WEBVTT - This Is Why It's So Hard To Cut Public Spending 0:00:02.720 --> 0:00:16.400 Bloomberg Audio Studios, Podcasts, Radio News. 0:00:18.520 --> 0:00:22.119 Hello and welcome to another episode of the Odd Lots Podcast. 0:00:22.160 --> 0:00:23.960 I'm Joe Wisenthal. 0:00:23.600 --> 0:00:24.800 And I'm Tracy Alloway. 0:00:25.320 --> 0:00:29.040 Tracy, spending cuts in the air these days. 0:00:30.120 --> 0:00:32.479 You could say that it's a vibe shift. It's a 0:00:32.560 --> 0:00:33.440 vibe Yeah. 0:00:33.440 --> 0:00:33.680 Sure. 0:00:33.800 --> 0:00:36.760 So under the Trump administration, obviously there is a stated 0:00:36.920 --> 0:00:42.560 ambition to reduce spending and make the government more efficient overall. 0:00:43.000 --> 0:00:46.120 Yeah, Scott Besten, I think he has something the three 0:00:46.240 --> 0:00:49.280 three three plan part of it. I think he wants 0:00:49.440 --> 0:00:53.639 three percent growth, three percent more oil production, and then 0:00:53.840 --> 0:00:56.920 three percent deficit. And I think deficits are around six 0:00:56.960 --> 0:01:01.640 percent currently, which is really high by historic standards, especially 0:01:01.720 --> 0:01:06.200 because we're at what four point one percent unemployment. Usually, 0:01:06.240 --> 0:01:09.360 when the economy is running this hot or this tight, 0:01:09.760 --> 0:01:12.840 you don't expect to see deficits this large at in 0:01:13.640 --> 0:01:16.240 rates as high as they are. There does seem to 0:01:16.280 --> 0:01:19.479 be this impulse for better or worse, and other people 0:01:19.560 --> 0:01:21.880 can be the judge of that to cut spending. But 0:01:22.000 --> 0:01:23.840 on the other hand, it's very difficult. 0:01:24.040 --> 0:01:26.880 Wait, why do you say that, Because early in my 0:01:27.000 --> 0:01:30.360 career there was the Eurozone cross and I think there 0:01:30.480 --> 0:01:34.600 was some austerity imposed in places like Greece ultimately, so 0:01:34.640 --> 0:01:35.800 why do you say it's difficult? 0:01:35.959 --> 0:01:38.000 So, actually, there's two things here, and I think there's 0:01:38.040 --> 0:01:40.720 really apt and I think this is a fascinating question 0:01:40.920 --> 0:01:43.240 in its own right, which is, why is it that 0:01:43.360 --> 0:01:46.360 in two thousand and nine twenty ten, in the aftermath 0:01:46.440 --> 0:01:50.640 of the Great Financial Crisis, when we had widespread unemployment, 0:01:51.240 --> 0:01:54.200 why was the appetite for austerity so high then at 0:01:54.240 --> 0:01:56.880 a time when there was so little aggregate demand, And 0:01:56.920 --> 0:01:59.840 now at a time when you know, obviously inflation has 0:01:59.880 --> 0:02:02.440 been running hot and so forth, why does it seem 0:02:02.480 --> 0:02:05.680 more difficult? That in itself is a fascinating question. But 0:02:05.720 --> 0:02:08.880 I guess what I would say to answer your question specifically, 0:02:08.960 --> 0:02:12.400 is that anytime people talk about cuts, there is not 0:02:12.520 --> 0:02:16.600 a ton of discretionary spending in the US government budget. 0:02:16.919 --> 0:02:22.640 There's the entitlement, social Security, Medicare, Medicaid, and then there's defense, 0:02:23.040 --> 0:02:25.680 which there's usually not much political appetite to cut, and 0:02:25.680 --> 0:02:28.600 then when you have left over, it's hard to move 0:02:28.840 --> 0:02:31.320 the dial. And so the theory is that if you 0:02:31.440 --> 0:02:34.799 actually want to move the dial on spending and deficits, 0:02:35.120 --> 0:02:38.240 you have to like cut into some areas you have 0:02:38.320 --> 0:02:42.519 to break promises perhaps that you've made to various constituencies 0:02:42.960 --> 0:02:44.000 like senior right. 0:02:44.160 --> 0:02:48.360 Ultimately you're inflicting pain on someone, and at least in 0:02:48.440 --> 0:02:52.840 democratic governments, because it's all about a numbers game. It's 0:02:52.880 --> 0:02:54.840 all about getting votes. That would be a bad thing. 0:02:55.480 --> 0:02:58.200 Well, we have to then talk about how do the 0:02:58.280 --> 0:03:02.080 stars align if you actually want to meaningfully cut spending, 0:03:02.680 --> 0:03:06.280 how does that actually happen. How do democratically elected government 0:03:06.440 --> 0:03:11.480 sort of build the political capacity to inflict pain perhaps 0:03:11.600 --> 0:03:15.480 on groups that obviously have some stature. We really do 0:03:15.560 --> 0:03:17.680 have the perfect guest. We are going to be speaking 0:03:17.720 --> 0:03:20.880 with Fritz Bartel. He is an assistant professor of International 0:03:20.960 --> 0:03:24.080 Affairs at the Bush School at Texas A and M. 0:03:24.400 --> 0:03:26.919 And he is the author of the book came out 0:03:26.919 --> 0:03:30.560 in twenty twenty two, The Triumph of Broken Promises, the 0:03:30.680 --> 0:03:33.079 End of the Cold War and the Rise of Neoliberalism, 0:03:33.360 --> 0:03:36.280 And it's kind of about exactly this topic, how governments 0:03:36.520 --> 0:03:39.440 break promises. So, Professor Bartel, thank you so much for 0:03:39.640 --> 0:03:40.600 coming on odd LATS. 0:03:40.720 --> 0:03:41.720 Thanks so much for having me. 0:03:42.400 --> 0:03:45.240 Your book is really interesting because you talk about this 0:03:45.400 --> 0:03:49.720 sort of resource constraints and spending constraints in the US, 0:03:50.200 --> 0:03:52.760 the UK, and the Soviet Union. All of it was 0:03:52.760 --> 0:03:55.760 sort of building up to a head in the late 0:03:55.840 --> 0:03:59.040 nineteen seventies early eighties. Before reading your book, that hadn't 0:03:59.040 --> 0:04:01.360 clicked to me that all the different economies were sort 0:04:01.360 --> 0:04:04.840 of facing the same stresses at the same time. What 0:04:05.040 --> 0:04:08.720 was going on that suddenly around the world governments felt 0:04:08.720 --> 0:04:10.760 this impulse like we have to cut we have to 0:04:10.800 --> 0:04:11.800 constrain ourselves. 0:04:11.920 --> 0:04:14.480 Yeah, So, I guess the short answer is that the 0:04:14.600 --> 0:04:18.000 kind of post World War two economic boom had run 0:04:18.040 --> 0:04:21.920 aground in the nineteen seventies. Obviously, there was the kind 0:04:21.920 --> 0:04:26.760 of birth of stagflation. There was a decline in productivity 0:04:26.760 --> 0:04:30.880 growth across Western economies, the Soviet economy, and the Eastern 0:04:30.920 --> 0:04:34.360 Bloc more generally, the Communist Block had run into the 0:04:34.520 --> 0:04:38.400 end of their growth model. Kind of this hyper industrialization 0:04:38.560 --> 0:04:41.960 growth model had started to produce fewer and fewer results. 0:04:42.480 --> 0:04:45.240 So in both the Eastern Bloc, the Communist world, and 0:04:45.320 --> 0:04:48.880 the West, the growth model, one largely based on kind 0:04:48.880 --> 0:04:54.200 of industrialization, certainly based on cheap energy resources, had started 0:04:54.240 --> 0:04:58.359 to run aground roughly at similar kind of moments in 0:04:58.400 --> 0:05:02.040 the early nineteen seventies, and then these crises that kind 0:05:02.040 --> 0:05:04.640 of came to define the nineteen seventies, the energy shock 0:05:04.680 --> 0:05:08.320 of nineteen seventy three again in nineteen seventy nine. The 0:05:08.440 --> 0:05:13.960 monetary confusion and shocks of the nineteen seventies also spurred 0:05:14.000 --> 0:05:17.440 a great deal of inflation and crisis across the world. 0:05:17.520 --> 0:05:21.440 And so in both East and West, the societies had 0:05:21.560 --> 0:05:26.240 largely concluded that they did not have the resources to 0:05:26.440 --> 0:05:30.279 meet the commitments that they previously had made to their constituencies, 0:05:30.360 --> 0:05:32.599 or at least that's how it became framed and understood. 0:05:32.960 --> 0:05:37.120 So you mentioned commitments, What exactly were the commitments or 0:05:37.160 --> 0:05:41.200 the promises that different governments had made to their citizens, 0:05:41.240 --> 0:05:43.680 Because you know, I think about America and obviously in 0:05:43.720 --> 0:05:47.200 the nineteen fifties nineteen sixties there was the American dream 0:05:47.560 --> 0:05:50.640 of a nice house in the suburbs and a car 0:05:50.720 --> 0:05:54.560 and two point four children or whatever it was. And 0:05:54.600 --> 0:05:56.960 then in the East, I think there was a promise 0:05:57.240 --> 0:06:03.119 of economic growth. Maybe the emphasis was more on equality 0:06:03.640 --> 0:06:07.480 of economic growth versus just pure economic growth. 0:06:08.000 --> 0:06:09.920 Yeah. So I think, as I defined in the book, 0:06:09.960 --> 0:06:13.360 this kind of politics of making promises took different shapes 0:06:13.640 --> 0:06:15.760 in the West and the East. The West had more 0:06:15.800 --> 0:06:19.320 abundance from the start, and certainly creating abundance was at 0:06:19.320 --> 0:06:23.520 the core of what democratic capitalism was all about, but 0:06:23.640 --> 0:06:26.680 it wasn't particularly because the West was in this Cold War. 0:06:26.760 --> 0:06:29.800 You couldn't just be about creating abundance. There had to 0:06:29.800 --> 0:06:33.880 be some sense of limiting inequality at the very least, 0:06:33.920 --> 0:06:39.000 and so Western states, not universally and not necessarily with 0:06:39.120 --> 0:06:42.440 all of their conviction, but they supported labor unions to 0:06:42.480 --> 0:06:46.560 a much greater degree than they would subsequently, they created 0:06:46.640 --> 0:06:51.400 broad welfare states that invested in cradle to grave type 0:06:51.440 --> 0:06:56.400 of state intervention. They largely secured for at least large 0:06:56.440 --> 0:07:01.440 segments of their population income security, security, full employee. Even 0:07:01.440 --> 0:07:04.480 the commitment to full employment was a kind of post 0:07:04.480 --> 0:07:08.359 war novelty that governments could actually make credible. And in 0:07:08.400 --> 0:07:09.720 the East it took something, you know, it was a 0:07:09.760 --> 0:07:12.440 slightly different shape, but there were similar kinds of promises 0:07:12.440 --> 0:07:16.440 made that your workday would get shorter, your even intergenerational 0:07:16.720 --> 0:07:21.400 upward mobility would increase, you had access to housing. All 0:07:21.440 --> 0:07:25.480 of these always very incompletely fulfilled, but they were kind 0:07:25.480 --> 0:07:28.760 of making progress incredibly in the eyes of their populations, 0:07:28.760 --> 0:07:33.280 making more progress towards a future of both material abundance 0:07:33.400 --> 0:07:37.800 and some form of equality, not full on equality, certainly 0:07:37.880 --> 0:07:41.440 much more in communists or state social societies, equality was 0:07:41.440 --> 0:07:44.679 held in higher regard, but also very much in the West. 0:07:44.720 --> 0:07:47.920 You kind of couldn't come out just as fully comfortable 0:07:48.000 --> 0:07:51.320 with the levels of inequality that we've reached by today's standards. 0:07:51.360 --> 0:07:55.400 So this search for both abundance and some measure of 0:07:55.400 --> 0:07:58.240 equality was there in both the West and the East. 0:07:58.960 --> 0:08:01.880 You know, it's funny, Like, obviously I think today we 0:08:01.960 --> 0:08:05.600 think of the Soviet Union's economic model as sort of 0:08:05.640 --> 0:08:08.720 having been a basket case and a disaster, But for 0:08:08.840 --> 0:08:13.240 many years they were actually they were growing, their industrializing, 0:08:13.320 --> 0:08:16.320 They had rapid growth, something that I hadn't realized until 0:08:16.320 --> 0:08:18.680 I read your book. And maybe we're skipping ahead a 0:08:18.680 --> 0:08:21.000 little bit here in the story, but even like in 0:08:21.080 --> 0:08:24.800 Western financial markets, there was sort of an obsession with 0:08:24.920 --> 0:08:28.080 like Eastern Bloc debt, Like it was an exciting trade 0:08:28.600 --> 0:08:32.960 to lend to some of the communist countries in the East, 0:08:33.000 --> 0:08:37.240 and like financial analysts were like really excited about these investments. 0:08:37.559 --> 0:08:39.560 Yeah, and I don't know that we can really pin 0:08:39.640 --> 0:08:42.720 that necessarily on their growth processure per se, But Western 0:08:42.800 --> 0:08:45.960 bankers definitely believed that the communist world had a nice 0:08:46.000 --> 0:08:50.040 recipe for making secure loans. So if things were to 0:08:50.080 --> 0:08:52.760 come to a crisis, it was believed that authoritarianism was 0:08:52.840 --> 0:08:56.720 going to be very good imposing these kinds of cuts 0:08:56.960 --> 0:09:00.959 at imposing discipline and breaking promises. And in the background 0:09:01.040 --> 0:09:03.720 the Soviet economy itself, in the background of a country 0:09:03.760 --> 0:09:07.120 like Poland or Hungary or East Germany, the Soviet economy 0:09:07.280 --> 0:09:10.120 was sitting there, as they literally called it, an umbrella, 0:09:10.360 --> 0:09:13.599 an economic and financial umbrella over the rest of the 0:09:13.640 --> 0:09:16.560 Eastern Bloc, where if any of these countries ran into 0:09:16.600 --> 0:09:20.160 financial difficulties, it was assumed that the Soviet Union would 0:09:20.200 --> 0:09:23.000 kind of come to their financial rescue, would bail them 0:09:23.000 --> 0:09:25.280 out and in the end pay off their debts. And 0:09:25.559 --> 0:09:27.360 it turned out that that wasn't the case by the 0:09:27.440 --> 0:09:30.760 nineteen eighties, but in the nineteen seventies in particular, that 0:09:30.880 --> 0:09:33.800 was a very popular view in the Western financial press. 0:09:34.360 --> 0:09:37.760 Explain how we got from the nineteen seventies where Russia, 0:09:37.920 --> 0:09:40.880 you know, is kind of impressive at least to Western 0:09:41.040 --> 0:09:45.640 investors and analysts, to the nineteen eighties where it's unable 0:09:45.760 --> 0:09:49.360 to do what it had promised to some of its allies. 0:09:49.960 --> 0:09:52.240 Yeah, so you know, it's largely a story of oil 0:09:52.280 --> 0:09:55.120 and natural gas kind of coming into the nineteen seventies, 0:09:55.160 --> 0:10:00.080 the Soviet Union has found significant oil reserves in and 0:10:00.440 --> 0:10:03.840 western Siberia. It's started to develop those reserves over the 0:10:03.840 --> 0:10:07.079 course of the nineteen sixties, and by the nineteen seventies 0:10:07.520 --> 0:10:11.440 it's coming online, so to speak, as an energy superpower. 0:10:12.000 --> 0:10:15.560 At the same time that world markets are creating multiple 0:10:15.600 --> 0:10:19.360 crises that send the price of oil and natural gas 0:10:19.880 --> 0:10:22.560 through the roof, and so throughout the nineteen seventies it 0:10:22.559 --> 0:10:25.080 looks like the Soviet Union, and in fact it does 0:10:25.160 --> 0:10:28.640 have all of this energy wealth at its disposal. And 0:10:28.679 --> 0:10:31.640 then the nineteen eighties come and the kind of fortunes reversed. So, 0:10:32.240 --> 0:10:34.080 you know, when prices go up, people start to look 0:10:34.080 --> 0:10:37.280 for more supply. They find energy in places like the 0:10:37.320 --> 0:10:41.360 North Sea. They start to develop much more energy supply. 0:10:42.000 --> 0:10:45.440 Western countries have done not a great job, but they've 0:10:45.480 --> 0:10:49.000 done something to create more energy of fission economies, and 0:10:49.040 --> 0:10:51.920 so the forces of supply and demands start to send 0:10:52.040 --> 0:10:54.280 the price of oil in the nineteen eighties on a 0:10:54.840 --> 0:10:58.440 downward trend, pinpointed by a couple of particular moments like 0:10:58.559 --> 0:11:03.280 nineteen eighty five, where it really significantly collapses, and the 0:11:03.280 --> 0:11:06.160 Soviet Union itself finds that it's much more difficult to 0:11:06.240 --> 0:11:09.840 produce the growth in its energy sector that it had 0:11:09.880 --> 0:11:12.960 produced in the nineteen sixties in the nineteen seventies, and 0:11:13.040 --> 0:11:16.559 so these two forces, a kind of plateau in production 0:11:16.800 --> 0:11:20.079 and the collapse in price, all of a sudden leave 0:11:20.120 --> 0:11:24.040 the Soviet Bloc as a whole looking much less economically 0:11:24.080 --> 0:11:26.880 powerful by the even the middle of the nineteen eighties 0:11:27.040 --> 0:11:30.120 than it was, let's say, in the late nineteen seventies. 0:11:30.120 --> 0:11:32.400 When we were talking about the intro and you sort 0:11:32.400 --> 0:11:34.360 of alluded to it when you were talking about the 0:11:34.520 --> 0:11:38.760 Umbrella and this belief in the West that well, you know, 0:11:38.800 --> 0:11:43.520 the Soviet Union is authoritarian, essentially planned economy. They don't 0:11:43.600 --> 0:11:48.160 have to pander to voters, and therefore one might think 0:11:48.520 --> 0:11:53.679 that that's a more politically conducive environment for cutting spending 0:11:53.760 --> 0:11:58.160 or making difficult decisions. I'm curious the answer why that 0:11:58.200 --> 0:12:00.640 didn't turn out to be the case. Yes, as part 0:12:00.679 --> 0:12:04.599 of the story is that, well, maybe the promises to 0:12:04.640 --> 0:12:08.000 their own citizens could be taken for granted, that these 0:12:08.080 --> 0:12:13.240 other satellite countries East Germany, Poland, et cetera. They have 0:12:13.280 --> 0:12:16.880 no obligation to stick with the Eastern Bloc if they're 0:12:16.880 --> 0:12:19.599 not getting that support anymore from the Soviet Union. But 0:12:19.640 --> 0:12:24.079 why don't you sort of explain why that authoritarian ease 0:12:24.440 --> 0:12:25.600 didn't end up working out. 0:12:26.400 --> 0:12:29.640 Yeah, so it kind of corresponding to this belief in 0:12:29.679 --> 0:12:32.920 the West that authoritarians would be good at breaking promises, 0:12:33.600 --> 0:12:36.840 those same people and many others believe that democracies would 0:12:36.840 --> 0:12:39.800 be very bad at breaking promises, because, as you mentioned, 0:12:39.880 --> 0:12:42.120 the intro would seem to make sense that if you're 0:12:42.120 --> 0:12:44.800 trying to get elected, it's just not in your interest 0:12:44.960 --> 0:12:48.680 to try to break promises to your own citizens. The 0:12:48.760 --> 0:12:51.000 turn of the nineteen eighties, both events in the United 0:12:51.000 --> 0:12:54.200 States and Great Britain and events in the Eastern Bloc 0:12:54.400 --> 0:12:56.880 suggest that this might not be true, and in fact, 0:12:57.440 --> 0:13:01.040 democratic elections and the kind of legitimacy that it bestows 0:13:01.160 --> 0:13:04.800 on governments, at least that it did bestow in the past, 0:13:04.960 --> 0:13:07.120 we can talk about whether or not that's still true. 0:13:07.440 --> 0:13:09.680 In the nineteen eighties, it turned out that democracy and 0:13:09.800 --> 0:13:14.800 competitive elections provided a sense of legitimacy that made the 0:13:15.280 --> 0:13:20.079 let's say, the sales pitch of breaking promises more credible 0:13:20.160 --> 0:13:22.760 in the eyes of Western populations than it turned out 0:13:22.800 --> 0:13:26.880 to be in communist societies. So the specific case that 0:13:27.080 --> 0:13:30.480 I think is probably most illustrative is Poland in the 0:13:30.480 --> 0:13:34.000 early nineteen eighties. People will probably know, or if they're 0:13:34.040 --> 0:13:38.160 old enough, remember the Polish labor union Solidarity, it's famous leader, 0:13:38.480 --> 0:13:42.600 Left Bowensa. It's born in the summer of nineteen eighty 0:13:42.640 --> 0:13:47.280 precisely because the Polish government tries to increase consumer prices 0:13:47.760 --> 0:13:50.920 basically which in communist societies was one of the foundational 0:13:50.960 --> 0:13:53.680 promises that had been made to the population, we will 0:13:53.760 --> 0:13:57.199 keep your basic basket of goods the price of those 0:13:57.240 --> 0:14:00.920 goods very stable. They try to increase the in order 0:14:01.000 --> 0:14:03.640 to repay their debts, partially in order to solve some 0:14:03.720 --> 0:14:08.400 of their financial problems, and people openly revolt because they 0:14:08.440 --> 0:14:12.320 don't trust that their government, that the state's socialist state, 0:14:12.840 --> 0:14:15.600 is essentially telling them the truth that you need to 0:14:15.640 --> 0:14:18.120 go to the people to break these promises to get 0:14:18.120 --> 0:14:21.400 some sacrifice from them in order to repay debts. That's 0:14:21.520 --> 0:14:25.720 not a credible and legitimate claiming in the eyes of 0:14:25.800 --> 0:14:29.200 Polish society. In contrast, when someone like Paul Volker in 0:14:29.240 --> 0:14:33.240 the United States says essentially that the United States needs 0:14:33.280 --> 0:14:37.680 to go through a very painful recession in order to 0:14:37.720 --> 0:14:41.520 fix the problem of inflation that had come to define 0:14:41.600 --> 0:14:44.280 the United States over the course of the nineteen seventies. 0:14:44.800 --> 0:14:47.840 Lots of people are unhappy about that. He gets death threats, 0:14:47.880 --> 0:14:50.480 there's protests, he's on the cover of Time magazine. He's 0:14:50.560 --> 0:14:53.280 kind of public enemy number one in a sense. But 0:14:54.040 --> 0:14:56.880 it does not result in a kind of full blown 0:14:57.080 --> 0:15:00.800 revolt against the system as it did in the Eastern Bloc. 0:15:00.840 --> 0:15:01.720 And so the. 0:15:01.760 --> 0:15:06.760 Legitimacy that democracy itself bestowed on Western States turns out 0:15:06.800 --> 0:15:10.120 to be the mechanism, I think, by which they were 0:15:10.160 --> 0:15:12.760 able to break promises to their people, whereas in the 0:15:12.760 --> 0:15:16.240 Eastern Bloc authoritarianism proved to be very weak at this 0:15:16.360 --> 0:15:19.240 task because the only thing people had come to expect 0:15:19.320 --> 0:15:22.640 from their government, they didn't have any political role in it. 0:15:22.680 --> 0:15:25.440 The only thing they'd come to expect was some kind 0:15:25.440 --> 0:15:28.840 of material improvement year over year, meager though it was, 0:15:29.360 --> 0:15:31.520 and that was lacking in the Eastern Bloc. 0:15:46.800 --> 0:15:49.680 Can you say more about this, maybe in the context 0:15:50.040 --> 0:15:52.560 of Ronald Reagan, because I think that would be a 0:15:52.560 --> 0:15:56.400 good example of I guess the role of free elections 0:15:56.520 --> 0:16:01.520 and competition between political candidates in basically letting the population, 0:16:01.840 --> 0:16:05.680 like let some of their frustration out right. It's kind 0:16:05.720 --> 0:16:09.680 of like, Okay, the current politicians have failed to keep 0:16:09.800 --> 0:16:12.920 their promise, and so we are willing to try anything, 0:16:13.640 --> 0:16:17.480 even if it means short term pain in order to 0:16:17.800 --> 0:16:19.080 get what we want again. 0:16:19.320 --> 0:16:22.760 Yeah, So Reagan is a kind of quintessential figure for 0:16:22.840 --> 0:16:27.160 this turn. He's not a political outsider necessarily, certainly on 0:16:27.200 --> 0:16:30.120 the level of Trump in the nineteen seventies, but he 0:16:30.200 --> 0:16:34.480 does come to DC wins the nineteen eighty election with 0:16:34.560 --> 0:16:39.320 a distinctly different message. Right. He famously says in his 0:16:39.320 --> 0:16:42.160 inaugural a dress in nineteen eighty one, government is not 0:16:42.720 --> 0:16:45.720 the solution to the problem. It is the problem. And 0:16:45.760 --> 0:16:49.040 that kind of message, which is already one that is 0:16:49.440 --> 0:16:54.720 then conducive to breaking promises because it's redefined the state 0:16:54.880 --> 0:16:59.800 as the problem itself. The popular mandate that he has 0:17:00.240 --> 0:17:03.920 by winning the nineteen eighty election, in turn, gives him, 0:17:04.560 --> 0:17:07.239 I guess the term would be more political capital and 0:17:07.280 --> 0:17:10.800 certainly more receptivity even from his enemies or from his 0:17:10.880 --> 0:17:16.080 political enemies to accept the policies that he then enacts. 0:17:16.600 --> 0:17:19.440 So I think that's one of the key factors is, yes, 0:17:19.480 --> 0:17:21.959 he has certain people who agree with many people who 0:17:22.040 --> 0:17:24.920 agree with him, but even those who disagree with him 0:17:25.440 --> 0:17:29.000 work within the bounds of the system where they accept. Again, 0:17:29.080 --> 0:17:31.080 this is where it gets a little different in the 0:17:31.160 --> 0:17:34.160 recent years. They accept the outcome of the election right, 0:17:34.200 --> 0:17:36.960 and they view the process itself by which this was 0:17:37.000 --> 0:17:41.679 decided as legitimate. And so he's not particularly successful, and 0:17:41.760 --> 0:17:45.920 he and his team are not particularly successful in cutting spending, 0:17:46.080 --> 0:17:49.240 in particular in breaking promises. Much more of that in 0:17:49.280 --> 0:17:52.400 the US case comes from the federal Reserve. But he 0:17:52.480 --> 0:17:57.359 dramatically alters the rhetorical landscape of the United States, and 0:17:57.520 --> 0:18:02.880 does so by bringing this movement from outside Washington, DC 0:18:03.520 --> 0:18:05.639 and redefining what the kind of terms of the debate 0:18:05.680 --> 0:18:07.960 will be. In the nineteen eighties. 0:18:08.119 --> 0:18:10.719 You make a compelling argument that at least, you know 0:18:10.840 --> 0:18:15.480 forty something years ago that something about the democratic system 0:18:15.920 --> 0:18:20.199 was more conducive to cutting spending. But a you know, 0:18:20.680 --> 0:18:23.800 a lot of the sort of austerity that was imposed 0:18:23.920 --> 0:18:26.959 in the US came more from the FED rather than 0:18:27.080 --> 0:18:30.080 actual spending cuts. And of course we know that deficits 0:18:30.119 --> 0:18:33.120 actually widened quite a bit, so it sort of relied 0:18:33.160 --> 0:18:34.880 on the fact that we sort of have this sort 0:18:34.920 --> 0:18:39.560 of outside of government undemocratic enforcer in the form of 0:18:39.560 --> 0:18:44.600 the Federal Reserve. But then also the UK example, which, 0:18:44.920 --> 0:18:47.760 as your book lays out, you know, there was fights 0:18:47.800 --> 0:18:50.280 with the coal miners and maybe you can explain that, 0:18:50.560 --> 0:18:53.800 but it like, ultimately what allowed Margaret Thatcher to have 0:18:53.880 --> 0:18:57.240 the political capital to cut was the Falkland Islands War 0:18:57.440 --> 0:19:01.720 in nineteen eighty two, which gave her a burst and popularity, which, okay, 0:19:01.760 --> 0:19:06.240 maybe that allowed for some breaking promises, but sort of 0:19:06.280 --> 0:19:08.840 a I don't know, dirus x mockin like does not 0:19:09.160 --> 0:19:13.200 sound like a great triumph of like, oh, this is 0:19:13.240 --> 0:19:16.560 the democratic process working smoothly with the mandate. 0:19:17.160 --> 0:19:20.400 No, and I don't think it's ever a let's say, 0:19:20.400 --> 0:19:23.960 clean and easy process. And Reagan was one of those 0:19:24.000 --> 0:19:27.359 elected I guess with that most in his mandate. Thatcher 0:19:27.400 --> 0:19:30.680 another one, And even those who were elected with spending 0:19:30.720 --> 0:19:33.240 cuts as part of their mandate found it a very 0:19:33.280 --> 0:19:38.359 difficult thing to actually enact. So in Thatcher's case, yes, 0:19:38.440 --> 0:19:41.439 cutting spending is an important part of what she does. 0:19:42.040 --> 0:19:44.680 They also have a whole series of state owned industries 0:19:44.720 --> 0:19:47.720 that they're trying to either close down or privatize, and 0:19:47.920 --> 0:19:50.359 the coal miners of Great Britain are the ones who 0:19:50.440 --> 0:19:54.639 ultimately try to fight back against this, and Thatcher, I argue, 0:19:54.680 --> 0:19:57.760 I think, partially because of the kind of legitimacy that 0:19:57.960 --> 0:20:02.760 democracy bestows upon her, doesn't end up with British society 0:20:02.880 --> 0:20:04.760 in full revolt against her. 0:20:04.840 --> 0:20:05.000 Right. 0:20:05.040 --> 0:20:07.920 So I compare in the book the course of the 0:20:08.080 --> 0:20:11.160 minor strike in Great Britain versus the course of solidarity 0:20:11.160 --> 0:20:15.199 in Poland. Solidarity starts as a strike among workers and 0:20:15.600 --> 0:20:19.560 builds out into a kind of society wide revolt against 0:20:19.560 --> 0:20:23.640 the state socialist system, whereas the miners in the UK, 0:20:24.160 --> 0:20:26.960 for a series of contingent but also I think structural reasons, 0:20:27.000 --> 0:20:31.000 they are unable to form a broader coalition that would 0:20:31.040 --> 0:20:35.080 ultimately thwart Thatcher's action, and so the strike fails. Ultimately, 0:20:35.160 --> 0:20:39.600 the coal industry in the UK declines throughout the nineteen eighties, 0:20:40.240 --> 0:20:44.040 and I think it is the kind of democratic system, 0:20:44.080 --> 0:20:47.560 the legitimacy of the system itself, that allows this process 0:20:47.600 --> 0:20:51.000 to unfold. So, for instance, Thatcher in this period is 0:20:51.040 --> 0:20:53.760 a very divisive figure. Her approval ratings are something in 0:20:53.800 --> 0:20:57.880 the range of forty five percent, But the police who 0:20:57.920 --> 0:21:01.320 are kind of carrying out her actions and doing the 0:21:01.359 --> 0:21:05.399 actual work to break up the minor strike have an 0:21:05.400 --> 0:21:07.800 approval rating somewhere in the ninety two to ninety three 0:21:07.880 --> 0:21:13.240 percent rank. So the state itself is deemed to be legitimate, 0:21:13.320 --> 0:21:17.719 even if the politician who is enacting these policies is 0:21:17.760 --> 0:21:22.240 still a highly divisive figure. And that's the kind of 0:21:22.320 --> 0:21:27.199 deep legitimacy that democratic states had in this period and 0:21:27.280 --> 0:21:29.919 that state socialist countries did not have, I think is 0:21:29.960 --> 0:21:33.800 what ultimately produced the break or allowed the process of 0:21:33.840 --> 0:21:37.200 breaking promises to go ahead in the United States and 0:21:37.320 --> 0:21:39.159 the Western world more broadly. 0:21:39.200 --> 0:21:42.960 The sort of distinction between politics and the economy. 0:21:43.000 --> 0:21:45.240 I guess, well, that's a whole nother yes, I mean, 0:21:45.240 --> 0:21:50.000 that's another way by which states, particularly capitalist states, have 0:21:50.080 --> 0:21:54.439 found ways to break promises, is to shift responsibility for 0:21:54.760 --> 0:21:59.120 social and economic outcomes from the government itself to the market. Right. So, 0:21:59.640 --> 0:22:04.200 even processes of privatization, although technically a change in ownership, 0:22:04.240 --> 0:22:07.280 were also the kind of consequences of those were often 0:22:07.920 --> 0:22:12.840 downsizing unemployment, things like that. Right, So you've shifted responsibility 0:22:12.960 --> 0:22:17.440 over to the marketplace. Over to this realm called the economy, 0:22:18.000 --> 0:22:21.919 and then the negative social consequences that stem from that 0:22:22.359 --> 0:22:26.520 process of privatization appear to be the product of the market. 0:22:26.520 --> 0:22:29.560 They appear to be the product of the economy rather 0:22:29.680 --> 0:22:33.720 than a political decision itself. And so that distinction, Yeah, 0:22:33.960 --> 0:22:38.080 the politics versus economy distinction is a fundamentally important one 0:22:38.400 --> 0:22:41.080 for how and why capitalist societies work. 0:22:41.840 --> 0:22:45.919 So Gorbachev has a famous quote. I think it's something 0:22:46.000 --> 0:22:50.000 like politics always follows the economy, not vice versa. And 0:22:50.040 --> 0:22:52.640 you actually you mentioned that in your book, but I'd 0:22:52.680 --> 0:22:56.280 be curious to get your take about the relationship between 0:22:56.720 --> 0:22:59.600 politics and the economy and which one has the most 0:22:59.800 --> 0:23:00.960 influence on the other. 0:23:01.680 --> 0:23:04.240 Yeah. So I've wrestled with this for quite a long 0:23:04.280 --> 0:23:06.080 time as I was writing this book, and I don't 0:23:06.119 --> 0:23:08.200 think I have a categorical answer. I think it can 0:23:08.240 --> 0:23:12.320 be different things in different moments. Generally speaking, I do 0:23:12.400 --> 0:23:17.560 think that political economy, the economic forces of our world 0:23:17.880 --> 0:23:21.960 of the late twentieth century, did provide let's say, windows 0:23:21.960 --> 0:23:26.960 of opening windows of possibility and also closed other possibilities 0:23:26.960 --> 0:23:30.080 in the realm of politics. So if you take something 0:23:30.160 --> 0:23:33.960 like supply side economics in the United States on its 0:23:33.960 --> 0:23:35.880 face in terms of whether or not it actually could 0:23:35.920 --> 0:23:39.960 have succeeded on its own terms. The idea that you 0:23:40.080 --> 0:23:43.520 cut taxes, you'll un leash economic growth and it will 0:23:43.600 --> 0:23:49.359 essentially pay for itself. That idea has continuously been disproven, 0:23:49.400 --> 0:23:53.320 and yet it continues to exist in US political discourse, 0:23:53.480 --> 0:23:56.720 largely because the United States has been able to borrow 0:23:56.760 --> 0:24:00.520 more money than anyone from the nineteen eighties onwards thought possible. 0:24:01.000 --> 0:24:05.760