> 00:28:06,640
Speaker 4: or in Moscow, there was an entire story there of

474
00:28:06,640 --> 00:28:09,520
Speaker 4: officials on both sides of the Aaron Curtain. I don't

475
00:28:09,520 --> 00:28:13,400
Speaker 4: think the word is too strong. Literally obsessed with questions

476
00:28:13,400 --> 00:28:16,919
Speaker 4: of international finance and energy, and questions of how do

477
00:28:16,960 --> 00:28:21,600
Speaker 4: you go about legitimizing austerity or breaking promises to your

478
00:28:21,600 --> 00:28:25,439
Speaker 4: own population, and so it was an exhilarating experience at

479
00:28:25,520 --> 00:28:29,200
Speaker 4: least or a historically minded person like me to find

480
00:28:29,240 --> 00:28:34,520
Speaker 4: this story in archives all over North America and Europe

481
00:28:34,720 --> 00:28:35,480
Speaker 4: at least.

482
00:28:35,920 --> 00:28:38,560
Speaker 2: Going back to the Soviet Union for a second. So

483
00:28:38,840 --> 00:28:42,719
Speaker 2: obviously we could do one hundred episodes of the podcast

484
00:28:42,840 --> 00:28:45,800
Speaker 2: and never arrive at a definitive answer of why the

485
00:28:45,840 --> 00:28:49,840
Speaker 2: Soviet Union collapsed, and everyone has their various theories. The

486
00:28:49,880 --> 00:28:53,600
Speaker 2: Berlin Wall comes down in nineteen eighty nine, what promises

487
00:28:53,880 --> 00:28:56,600
Speaker 2: did the Soviet Union ultimately have to break and how

488
00:28:56,600 --> 00:28:58,840
Speaker 2: did those go down? What were the specific sort of

489
00:28:59,240 --> 00:29:02,440
Speaker 2: decisions made out of Moscow, to the satellites, to the

490
00:29:02,440 --> 00:29:05,840
Speaker 2: domestic citizenry that they actually had to bite the bullet,

491
00:29:05,840 --> 00:29:08,720
Speaker 2: and how did that contribute to the ultimate collapse of

492
00:29:08,760 --> 00:29:09,600
Speaker 2: the whole project.

493
00:29:09,840 --> 00:29:14,960
Speaker 4: So the international promise, I think promise is one word

494
00:29:15,000 --> 00:29:16,800
Speaker 4: for it, but in a sense that they're kind of

495
00:29:16,800 --> 00:29:22,840
Speaker 4: dictating to their paternal allies, but certainly promising to the socialists,

496
00:29:22,840 --> 00:29:26,200
Speaker 4: the state socialists in their allied countries that they will

497
00:29:26,240 --> 00:29:28,600
Speaker 4: come to their defense. Right, So if there's ever a

498
00:29:28,680 --> 00:29:32,120
Speaker 4: kind of domestic revolt or a movement for domestic reform,

499
00:29:32,160 --> 00:29:35,600
Speaker 4: this had happened in nineteen fifty three, in nineteen fifty six,

500
00:29:36,160 --> 00:29:40,000
Speaker 4: the Prague Spring in nineteen sixty eight, almost to a

501
00:29:40,000 --> 00:29:42,640
Speaker 4: certain degree in Poland in nineteen eighty and eighty one,

502
00:29:43,240 --> 00:29:45,840
Speaker 4: the Soviet Union was always standing there in the background,

503
00:29:46,120 --> 00:29:51,680
Speaker 4: either literally intervening militarily or threatening to intervene to in

504
00:29:51,720 --> 00:29:56,200
Speaker 4: their frame of reference, save state socialism, save socialism from

505
00:29:56,240 --> 00:29:59,880
Speaker 4: its capitalist enemy. That kind of gets encased in the

506
00:30:00,240 --> 00:30:03,560
Speaker 4: idea of the Brezhnev doctrine, named after Lenid Brezhnev, that

507
00:30:03,720 --> 00:30:06,640
Speaker 4: the Soviet Union will always intervene to save its allies

508
00:30:06,680 --> 00:30:11,520
Speaker 4: from domestic unrest or counter revolution. That promise gets broken

509
00:30:12,040 --> 00:30:15,600
Speaker 4: in the late nineteen eighties, as Gorbachev and many many

510
00:30:15,640 --> 00:30:21,200
Speaker 4: others beyond him end up viewing their imperial relationship as

511
00:30:21,200 --> 00:30:25,720
Speaker 4: a bad economic deal. So they're subsidizing their satellites in

512
00:30:25,760 --> 00:30:28,880
Speaker 4: all kinds of ways, but particularly with low cost energy,

513
00:30:29,480 --> 00:30:32,200
Speaker 4: and they're not getting, in their view, anything in return,

514
00:30:32,880 --> 00:30:36,480
Speaker 4: or certainly not getting a fair deal in that alliance relationship.

515
00:30:36,480 --> 00:30:39,720
Speaker 4: And so he eventually says, essentially, you handle your own problems,

516
00:30:39,800 --> 00:30:43,080
Speaker 4: will handle our problems. I placed that moment in nineteen

517
00:30:43,120 --> 00:30:46,200
Speaker 4: eighty six, and within a couple of years of course

518
00:30:46,400 --> 00:30:49,400
Speaker 4: they're testing the limits, and in nineteen eighty nine the

519
00:30:49,440 --> 00:30:53,480
Speaker 4: Iron curtain comes down in the Berlin Wall collapses. Domestically

520
00:30:53,640 --> 00:30:56,160
Speaker 4: the Soviet economy, at least, there's a kind of Soviet

521
00:30:56,240 --> 00:30:59,680
Speaker 4: social contract that the state will provide, right, in exchange

522
00:30:59,680 --> 00:31:03,000
Speaker 4: for your political silence, the state will provide you with

523
00:31:03,280 --> 00:31:08,440
Speaker 4: low cost consumer basics, job security. Right, there's no unemployment

524
00:31:08,480 --> 00:31:11,680
Speaker 4: in the society, at least no official unemployment, so you're

525
00:31:11,720 --> 00:31:14,400
Speaker 4: going to get kind of a lower level but certainly

526
00:31:14,520 --> 00:31:21,560
Speaker 4: socioeconomic security in exchange for your political silence. And that

527
00:31:22,040 --> 00:31:25,760
Speaker 4: he too, also through Paristroika, tries to start to break

528
00:31:25,800 --> 00:31:30,120
Speaker 4: those promises, introduce more market mechanisms, even eventually coming to

529
00:31:30,480 --> 00:31:33,040
Speaker 4: the idea that there would need to be unemployment and

530
00:31:33,160 --> 00:31:36,240
Speaker 4: more job in security in Soviet society.

531
00:31:37,000 --> 00:31:40,000
Speaker 3: I know your book stops with the end of the

532
00:31:40,040 --> 00:31:43,120
Speaker 3: Soviet Union, but can you maybe give us a little

533
00:31:43,120 --> 00:31:47,000
Speaker 3: bit of color on how the market opening played out

534
00:31:47,080 --> 00:31:50,840
Speaker 3: among people? And I'm thinking specifically about price increases. Right,

535
00:31:50,880 --> 00:31:54,080
Speaker 3: So the social contract for such a long time is

536
00:31:54,200 --> 00:31:57,040
Speaker 3: as you said, You'll have subsidized energy and low cost

537
00:31:57,080 --> 00:32:00,520
Speaker 3: basic goods and a job. And then suddenly all of

538
00:32:00,560 --> 00:32:04,480
Speaker 3: that becomes a very uncertain what happened and what was

539
00:32:04,520 --> 00:32:06,719
Speaker 3: the sort of response from society.

540
00:32:07,360 --> 00:32:10,360
Speaker 4: So it plays out slightly differently in each place, of course,

541
00:32:10,440 --> 00:32:14,080
Speaker 4: but the place like Poland, for instance, very quickly introduces

542
00:32:14,440 --> 00:32:18,400
Speaker 4: shock therapy, as it was even called by its proponents

543
00:32:18,560 --> 00:32:22,160
Speaker 4: in the fall of nineteen eighty nine. Essentially, the question

544
00:32:22,360 --> 00:32:25,680
Speaker 4: on everyone's mind was if we see that there's this

545
00:32:26,080 --> 00:32:29,040
Speaker 4: they hoped very short period maybe six eight months, maybe

546
00:32:29,040 --> 00:32:32,920
Speaker 4: a year of economic difficulty that we have to go

547
00:32:33,000 --> 00:32:36,280
Speaker 4: through as we enter into the market, then we might

548
00:32:36,320 --> 00:32:38,040
Speaker 4: as well get it done as quickly as we can.

549
00:32:38,120 --> 00:32:41,560
Speaker 4: That was the shock therapist's message. It was also they

550
00:32:41,560 --> 00:32:45,280
Speaker 4: were fully aware that this was going to be extremely unpopular.

551
00:32:45,800 --> 00:32:49,719
Speaker 4: Breaking promises is never popular, so again, better to do

552
00:32:49,760 --> 00:32:53,760
Speaker 4: it quickly. While everyone is kind of in this euphoric

553
00:32:53,840 --> 00:32:58,480
Speaker 4: moment of having defeated communism or moved past their communist systems,

554
00:32:58,920 --> 00:33:01,200
Speaker 4: we should use this time time to do as much

555
00:33:01,920 --> 00:33:06,200
Speaker 4: economic transformation as we possibly can. And so in many

556
00:33:06,200 --> 00:33:10,560
Speaker 4: of these countries there are periods of wrenching economic change,

557
00:33:11,040 --> 00:33:15,120
Speaker 4: dramatic price increases, Unemployment goes up at a slower rate

558
00:33:15,160 --> 00:33:19,200
Speaker 4: than people had been anticipating, largely because companies kind of

559
00:33:19,240 --> 00:33:25,080
Speaker 4: take their employees' livelihoods. Luckily much more heart than standard

560
00:33:25,120 --> 00:33:28,200
Speaker 4: market models had been predicting, so there was not as

561
00:33:28,320 --> 00:33:31,080
Speaker 4: much unemployment as people anticipated, but still a great deal,

562
00:33:31,720 --> 00:33:36,120
Speaker 4: a great deal of industrial restructuring, de industrialization, things like that.

563
00:33:36,680 --> 00:33:39,520
Speaker 4: And the question, a much broader question that I think

564
00:33:39,600 --> 00:33:42,200
Speaker 4: is something for open for historical research, is how that

565
00:33:42,280 --> 00:33:47,240
Speaker 4: all of that process could have been done much more productively.

566
00:33:47,760 --> 00:33:51,440
Speaker 4: Let's say that maybe some promises had to be broken

567
00:33:51,960 --> 00:33:53,760
Speaker 4: in some kind of way, right, I think there is

568
00:33:53,920 --> 00:33:59,840
Speaker 4: something about industrial restructuring that is going to be painful,

569
00:34:00,440 --> 00:34:02,760
Speaker 4: and if you think that entering the global market is

570
00:34:02,840 --> 00:34:06,440
Speaker 4: ultimately a good thing on some kind of terms, there

571
00:34:06,480 --> 00:34:09,799
Speaker 4: may be some kind of broken promise within that. But

572
00:34:09,920 --> 00:34:13,360
Speaker 4: how to do it in a way that is most humane,

573
00:34:13,600 --> 00:34:16,920
Speaker 4: most pro growth because economic growth often didn't appear in

574
00:34:16,920 --> 00:34:19,479
Speaker 4: these places for quite a long time. I think that's

575
00:34:19,520 --> 00:34:23,120
Speaker 4: something that we'll need to focus on as historians for

576
00:34:23,239 --> 00:34:26,040
Speaker 4: quite a long time to see where the better routes

577
00:34:26,080 --> 00:34:27,239
Speaker 4: may have been passed over.

578
00:34:28,200 --> 00:34:32,319
Speaker 2: Fritz Bartel, fascinating conversation, very timely. Thank you so much

579
00:34:32,360 --> 00:34:33,640
Speaker 2: for coming on outlaws.

580
00:34:33,880 --> 00:34:48,120
Speaker 4: Thanks so much so, Tracy.

581
00:34:48,360 --> 00:34:53,040
Speaker 2: My takeaway is that cutting spending breaking promises is extremely hard,

582
00:34:53,520 --> 00:34:58,280
Speaker 2: and even if you have very popular, incredibly talented politicians,

583
00:34:58,760 --> 00:35:00,719
Speaker 2: you still might have a hard time. I'm doing it.

584
00:35:01,000 --> 00:35:04,840
Speaker 2: But maybe sometimes if the government enjoys a high degree

585
00:35:05,040 --> 00:35:09,400
Speaker 2: of public credibility across the aisle, maybe sometimes it's possible

586
00:35:09,440 --> 00:35:11,239
Speaker 2: without destroying society.

587
00:35:11,160 --> 00:35:15,200
Speaker 3: Public credibility and I guess ironically democracy.

588
00:35:14,800 --> 00:35:17,680
Speaker 2: Yeah, at least in that specific period of time.

589
00:35:17,760 --> 00:35:19,960
Speaker 3: But I do think this is sort of like it's

590
00:35:20,000 --> 00:35:23,040
Speaker 3: a funny one because we're used to thinking of humans

591
00:35:23,160 --> 00:35:26,680
Speaker 3: as very short termist. Yeah, and yet you know, people

592
00:35:26,719 --> 00:35:30,279
Speaker 3: are voting for short term pain in order to have

593
00:35:30,360 --> 00:35:33,240
Speaker 3: longer term gains. But I think there's still an element

594
00:35:33,280 --> 00:35:36,400
Speaker 3: of short termism at play in the sense that, like

595
00:35:36,680 --> 00:35:40,000
Speaker 3: it's a pendulum swinging, right, So like you go from

596
00:35:40,280 --> 00:35:44,200
Speaker 3: one candidate or one system that failed to deliver what

597
00:35:44,280 --> 00:35:47,239
Speaker 3: you wanted, and then you just swing to the other

598
00:35:47,280 --> 00:35:49,680
Speaker 3: one in the hopes that they're able to do it.

599
00:35:49,719 --> 00:35:52,120
Speaker 3: And again, in the US, at least there's only two systems,

600
00:35:52,160 --> 00:35:54,520
Speaker 3: so you get that pendulum swinging quite a lot.

601
00:35:55,200 --> 00:35:58,919
Speaker 2: I don't know listening to that conversation. Again, I don't

602
00:35:58,960 --> 00:36:01,439
Speaker 2: have an opinion on what the government the optimal size

603
00:36:01,480 --> 00:36:03,920
Speaker 2: of government spending or the optimal size of the deficit.

604
00:36:04,880 --> 00:36:08,440
Speaker 2: It's hard for me to imagine a meaningful change in

605
00:36:08,560 --> 00:36:13,960
Speaker 2: the spending or deficit trajectory under the current political environment

606
00:36:14,239 --> 00:36:15,840
Speaker 2: in the US. You Know, what I thought was that

607
00:36:15,960 --> 00:36:18,480
Speaker 2: maybe one of the most interesting points this idea that

608
00:36:18,840 --> 00:36:23,080
Speaker 2: when Margaret Thatcher, she didn't have high approval rating, but

609
00:36:23,200 --> 00:36:25,719
Speaker 2: the police that ultimately had to sort of carry out

610
00:36:25,760 --> 00:36:30,480
Speaker 2: actions against the coal miners, they had very high approval rating.

611
00:36:30,840 --> 00:36:34,760
Speaker 2: So this idea that like, the politician may not be popular,

612
00:36:35,040 --> 00:36:38,680
Speaker 2: but the state apparatus still enjoys a lot of credibility.

613
00:36:38,680 --> 00:36:41,600
Speaker 2: And this distinction between the politician and the state apparatus,

614
00:36:41,960 --> 00:36:45,000
Speaker 2: a distinction that didn't exist in the Soviet Union, that

615
00:36:45,000 --> 00:36:48,160
Speaker 2: that was really the key to at least making it

616
00:36:48,200 --> 00:36:50,160
Speaker 2: so that once the thing has been carried out, it

617
00:36:50,200 --> 00:36:51,800
Speaker 2: doesn't like destroy society.

618
00:36:51,920 --> 00:36:56,879
Speaker 3: Yeah, I think this is exactly it. So in communist systems,

619
00:36:57,160 --> 00:37:01,880
Speaker 3: the state is mixed with efecte yes, right, like, including

620
00:37:01,920 --> 00:37:05,080
Speaker 3: the economy, so you don't get that political economic distinction,

621
00:37:05,560 --> 00:37:09,160
Speaker 3: whereas in the West that exists. It's a useful thing

622
00:37:09,239 --> 00:37:12,680
Speaker 3: for politicians to blame and you know, manipulate to their

623
00:37:12,719 --> 00:37:13,280
Speaker 3: own ends.

624
00:37:13,400 --> 00:37:16,279
Speaker 2: I guess the question. We know that the politics is

625
00:37:16,400 --> 00:37:19,520
Speaker 2: very divisive in this country. I also worry that like this,

626
00:37:19,640 --> 00:37:22,680
Speaker 2: you know, the state itself and the legitimacy of like

627
00:37:22,800 --> 00:37:27,080
Speaker 2: government is coming under fire. So some difficult challenges if

628
00:37:27,160 --> 00:37:28,920
Speaker 2: we if we're going to go down that path.

629
00:37:29,080 --> 00:37:30,600
Speaker 3: Yeah, shall we leave it there?

630
00:37:30,719 --> 00:37:31,439
Speaker 2: Let's leave it there.

631
00:37:31,760 --> 00:37:34,480
Speaker 3: This has been another episode of the Oud Thoughts podcast.

632
00:37:34,680 --> 00:37:37,880
Speaker 3: I'm Tracy Halloway. You can follow me at Tracy Halloway.

633
00:37:38,239 --> 00:37:41,480
Speaker 2: And I'm Joe Wisenthal. You can follow me at the Stalwart.

634
00:37:41,760 --> 00:37:45,560
Speaker 2: Follow our guest Fritz Bartel, He's at Fritz Underscore Bartel

635
00:37:45,640 --> 00:37:48,160
Speaker 2: and check out his book, The Triumph of Broken Promises.

636
00:37:48,640 --> 00:37:51,799
Speaker 2: Follow our producers Carmen Rodriguez at Carmen armand dash Ol

637
00:37:51,800 --> 00:37:54,880
Speaker 2: Bennett and Dashbot and kill Brooks at Kilbrooks. From our

638
00:37:54,920 --> 00:37:58,040
Speaker 2: odd Laws content, go to Bloomberg dot com slash odd Lots.

639
00:37:58,080 --> 00:38:00,360
Speaker 2: We have transcripts, a blog in a newsletter and you

640
00:38:00,360 --> 00:38:02,320
Speaker 2: can chat about all of these topics twenty four to

641
00:38:02,320 --> 00:38:05,920
Speaker 2: seven in our discord Discord dot gg slash od lots.

642
00:38:05,920 --> 00:38:07,920
Speaker 3: And if you enjoy odd Lots, if you like it,

643
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Speaker 3: when we talk about historical examples of government's cutting costs.

644
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649
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Speaker 3: listening

650
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Speaker 1: And