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- [00:01]
A
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B
Hello everybody. Welcome to the Radical Sabbatical Podcast. This is Kim Scott and while the Radical Candor team is thinking about management topics to talk about, I'm going to be talking to the authors of some of the books that I've read in the last year that have really influenced me and I'm thrilled to have with me today David Gibbs, who wrote the book Revolt of the Rich how politics of the 1970s widened America's class Divide. Welcome David.
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A
Thank you for having me on. Kim.
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B
Thank you so much for being here. I have been thinking a lot about your book for about a thousand reasons since I read it and in fact I've come back to it a couple of times. But it's particularly top of mind for me right now, given my last trip to the gas station innovation and given the anxiety that people are having about what what the current administration is doing to the price of oil and what that is going to do to our economy. And one of the things that really surprised me that I mean maybe this, maybe everybody knew this except me, but when I read your book is is during the oil crisis under Nixon, he actually wanted the price of oil to be high. Can you tell folks what he did and why he wanted the price of oil to be high?
- [02:28]
A
A little bit of background on this. The oil price is the lead. So he's the first one again in October 1973, coinciding with the Arab Israeli war of that year. Israel and Iran keep on coming back and forth on this topic as it is today. And that was the origins of the crisis. And a series of mostly Arab countries led by Saudi Arabia used oil as a weapon and punished the United States for supporting Israel. But Then after a fairly short period of time, other, not just Arab, but Muslim countries, and some non Muslim ones too, actually saw the advantage just in terms of increased revenues. They didn't really care that much about the Arab Israeli conflict. They didn't feel solidarity with the Palestinians, but they wanted to raise prices and make money. So there was a second phase of oil price increase took place fairly quickly that was led by Iran. Iran did not have a bad relationship with Israel. They had an excellent, very intimate relationship with Daddy States. And Iran led the second phase oil price increases. And that led to cumulatively about a 400% increase in oil prices in a matter of months, which devastated the economy, the United States and much of the world economy. It's very striking, first of all, just the extent of the damage it did. It was the deepest recession, the 73 to 75 recession, which was triggered by the oil crisis was the deepest recession since the 1930s up to that point in 12. And it led to reduced economic performance for about a decade. And in some respects you could say it had lingering effects. If you look at world data on GDP growth from the World bank, it was very high in the 50s and 60s until 1973. It died.
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B
Yes.
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A
And it never fully recovered the growth rate since then. Ever since then, for 50 years. I've never recovered those happy decades of the 50s or 60s. Now, how much the oil crisis had to do with that is hard to say. But the remarkable detail is that it coincided almost exactly with the oil price. The oil prices had something to do with long term declining growth. And so it was a big deal. And I think we should all be extremely worried about what's going on with the broken Gulf right now. Unaccountably historical record. We can get to that in a moment. What I do want to note here is Richard Nixon, we now know from private papers, on the one hand, he expressed great anxiety about the oil crisis and he was very worried about the oil crisis. It was presented publicly and it was publicly presented by journalists, academics, enemies of Nixon, everybody as being just bad luck, Nixon bad luck with designing algorithms. We now know as Nixon encouraged the oil price increase and played probably a critical role in making it possible. And I say this because I've been through a lot of the private documents and archives from this period, and that is clearly what the record shows in the sense that the United States communicated. Nixon communicated directly with the Iranian Ambassador Zahedi in 1971. He said, you can raise oil prices as much as you want.
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B
And basically, can we just pause on that? Like did he not understand that this was going to lead to a recession and to de industrialization or did he not care? Like what was his, what was the motive?
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A
That's the key. That's the $54,000 question. Let me just for one second let me hold off on that question. Like first let me give you the facts and then I'll interpret the facts.
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B
Yes.
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A
So a bit more of the fact is that Munstyle crisis occurred. Saudi Arabia seems to have had a political shakeup and a different faction of the royal family came to the fore and they wanted to repair the damaging relationship with the United States. And it was proposed quietly by the oil minister Ahmed Zakari Al Mani that Saudi Arabia would work with the United States to lower oil prices. And the United States refused. I emphasize that the United States refused and the Omani was expressed astonishment. I saw a letter he wrote.
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B
Yeah, that's right, you want to pay more for our oil than you need.
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A
He couldn't believe it. That's right. And the I should add the Treasury Secretary William Simon who opposed this whole policy in the shock as well. But nevertheless that's what Nixon did and he stuck by it. And Kissinger too who's instrumental. Now the question was why? And the answer is the Shaw was one of America's most important allies, almost as important as Israel. And if he was a close personal friend of many top policy members including himself. Iran had been designated as the guardian of American interest in the Gulf region. Britain had pulled out the military forces after 1968 and for it after Vietnam the aid states couldn't politically or financially afford to insert military forces into the Gulf. And so to protect the Gulf we relied upon the Shah. And the Shah had to buy weapons to do this and to buy weapons he had to increase oil prices. That was okay with Nixon plus he bought the weapons from American suppliers were hurting because of the Vietnam War. Vietnam attainted. Losing a war damages your credibility in this is losing a war in Vietnam. And weapons sales were down globally and the Shah is thomas in to buy huge quantities of US weapons. Nixon appreciated that as did the weapons manufacturers. Furthermore, the Iranian embassy in Washington was very clever. They went around distributing expensive gifts to hundreds of very prominent journalists all over Washington and giving caviar and like thousand dollar tins of caviar but other things as well to people like Barbara Walters and others and people you've heard of. And they produce fawning coverage, not just positive but foreign coverage of the Shah. I mean stuff throughout the United States media if you want to Read critical articles about the shot much of European plus I the French press in particular. You have articles that discuss his use of torture and that kind of thing. You really couldn't find that much. The American press who are in a certain sense of the term bought off.
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B
Yes. And so what was the Shah doing to his own people? I think that's also worth.
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A
Well, just a little bit more, I mean, to that the oil companies, the top seven oil company, the seven sisters that both five were market on, they had a huge surge in profit. So they supported this too. The Rockefeller family had been socially very friendly with the Shah. And the Rockefellers, of course, used to all of their influence, which is considerable. See this broad coalition of interests, all right, who favored high oil prices even though it was devastatingly common.
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B
Yeah.
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A
And the Shah.
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B
So the weapons manufacturers. The oil companies.
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A
Oil companies. The Rockefeller family.
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B
The Rockefeller family.
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A
That's a big one.
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B
Yeah.
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A
So there are others too. Microfinancing. Yeah. I mean there's a whole range of interests at investing. I have a letter from U.S. ambassador to Ron Business that there's a tremendous amount of investment coming out of the United States. And Ron right now. It's just a wonderful thing. And so this was for certain segments of business, the oil price increase was a huge advantage. And so they were pressured on nicks in favor of pyro buses that represented a tiny segment of the American society and everyone else.
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B
The American economy, frankly.
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A
That's right. The American economy overall was devastated by those friends. And so that's. It really is remarkable that this policy was pursued and that Nixon stuck to it even after causing the damage. But he did. He did. And so the shah. You wanted to want some information on the Shah.
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B
Yeah. But before we jump into the shah and what he was doing to his own people, what about Wall Street? What was what. Because there was that. That was also part of what was going on.
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A
Okay, well, following up on this, what this gets a little bit complicated. The United States at this point was when during the Nixon presidency from being a net accredited nation at dinner country. We had a deficit, a structural deficit on our trade balance. In other words, we were importing Memorial, we were exporting. That was new for the United States. We hadn't had that in the last century. That happened under Nixon and it remained prolonged and we still are. We have a structural deficit that's just gotten worse over time. Question is, how does the United States remain superpowered running the world's top currency, dollars, electric currency, with hundreds of overseas basins.
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B
Right.
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A
If it's if it seems to be going the way Britain went when it began declining as a superpower, how do you compensate for that? And the answer was petrodollars. You see countries like Saudi Arabia that all the major oil exporters had this huge surplus of petrodollars. Oil was priced in dollars then, it's today. And so they had this huge surplus of dollars that they didn't know what to do with. It was sitting in bank accounts, earned interest. And so in 1974 the US Treasury Secretary flew to Jeddah, Saudi Arabia and cut a deal with the Saudis. And the deal was the United States would give political back into Saudi Arabia, including arms sales. And they would give, you know, Saudi Arabia co equal status for the Iran and the Gulf and allow encourage Saudi Arabia to become kind of a regional power to reign all over the Gulf and in Africa as well in cooperation with the United States. In exchange, the Saudis would use their petrodollars to buy U.S. treasury bonds and therefore finance the U.S. debt on a long term basis. And they would use their influence with the smaller Gulf states like the UAE and Qatar and Bahrain to do the same thing. And this sent a signal all over the world, the dollar, that the treasury bonds are safe haven. And all over the world people began buying U.S. treasury bonds. And it set up a system that prevails to this day where the US remains a deficit country. It continues to have a growing and growing deficit which we never have to correct because foreign countries and international private sector interests financed the debt by purchasing with treasury bonds. That's how it's been working. And so the advantage was the United States remained not only a global military power, but a global economic power. It's enormous.
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B
Not only economic, but financial power.
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A
Well, that's right, financial power that basically the dollar will remain. Yes, top currency. United States would retain its influence in organizations like the IMF and the World Bank. And also we can use the sanctions weapon against countries we devastated. Consequences, yeah, tremendous impact. And all of that was made possible by this deal cut with the Saudis. What it meant also though is that there were large quantities of foreign, foreign money, foreign cash flowing into the US economy and that helped to drive financialization. There are other factors at work too, which I won't go into. But financialization began exploding during this period as foreign money began pouring into the US economy. And there was just lots of more money for bankers to play with, shall we say. And it was supercharged. The financial sector. What that meant is finances of sector which had been weak since the Great Depression. It's very interesting to note that the stock market never recovered its 1929 level until 1950. It took that long because the stock market crash was so devastating and finance was heavily regulated and viewed somewhat dimly in policy circles because it was associated with the Depression. That all changed in the 70s and finance took off in the 70s. And the bottom line is it changed the whole character of the economy as increasingly you had low rates of profit in industry and manufacturing and the opportunity for a quick buck in finance. And increasingly more and more money flowed out of industry and into finances. And the beautiful thing about finance, the beauty of it, was bailouts. You see, if you engage in speculative behavior, a lot of this was speculative bubbles, one bubble after another. If you engage in speculative behavior and the speculation goes badly, if you're big enough, if we're too big to fail, the government would bail you out with public money. That happened already. That began to happen first in 1974 and happened again and again and again and again. And word got out they'd engage in financial speculation with some degree of safety because that would bail you out. It was ironic because the whole idea here was free markets, but it wasn't really free markets. That wasn't free at all.
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B
Basically, workers paying for bankers.
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A
Exactly. And also what it meant basically is deindustrialization, because as finance ascended and industry declined, there was a relationship here. More and more money is flowing out of the street into finance because the profitability opportunities were greater than finance, partly due to what I just described. Rise of petrodollars. Petrodollars. There are other things that could have been done. I mean, the United States basically could have saved an industry, but if these values of the dollar encourage exports. But that wasn't done. Instead, finance was favorable and the people making the policy mostly had ties to the financial industry. William Simon, the Treasury Secretary, was the one who engineered this deal. And he was former president to sell non buildings. He was a lifelong investment banker and his whole perspective was banker. He was quite natural in terms of finance.
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B
Right, because that was where he made his career. Those were the people he knew. So let's kind of take a step back and take a look at what this whole process did to the ordinary people in Iran and to the ordinary people in the United States. You had the bankers, you had a few oil executives, and you had a few executives from the military industrial complex exerting pressure on Nixon to allow the price of oil to go up. What was the net result for the people of Iran and for the people of the United States.
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A
Well, I'm an American citizen. I assume you are too. Let me give it to the United States and then I'll get to a lot. America first is my motto as far as the United States goes. Well, first of all, the mid decade recession is devastating work. Lowered living standards, spiked unemployment. Not only unemployment, but underemployment. People who's, you know, that's never taken into account in the data is typically in recession. Not only do you get people lose their jobs, people don't lose their jobs, but get lowered hours or lower wages. That happens all the time at a larger scale. That happens massively in the 70s and that was totally connecting to the oil crisis that I've just described. Furthermore, it was another thing too, which is that basically because inflation was associated with all of this, basically there were a lot of pressures to engage in anti inflation and the anti inflation policies, which really took a while, they didn't really fully activate it until the end of the decade. But to preserve, to lower inflation and also to preserve the value of the dollar as a currency, the standard remedy is to increase unemployment. It's called austerity. That's the term which that is mostly through the Federal Reserve. The Federal Reserve raised interest rates, which they did to draconian levels by the end of the decade. Interest rates will raise so much by the end of the decade that German Chancellor Helmut Schmidt said global interest rates are higher than they've been since the birth of Christ. That's insane.
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B
Oh my gosh.
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A
Long, long time. There's a long memory. I personally can't remember back to the birth of Christ, but I guess he did in any case. And as a result of very high interest rates, it had the predictable effect and intended effect of driving down living standards. The whole idea is if prices are too high, whether it's because of oil, if whatever reason, the standard remedy is you drive down living standards, force people to consume less by making them too old. And that basically will cure inflation. I should add, by the way, the cure was much worse than the disease. Inflation did go down by the 80s, but wages never come. Really. Yeah, yeah, prices were lower, but your wages were lower, too much lower and they didn't recover. The average male wage was lower in 2017 than it had been in 1917, now 1970. And so there was a permanent resetting of wages at a lower level as a result of this. And a lot of this flowed from the oil prices because the inflation, it wasn't all due to oil, but it was mostly due to oil. Oil prices Surged. And because of oil prices surged. You know, you had to. There were pressures for austerity. There were demands to have the standard remedy, which was austerity, higher unemployment. That was done. And so there was an enormous price paid by the average American for the oil crisis. That's not all of what was going on here, but that was a very big part of what was going on.
- [18:52]
B
Yeah. I mean, and it's also interesting. One of the points you made in your book, I think, is that inflation tends to. To hurt people who have money more than people who don't have money. Because it. It, you know, so inflation hurts the rich. And so basically the rich didn't. The. This is the. The title of your book, which is so good, the Revolt of the Rich. The rich didn't like having their money be devalued. And so they told everybody else, you've got to, you know, tighten your belt and eat less. And.
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A
Well, detail on that is that the inflation in the 70s is different from inflation now in the sense that we still had unions back there, reasonably strong, was 25% humanized rate in force since 1970. And they did have some influence on a wage level, overall wage levels. And so what that meant, basically is what was called the wage price spiral. As prices went up, typically wages went up not in the middle of the recession, but after the recession. And before the recession, wages tended to go up mostly in tandem with prices. And you did not really.
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B
As long as you add unions.
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A
That's right. Wages. Well, it was. That's right. And we don't have that now. So inflation has a very different impact. But then basically, wages did go up to some degree. Also, Social Security was indexed to inflation. The people who were most hurt by inflation were actually the very rich, believe it or not. It's hard to believe that. It's true. And the reason is it's very hard to preserve the value of accumulated wealth, real value, times of inflation. The stock market, for example, did not do very well.
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B
Excuse me.
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A
Investments did poorly during the 1970s. And that combined with low rates of profit. Rate of profit in the 70s was the lowest, I believe, in the 20th century.
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B
Yeah.
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A
And the combination of inflation and low rates of profit caused the very wealthy to organize in a way they've never organized before and a massive scale, and to pour money into politics. And the brains behind this were people like Milton Friedman and Friedrich, who were not only talented economists, but they're also political operators, and they had enormous corporate backup. For example, Mildred Friedman's book Capitalism and Freedom, which I read at age 17 that was. It was actually a very well written book. And I remember at 17 I was impressed by it, but I did not know was that the public relations firm of Hill and Melton is paying to generate sales in this book, which became a bestseller on Alphabet. I'll let my book. If I Hill and Melton behind me, I'd be a bestseller too.
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B
If somebody buys 100,000 copies of your book, it's a bestseller.
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A
That's right. That's right. And so it wasn't just talent. Talent is never enough. You also have to have financial backing. And Friedman had that freedom, had that big money. And so I think basically what you had here was also a general push by the very rich to redistribute wealth upwards. The bottom line is this. The economy, the US economy was sick during the 1970s. It was running a temperature. Inflation was the main indicator of that temperature. And you have to look at rates of productivity, best education of economic health or basically flattened sentences. Right. And so the question is, somebody has to pay. And so the rich basically said to each other, if anybody has to pay, it better not be us.
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B
Yeah, okay.
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A
And so shift the burden onto someone else. And someone else was the working classes. All right. And that's exactly how it was done. That's exactly how it was done. By the end of the decade, you had a full. Well, first we have financialization, as I described it, which industry wiped out industry also wiped out unions because as industry
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B
was deindustrialization, de unionization.
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A
That's exactly what it was. Yes, that's right. There was very close correlation there. And in addition to that, you had austerity and privatization taking place and deregulation in particular, I mean, I have to say deregulation in theory, deregulation can work well in that there were new regulations that did impede productivity that basically reduced competition and peaked productivity. And if we're done correctly, it could have produced positive results. There were two problems here. Well, under Carter, deregulation. That goes to Carter, who did deregulation.
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B
Yeah. This is. Let's pause here on this because this is really interesting. This is another thing I didn't know. Like, Carter actually kind of outdoed Doge. There was some. Correct. Yeah. Yes. But he. There was. I'm going to get the facts wrong, so you can correct me. But. But one of his campaign, and one of his campaign promises was that the, the US government had, you know, 2,000 federal bodies and I'm going to reduce it to three or something like that really Shocking. What, what was that about?
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A
Well, you know, he promised that he would consolidate government departments in a way that would save overhead and produce bureaucracy efficiency. Planned to have done that in Georgia. He didn't really do that, but what he did do was deregulation. He wasn't for. Locardo was an economic conservative. He always was an economic. He came from a right.
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B
He wasn't really supportive of unions either.
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A
He came from a right to work state and the south was basically union was free. He had no conception of unions. The importance of. Yeah, and he was a small businessman, essentially relatively wealthy one. He came from a small town, but he was not poor. And he. I think he saw himself as an economic technocrat in which he's not. It's not ideological, but his ideology as it turned out was to redistribute wealth of works. I'm not sure he saw it that way, but that certainly was the effect and one of the ways it was deregulation. Now, as I said, deregulation in theory could have been useful and that there weren't regulations that did impede productivity and it could have been done in a way that. That would have been useful. But I think the regulation was largely a pretext to normal wages. That was the name.
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B
Yes.
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A
In other words, that's what happened and I think that's what was intended by the people who supported it.
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B
Well, there were the. There were the trucker. There were a lot of truckers who refused to deliver goods. Right. Or these trucker.
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A
Well, there were splits in the trucking industry. So the problem is the team steer agreement was very corrupt and a lot of the writing file work rightly alienated from the corruption of the Teamsters. And they also were alienated for the fact that wages weren't going up in this. Weren't going down, but they were mostly flat. They weren't going up either. And workers have been used to the idea wages gone up. That had been the American. That had been the American scandal, American growth flight almost. And that wasn't happening in the 70s. And so I think they turned to. Bottom line is nobody was offering any good alternatives. Economics profession just totally is becoming very much free market oriented. I wasn't really that interested in the work that was in law and the political left at that point, if you can go into this more was becoming very interested in identity politics, gender, sexuality,
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B
missions, Watergate, babies, you know.
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A
Well, there was that, I think what in terms of the mass movements of this era, they were non economic in focus. In other words, people who focused on Women's rights have focused on women's rights narrowly. Not in terms of women have to pay the credit card, have to pay the rent, but in terms of abortion, in terms of a woman's right to abortion. Not saying that's not important. It is, but wouldn't it also to me. Well, I'm sure it is. All women feel that way and rightly so, men too. But the point is we also have to pay the rent. And there was no frame of a conception of that. It's kind of amazing.
- [26:27]
B
Yeah. I think that that's the other thing that I really. Sorry to interrupt, but that really struck me as I was reading your book is that we, from an economic point of view, from a, you know, what happens to the average American. We really have one party and for a while we had, we had, you know, both the Democrats and the Republicans were pretty progressive. Fdr, Ike, I was arguably like what was the tech tax rate? What was the, let me say, I,
- [26:58]
A
I, I was a die hard communist. Clearly you could nominal tax rate for the top rapids was 91% of Eisenhower. That was the latest New Deal. Eisenhower. I think Eisenhower's most important contribution to domestic history, foreign policy aside, is that he ratified the New Deal.
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B
Yeah.
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A
And he was not going to repeal the New Deal. He basically got the Republican party on board with the New Deals when he did for a while Nixon came along mostly until Nixon. Well, until Nixon kind of quietly and then gradually, much more publicly, the public and party jettison the New Deal.
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B
Yeah.
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A
But Eisenhower, you know, I remember Alexandria Ocasio Cortez posed a 70% bracket and she was accused of being a radical socialist. Eisenhower, they must be a communist by any reasonable standard.
- [27:49]
B
Yeah, he was, he was 91, not 70.
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A
That's why I should have had. These were nominal rates. The real rates given loopholes was always lower. But taxation was very progressive. In the 50s it did tax more than the poor. And you can see if you look at the data on the distribution of income and wealth, it narrowed considerably during this period. All right. And so it had a real impact.
- [28:11]
B
Yeah. Yeah.
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A
So anyway, it sounds like you want to ask a question, right?
- [28:15]
B
I do. So basically, I mean again, I tend to overstate things for clarity, so correct me if there's more nuance to this, but basically, once, once Nixon and Carter came along, not only did the Republican Party sort of give up on the New Deal, the Democratic Party gave up on the New Deal too. I mean, and that's what is. I don't know how I got to be 60 years old and not know that, not understand that. But it was really revelatory for me. Like what happened to the. I mean, it's not surprising that the Republican Party did. But what happened to the. Why did the demo. Why did Carter give up on unions? On, you know, why did he tell the workers of the U.S. we need to tighten our belt instead of fight these high oil prices and fight financialization like what happened to us.
- [29:11]
A
It was the ideology of Milton Friedman and that took hold across the whole economic profession to increase a degree and of course the policy level. And the other system is funded very heavily, very powerfully by big money, really big money.
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B
So there was a strategy there, a big money strategy.
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A
That's one of my central points here. Yes, White was acting very strategically and I went to the private papers of a lot of what I did for research. I went to the private papers of wealthy individuals and looked at what they were saying privately to each other. And there was a certain sense, I'm speaking figuratively here, but I'm sure it happened yearly, that they would go into a act almost like a Marxist caricature or something. They can go into a room, close the door and hand out the cigars, hand out some brandy, maybe tell a few dirty jokes to break the eyes of old men in those days. And then they started plotting strategy. And there was a certain sense that the top figures, the people who were orchestrating this were like generals plotting a military offensive. It was that carefully done. It was done with great care still.
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B
And who are the main characters? Who are these?
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A
Well, a number of people. There's Paul Winrich who helped. He was a political activist heavily funded by the Scaife family. Richard Mellon scape of the Melon fortune, heavily funded by Scaife. And he was the, I'd say the most brilliant mind in terms of political strategy during this period. And what he says is that he is the one who thought of the idea of forging an alliance between economic conservatives and social conservatives than evangelicals. The United States is a very religious country, always been a religious country. The periodic upsurges of evangelical Christianity in the 70s is one of these upsurgeons. Fourth grade awakening was Claude himself. Reactions to the 1960s and all the shocking things in the 1960s. It is remarkable cultural changes that in 60s now fastly occurred and a lot of people were shocked. And evangelical Christianity was the response. And the. It was a huge number of people here. Big. We're talking big. Also Christian Zionism became very popular. And so way Rich had this idea of Coalitions called the fusionism. And the idea is basically of economic conservatives. That's big business, basically. And I want basically deregulation of redistribution of wealth upwards and on. Then you have social conservatives who want, you know, anti abortion and you know, I don't know, against immorality as they define it and all those things. Against speaking sex and drugs in rocky mole, shall we say.
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B
Yeah.
- [31:42]
A
And finally you add militarists who want to greatly increase military spending because spending, military spending is low. After Vietnam, people forget that. But Nixon actually reduced the military budget and there was a big movement to increase it. And so you bring in those risks. And also the pro Israel faction, you know, basically Israel Robins went into this as well. And so that was the image that was projected by Wayrich and it was very instrumental document. If you listen to him discuss it, he's been interviewed, he's very clever. And he said that now we tried going into middle class or working class neighborhoods and talk about cutting business taxes and people hate him. That didn't work in October. And so we pivoted, we corrected our mistakes. That's right. And cussed, by the way, the right corrections mistakes. Fourth Methodist Life, the right corrections mistakes. And he said, so we didn't do that. We realized what really sells in those communities is morality. Okay. That's, that's the ticking. And so that's when they got, got the idea of the Christian right and they began pouring money into evangelical creatures and, and forging a relationship with evangelical creatures produced an unbeatable partnership. Yeah, that didn't happen. I told them, I said, might be the mid-70s. Most of the evangelicals were relatively not completely. This is a small Christian right. But it wasn't anything on the scale that occurred. And Way Rich set up the idea of this big, very big tent. The idea was get a majority and then take power and implement a program. That's exactly what he did. And it wasn't just in the Republican Party. Well, evangelicals, social issues mostly, that was the Republicans. But the economic conservatism that affected both parties. I think what the Democrats did is for the most part they moved left on social issues, things like abortion rights, gay rights, but they completely moved right on economic issues because most of the left activists didn't care about economics.
- [33:32]
B
Yeah.
- [33:32]
A
Increasingly what I would call. There's a French economist, Thomas Piketty referred to the smuggle left, you might call it less politely a snob left or a posh left. All right, I just say that, I mean that my background is on the political left. And I don't say that lightly. It is true if you look at who goes to these meetings. And that's been true since the 70s. It's people with advanced degrees in Huntington's. Okay. And that's, that's, that's not what used to be that. That's what it became in the 70s. And people in that kind of category don't have to worry about paying their electric things and plant.
- [34:03]
B
Yeah. It doesn't matter how much the grocery bill is.
- [34:06]
A
Exactly. Nick is quarter. And so there's no conception of economics. And so they lost visions of economics. And so people were raising.
- [34:14]
B
Sorry to interrupt, but they were raising a lot of money from Wall street too. They got very close to Wall Street.
- [34:19]
A
Well, the foundations, private foundations we funded by the wealthy increasingly by moving into these social issues. And I think one of the reasons they did is they very much don't really care that much about these things. All right. They have the problem with gay rights, except for. Still probably half the billionaires are today.
- [34:36]
B
Yeah.
- [34:36]
A
It's not a problem at all. And so.
- [34:40]
B
And people on the right don't care. Even though half of them may be gay too. The, you know, they're not gonna get. They're not gonna get in trouble. Right. Their money can. Can insulate them from the lack of rights that the rest of the people have.
- [34:56]
A
Well, they see rich farms an extension of the rights of the picture. I mean we had. I was very impressed by the fact that there was a certain sense of victimization by the very wealthy in the early 70s.
- [35:07]
B
Yeah.
- [35:07]
A
And they're literally talking privately about themselves like the persecuted minorities that when you're better off in the most persecuted minorities. It's a little bit entertaining to read these things, obviously. And the extraordinary lack of self irony, perhaps these people. Lack of a sense of humor maybe. But that is how they felt about it. And so they wanted to redistribute wealth in a way that would benefit them. They had the means to do that because they had ready reserves of money they could invest in politics. They did invest in politics.
- [35:39]
B
Also in pr. Sorry, I keep interrupting you. But also in pr. Like they, they were very smart on figuring out what their messaging was. And you know, Orwell wrote a book called All Art is Propaganda. They were better on the propaganda side
- [35:55]
A
than, than they were excellent. And they had very tough people in front of them. And I must say I came up with a certain sense of begrudging respect on the skill of people on the right. They're so much better at this than anybody on the left, very disciplined. That's right. Also, there is a certain sense again of strategic thinking. When I was a child, I played chess a lot. I have a perception of chess as a strategic game. And these people played politics like a chess player. Thought about their moves in theirs.
- [36:26]
B
Yeah, yeah, yeah, they sure did. So let's, let's pivot a little bit now and talk about most. Most of the radical Caner podcast listeners are, are managing teams throughout the economy. And one of the things folks are stressed about is how do you manage it? Like how do you deal with the. This sense of uncertainty in the economy as you're trying to manage a team through turbulent times. So one of the questions I have for you is how does this relate. What should people be thinking about when they go to the gas station and what should they be thinking about when they're doing some planning for the business? Like what are the implications for the situation that people find themselves in today?
- [37:17]
A
Well, I'm assuming this based on the stable record we're going to see. First of all, we already seen right before our very eyes a very big surge in gasoline license and that's only beginning every reason that won't end anytime soon, even the war ends tomorrow. It'll take I think months at least for things to next phase will be food prices because food agriculture is one of the most energy depending sectors. Fertilizers are mostly petroleum based directly from the Peru Gulf. So there'd be a big surge of food prices and after that probably a major economic downturn. There's possibly an AI bubble. There's deregulation of finance, which means financial crashes with very high levels of household debt, much higher than in the 70s, not as high as they were at the time of the 2008 crash, but way higher than the 70s.
- [38:09]
B
Yeah.
- [38:09]
A
And all of that bodes well for the way the economy is going. So basically any kind of. I was talking to my son today that, you know, you should plan financially with certain prudence and hold reserves because people are going to need reserves, those who can have that money. I know most of the people with paycheck to paycheck and they're going to really suffer. But those of us who are beneficial have benefit of reserves. We should build those reserves as much as possible and be very prudent financially in coming months and perhaps in coming years because it's going to be a wild ride. It's guaranteed to be a wild ride. The only question is how wild will it be? And nobody knows the answer to that question.
- [38:50]
B
Yeah, yeah. What's your guess? What's your how wild. On a scale of 1 to 10, how wild is it going to be?
- [38:58]
A
I would, I would, I would expect something probably like the mid decade recession of 1970s which was really pretty bad. Yeah, it was very severe. And there's always the danger, and I do emphasize this, there's always the historic danger of something like the 30s. We should never rule that out completely. I think there are all sorts of barriers that would prevent that. But none of these barriers are complete, shall we say. I mean all sorts of vulnerabilities. Bear in mind this is not the first global shock we see. The first global shock was the war in Ukraine and Russia which had major economic including on energy, especially for Europe and other United States as well. There's been all sorts of uncertainty and business hates uncertainty, investors hate uncertainty. It's bad for the economy, the private sector economy. Investment is mostly private sector and people don't like for investing. Times of uncertainty, multiple wars are not good for the climate, for the business investment climate. Additionally, there's a sense of uncertainty about American politics. Nobody knows. American politics is going are we going to have mass violence in this country? What's Trump going to do? Are the Democrats going to do in response to Trump? Nobody knows. And I think that sense of nobody knows and that basically we're in a new world here where the old rules don't apply so much is something I think investors would be very skittish about. That's going to be bad for the rate of investment and therefore bad for the rate of economic growth. And all of that basically suggests again a very wild ride. And only question is how bad will it get? And we'll see.
- [40:35]
B
Yeah, I think one of the things that I find helpful at this moment in time is really thinking about building a team of people and making sure that the gap between the highest paid person and the lowest paid person is not too great, that we are and also trying to the maximum extent possible not to depend on the financial markets but to depend on real things that are really happening in the real world. Because, because the, the, the, this, the class divide is very troubling and, and as a, as a probably left of left progressive I like it really is, I think an economy does well when everyone can participate and thrive. Like that's what creates an innovative environment. And so one of the things that I've been thinking about in terms of AI, for example, is don't use AI to cut costs, use AI to do new things that you could never have done before. AI and encourage the best ideas out of all different kinds of people in your organization and sort of create a micro counterbalance to this. But also I think, like, let's figure out how to plan for an economy that includes everyone because we have done a bad job of that.
- [42:06]
A
Well, that's true. I mean, one thing I do want to note is basically, we've paid a very high price for enormous inequalities. We've got essentially the distribution of income and bounces back to what it was previously up. All right. We have a certain sense, maybe even. Well, or even worse. That's right. That's right.
- [42:20]
B
I think Musk is the richest man that the United States ever had in terms of.
- [42:25]
A
Yes, right. I think globally, if I'm not mistaken. And so the concentration of wealth is really quite extraordinary. That has a number of consequences. One of them is effective demand is going to be reduced in growth in the former groups because people don't have enough money in their pockets.
- [42:40]
B
Yeah.
- [42:40]
A
To find what's being produced. So there's that. Another one is it produces poverty and social problems associated with poverty. It produces. One of the most unhealthy things you can have in your life is stress associated with money is well established. And people are enormously stressed by not having enough money. We're not talking about a minority here. We're talking about a majority of the public are in that position. And the worst social problem is you've got mental illness, you get crime, you get social breakdown. You know, enormous homeless in capitalism, including right in front of my house in Tucson. That has enormous costs, including. Forget about morality, financial costs. You know, you have children basically, who are being damaged by not having their parents at home, by being left alone for long periods of time. This produces intergenerational costs, financial costs to the economy. It's not good for the economy. Okay. I. You could say it's not very good in a moral sense either. But let's leave that out for the moment. Okay. And just know it's expensive. You don't really save anything by cutting social problems now.
- [43:42]
B
In fact, you incur enormous expenses.
- [43:45]
A
It was a study. You know, New York City was where the idea of austerity was first used almost as a Laboratory experiment in 1975 in response to the fiscal crisis of New York in 1975. And I focus on that in the book. One of the striking things, the idea is that they were encouraged to. To greatly reduce spending on social programs anymore. And the irony is that there was a study by the Journal of Public Health on The long term costs of cutting social programs vastly exceeded what was saved. They didn't save a dime. They didn't save anything by cutting programs. It cost more money. All right. And that's, that's really the long term effects of allowing inequality to fester, allowing poverty to fester is, is there's no real long term benefit anyone from that. I suppose maybe if you're Elon Musk and you can always fly out to your island where you're Jeffrey Epstein, you can go out to your hideous island of the Caribbean or something. You always have that. I suppose maybe the top tier can be insulated, but be the very top tier. Okay. Everybody's going to be advice, even the top tier.
- [44:45]
B
I mean, the Rockefellers were. People were constantly trying to kill them. Like you make yourself a target.
- [44:52]
A
Oh, that's true. And you create hatred. That's, that's true. Who wants to live that way? You could legitimately ask that question and say, maybe the very wealthy Joseph Kennedy, who is not a very pleasant person, by the way, but he did say something very interesting, is that he once said, in terms of justifying the support for Franklin Delano Roosevelt, which he said, he basically said that what was going on, inequality was getting so bad, that was destabilizing, threatening political stability. And he said something like, this isn't a direct quote, it's a paraphrase. If I could give up half of my fortune, which is very large, by the way.
- [45:26]
B
Yes.
- [45:27]
A
So I could, so I could live with the other half safely and securely, I would happily do that.
- [45:32]
B
Yeah.
- [45:32]
A
All right. And you could say that's a rational attitude, it's not an altruistic attitude. It's in his interest to do that. And Joseph Kennedy was smart enough to figure that out.
- [45:41]
B
Yeah.
- [45:41]
A
And obviously there for a long time,
- [45:45]
B
that was the, like, I certainly have paid 51%, 52% tax. Right. My like. And I've actually paid it, you know, I haven't had any loopholes. And what the problem is, like, I'm not a, I'm, you know, I'm not a billionaire. I'm doing fine. I'm not pleading poverty, but I'm certainly, you know, I own my house. That's, that's, it's good. Yeah, it's great. It's awesome.
- [46:10]
A
Better than the alternative.
- [46:11]
B
Yeah. Yeah. But, but I'm Happy to pay 52% tax rate when I'm, you know, unfairly lucky. Like, I don't understand why the. As far as I'm concerned, there's an excellent ROI on that.
- [46:26]
A
Money, generally speaking, it's true. I mean, obviously you can always. There's no doubt there's always a certain amount of waste of fraud and mismanagement. It's always true. That's true of everything.
- [46:35]
B
Yeah, well, it's also true of billionaire spending, by the way.
- [46:38]
A
There's no question. And five acceptor. Oh, yes. And private sector is massive enough to that. I suppose one area basically that is disturbing is the United States has become addicted to permanent war. It really is true. I think it is like a drug addiction almost. And we're seeing it play out right now in the Britain Gulf. It does not promote security. What's going on in the gulf has nothing to do with security. It has insecurity. And it's extremely expensive. We're seeing how expensive it really is. And so I think basically cutting back on the expenses basically of what some have called the overseas market empire. The empire of those business is something that really needs to be looked at very carefully because again, that's a major source of inequality. The beneficiaries of this are weapons manufacturers for the most part, and everyone else pays for it in a very negative way.
- [47:30]
B
Yeah, yeah. Well, David, I always learn so much from talking to you and I know our listeners will as well. Thank you so much for writing your book Revolt of the Rich. I'll put this in the show notes. I encourage folks to buy it, read it, learn from it. Any final words of wisdom for people before we say goodbye?
- [47:54]
A
Well, one thing I should. Yeah. The guard art for in new course for austerity. Because with inflation surging, we'll now see another call to fight inflation through austerity, lowering living standards and increasing unemployment. Okay. That's exactly what happened at the end of the 1970s. And I can almost guarantee any calls for that now. Be willing to fight that. People need to fight that. All right. That is not a good solution. That lowers wages. Lowers wages probably for good. Okay. That's what happened in the 70s. And so I think they basically politically primed to oppose that.
- [48:31]
B
Yes, and not only politically. A lot of our people make decisions about how much people get paid. Take a little bit about away from the people on your team who are getting paid the very most and give it to some of the people who are getting paid the very least. This is in your power to do. And it's a good thing for those individuals. And if we all do it collectively, it's a good thing for the economy. All right, thank you so much. The Radical Candor podcast is based on
- [48:59]
A
the book Radical Candor via Kickass Boss
- [49:02]
B
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A
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