“The strength of the economy should be thought of in the actual resources you have, not in terms of monetary numbers and government spending.”
Zach Carter is a Senior Reporter for HuffPost and the Author of The Price of Peace: Money, Democracy, and the Life of John Maynard Keynes. After reading Keynes’ The Economic Consequences of Peace, Zach realized there was more to the economy than dollars, deficits and numbers. Keynes presented social theory and the idea that a national economy could enable a broader social vision.
Keynes was a philosopher first and an economist second. On the difference between Republicans and Democrats, Zach says it’s what they decide to spend money on. Both sides now agree that governments must help fuel spending.
Do deficits matter? “Deficits can matter. But there will be a certain point where all resources in society are mobilized.” Faith in the future is essentia to democracy, regardless of your political position.
LISTEN AND SUBSCRIBE
SPEAKER
Zachary D. Carter
Senior Reporter
HuffPost
MODERATOR
Anthony Scaramucci
Founder & Managing Partner
SkyBridge
EPISODE TRANSCRIPT
John Darsie (00:07):
Welcome, everyone back to the SALT Talks. My name is John Darsie. I'm the managing director of SALT, which, as many of you know, is a global thought leadership forum and networking platform at the intersection of finance, technology and geopolitics. SALT Talks are a series of digital interviews that we've been doing during this work from home period, to provide our audience a window into the minds of subject matter experts and to provide a platform for big important ideas the same way we do at our global SALT Conferences, which some of you have attended in Las Vegas, Abu Dhabi and Singapore.
John Darsie (00:39):
Today, we're very excited to welcome Zach Carter to SALT Talks. And Zach is a senior reporter at HuffPost. But most topically today and the impetus for him coming on the SALT Talk today is that he's the author of a fantastic new book called, The Price of Peace: Money, Democracy, and the Life of John Maynard Keynes. In addition to being the author of that book, he's a frequent guest on television, and radio and his work has appeared in The Washington Post, The New Republic, The Nation and The American Prospect among other outlets. He began his career at SNL Financial, which is now a division of S&P Global. He was a banking reporter there during the 2008 financial crisis and he had a feature story called Swiped: Banks, Merchants And Why Washington Doesn't Work For You which was included in the Columbia Journalism reviews compilation of best financial or business writing for 2012.
John Darsie (01:35):
Anthony got a hold of Zach's book and read it a couple of weeks ago and reached out to Zach who graciously agreed to join us. And I think we're in for a fascinating intellectual discussion today about John Maynard Keynes, the ideas that he espoused and how his life affects our lives today. So Zach, thanks so much for joining us. I'm going to turn it over to you and Anthony for the interview.
Anthony Scaramucci (01:58):
All right. Well, Zach, I appreciate you being on with us. I mean, the great irony of this talk is, it was preceded by a great endorsement of your book by Jerome Pal. He didn't exactly say it was your book, but he's basically espousing Keynesian economics for the last hour and a half on CNBC. And so I want to hold the book up, because I know you've got it behind you, Zach. But this is the book, Money, Democracy, and the Life of John Maynard Keynes, The Price of Peace. Zach, it's a fascinating book. I guess for our listeners and viewers, I'd like you to tell us a little bit about your background. You told me it took you four and a half years to write the book, why did you want to write the book, and then we'll talk a little bit about professor Keynes and how we are still living with his legacy.
Zach Carter (02:46):
So as John mentioned there, I used to be a banking reporter at a trade publication called SNL Financial that is now part of S&P Global, and I was there, frankly, I was not terribly excited to have this job in 2006. I thought the idea of being a journalist covering banking from a place in Central Virginia was not the most exciting job you could have. But I learned an awful lot about how the financial system works over the course of that enterprise. And of course, in 2008, the financial system essentially collapsed.
Zach Carter (03:21):
And in that moment, everything that I had been told about how markets were supposed to work, about how supply and demand was supposed to reach an equilibrium seemed to fall apart. And people who had been telling me that supply and demand would always reach a prosperous equilibrium, started reaching for the government for very large infusions of cash to save the financial system. And frankly, to be clear, I think if you had not saved the financial system in 2008, we would not be living in the United States of America today. The collapse would have been absolutely catastrophic.
Zach Carter (03:55):
But it was very clear to me that there was an intellectual sea change that was underway at that moment, and people started talking about John Maynard Keynes, just sources that I would talk to on the phone. And these people did not talk about John Maynard Keynes a year, 18 months prior to the crash. And so I went and started reading John Maynard Keynes. As an undergraduate I studied philosophy, I studied politics, I did not study economics. So I learned economics on the job, as a banking reporter from people in the financial system.
Zach Carter (04:27):
And frankly, I think that's a good way to learn economics. Because the financial practitioners, the people who are actually doing it, every day, economists are one step removed from what's actually going on in the world, and that can be a valuable perspective, but particularly in the crash, watching the way people changed their minds about something. I mean, in politics, I've been covering politics for several years since, people almost never change their minds. But in the financial crisis, you could see people in the markets change their minds about the way they believed the world work.
Zach Carter (04:57):
And so I started reading John Maynard Keynes. And first the first book I tried to read was The General Theory of Employment, Interest and Money, which is a terrible, terrible book to read. It is just written like... It's like a pretzel covered in thorns. It's awful. And so I got a couple of chapters in and I just said, "I'm going to try something else." And I tried The Economic Consequences of the Peace. And that book, it's like reading a big stick of butter. It's just beautiful. It's a wonderful, wonderful read. It's much more consistent with Keynes's broader body of work and his writing style than The General Theory is.
Zach Carter (05:32):
And I realized, reading that book, there's a lot more going on here than just dollars and deficits and money and numbers. There's a whole social theory, there's a whole idea, not only of what a national economy is supposed to look like, but what international cooperation is supposed to look like. And economic policy wasn't this technical mathematical thing. It was the thing that was supposed to embolden and enable this broader social vision. And so I became totally obsessed with Keynes and the book is the byproduct of that.
Anthony Scaramucci (06:05):
Okay. So let's take people back for a second, and I don't want to cut you off because I really want you to elaborate on this. But I want to give all of our viewers who may not be as familiar with John Maynard Keynes, a brief synopsis. So he was a legendary economist. And he wrote about the Versailles Treaty, which you elaborate in the book, and he wrote that the wartime reparations that were being imposed upon the Germans were not sustainable, unlikely to be paid back and would cause social and political unrest in Germany.
Anthony Scaramucci (06:40):
And so that was a big hullabaloo in the West because they were trying to extract damages from the aggressor Germany in the First World War. But Keynes was really trying to point out that if you do that, you're going to set them up for nationalism, you're going to set them up for a specter of dissociation from that alliance that you're talking about. Of course that happened, but in the ensuing years, we were touched with the Great Depression. And you go into that, you can explain why that happened.
Anthony Scaramucci (07:11):
A combination of bad monetary policy, a lot of what Liaquat Ahamed said in the Lords of Finance, but there was John Maynard Keynes standing for the principle that the government needed to prime the pump. And the government needed to replace aggregate demand and deficits, frankly, were not going to be that big of a deal. As you, Stephanie Kelton and others pointed out, they have been sustainable for generations. They've been sustainable for thousands of years in our civilization. And so now I want to bring it back to you. It's John Maynard Keynes. He's living in the early 1930s, espousing these theories, which we're using today, but go ahead.
Zach Carter (07:51):
Well, just remember, he eventually comes to support deficit spending. But in 1919, when he's seeing the Treaty of Versailles and been horrified by it, he's still a very conventional 19th century economist. He thinks that they need to do widespread debt relief in order to allow markets to work their magic. That supply and demand will come into equilibrium and there will be a prosperous natural outgrowth of the post war world, but only if these terrible war debts and the reparations that are assigned to Germany, at the end of the war are limited. He thinks these things, they're just unpayable.
Zach Carter (08:33):
So he's not this revolutionary economic thinker at the beginning of his career. And he makes his career in large part pursuing this particular social vision. He thinks there is this world of international harmony and cooperation. I think it's largely a naive view of the way the late 19th and early 20th century international economies functioned, but it's a beautiful vision. I mean, he was talking about people exchanging ideas and culture across different national boundaries and that trade and finances is a vehicle for cooperation, growth and social harmony. It's a way to eliminate war in particular.
Zach Carter (09:15):
And so he loses that key political battle in 1919. He does not succeed in eliminating war debts or reparations from the Treaty of Versailles. And he basically loses every single political battle that he fights, particularly in Britain, from 1919 until about 1941. But he becomes, around 1929 enamored with this idea of deficit spending. He says, "Look, we have huge debts everywhere," because the war debts aren't going away. Everybody's still in debt from the war in 1929. But there are all of these problems that need to be solved.
Zach Carter (09:51):
And so before he has this very sophisticated economic theory that he develops in The General Theory in 1936, he just recognizes there's a political necessity for rebuilding to occur. Governments just have to start doing things because the private market is not doing anything. And if nobody does anything, the economy is not happening. It's not functioning. We've talked about the Great Depression in the United States, like something that got kicked off in 1929, sometime after the stock market crash. But in Britain, they were in a double digit unemployment situation from 1919, all the way through to the Second World War.
Zach Carter (10:27):
So for Keynes, this is just an astronomical political crisis. And they have these enormous strikes that are happening in the streets. In 1926 there's a general strike, where basically all of the labor unions just unite and say, "We're not going to work anymore." And that is devastating to Keynes. He's very politically conservative in that he's afraid of change. But a lot of his policy ideas, I think, end up being quite radical in that they're new ideas designed to facilitate the conservative political goal that he has in mind, that goal of social stability. So eventually we get to the '30s and he starts talking about deficits, by necessity. Everybody is in debt, and we've got to do something. So let's go for it.
Anthony Scaramucci (11:11):
So let's talk a little bit about that conservatism that you're mentioning, because as you point out in the book, a lot of the conservative economists were ridiculing him. You mentioned Ludwig von Mises an economic, I believe it was a publication just lighting him up about these non classical theories of economics. And there are many conservatives that tune into these podcasts and are listening and they have this feeling, this Adam Smith, laissez faire feeling except it's a little bit like Mike Tyson zag, "Everybody has a plan until they get punched in the face," and then everybody goes hard left and starts massive deficit spending. So I want you to put at ease the conservatives that are listening in on this and explain to them why their theories are wrong and why John Maynard Keynes is right.
Zach Carter (12:05):
Well, both von Mises and Hayek had a much deeper understanding of economic history than John Maynard Keynes did. He did not study economics as a young man, he studied mathematics. Cambridge didn't have an economics program until 1903, I believe, and he graduated in 1902. So there were economics courses, but you couldn't major in economics there. And so Hayek and von Mises have this much deeper and longer knowledge about the economics profession. And I think, to some extent, this ends up hamstringing them when they get to the depression because the rules that are supposed to apply suddenly don't apply anymore.
Zach Carter (12:48):
However you look at the Great Depression in the 1920s and 1930s, at some point, markets should have been able to clear whatever dumb decisions governments were making. Rational individuals maximizing their own economic potential should have figured out a way for supply to reach equilibrium with demand and lead to an equilibrium in which there was sustained high employment. And that just did not happen in Britain.
Zach Carter (13:15):
And so, the thing about Keynes is he looks at economics from a more philosophical perspective than I think Hayek and von Mises did. He was fundamentally a philosopher, first, a social thinker first, and then an economist second. He's always using economics to try to pursue these other social goals. So I want to say to the conservatives here, if you are upset with John Maynard Keynes, because you think that he's pursuing social goals that you don't agree with, you are correct, that is, in fact, something that he was doing.
Zach Carter (13:48):
But it is also the case that essentially every single government since the Great Depression has pursued the ideas of John Maynard Keynes in some variety or other. Everyone runs big deficits when we get into a crisis, it always happens. Even Ronald Reagan after the big monetarist recession under Paul Volcker, in the early 1980s, started ramping up government spending for the military in order to try to win reelection in 1984. He eventually sacked Paul Volcker in favor of Alan Greenspan, in order to get some more help from the Fed, frankly, in a very traditionally Keynesian way.
Zach Carter (14:28):
The difference between the Republicans and the Democrats on this and I think even the difference between Democrats and Keynes is what they decide to spend the money on. We have always spent enormous sums of money when we get into crises and we've also spent much larger sums of money since the Great Depression just as a standard baseline of how the government functions. Before the Great Depression the government spent two or 3% of GDP on its operations. Since 1960s we've been hovering around 20%. You move a couple of percent up, a couple of percent down, that is a significant change. I think Keynes would have wanted more of that.
Zach Carter (15:06):
But the fact is Keynesian thought in the sense of using the government to supplement aggregate demand, it is not a controversial theory in government, between Republicans and Democrats, when they're actually governing. It's just how the world works. So if you're worried about adopting Keynesian ideas, because you think that it's going to cause some crisis or move the economy out of kilter, you have to grapple with the last 80 years.
Anthony Scaramucci (15:33):
Well, I think that's well said, and I want to take you back to the original gold standard, which we lifted in 1933. And then John Maynard Keynes himself worked on the Bretton Woods treaty in 1944. But then there's August 15th, 1971, where Richard Nixon pulls the pin on gold. And there's this theory, and so I want you to address that and then the second part of the question is, let's go from 1971 to today because conservatives would say, "Well, we took ourselves off the gold standard, we had that rapid inflation in the '70s that needed to be tamed by Volcker and that these strategies are incredibly inflationary and that deficit spending actually harms the middle class and the lower middle class, because if you're devaluing the dollar, their wages can't catch up. So it's a two parts. So let's go to '33, '44, '71. And then that last piece there.
Zach Carter (16:33):
So Keynes's issue with the gold standard by 1933 is not anything about gold in particular. He just thinks that the economic order of his day is forcing countries into a deflationary crouch. If you are losing gold under the gold standard, if it's flowing out of your country because people are losing confidence in either your financial situation or your economy is just not doing well, then you have to do something to retain gold. So typically it was raising interest rates, that was how central banks dealt with that, and the gold would flow back. But by raising interest rates, you caused high unemployment.
Zach Carter (17:14):
And there was this famous quote from Keynes in 1923, where he says, "In the long run, we're all dead." And this has been interpreted in various ways by different people throughout time. But the basic point is that if you have a social revolution, in the meantime, while you're waiting for the scales of the Adam Smith economy to balance eventually, that doesn't help you any. You still have a social revolution, and that is a problem. So Keynes says that we have to do something. We have to find some way of managing the economy to prevent these really terrible social outcomes in the short term, while we're waiting for the economy to balance. And the long run could be a long time. It could be 90 years, it could be nine years, but however long it is if we have a revolution in the meantime, that's going to be a problem for somebody like Keynes.
Zach Carter (18:04):
So in the 1930s, he sees the gold standard, this real transmission mechanism for austerity and for social revolution. As one country has a run on its currency, it backs down and gets into this crouch. And it never really works. The deflationary positions never actually... The strategies don't actually prevent the financial crises from going full bore and from wrecking these currencies. So country after country keeps going off the gold standard, but they do that, as one country has a problem. And then investors look to other countries say, "Well, who's the next weakest thing?" I think people who lived through 2008 and saw people looking from bank to bank from Lehman, to Morgan Stanley, that sort of thing understand that kind of thinking that happens among investors.
Zach Carter (18:52):
So when you go off gold in 1933, there's a new world and it's very chaotic, and it's not particularly prosperous. I mean, we have the Great Depression. And in 1944, this is the Bretton Woods Conference, is the attempt to create a new system among different countries to cooperate on economic policy, on finance and trade. And to create a new system that is not going to force countries into these deflationary crouches whenever they get into trouble. It works, it doesn't, but in 1971, the United States blows it up.
Zach Carter (19:31):
And look, the inflation era of the 1960s and 1970s, there's a reason why people are critical of Keynesian economics at this point in time. There's a lot of spending that's happening among governments. Keynesians don't have a particularly good explanation for why the inflation is taking off. There's the oil price increases, which happens because of a lot of foreign policy decisions in the Middle East. So that's part of it, but inflation really is taking off. And it totally discredits Keynesian thinking in the 1970s.
Zach Carter (20:06):
I don't have a great explanation for why the 1970s inflation happens. I don't have a great explanation for why we don't have any inflation right now, even though people have been calling for hyperinflation since 2006, I think. I think the certainty that the economics profession develops every three or four years as news theories take hold is often quite illusory. But with Keynes, you have this very flexible mind, somebody who is attached not only to deficit spending, he liked deficit spending, because he saw it as a political necessity. But he never wanted to be remembered as a deficit therapist. He wanted to be remembered as this guy who was trying to prevent war and deprivation. Who was trying to promote prosperity and international harmony.
Zach Carter (20:59):
And the tactics that he was willing to use, the improvisational attitude that he had towards economics, I think is an unusual spirit within the profession. He didn't claim to have this deep knowledge about the way the world works on some deep down in the ether of reality. He was someone who was willing to change his mind when circumstances changed.
Anthony Scaramucci (21:23):
Well, there's an extension of Keynesianism now called Modern Monetary Theory. Your friend, Stephanie Kelton, will be doing a SALT Talk with us next week on her book, The Deficit Myth. I know you're going to be with her tomorrow. We should publicize that, it'll be tomorrow, the bookstore Politics and Prose, one of my favorite bookstores is hosting a podcast with the two of you. And what time is that going to be Zach?
Zach Carter (21:49):
7:00 PM Eastern Time.
Anthony Scaramucci (21:51):
7:00 PM, Politics and Prose. So find them on a bookstore in Washington DC. But in Stephanie's book, which I read in preparation for this, and for my SALT Talk with her next week, she really believes that this is the Galileo Moment. She really believes. I mean, she really says that Modern Monetary Theory is like a [panicist 00:22:12] discovering that the earth is actually rotating around the sun as opposed to being flat and the center of the universe according to some of the religious experts. And so she really believes that this massive deficit spending is a great equalizer and is almost a tonic to help the lower and middle class. And so I'm just wondering what your thoughts are on that, you now being the Keynesian expert?
Zach Carter (22:41):
Sure. I have a great deal of respect for Stephanie, and that's why we're doing an event together tomorrow. But the big shift that she's talking about is the focus on real resources, the actual productive capacity in the economy. How many people you have who can be put to work, what they are skills are, how many resources you have, how many farmers you have, how many miners you have, how many tons of coal you have in the ground. Probably not great for The Green New Deal kind of stuff, but the actual resources you have in your economy. That's how you should think about economic policy. You should not think about it in terms of the monetary numbers that we attach to government spending.
Zach Carter (23:27):
So the numbers that we talk about when we talk about debt and deficits and whether or not we can afford things, her point is just that, I mean, I don't think I'm putting words into her mouth here. Because I've talked to her many times. But her point is that if we have the stuff, if we can actually do it, then we can afford it. The amounts that we have on our ledgers and on our accounting books, those may not be irrelevant, but they're not important to the question of whether or not we can afford to do something.
Zach Carter (23:59):
And I think that's an important point. And frankly, I think it goes all the way back to Keynes. He has this very important essay that comes out in 1941, I believe maybe 1940, called How to Pay for the War. And it's about how the British government is going to deal with these massive, massive expenses that are going to be required by World War II. And he basically says, "Look, this is about mobilizing our resources. Every other question that we have is about what society we want to live in after those resources are mobilized. Do we want to sell debt so that the investor class makes a lot of money and becomes wealthy and gets interest payments hereafter? Or do we want to raise taxes on the investor class so that they have less money in here now?"
Zach Carter (24:44):
The point is that these questions end up being about distribution ultimately. That scarcity of resources, which is the basic underlying premise of economics, certainly in the Austrian tradition, but really throughout much of the Anglo Saxon tradition as well, is maybe not the real problem. The real problem maybe about distribution. And I think Stephanie has really keyed into something important there. And I think that's really... Honestly, when the MMT people start talking about sophisticated Federal Reserve operations and the relationship between the Fed and Treasury, there are moments when they lose me. I get lost. It's very technical and complicated. But I think the basic point that scarcity is not the key factor and that the monetary numbers about deficits are not what matters, it's real resources in the economy, that strikes me as correct. And it seems to me to flow directly out of John Maynard Keynes.
Anthony Scaramucci (25:40):
Well, she certainly makes that case in her book and we'll address that next week, and I appreciate you bringing it up. I guess, what often happens to me, Zach, with clients, I'm out making a presentation, somebody raises their hand and says, "Hey, are you worried about the deficits? Are you worried about the long term accumulation of deficits?" And again, conservatives, von Mises others, what would they say? They would say, "Well, the deficits have a tendency to crowd out. You have interest payments on the budget that are going towards those. And then governments have to monetize that debt in some way."
Anthony Scaramucci (26:16):
Let's look at our own government for a second, in 1971 $35 an ounce for gold, today it's $1700 an ounce for gold. A conservative economist would make the case that our money was devalued by 98% over that two generational period of time, totally fine for people that have assets because the assets denominated in dollars, they go up in value. That $1 million beach house is now 10 million. But again, for people that have wages, and I saw this in the 2016 campaign, when I was campaigning with then candidate Trump, we had people really struggling.
Anthony Scaramucci (26:52):
And I remember being on the campaign plan, I did an analysis of what my dad, my dad was a blue collar worker. He was a crane operator, he was an hourly worker in a union. And I did the calculation for then Mr. Trump, I looked over to see if my dad in 1976, if he was doing the same job, same union 2016, his wages are down 26 and a half percent. So it's a broad question. But do deficits matter? Are they going to come back to haunt us? Are they impairing the ability for middle class people to get ahead? Is it hurting their wages? And what do you say about their grandchild?
Zach Carter (27:31):
Well, I think deficits can matter. Certainly, if you believe Stephanie, there's a certain point in which all of the resources in society are mobilized, and there's just nothing more to produce. And so at that point, you start seeing inflation. And when you start seeing inflation, that can be a social problem, not only for the investor class, but for working people. I don't think we're there.
Zach Carter (28:03):
When I think about the question about the grandchildren, though, your grandchildren want you to have a job, so that you can have a fulfilling life and pass good things down to them, whether it's money, or learning, or culture, they want you to be able to have a full life. They're not thinking, "My goodness, it's my grandparents who are stealing from me every day." They're thinking, I mean, I have a 10 month old daughter now. So I think about this all the time.
Anthony Scaramucci (28:34):
Congratulations.
Zach Carter (28:34):
Yeah, thank you very much. What she wants is for daddy to be employed so that daddy can have a job and afford to buy her toys and books and teach her things. She wants to have all the ingredients of a good life. This is essential to Keynesian thought.
Anthony Scaramucci (28:48):
Let me push back.
Zach Carter (28:49):
Go ahead.
Anthony Scaramucci (28:49):
Let me push-
Zach Carter (28:50):
Sure.
Anthony Scaramucci (28:50):
... back for a second though, are we mortgaging her future? Because that's a big issue. That's a big statement that people make, "Well, we're mortgaging our children's future to pay for our goods and services today."
Zach Carter (29:02):
What happens to my daughter if I lose my job? What happens to her if I don't have any money? If I can't pay the bills? The idea that we're mortgaging her future to make sure that her parents are employed, I think is very silly. Her future gets much, much worse if her parents are in a terrible financial situation.
Anthony Scaramucci (29:19):
Okay. So now you sound like John Maynard Keynes. And you do make the point in this amazing book. What you're basically saying is that we have to solve for today, and that if we can create the right economy today, we get an amazing amount of innovation, an unleashing of growth. And people that think the way I am positing right now are thinking too linearly. In fact, we have this exponential opportunity if we can set the economy up right today. And so that the future for your daughter or my children, is going to be so much different. And I would point out to people just think about where we were in the '80s with peak oil theory. I was sitting in a classroom Zach, in the middle '80s where people told me, "Well, we're running out of oil. By 2010 there'll be no oil." And they left out the exponential, technological growth that took place under heavy deficit spending to lead to this abundance of oil now.
Anthony Scaramucci (30:16):
We could question a bit that impacts on the environment. But the point being, I think the point that Keynes would make, you would make, it's a very interesting intellectual comment is if you fix today, we won't have to worry about tomorrow because we'll unleash unbelievable amounts of growth in the process, and make people's lives in the future way better than ours today.
Zach Carter (30:38):
Keynes had a very different framework for understanding economics than I think most economists who have followed him have adopted. His view is that it's not scarcity of resources that dominates our condition as human beings, it's uncertainty about the future. And if you can find a way to deal with uncertainty... Ultimately, there's no way to cure uncertainty. But if you can give people a reason to believe that tomorrow will be better than today, each step of the way, you have a much better chance of securing the type of social harmony that he always wanted to see.
Zach Carter (31:15):
And so his economic policy is designed to make people believe that tomorrow will be better than today. And look, that is a difficult thing to secure when things are bad. I know that right now we've got the pandemic, we've got unrest in pretty much every single American city. But Keynes lived through this too. He lived through the First World War, the Great Depression, and the Second World War, those were catastrophic things. And he never lost that faith in the future.
Zach Carter (31:42):
And I think that's a pretty essential belief that you have to maintain if you're going to live in a democracy, regardless of what your economic position is. And so whether you're an Austrian or a Keynesian, that faith in the ability for people to solve problems collectively, I think is a pretty essential way of understanding the world.
Anthony Scaramucci (32:01):
I think it's very well said. Before I turn it over to John Darsie, I have one more question. And when I read this in your book, I was like, "Okay, this is fascinating. I'd like you to explain this to our viewers and listeners." Keynes really felt that it wasn't normal for human beings to be on a trajectory of peace and prosperity. He felt that they needed a political system to help guide that and we needed, as a culture and sociologically mechanisms in the political system to further that. I was wondering if you could elaborate on that, and explain that to our viewers.
Zach Carter (32:37):
Sure. One of the lessons of The General Theory is it's not just about deficits and debt as we've been discussing this entire event. He thinks that society is, if you don't have political leadership, it tend towards, not only you can call it an equilibrium, but it's a socially dysfunctional equilibrium where you have high unemployment. And if you take a step back from the economic language, what he means is there's a lot of social unrest. That you have social breakdown. So you need some political leadership in order to sustain the idea of harmony in politics.
Zach Carter (33:13):
And he gets this from being a political philosopher, frankly. He's not just a guy who wakes up one day and reads Adam Smith and thinks, "Okay, let me start moving some equations around." He's very, very steeped in enlightenment liberalism and in these basic ideas of what makes people function, what makes society healthy. And one of the guys he likes a lot is Edmund Burke. And he thinks Edmund Burke's ideas about social stability are really important. He disagrees with Burke on whether or not democracy is fuel for social instability. He thinks that Burke, maybe there's something there, but so far, he says democracy has not embarrassed itself on its trial.
Zach Carter (33:55):
So he believes that people can come together to solve problems. But he does believe that somebody has to do the solving of the problems. And that is political leadership. And without political leadership, you not only have all the social unrest, you can't have things like markets. They need some political foundation to exist at all. So people can disagree and dispute what rules we want to have when we create these markets, but they are fundamentally a product of the state itself. And the state he has... I mean, there's a lot to discuss here. But he has a fairly benign view of the state. He sees it as an expression of the democratic will much like the philosopher Jean-Jacques Rousseau did.
Zach Carter (34:38):
So he believes that this is the only way for people to come together and express their beliefs about how they want to be governed, is through the government. And he believes that markets and all the economic underpinnings of society that we take for granted are actually byproducts of the state itself. So that means ultimately, that governance and that intervention in the markets is inevitable. And the question is what kind of interventions we want to have. And people have been disputing that ever since.
Anthony Scaramucci (35:06):
Listen is fascinating. And I think it's just a reminder to people, I'll take them back to their eighth grade social studies, Solon who invented democracy in Athens, he basically went to the other aristocrats, and said, "Hey, if we're not careful here, there's going to be a rebellion and an uprising. We need to figure out a way to include all people of economic strata." It was men at that time. Now it's all people in this great, wonderful diversity. We have to include everybody. And so we have to try to make the system is fair as possible. Otherwise, there'll be just haves and have nots, Zach, and we don't want that. And I think that's one of the reasons why we're faced with issues of populism and nationalism now. But you wrote an amazing book.
Anthony Scaramucci (35:50):
I want to turn it over to John for some questions from the audience if you have a couple of more minutes for us, but I want to hold the book up again, it's amazing, available on Amazon and other places. I like buying my books from a local bookstore. I just try to help out the community. But this is a great book, Zach. John, do you have questions for Zach Carter?
John Darsie (36:09):
Yeah, we have several audience questions. And Zach, thanks again for joining us. The first one pertains to politics in the United States. The Republican Party has become known as the party that's concerned about deficit spending more so than the Democratic Party. We talk about increases in deficit spending, being a left leaning policy, but if you really look historically, at conservative presidents like Nixon, Reagan and Bush. They have been the ones that have ballooned US deficits, while Clinton was the one who balanced the budget. And President Obama, now in hindsight, it appears that his lack of spending post the 2008 crisis constrained the acceleration of the recovery. Could you elaborate on that observation and share your view of whether you think a Biden administration, I know the Sanders team has Stephanie Kelton as a economic counselor. But do you think the Biden administration understands that issue and has the appetite to spend aggressively if he wins in this election?
Zach Carter (37:11):
Well, let me start with the Biden question. I mean, frankly, Biden is a total black box to me. I think he sometimes comes out and talks about how he wants to do something like an FDR New Deal style program, and then other times he sounds like he's an Austrian. I think Biden's is just trying to get through this election, and we're going to learn a lot about what the direction of the Biden administration will be when he names his vice president. That is going to be a sign to people about what kind of administration he really wants to run. I think he's been talking out of both sides of his mouth for much of the campaign since he basically secured the nomination, trying not to lose a lot of those Sanders supporters, but also trying not to alienate the suburban moderates who he feels like are part of his base.
Zach Carter (38:03):
And I don't think he knows what he wants to do. I think he's going to figure it out. He's a guy who's capable of changing his mind. He voted for all of this bank deregulation stuff in the 1990s, as part of the Clinton administration. He was very enthusiastic about it. But in 2016, when he was looking back on his career in politics, he said to, I believe, it was Jake Tapper that he thought his vote for the repeal of Glass-Steagall was the worst vote he ever made. So he's capable of changing his mind. I just don't know which way he's going to change it going forward. And I think predicting the future is an extremely difficult thing to do in politics at this juncture. This is a very, very uncertain time.
Zach Carter (38:43):
About Republicans and Democrats and deficits. I mean, what you said is basically right, everybody, with the exception of Bill Clinton, since 1932, has been running up larger and larger deficits. It's just a fact of life. Whether or not those deficits are good for America, the thing about economic disputes is you can always find statistics to fit your particular worldview. The empirical questions, they're very difficult to decipher. So some people could say, "Look, the deficits caused inflation in the 1970s, they caused a recession in 1992." Other people... I tend not to find that stuff terribly persuasive. But I can point to a different set of data that says deficits don't really make that big of a difference for the United States, particularly since the age of gold is over.
Zach Carter (39:38):
I do think it's the case that the Democratic Party is more committed to what we would traditionally call fiscal responsibility than the Republican Party is. They seem to think that it's a point of honor to reduce the deficit in ways that the Republicans don't when they're in power. I think Nancy Pelosi has been very clear about this. I'm not particularly excited about that as somebody who's traditionally been affiliated with the Democratic Party. I wish they weren't so committed to deficit reduction. I think it ultimately ends up hurting the people who they want to help. But we will see what happens in the Biden administration. I think it's a very uncertain time. And I think ideologically, everything is scrambled right now. The Republican Party, there are voices in the Republican Party right now who are talking about running big deficits to help working families. That was not happening a few years ago. And we'll just see what happens.
John Darsie (40:33):
The next question came from the chat. It's about whether there seems to be a resurgent interest in the ideas of people like Keynes and Karl Polanyi. Is that a sign that our ideas about free markets and how they work is fundamentally changing?
Zach Carter (40:49):
I do think so. I mean, think 2008 was a really big moment intellectually in the history of ideas for not only the United States, but the Western world more broadly. This idea that markets were self-correcting things, that supply was going to balance with demand and reach a prosperous equilibrium, I mean, you got to account for what happened in 2008. It was a total disaster. And I think the criticisms of the Obama administration that followed, that they were not aggressive enough in responding to that suggests that the government needs to be involved in the management of the economy, whatever you do.
Zach Carter (41:30):
So the idea of the free market is something that's separate from the government, rather than something that is managed by the government and interacts with the government in some way. I think that is changing. We do not really accept the Milton Friedman idea that there's a free market that exists out there in the state of nature and the government moves in after the fact and intervenes across it. I think that has changed. But it doesn't necessarily... Just accepting that difference doesn't actually help you decide what the policies are that need to be made in that reality.
Zach Carter (42:08):
So people like me who were deeply concerned about economic inequality are going to advise a different set of policies than people who are concerned about other factors. But that gets us to a basic political struggle. You can't just say, "Look, the equations add up this way. This is what the numbers say," you have to actually start talking about values and beliefs. And that is what democracy is for.
John Darsie (42:34):
And one final thought as I plug your book one more time. Zach's book is The Price of Peace: Money, Democracy, and the Life of John Maynard Keynes. I had a chance to read it as well. It's fantastic. What's your next book going to be about, Zach?
Zach Carter (42:46):
I have got to keep that under wraps. I am talking with my publisher right now. And we have exciting things on the way but that's all I can say.
Anthony Scaramucci (42:58):
Well, we caused you to blush on our SALT Talk webinar. You could be the first blusher Zach, I caught the redness in your face there.
Zach Carter (43:06):
I blush easily Anthony.
Anthony Scaramucci (43:08):
All right. Well, that's good for me to know. Because I'm not the type to ever embarrass people. So I'll keep that on the down low, Zach. But in any event, I appreciate. Any parting thoughts of wisdom that you would like to share with us before we sign off?
Zach Carter (43:22):
Sure. Look, I think Keynes was deeply naive in a lot of ways. I think he made a lot of bad mistakes politically, he was a goofball throughout his life. But I think his faith, in our ability to solve our problems together as a society, I think is a faith that we cannot afford to lose. That is an essential belief, whatever your political perspective is, whether you call yourself a conservative, or a left-wing socialist or whatever, you have to believe that we can deal with the problems that are facing us. Because if you stop believing in that you end up with a future that's far worse than it needs to be. And I think that was a very wise and difficult thing for Keynes to maintain throughout his life, but I think it's very admirable.
Anthony Scaramucci (44:08):
Well, don't knock being a political goofball or being naive Zach. Some of us may be that. Some of us even on this SALT Talk may be political goofballs. But in any event, we appreciate your time. It was a phenomenal book, I really recommend everybody. I do believe, as we were talking about before we opened up the line to others, the Lords of Finance written by Liaquat Ahamed, 10 or 11 years ago had great influence on people like Dr. Bernanke and it became the, to use the metaphor, because it's appropriate the gold standard, contemporary book for that moment, I do believe your book is going to be that one for today. So congratulations, Zach, wish you the best with the book and hopefully we'll get you to our SALT Conference when we get it back up and running. But thank you again.
Zach Carter (44:56):
Looking forward to it.