WEBVTT - Jan Toporowski Explains Why Capitalists Dislike Full Employment 0:00:10.280 --> 0:00:14.480 Hello, and welcome to another episode of the Odd Lots Podcast. 0:00:14.600 --> 0:00:18.520 I'm Joe Wisenthal and I'm Tracy. Tracy, you said something 0:00:18.680 --> 0:00:21.400 on a recent episode, and I don't remember which one 0:00:21.440 --> 0:00:24.800 it was, um, one of our macro ones, maybe like 0:00:24.880 --> 0:00:27.840 Neil and Connor or something like that. This idea is 0:00:27.840 --> 0:00:31.400 still that we sort of talk about, like relief at 0:00:31.440 --> 0:00:34.519 the idea of labor market soft right, it's kind of perverse. 0:00:34.680 --> 0:00:36.960 First of all, thank you so much for listening to 0:00:37.040 --> 0:00:39.720 what I say. I really appreciate that. Secondly, I think 0:00:39.720 --> 0:00:42.120 what I said is it feels really weird that you 0:00:42.240 --> 0:00:46.360 have a central bank, specifically the Federal Reserve, that is 0:00:46.479 --> 0:00:50.600 saying basically that they want to push the unemployment right up. Yeah, 0:00:50.640 --> 0:00:54.360 and significantly. Right. So we're at round three and a 0:00:54.400 --> 0:00:59.440 half percent unemployment right now fifty which sounds great. That 0:00:59.560 --> 0:01:03.520 seems unambiguously good, and especially you know, after coming after 0:01:03.720 --> 0:01:07.520 years of slow labor market growth. Um, some of the 0:01:07.640 --> 0:01:11.120 fears during the worst of the COVID pandemic about how 0:01:11.160 --> 0:01:13.959 how much unemployment there is, and yet here we are, 0:01:14.080 --> 0:01:17.000 and it's almost always talked about as a problem to 0:01:17.080 --> 0:01:20.880 be solved rather than an opportunity to be embraced. Yeah, 0:01:20.920 --> 0:01:24.640 there's always concern that you're running an economy too hot 0:01:24.760 --> 0:01:27.720 if employment gets too low, But then that just brings 0:01:27.800 --> 0:01:31.000 up all these really big picture questions about well, what 0:01:31.200 --> 0:01:34.880 is the economy for anyway? Shouldn't we be aiming for 0:01:34.920 --> 0:01:38.560 a system that kind of works for everyone where you know, 0:01:38.920 --> 0:01:42.200 hopefully the unemployment rate is very very low. But I 0:01:42.200 --> 0:01:44.560 guess the risk is and the concern is that you 0:01:44.640 --> 0:01:46.160 don't want to run it in such a way that 0:01:46.200 --> 0:01:49.840 it starts pushing up prices and you get this unrelenting inflation, right, 0:01:49.880 --> 0:01:52.520 and inflation is bad and people, it hurts people, and 0:01:52.600 --> 0:01:55.600 people don't like it. But nonetheless, I think people find 0:01:55.600 --> 0:01:57.960 it strange that the central bank is part of what 0:01:58.040 --> 0:02:01.520 they see as an outcome of optable monetary policy would 0:02:01.520 --> 0:02:04.240 put so many, you know, at least another million to 0:02:04.280 --> 0:02:07.200 have people out of work. They find it's strange when 0:02:07.280 --> 0:02:11.200 weak labor market data often leads to a stock market 0:02:11.280 --> 0:02:13.639 railly right, the whole bad news is good news for 0:02:13.760 --> 0:02:17.200 stocks perverse. And you know, you think, like, Okay, a 0:02:17.240 --> 0:02:19.360 lot of people have jobs, that means a lot of spending, 0:02:19.480 --> 0:02:21.840 corporate profits really high, Like do you think these are 0:02:21.880 --> 0:02:24.640 like good things? And yet at some level it's like 0:02:24.680 --> 0:02:26.520 all of this is bad, and I do and I 0:02:26.520 --> 0:02:29.880 think like we shouldn't just jump away from that, like 0:02:29.919 --> 0:02:32.519 we shouldn't sort of move on. And of course there's 0:02:32.520 --> 0:02:34.680 a room to discuss soft land things and all that, 0:02:34.720 --> 0:02:36.959 but some of these route questions I think are still 0:02:36.960 --> 0:02:41.400 worth out thinking about, Like why do investors hate full employment? Yeah, yeah, 0:02:41.480 --> 0:02:44.440 exactly right. So I'm really excited about our guests. So 0:02:44.480 --> 0:02:48.360 one of the one of the economists from the old 0:02:48.440 --> 0:02:50.919 days that people sometimes talk about when they're talking about 0:02:51.000 --> 0:02:54.880 the political economy of full employment or maximum employment. On 0:02:55.080 --> 0:02:59.120 economist named Michael Kalski um has talked about this his 0:02:59.200 --> 0:03:02.000 work uh comes up every once in a while. So 0:03:02.040 --> 0:03:05.080 we're gonna be speaking to an economist who himself has 0:03:05.080 --> 0:03:07.800 studied a lot of Kletzki's work and has done an 0:03:07.880 --> 0:03:10.160 own his own work on a lot of these questions, 0:03:10.320 --> 0:03:13.240 trying to understand a little bit more about this attention 0:03:13.360 --> 0:03:16.520 that full employment, full employment brings. We're gonna be speaking 0:03:16.560 --> 0:03:20.760 to a Yan Toparowski, a professor at so Is University 0:03:20.800 --> 0:03:24.360 in London, and uh So, Professor Taparowski, thank you so 0:03:24.440 --> 0:03:26.760 much for coming on odd lots, Thank you very much 0:03:26.800 --> 0:03:29.240 for inviting me. Why don't you tell us a little 0:03:29.240 --> 0:03:32.040 bit about your what your your work and your research 0:03:32.080 --> 0:03:34.639 and sort of like what what drove you to sort 0:03:34.639 --> 0:03:39.839 of focus on some of these topics When I came into, uh, 0:03:40.080 --> 0:03:44.400 this kind of work, I actually came across Kalski when 0:03:47.080 --> 0:03:49.960 when I was when I first came to study economics. 0:03:50.000 --> 0:03:53.280 Now at the time when I actually didn't do my 0:03:53.360 --> 0:03:57.760 undergraduate studies in economics, it was more in sociology and 0:03:57.800 --> 0:04:01.920 political science, um and what. The first job that I 0:04:02.040 --> 0:04:07.480 got was in fund management for the Church of England 0:04:07.480 --> 0:04:10.800 for an institution called the August Institutional, the Church Commissioners 0:04:10.880 --> 0:04:15.480 for England. And because I had had I had done 0:04:15.600 --> 0:04:21.400 one course in introductory economics, they thought, well, he knows 0:04:21.480 --> 0:04:23.440 something about it, and they put me into the best 0:04:23.920 --> 0:04:28.800 Change Investments department. Now this was in nineteen seventy four. 0:04:30.040 --> 0:04:35.760 You're you're obviously too young to remember what happened around 0:04:35.880 --> 0:04:40.480 nineteen seventy four, But there was an oil price shock 0:04:40.720 --> 0:04:49.440 which in England was rapidly followed by a collapse in 0:04:49.520 --> 0:04:54.880 the real estate market, a collapse on the in the 0:04:54.960 --> 0:04:59.320 stock market. A couple of brokers brokerage houses went bust, 0:05:00.200 --> 0:05:05.719 UH banks started some some of the mark fringe banks 0:05:06.360 --> 0:05:12.919 UH went bust, A major bank tottered. The Bank of 0:05:12.960 --> 0:05:17.600 England had to call in the senior City of London 0:05:17.640 --> 0:05:23.240 figures to try and shore up the position. UH. And 0:05:23.480 --> 0:05:26.960 for me, you know, as as a newcomer to all 0:05:27.000 --> 0:05:31.440 of this, I thought this was tremendously exciting. But I thought, well, 0:05:31.600 --> 0:05:33.200 I need to find out more about it. I need 0:05:33.200 --> 0:05:39.440 to study economics. So I went. I registered at Birkbeck College, 0:05:40.560 --> 0:05:45.680 part of the University of London, for an MSc in economics. UH. 0:05:45.720 --> 0:05:49.760 And I was actually greatly disappointed. Was all my professors 0:05:49.760 --> 0:05:53.159 would stand up and say, look, we have this general 0:05:53.160 --> 0:05:58.840 equilibrium model at the economy and my my my senior professor, 0:05:58.839 --> 0:06:06.240 the senior professor there, a very distinguished American British economist. 0:06:06.960 --> 0:06:11.200 I remember standing in class and saying, look at the 0:06:11.240 --> 0:06:14.800 economy out there, it's in equilibrium. We know it's in equilibrium. 0:06:14.960 --> 0:06:20.040 You know the models say so. And I remember sitting 0:06:20.080 --> 0:06:23.760 there thinking, I don't know what world this man lives in. 0:06:24.800 --> 0:06:27.279 You know what he was saying. You had no bearing, 0:06:28.200 --> 0:06:31.919 should no understanding of what was really going on. I 0:06:31.960 --> 0:06:34.840 remember going down into the library and flicking through some 0:06:34.880 --> 0:06:40.120 books and coming across a Polish name Kalitsky, and I thought, oh, 0:06:40.240 --> 0:06:43.719 I wonder what he has to say about this. I 0:06:43.720 --> 0:06:47.839 didn't realize that there was there any distinguished Polish economists. 0:06:47.920 --> 0:06:52.159 So I started reading the book and it was his 0:06:52.279 --> 0:06:57.280 early essays on the business cycle, and suddenly it all 0:06:57.320 --> 0:07:05.120 made sense, uh, And it's continue to make sense since then. Albeit, 0:07:05.240 --> 0:07:07.040 I think I take a rather different for you too, 0:07:07.040 --> 0:07:10.920 many followers of of me, how Kalitski in a sense 0:07:11.000 --> 0:07:16.360 that I'm I have this background in in banking and 0:07:16.480 --> 0:07:23.200 finance side. This has always been my approach to the 0:07:23.200 --> 0:07:27.440 work of Kalitzski. So I think your your question issues 0:07:27.520 --> 0:07:33.640 that you're raising are absolutely fundamental to my understanding of Klitzki, 0:07:33.880 --> 0:07:37.240 and I wish they were more fundamental to the understanding 0:07:37.320 --> 0:07:43.160 of many, uh, many of my friends and colleagues who 0:07:43.360 --> 0:07:47.200 uh you know follow Klitski. Well, yeah, talk to us 0:07:47.240 --> 0:07:50.320 then about what it was that you read that made 0:07:50.360 --> 0:07:53.640 sense to you. And I'm particularly interested in the relationship 0:07:53.880 --> 0:07:59.840 between the business cycle and you know, theoretical equilibrium levels 0:08:00.400 --> 0:08:03.440 and full employment as as you kind of just alluded to, 0:08:04.560 --> 0:08:12.400 the general equilibrium approach is essentially a static approach. It 0:08:13.360 --> 0:08:18.680 tells you what situation will arise where there will be 0:08:18.760 --> 0:08:25.160 no further change. Uh. And this actually doesn't happen in 0:08:25.200 --> 0:08:30.200 the real world. What you have in the in the 0:08:30.200 --> 0:08:34.600 real world is a constant state of flux. And this 0:08:34.679 --> 0:08:44.200 is why Kalitzki's approach to economics, focusing on a business 0:08:44.240 --> 0:08:49.840 cycle uh, I think, is really much more satisfying than 0:08:51.480 --> 0:08:54.400 than the approach, for example, of Kines in the general theory, 0:08:55.520 --> 0:09:00.400 which is which was essentially a static approach to a 0:09:00.520 --> 0:09:05.360 problem that is fundamentally dynamic. So what don't you explain? 0:09:05.360 --> 0:09:07.800 Because when I think of you know, Canes also wrestled 0:09:07.840 --> 0:09:11.400 with these topics of why don't why doesn't a market 0:09:11.440 --> 0:09:15.960 economy on its own create full employment? Why is investment 0:09:16.160 --> 0:09:18.960 inadequate in typical times? Why do we tend to these 0:09:18.960 --> 0:09:23.199 periods of stagnation? How did Kollecgi differ from Canes and 0:09:23.320 --> 0:09:27.440 these questions? Well, let me start off with what he 0:09:27.559 --> 0:09:33.800 agreed with Kane's on and he agreed with Kanes that 0:09:35.080 --> 0:09:43.200 capitalism is fundamentally a system that in which the level 0:09:43.200 --> 0:09:45.920 of output, the overall level of output, and the overall 0:09:46.000 --> 0:09:51.959 level of employment is determined by the level of investment, 0:09:52.120 --> 0:09:56.880 the level of business investment. Now, obviously in the in 0:09:56.920 --> 0:10:00.920 the post war, post Second World War economy, the government 0:10:00.960 --> 0:10:05.120 also has Government spending also has a lot to do 0:10:05.240 --> 0:10:10.120 with it. But fundamentally the in the the private sector. 0:10:11.400 --> 0:10:14.079 The level of activity in the private sectors really determined 0:10:14.160 --> 0:10:20.280 by the level of investment. And the question is what 0:10:20.559 --> 0:10:24.560 causes that level of investment to be unstable, much much 0:10:24.559 --> 0:10:32.760 more unstable than for example, consumption. Uh and they This 0:10:33.280 --> 0:10:37.760 was an answer that in many respects tormented Coltsky throughout 0:10:38.960 --> 0:10:44.160 his life. He would put forward various models and then 0:10:44.800 --> 0:10:49.240 reflect on them and decide that no, they that they 0:10:49.280 --> 0:10:56.800 were wrong. Kane's sort of tried to cover up this 0:10:57.920 --> 0:11:00.480 problem by saying, or what it was all due to 0:11:00.920 --> 0:11:06.920 animal spirits. It's all due to uncertainty. And the problem 0:11:06.960 --> 0:11:13.840 with this is that you know uncertainty and um an 0:11:13.880 --> 0:11:20.000 animal spirits are not um measurable in the same way 0:11:20.000 --> 0:11:24.680 that for example, steel production is measurable. It's really pushing 0:11:25.880 --> 0:11:32.520 the solution onto what cannot be seen and cannot be observed. 0:11:32.880 --> 0:11:38.400 And Clitski. Clitki's background was as an engineer, and he 0:11:38.520 --> 0:11:47.560 found this deeply, deeply unsatisfactory. Tried to resolve it. Certainly, 0:11:47.559 --> 0:11:52.000 he thought that the rate of interest didn't have uh 0:11:53.040 --> 0:12:01.000 much impact. He businessman, he thought, were on the whole 0:12:01.120 --> 0:12:04.440 much more much more cynical, much more hard bitten than 0:12:04.480 --> 0:12:12.240 to be influenced by let's say, ephemeral moods uh and 0:12:12.240 --> 0:12:17.760 and temperament. In fact, the way in which corporations are constructed, 0:12:17.840 --> 0:12:22.160 that the hierarchical, bureaucratic way in which business corporations are 0:12:22.200 --> 0:12:30.560 constructed is is really in order to eliminate the effect 0:12:30.640 --> 0:12:38.080 of you know, passions and biases on issues like investment. 0:12:39.920 --> 0:12:43.800 In the end, what what critic you thought was really 0:12:43.840 --> 0:12:51.679 most importantly it was the issue of capacity utilization. Businesses 0:12:51.760 --> 0:12:59.959 will invest if there if they've got customers that cannot 0:13:00.080 --> 0:13:06.479 be satisfied from existing production, uh even at full capacity. 0:13:08.000 --> 0:13:12.319 And what they will then do is if let's say, 0:13:12.320 --> 0:13:15.520 if the restaurant is full and there are still customers 0:13:15.520 --> 0:13:19.520 at the door, then the restaurant owner will invest in 0:13:19.960 --> 0:13:27.360 more tables more, you know, expanded his premises. So and 0:13:27.400 --> 0:13:30.600 he then explained it, interestingly enough in in the form 0:13:30.640 --> 0:13:35.960 of a very nice parable. He said in in uh, 0:13:36.400 --> 0:13:42.320 in the United States, there are cities which are joined 0:13:42.360 --> 0:13:46.000 by more than one railway line, and the effect of 0:13:46.000 --> 0:13:49.720 their camp if you have, if they're both operating at 0:13:49.760 --> 0:13:54.800 less than full capacity, uh, the effects of competition between 0:13:54.840 --> 0:13:58.560 them will be that eventually one of those railway lines 0:13:59.240 --> 0:14:03.200 will uh go out of business and you'll end up 0:14:03.200 --> 0:14:09.679 in a situation with much less capacity uh and actually 0:14:10.120 --> 0:14:15.600 much less employment, much much much less output. So what 0:14:15.760 --> 0:14:21.640 is the answer to this problem of under utilization of capacity? 0:14:21.720 --> 0:14:30.120 And build a third railway exactly you've read the article, Uh, 0:14:29.120 --> 0:14:33.000 it's it's a lovely parable. And then, of course the 0:14:34.120 --> 0:14:37.880 first two railway lines will be busy ferrying all the 0:14:38.440 --> 0:14:43.600 workers and the steel and required to for building the 0:14:43.680 --> 0:14:45.840 third railway line. And then of course you've now got 0:14:45.880 --> 0:14:48.680 three railway lines. At the end of this year, you 0:14:48.720 --> 0:14:51.880 now have three railway lines. What you do then? And 0:14:53.160 --> 0:14:55.360 so he said, well, the answer is you build a 0:14:55.360 --> 0:15:00.800 fourth railway line and then problem and ye and he said, well, 0:15:00.920 --> 0:15:05.320 you know, all this sounds paradoxical, and but he said, well, 0:15:05.560 --> 0:15:09.680 it's the system that's paradoxical. And the reason why it's 0:15:09.720 --> 0:15:14.360 paradoxical is that it's a system that depends on the 0:15:14.440 --> 0:15:17.840 level of investment. And what's critical about the level of 0:15:17.880 --> 0:15:21.840 investment is that it's the level of investment that, according 0:15:21.880 --> 0:15:28.600 to Kalitsky but also Kines uh determines how much profits 0:15:28.960 --> 0:15:34.400 businesses will make. Businesses invest a lot, they will make 0:15:34.440 --> 0:15:41.080 a lot of in profits. If they don't invest so much, 0:15:41.120 --> 0:15:48.480 then it's uh, it doesn't you You you have this 0:15:48.600 --> 0:15:57.320 problem of excess capacity, uh, discouraging economic activity, discouraging investment. 0:16:14.600 --> 0:16:18.400 So my understanding of Knes is that, you know, Canes 0:16:18.720 --> 0:16:22.480 also wrote a lot about the business cycle and believed 0:16:22.560 --> 0:16:24.920 that the business cycle could be managed in one way 0:16:25.000 --> 0:16:28.720 or another through monetary policy or smoothed in some way. 0:16:29.360 --> 0:16:34.440 What does Kletski say about managing the business cycles or 0:16:34.760 --> 0:16:39.200 investment given its importance in the cycle. Well, Kletski thought 0:16:39.240 --> 0:16:43.840 that managing the economy by trying to influence the level 0:16:43.920 --> 0:16:50.800 of investment, it's really a fool's game because you, uh, 0:16:51.120 --> 0:16:54.080 for example, you may lower the rate of interest or 0:16:54.160 --> 0:16:57.520 lower the rate of taxation. Uh, you know, give additional 0:16:57.600 --> 0:17:04.160 tax allowances, and uh then you find that, okay, business 0:17:04.200 --> 0:17:09.240 takes it takes up a certain amount of investment, does 0:17:09.320 --> 0:17:16.480 some investment, and then requires further tax cuts, further cuts 0:17:16.520 --> 0:17:21.200 in the rate of interest in order to invest further. 0:17:21.840 --> 0:17:27.720 And it really, um, it really doesn't make sense. It 0:17:27.760 --> 0:17:30.919 doesn't make It didn't make sense for Kalitzky because the 0:17:30.960 --> 0:17:37.200 purpose of investment shouldn't be to maintain full employment. There 0:17:37.200 --> 0:17:42.439 are other instruments for doing this. Uh, the purpose of 0:17:42.520 --> 0:17:46.920 investment should be to provide the capacity for the amount 0:17:46.920 --> 0:17:52.159 of consumption that is required in the economy. That you know, 0:17:52.240 --> 0:17:57.600 that's that's how a rational economy would operate. So this 0:17:57.680 --> 0:18:01.760 again was a small difference between Canes and Kaletski. Canes 0:18:01.840 --> 0:18:09.960 wanted UH investment to be the leader. Kaletski argued that 0:18:10.840 --> 0:18:15.399 in fact, you can create the equivalent of an investment 0:18:15.480 --> 0:18:20.600 boom through fiscal stimulus. It has the same effect of 0:18:21.040 --> 0:18:26.840 expanding profits and in particularly using the fiscal stimulus to 0:18:26.880 --> 0:18:32.159 provide additional public goods and public services which would be 0:18:32.200 --> 0:18:37.800 provided free. So this gets around the problem of raising wages. 0:18:37.880 --> 0:18:44.000 You can increase real wages by providing free public goods. 0:18:44.840 --> 0:18:48.440 And then, of course the other way is to redistribute 0:18:48.440 --> 0:18:55.520 income from hiring incomes to lower incomes again by by 0:18:55.600 --> 0:18:59.960 various transfer payments. So to bring it up to today, 0:19:00.200 --> 0:19:02.359 and I don't know if we have full employment because 0:19:02.359 --> 0:19:04.240 I'm not even I'm not even sure what that means. 0:19:04.280 --> 0:19:09.840 But we have very low unemployment, the lowest in fifty years. Um. 0:19:09.920 --> 0:19:12.280 Some might say, okay, that's close to full employment, but 0:19:12.359 --> 0:19:15.400 that's a separate debate. But people there's like this, it's 0:19:15.480 --> 0:19:18.640 it repels people. It's ah, there's it's almost like there's 0:19:18.640 --> 0:19:20.720 like these white blood cells of the economy and it's 0:19:20.760 --> 0:19:23.399 like the Fed is coming in, it wants to raise rates. 0:19:23.400 --> 0:19:25.560 It talks about how the optimal situation would be at 0:19:25.640 --> 0:19:28.000 least a one percent increase, one and a half billion 0:19:28.040 --> 0:19:31.560 people laid off. You have investors who gets sort of 0:19:31.560 --> 0:19:34.040 a sense of relief every time the labor market data 0:19:34.200 --> 0:19:38.000 comes in week. Why is there this discomfort in a 0:19:38.200 --> 0:19:41.320 state of the economy which, on paper you think lots 0:19:41.359 --> 0:19:45.320 of spending good, lots of reason to invest do capex good, 0:19:45.400 --> 0:19:49.240 that's everyone's investment to someone else's income. Why is there 0:19:49.280 --> 0:19:52.560 this sort of like rebellion against that? Can let's keep 0:19:52.960 --> 0:19:58.880 put it in A argued that it's it's purely political. Um. 0:19:58.880 --> 0:20:02.840 He said that this he argued his faith in his 0:20:02.920 --> 0:20:06.960 famous article, uh, political aspects of full Employment, which I 0:20:06.960 --> 0:20:11.000 would recommend to anyone who doesn't know much Klitzki is 0:20:11.119 --> 0:20:13.679 very very easy to read. It. Not a single equation, 0:20:14.720 --> 0:20:21.159 but he oughta good he argued. There, but you know, 0:20:21.240 --> 0:20:26.000 there's no doubt that full employment is more rational for 0:20:26.040 --> 0:20:29.959 the system as a whole. It's more rational. Profits are higher, 0:20:30.320 --> 0:20:37.040 employment is higher. Everything is better if you have full employment. However, 0:20:38.480 --> 0:20:46.960 full employment strikes at the heart of another feature of capitalism, 0:20:47.000 --> 0:20:51.879 which is the question of labor discipline. If you have 0:20:52.040 --> 0:20:57.119 a state of full employment, then uh, it's very It 0:20:57.200 --> 0:21:02.520 becomes difficult to discipline workers in the factory or in 0:21:02.560 --> 0:21:09.439 the office. If if a worker can leave his or 0:21:09.480 --> 0:21:15.440 her place of employment and immediately get another one, then 0:21:16.800 --> 0:21:21.120 where is the labor discipline? It's about control. It's it's 0:21:21.200 --> 0:21:25.760 really about the control of labor. And Keletski argued that 0:21:25.880 --> 0:21:29.879 in in what would tend to happen is that in 0:21:29.920 --> 0:21:35.879 a state of m full employment you would get a 0:21:36.000 --> 0:21:46.440 political coalition UH, put together by major employers, UH, the 0:21:46.520 --> 0:21:53.639 people in finance UH, central bank, central bankers, all of 0:21:53.680 --> 0:21:58.920 whom would argue that the situation is somehow manifestly unsound. 0:22:01.240 --> 0:22:05.760 Will unsound in what way? Well? Inflation? And sure enough, 0:22:06.000 --> 0:22:10.320 you know we we have had inflation, but we also 0:22:10.800 --> 0:22:16.080 know at the moment that inflation is coming down quite rapidly. 0:22:17.280 --> 0:22:20.639 As well, because so much of the current inflation was 0:22:20.680 --> 0:22:31.160 simply an energy market adjustment two sanctions on on Russian energy. 0:22:31.320 --> 0:22:38.119 Uh So it's a kind of future inflation because the 0:22:38.200 --> 0:22:43.920 future is unknown, and it's very very easy to to say, oh, well, 0:22:44.080 --> 0:22:48.000 you know, things may appear okay at the moment, but 0:22:49.480 --> 0:22:51.960 we know we have these these and these economists with 0:22:52.119 --> 0:22:57.359 all these models showing that there's some terrifying inflation around. 0:22:57.520 --> 0:23:01.760 This kind of reminds me of the debate over work 0:23:01.880 --> 0:23:06.800 from home, which is, you know, post pandemic UM, people 0:23:06.840 --> 0:23:09.760 started working from home and there didn't seem to be 0:23:09.880 --> 0:23:12.919 much of a hit on productivity, and a lot of 0:23:12.960 --> 0:23:16.600 companies still met whatever their internal benchmarks are. So then 0:23:16.680 --> 0:23:18.880 you had a lot of bosses who started talking about 0:23:18.880 --> 0:23:22.440 a degradation of corporate culture and how you know it's 0:23:22.480 --> 0:23:24.600 bad people are working from home. They might be doing 0:23:24.680 --> 0:23:27.919 okay um on a pure numbers basis, but in the 0:23:28.080 --> 0:23:31.199 long run it's going to impact the company by hitting culture. 0:23:31.720 --> 0:23:34.760 Uh yeah. Can you maybe connect more of what we've 0:23:34.800 --> 0:23:38.720 seen over the past year or two to Colletski's ideas, 0:23:38.760 --> 0:23:42.960 Do you think the post pandemic maybe shift um towards 0:23:42.960 --> 0:23:47.080 worker power has vindicated some of his ideas. I think 0:23:47.080 --> 0:23:54.359 it has um it's it's it's vindicated a lot of 0:23:54.359 --> 0:24:00.639 these ideas because it's actually weakened, uh, the the the 0:24:00.760 --> 0:24:09.000 power of many businesses who uh, particularly businesses in uh 0:24:09.040 --> 0:24:17.680 in activities retail, hospitality, UH, these kind of these kinds 0:24:17.680 --> 0:24:24.159 of activities which transport even which I just saw that 0:24:24.880 --> 0:24:34.399 their markets shrinking, shrink shrinking quite drastically. The the what 0:24:34.680 --> 0:24:38.600 then happened, however, was that the speed of the recovery 0:24:40.440 --> 0:24:46.399 as uh you know, lockdown was removed. I think a 0:24:46.400 --> 0:24:50.280 lot of those businesses took advantage of that situation to 0:24:50.280 --> 0:24:54.439 start raising their price And my view is that they 0:24:54.480 --> 0:24:58.240 were raising their prices because many of them had got 0:24:59.119 --> 0:25:03.080 seriously into debt, many of them had got had found 0:25:03.119 --> 0:25:08.159 their political position weakened. They had to go knocking at 0:25:08.160 --> 0:25:17.080 the door of uh of governments asking for loans, asking 0:25:17.240 --> 0:25:25.440 for tax free bates, various other uh you know, public subsidies. 0:25:25.480 --> 0:25:32.399 Governments had responded by insisting on on no layoffs. UH. 0:25:33.920 --> 0:25:40.359 This kind of thing put UH companies, particular corporations into 0:25:40.760 --> 0:25:45.600 a difficult bind, and a lot of them got out 0:25:45.640 --> 0:25:50.720 of this by borrowing at record low rates in trust 0:25:51.480 --> 0:25:58.520 and then seeking to recover that borrowing by raising raising 0:25:58.520 --> 0:26:04.440 their prices. So you have my my explanation of the 0:26:04.520 --> 0:26:09.080 inflation is would be twofold. One is that you have 0:26:10.880 --> 0:26:16.199 this energy costs, which is a temporary phenomenon. But the 0:26:16.240 --> 0:26:23.320 other one is really the what Richard Coup referred to 0:26:23.359 --> 0:26:28.320 as it is a type of balance sheet effect where 0:26:29.440 --> 0:26:34.880 firms are trying to clear off debt by by raising 0:26:35.000 --> 0:26:39.400 prices and I think doing it. Uh, they were doing 0:26:39.560 --> 0:26:43.800 quite successfully. But that then feeds into a narrative that 0:26:44.119 --> 0:26:50.560 the uh, that all this is the consequence of full employment, 0:26:50.680 --> 0:26:55.080 and therefore, uh, you know, must be it must show 0:26:55.160 --> 0:27:01.760 that the state of full employment is is financially unsound. 0:27:05.000 --> 0:27:08.800 It isn't, of course, because the the the inflation has 0:27:08.880 --> 0:27:11.560 very little to do with with what's happening in the 0:27:11.640 --> 0:27:19.560 labor market. Wage increases have lagged lagged price increases. UH. 0:27:20.720 --> 0:27:26.639 Unions and workers in general have a much weak have 0:27:26.760 --> 0:27:32.000 a match weaker position in the labor market. Um to 0:27:32.160 --> 0:27:37.960 some degree, actually individual workers are benefiting from labor shortages, 0:27:38.640 --> 0:27:43.679 but in terms of organization, in terms of powering in 0:27:45.280 --> 0:27:50.200 what politically called the power in the factories, workers still 0:27:50.240 --> 0:28:12.840 remain weak because worker worker organizations are weak. So we 0:28:12.920 --> 0:28:14.399 just have a couple of minutes left. But I just 0:28:14.440 --> 0:28:18.560 want to on the inflation question. A term that you 0:28:18.680 --> 0:28:23.280 hear political activists sometimes in the US probably around the world, 0:28:23.600 --> 0:28:27.640 like greed inflation, And I'm curious whether you think that's 0:28:27.680 --> 0:28:30.600 a useful frame. It kind of doesn't sound like it 0:28:30.960 --> 0:28:35.320 listening that, of course, there are opportunistic situations and that 0:28:35.440 --> 0:28:39.120 for balance sheet reasons, corporations feel the impulse to uh 0:28:39.480 --> 0:28:43.280 to raise prices, But like greed kind of seems like 0:28:43.280 --> 0:28:46.440 one of these things that's kind of immeasurable. I'm curious, 0:28:46.480 --> 0:28:51.000 like in your perspective or collect keys perspective, like, is 0:28:51.040 --> 0:28:57.240 that a useful analytical mode Perstally, I wouldn't use the word, uh, 0:28:57.480 --> 0:29:00.640 the term greed because it seems to be a kind 0:29:00.680 --> 0:29:07.960 of moralizing the fact that it's it's business practice to 0:29:08.000 --> 0:29:12.720 get the best possible price, uh for for your output. 0:29:13.600 --> 0:29:17.600 I think there is a there is a sense in which, 0:29:18.360 --> 0:29:26.920 if you have excess capacity, uh, the excess capacity may, 0:29:27.000 --> 0:29:36.160 under certain circumstances, um cause a business to um not 0:29:36.280 --> 0:29:42.960 to raise prices to moderate greed. But on the whole, 0:29:43.000 --> 0:29:45.880 I think business decisions are not made on a kind 0:29:45.920 --> 0:29:49.520 of moral issue. You try to get the best out 0:29:49.520 --> 0:29:52.520 of the market. That's uh, it's it's the nature of 0:29:52.560 --> 0:29:55.920 the system. So one thing that I always like to 0:29:55.960 --> 0:30:00.280 ask economists who have written biographies of other econom miss 0:30:00.320 --> 0:30:03.440 or who have studied their work, is is there any 0:30:03.560 --> 0:30:08.240 area in which you disagree with COLLECTI or think that maybe, 0:30:08.560 --> 0:30:10.400 you know, maybe he got it wrong, or maybe this 0:30:10.440 --> 0:30:14.600 particular theory could be improved or expounded upon. Yes, I 0:30:14.600 --> 0:30:20.240 think actually he well, he I think his political judgment, 0:30:21.280 --> 0:30:30.360 uh sometimes was when when when to skew for it? 0:30:30.960 --> 0:30:35.000 I mean, if I can give a particular example from 0:30:36.040 --> 0:30:40.880 from the United States, he thought that the student movement 0:30:40.920 --> 0:30:50.080 against the Vietnam War or you know, was headed for failure. Uh. 0:30:51.000 --> 0:30:58.200 And I think this was this was a misjudgment. He 0:30:58.360 --> 0:31:07.960 thought that American capitalism would it would be divided between 0:31:10.040 --> 0:31:16.280 the international capitals and American multinationals would be much more 0:31:16.280 --> 0:31:23.280 sensitive to the way in which America's perceived abroad, and uh, 0:31:24.000 --> 0:31:32.640 the domestic or business American businesses that only operating within 0:31:32.720 --> 0:31:36.920 the United States, who would be you know, maybe much 0:31:36.960 --> 0:31:41.040 more bullish. I'm not sure that this is a distinction 0:31:41.120 --> 0:31:50.440 that that works quite well in the United States. I 0:31:50.480 --> 0:31:55.480 think I wished he I regret that he didn't write 0:31:55.520 --> 0:31:59.840 more about money, uh and finance, because I think he 0:32:00.720 --> 0:32:08.800 um in this way he um uh. It's it's too 0:32:08.880 --> 0:32:14.040 easy to dismiss his ideas as being characteristic of the 0:32:15.160 --> 0:32:25.040 long period between nine and let's say, the nineties seventies, 0:32:25.600 --> 0:32:31.360 when you know, really the stock market and finance were 0:32:31.400 --> 0:32:38.680 not terribly important and could and we're in a fact 0:32:38.680 --> 0:32:43.680 dependent on on state support. M I think that they 0:32:45.240 --> 0:32:52.719 the situation now it's rather it's rather different and really 0:32:52.800 --> 0:32:58.240 needs um needs more working on. So I think this 0:32:58.320 --> 0:33:03.280 would be um kind of my my, my regret and 0:33:03.880 --> 0:33:09.880 my criticism. Plus the fact that I think he his um. 0:33:10.000 --> 0:33:14.520 He was a he was an engineer, and a feature 0:33:14.520 --> 0:33:17.400 of the type of economics of his time was that 0:33:17.840 --> 0:33:26.120 you had to you want success in profession by putting 0:33:26.160 --> 0:33:30.040 forward in a neat mathematical model. Now he knew that 0:33:30.080 --> 0:33:33.720 this was this wasn't enough. You had to have some 0:33:33.840 --> 0:33:38.280 kind of roots in the way in which the system operated. 0:33:38.440 --> 0:33:47.520 But uh, you know, he tended to believe that once 0:33:47.560 --> 0:33:52.600