Welcome to another episode of Ideas Untrapped podcast. My guest on this episode is Raymond Fisman, who is the Slater Family Professor in Behavioural Economics at Boston University. He is one of the foremost researchers on corruption and institutional behaviour in the last three decades, and I have been looking forward to talking to him. The main theme of our conversation was the re-election of Donald Trump as the new U.S president and his swift embrace of corporate oligarchs as his new inner circle and power proxies. We also discussed why corporate America is rushing to fall in line and "kiss the ring". This was an enlightening conversation for me, and I do hope you find it useful as well. I also hope to have Raymond back on the podcast for a more global exploration of the topics he covered.

Transcript

Tobi: Hi, everybody. This is Ideas Untrapped Podcast.

My guest today is Professor Raymond Fisman. He's the Slater Family Professor in Behavioral Economics at Boston University. He's a brilliant, brilliant economist that I've been looking forward to talking to for a while. It's a pleasure to have you, Raymond.

Raymond Fisman: It's a pleasure to be here. I'll tell my children that someone said I was brilliant. They'll find that very funny.

Tobi: I think the interesting place I would say to start is what was your reaction to the inauguration two days ago? [This conversation was recorded on January 22, 2025 two days after Donald Trump was inauguarated for a second time as the President of the United States of America] I mean, in some kind of mildly amusing horror, like, I would say I was at the open blatant embrace of the core of American government of oligarchy and downstream of that, corruption. What were your thoughts?

Raymond Fisman: Yeah, I think it's a little hard to know where to begin because there is so much to say and literally relevant news and so far as self-dealing is concerned, as well as obsequiousness of business elites in the U.S. is coming so quickly that if we had this conversation six hours from now, there'd probably be yet more to say about it.

On the one hand, I would say that it was horror, not mildly amused, except that it does almost transcend satire, what's going on, like, you can't make it up sort of thing. But something that I want to be very careful to emphasise throughout is that I really don't want to pin this on a particular party or make this about partisanship, as opposed to we have an individual who has been elected to the highest office in the land, that I think is doing a lot that runs counter to good government. And those are the issues I want to emphasise.

And I do think that we've seen a lot of troubling signs. I did not watch the inauguration. I'm following the advice of my friend, Marianne, who said that to stay sane, she just reads the news in a physical newspaper. Otherwise, it just comes at you too often and too fast.

But some of the things that have emerged in recent days that are really quite troubling are signals that the U.S. is moving towards a much more, if you like, personalistic approach to policymaking. And there's always been a role for connections in the way the U.S. is governed. But it does feel like it's just going to a different scale.

The most recent and high profile example is that of TikTok, where Trump had been in favour of a ban of the app, he met with the CEO and before that, a billionaire Republican mega donor, and he flipped his position on it. Now he is going to be TikTok's saviour. So that's on the one side. On the other side, you see TikTok entirely aware that they need to engage in flattery. So, you know, they personally thanked Trump for his intervention Monday morning after it was brought back from a very brief ban and now has a 90 day extension. But again, Trump has sworn to save it.

So it's this kind of very personalised, very public favour trading is clearly sending a message to business that they need to fall in line in order to remain profitable in Trump's America. And you can easily, or I shouldn't say easily, you can imagine sliding into a system in which we have something closer to what's termed competitive authoritarianism, where you do hold elections, but the media, as well as the levers of government, are so commanded by the party in power that oppositions are playing from such a disadvantage. We've seen this emerge to some degree in India. We've seen it emerge in Hungary. We've seen it with X. We've seen it with other sites. We've seen it, to some extent, with Facebook very recently. You can see it potentially emerging in the U.S.

So I do see a lot of troubling signs, and it is certainly a collective project to push back against these trends.

Tobi: One thing that I was surprised, you might not be, given that do work in this area is how quickly people fell in line once Trump won or it looked like he was going to be the next president and you know you had this scrambling for people to get face time in Mar-a-lago to book hotels and to basically make deals and then it does make me wonder that, yeah, like you said, the U.S. is shifting to a more personalistic type of governance. But do you think that the quickness or the way that this shift is rapidly happening before our eyes has something to do with perhaps grievances in whatever form with good governance generally or impersonal bureaucracies? You know, because there's so much gripe about the elites or the deep states and how they have failed. And this is how the people are getting the power back. But of course, we know that's not what it really is. But what exactly about the status quo stopped working to give us this shift we are seeing to a new equilibrium?

Raymond Fisman: I'm sure there are many things and one always runs the risk of naming the thing that you think is most important, or even worse, the first thing that comes to mind, and presenting kind of a monocausal case. So I'll say that I'm going to name the thing that I think is most important. It's the first thing that comes to my mind. I'm sure there are many factors that are pushing in this direction, including what you described, people being perhaps dismayed - that it's going to be related to what I say, including what you say about the seeming gridlock of the U.S. government.

But what troubles me most and what I think is perhaps enabling the most is increased polarisation, which is more extreme in America than elsewhere, but is also a global phenomenon. It shows up very clearly in the data. The extent to which people identify as left versus right has been steadily widening over the past few decades. And somehow it tinges everything, including people's views of good governance, with a partisan lens.

So somehow all that has come to matter is, is he my guy or is he not my guy? As opposed to, is this an honest, competent guy or a dishonest, incompetent one? So somehow people's views, people's attention is entirely drawn to partisan questions, rather than good versus bad government questions.

The fact that businesses fell in line so quickly, it is kind of hard to fault them, given the opening example of TikTok. That seems to have already reaped tremendous dividends for the company. If I take at face value, the stock price of Tesla as some summary measure of how valuable it is to have the president's sympathies. It went up by around 30% in the week following the election. There are lots of companies that appreciated in value for reasons that can easily be tied to policies. For-profit prison companies went up by a lot. That's because of anticipated immigration policies. Other carmakers, and especially electric carmakers, did not do so well. So what's special about Tesla, that's not like a big secret. It's that its biggest shareholder, Elon Musk, was a tremendous financial and personal backer of Trump. So if you say, well, being well-connected to this government is worth 30%, that's a pretty good incentive to fall in line.

I will note as an aside, or maybe not as an aside, something that's very directly related. So my PhD thesis was on the value of political connections in Suharto's Indonesia in the mid-1990s. And my thesis looked at what happened to the value of well-connected companies when there were threats to Suharto's health. And if you take the results of my PhD thesis at face value, connections in America now are worth something comparable to what they were worth back in mid-90s Indonesia, which at the time was viewed as one of the most corrupt countries in the world.

Tobi: I mean, a recent example in Nigeria is a particular oil company that was in trouble for a while, running to about five years, was on the edge of bankruptcy and could not even publish its annual reports. And after the the last election, we've had a new government now for 18 months. After the last election, due to the perceived closeness - I mean, it's an open secret - of this same company to the new president, it's recovered tremendously. Its financial fortunes have recovered tremendously to the point that during the Christmas party last December, this same nearly bankrupt company hosted the three biggest musical artists in Nigeria to its annual Christmas party.

So I read the Indonesia paper a long time ago, and one thing I want to draw your attention to, maybe with a bit more of an international lens, is the role of ideas here. I know you talked about partisanship, and I hope we'll get to unpack that a little later. So there is a general acceptance now, especially in the subfield of what we call development economics or international development scholarship generally, that some form of corruption is not so bad, right?

Since you… I don't know ho...