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Edward Stuart on Capitalism vs Socialism vs Communism
August 26, 2020
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I'm here with Professor Edward Stewart. Professor, why don't you tell the audience a little bit about yourself and what you're up to these days?
All right. I was born and raised in Houston, Texas, so I'm a native Texan. I teach here in Chicago at Northeastern Illinois University. I'm mostly retired, but not retired from traveling, taking students to Europe and teaching an occasional online class. And my main interest is
Comparative Economics, a subject of my Great Courses series on capitalism versus socialism, and with particular emphasis on the former Soviet Union, Eastern Europe, and Western Europe. Great. There's a few terms that need delineating because many people mix them up, such as social democracy, socialism, communism. Why don't you go through those three and disentangle them?
It might be easier to start with the most extreme first and that's communism, especially as practiced in the Soviet Union and its former satellites in Eastern Europe and to some extent it still exists in places like North Korea and for all intents and purposes, Cuba. Full communism means the government ownership, the public ownership,
all means of production.
Social democracy means more social control of the economy but has some room for private enterprise and also has some room for political diversity. Under Soviet style communism there's really only one political party and one political direction and it's very centralized and non-democratic. So
to contrast former Eastern European countries. And to some extent, Kurt, we still have a little bit of that going on right now in Belarus. What's happening in Belarus is that to some extent is a kind of a descendant of Soviet communism. The government still owns almost everything in the economy, and there is one political party and essentially one political ruler, Mr. Lukashenko,
who is under some, shall we say, protest right now. And so that's complete ownership and centralized political non-democratic control. Social democracy, socialism that exists in Western Europe and Scandinavia means that the government has a large role to play in the economy and may own some parts of the economy, but there's large scope for private enterprise and political
How does social democracy and socialism differ from the welfare state? Probably in the degree of ownership and social control. A welfare state, which we could describe to some extent as the United States or Canada
means that there's mostly private enterprise, in fact, preponderant private enterprise, but a lot of social redistribution and social safety net. So, welfare state is probably the least intrusive into a market economy and the least concerned with ownership of economic resources.
When I hear people describe China, sometimes they'll call it state capitalism. What is state capitalism for the people who are listening? China presents a strange mixture that's impossible to categorize. Because in one sense, it has the hallmark of the Soviet economy in that there is one political party and centralized leadership and no
political contest or political democracy. However, unlike the Soviet Union, there is a relatively large private sector in the Chinese economy that produces goods and services for profit and the owners earn profits and in some cases billionaires. The difference between say the Chinese economy and say the
Swedish economy or the French economy is that the French economy has guaranteed property rights and political contest so that the people that own Louis Vuitton, Moet, Hennessy, for example, President Macron doesn't have the power and certainly beyond the realm of French politics for him to unilaterally expropriate the owners
and re-transfer the ownership back to the state. That doesn't happen in China. Xi Jinping and the Communist Party of China has the ability and the power to immediately socialize or take away the property of any so-called Chinese capitalist. So the state is more important in China than capitalism. So it's a kind of a hybrid
and state capitalism to some extent is a misnomer. State capitalism is probably a better description of Nazi Germany, where there was one political leadership, one political party, no democracy, but the government of Hitler wasn't about to and probably couldn't nationalize Mercedes-Benz or Volkswagen or
What would you describe China as? A mixed economy? I would describe it as limited communism because the state, the Chinese government still owns a large proportion of the Chinese economy and still directs the Chinese economy
either directly through state ownership of enterprises, most of the big industrial enterprises, the steel companies, the coal companies, the power companies are owned by the Chinese government, or there are there are directions instituted through the People's Bank of China, the Central Bank of China, and to whom it lends money and to whom it doesn't lend money. Those aren't made on the basis of
When you talk to people who are more on the capitalist leaning end of the capitalist versus communism spectrum,
They'll tend to say that to the degree that China is successful, it's because of their capitalistic tendencies, their free market proclivities. And then the deleterious aspects are because of the state. And then when you talk to the people who love communism or love socialism, they'll say, actually, capitalism is what's wrong with China. And to the degree they were successful, it is because of their redistribution of wealth or their more state controlled properties. What do you say? What do you think? What do you see?
Hurt, you've just described why comparative systems is a great subject for four and five hour bar conversations late into the night that never reach a conclusion. And the answer I say to that being a good professor is that they're both right. In some sense, what China had to do initially was to achieve its independence from Britain and the colonial power in Japan that occupied it, educate the population,
improve the basic infrastructure. But then in 1978, as I talk about in my great courses, Deng Xiaoping began the process of allowing some kind of market forces to operate initially with regard to agriculture, but then eventually let Chinese business people exercise their entrepreneurial or
capitalistic, if you will, talents and build up very impressive industries. I will say, Kurt, the Chinese had a little bit of an advantage over the Russians because when the Soviets took over in 1917, Russia really wasn't a capitalist economy and there were no real Russian capitalists. It was a feudal economy run by the Tsar and the Orthodox Church.
The Chinese have the benefit of the Chinese diaspora, Chinese business people all over Asia, in India, in Indonesia, in Vietnam, in the Philippines, and to some extent even in the United States. So there was a kind of entrepreneurial knowledge, a kind of business acumen that the Chinese state, the People's Republic of China, could draw on
in terms of human resources. My view of economic development is that the most important resource in any success story in economics is people. You can have all the machines and all the gold and all the silver and all the trees and water, but if you don't have people that are motivated and educated, then you won't have any economic development.
The Chinese state kind of laid the foundation for a Chinese economy, and then the entrepreneurial talent of the indigenous Chinese and the Chinese diaspora were responsible for turning China into an economic powerhouse. And I must admit, I've taught in Beijing on three separate occasions
and the Chinese have have always been for thousands of years very very favorable to education and to learning and so there's a kind of a native drive that's deep in their history for learning and education which pretty much absent in my homeland
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The Chinese revolution under Mao happened in 1949 and Deng Xiaoping began his reforms in 1978 so that's less than 30 years of pure communism whereas in Russia,
I'm going to be a little bit polemical here.
In the socialist subreddits, I don't know if you follow them on Reddit, but they like sometimes to praise Mao and to praise Stalin, or at least defend them. And part of the reason is because they dislike capitalism and the people who are supporters of it so much, and those people hate Stalin and Mao. Okay, you get the idea. Here's a few. Someone was saying this.
When it comes to Stalin, he deserves obviously some hate because of what he's done, but also some praise because here's a bullet point list. He's turned an illiterate peasant society into a full nuclear superpower in just 15 years, raised the living standards of his people, raised the employment rates, raised the literacy rates, raised life expectancy, eradicated poverty and homelessness, eliminated food scarcity, gave his people free education, free healthcare, free housing, free electricity.
One of the questions in Soviet studies, and that was one of my specialties in grad school at the University of Oklahoma,
is to try to separate Stalin from Soviet communism and the system that was put in place originally by Lenin and Trotsky and Lukarin and other leaders of the Soviet Communist Party, most of whom Stalin ended up eliminating. And to ascribe agency to Stalin himself,
gives him way too much credit. Yes, there was employment, full employment, but a large part of full employment was prison labor, the Gulag system. Sorry, do you mind repeating that? It just cut off. Yeah. A large part of the full employment instituted by Stalin was prison labor, the Gulag system that Alexander Solzhenitsyn so graphically
Why is that? Just because they're not motivated or they're disagreeable people to begin with? They're motivated to do as little as possible, to be as unproductive as they possibly can, to do the minimum to avoid sanction or worse.
Is there not a way that you can incentivize them by saying if you are a great producer of whatever it is, you have a lesser sentence or you get better treatment? Yeah, but that only goes so far. That's not the same kind of incentive that you get for a private person having individual satisfaction or group satisfaction that he or she voluntarily achieves.
One of the great successes of the Soviet system was its math and science education, more or less, although the Stalin system distorted education tremendously. The biology
development was distorted by Lysenkoism. If you haven't heard of Lysenko, Lysenko was Stalin's pet biologist and really destroyed the field of Soviet biology by insisting on kind of cockamamie hairbrained theorems of heredity and environment. And speaking as an economist, Soviet economics was
not only worthless but anti-growth because you had to believe in Stalinism. Kind of an eclectic view of economics. The same thing with sociology, history, anthropology. It was all in the service of the state. So while primary and secondary education in the Soviet Union was pretty good, higher education was abysmal. Same thing with healthcare. Yes, you had free healthcare,
But for the common person, it was pretty awful in the sense that it was hard to get, right? Why was it hard to get? Well, because there were not many physicians for ordinary people. The only real good physicians were assigned to treat Communist Party members and physicians
One of the real problems with the whole Soviet economy is that yes, everybody was guaranteed employment and guaranteed a salary, low salary. There was very little incentive for anybody to produce anything or to provide any service. So if you were a physician in a local clinic, you got a salary no matter how good you were as a physician, how many people you treated or how many people you didn't treat.
So if you were, let's say, a mother and your daughter had some kind of illness, like bad, cold, or flu, then the only way to get an immediate care was to have some kind of bribery. One of the things that the Soviet economy generated was a whole system of bribery and favor-doing to get around the planned nature of the economy.
And Stalin also contributed tens of millions of Soviet citizens, first in the Ukraine famine of the 30s and then in his disastrous leadership at the beginning of the Second World War when he either executed or imprisoned most of the Soviet generals and made the mistake of stupidly trusting Hitler and the
the Soviet Union
The Ukraine was occupied by the Germans. The Germans went through Belarus and laid siege to Leningrad and Moscow and killed at least a million Soviet soldiers in Stalingrad in 1942 and 1943.
The legacy of Stalin is mainly dysfunction and blood and genocide against his own people. What about Mao? Some of the defense against Mao, or for Mao, is that he lifted hundreds of millions of people. He was a follower of Stalin, and so in the great leap forward of the 50s, there was mass starvation, probably in the tens of millions, we'll never know.
And then the great proletarian cultural revolution in the late 60s and early 70s was a huge setback for the Chinese economy because it destroyed the lives and careers of millions of scientists and intellectuals, the kind of people you need to build a modern
efficient economy. Probably the one positive thing I would have described to Mao is that he got rid of the Chinese addiction to opium. One of the horrible things about British colonialism is that the British carried out a military invasion of China to force the Chinese to buy opium that was being grown in India
so that the British could earn some funds to pay for that they were buying from India. And Chairman Mao and the Chinese Communist Party got rid of opium addiction and opium sales. Now, they did it, obviously, with a police state and military dictatorship and capital punishment and so forth, but they did rid the Chinese economy of
of its opium problem that was created by the British colonial powers. Probably not. He lifted, it may not be a right word,
He guaranteed a certain amount of food, the Chinese expression is the iron rice bowl, that every every Chinese family was guaranteed a minimal amount of food, primarily rice. So he might have cured some starvation in most of the parts of China. In order to do that, he essentially did what Stalin did in Ukraine, which is mandatorily
requisition rice crops from rice growing regions and redistribute it to the cities and the northern parts of China and created starvation in the rice growing regions that he had expropriated their crops from.
When talking about capitalism versus socialism, you also mentioned that the North Korea versus South Korea is like a comparative economics professor's dream. Now it's not a double blind test because it would be strange if you didn't know which country you belong to. So you have a control. It's just not blinded. So I'm curious. Tell us about that. And you have a control group because the Korean peninsula
prior to the 1950s, was essentially one country and one culture. The other comparative systems professor's dream experiment was East Germany and West Germany. It was essentially one country, one culture. And the really good thing about both the East Germany-West Germany comparison and North Korea-South Korea is that when they were divided into
communist and non-communist. The communist part was the rich part. So in 1949, when Germany was divided into communist East Germany and liberal capitalist West Germany, East Germany was the rich part. And the same thing with North Korea. North Korea, at the time of division, North Korea was the rich part and South Korea was the poor part.
In Germany, the region around Berlin and Leipzig and Bresden and those parts of what had been Prussia, that was the industrial part of Germany. That's where the German war machine came from. And the western part of Germany, especially southern Germany, Bavaria, I sometimes insult my German friend Bavaria,
as the hillbillies of Germany. They were rural, they were poor, they were Catholic, they were illiterate, all of those things go together. Really, until the post-war 1940s, when the U.S. Army came to southern Germany and the Marshall Plan and the Konrad Adenauer government and the beginnings of the EU lifted,
Southern Germany out of poverty into the terribly, terribly wealthy part of the world that it is today. South Korea, the same thing. In the 1950s, South Korea specialized their major fish paste and t-shirts and hair that South Korean women would grow their hair, cut it off, and send it to Japanese women for wigs. And that's what South Korea produced.
To jump in, that's to say that because generally wealth begets wealth when you have two states that are similar except for wealth and then you follow them across time and that flips then and obviously only one trait was different. The only trait that was different was the system.
If North Korea had stayed wealthy, then the people who believed in communism would say, well, it's because of communism, but you could say, well, it's also because they were wealthy to begin with. The beauty for a comparative systems person is that you impose two different systems and the
Capitalist system was imposed on the behind part. You started a race and the winner was the guy who started 10 yards behind. You have to say that he was a better runner.
Does that make it decisively clear that capitalism is as a whole better than communism? Yes, I would say yes. What about socialism? South Korea is a great example of state capitalism.
One of my favorite economists these days is a Korean economist who teaches at Cambridge. His name is Ha-Joon Chang, and he's written several books on economic development. And he's also written a kind of primer on economics called the ABCs of Economics. And from him I learned the real story of the South Korean development. It wasn't private enterprise, free market capitalism that all of a sudden
There was no regulation, no government, and these industries just developed out of entrepreneurial zeal and private enterprise. The South Korean government in the 1950s and the 1960s had a real, you could say Hamiltonian, Alexander Hamilton, economic plan. And that plan was to use tariffs and quotas, economic protection, and state-directed development
So the South Korean government told the Samsung company that they couldn't make fish paste anymore. That was not going to be their primary product. That's hilarious that Samsung used to grow vegetables or it was a food company. Yes, and a very primitive company. And the leadership, to some extent a military dictatorship in South Korea said, no you are going to make electronics, simple electronics.
And we will protect you. We will put tariffs and quotas against Japanese electronics, German electronics, American electronics, and we will invest in, the Korean government will invest in education by producing engineers and scientists and metallurgists and so forth. And that's what you will do. The South Korean government told the same thing to Korea and Hyundai.
that you will start to produce cars and we will protect you from Japanese imports American imports in the 50s and 60s as America were making horrible cars. From Japanese imports and German imports and the original Korean cars the Kia's and the Hyundai's and the Daiwos that were produced in the 70s and 80s were terrible. You wouldn't want to buy them. But Korean
South Korean consumers had to buy them because they had no choice. And eventually, as we know, Samsung and Kia and Hyundai and LG. LG was actually two companies. Lucky was making electronics and Gold Star was making home appliances. And the South Korean government told them to merge and to
realize economies of scale and so LG now produces television sets and TVs but also home appliances as well. When you say the government told them to merge, are you saying that they incentivized them to merge or actually mandated them to merge and if they didn't they would go to prison? They did both, exactly. They said the Korean government
ran the monetary system, so we will lend you money to build an electronics factory. We will not lend you any money to make fish paste, and if you make fish paste, we'll put prohibitively high taxes on it so nobody will buy it. So, probably didn't have to threaten to send them to prison. The Korean government forced for all practical purposes a change of direction for the large
Now, how did North Korea fare? Well, the difference between Samsung as an automobile producer, and I'm not sure North Korea produces automobiles, but the people at Samsung, they did a good job, earned profits and had big incentives.
The people that work in a real communist enterprise, no matter what they produce or not produce, they get the same money. All they have to do in a communist economy is meet the quota for that month. One of my favorite stories in my great courses course is about the
The Soviet shoe factory, right? That it's given a quota of producing 10,000 shoes. So it produces 10,000 size 10 left shoes, right? Because that's the easiest thing to do, to produce one size, one half, and one color. So the capitalism- That's the true story that actually happened? Oh, yeah. Oh, it happened in all kinds of Soviet enterprises. And they don't get penalized for that?
No, they don't get penalized. The director might get replaced or there might be more directions. That's a lot of the output. It reminds me of the monkey paw where you have to be careful of exactly how you word what you wish for. I want to become rich and then you become money yourself. That's one of the reasons why
communist central planning system to break down is that in the Soviet Union if you told one factory to produce 10,000 size 10 black boots and another factory to produce 10,000 size 10 white boots then everybody's going to get boots and if you have no shoes no matter what size you are you're happy to get a size 10 right maybe you're a size 3 or a size 11 but
Having boots is better than going barefoot, right? But once you get a certain level of development, and for something as complicated as a little transistor radio, right? There are different components that have to fit together, and it's really hard to plan complicated production. So you need some kind of incentive. It could come from the state. It could come from
The Japanese did the same thing with their automobile industry. The first Japanese cars that were exported were horrible. But the Honda I drive today, I always tell my students dollar for dollar Japanese cars are the highest quality per dollar that you could possibly buy.
Okay, so now in North Korea, you also mentioned that you believe it's going to have an economic collapse at some point. Yes, and a political collapse, because they all do. It's just essentially a straight line projection, right? You would have predicted, you would have been accurate to say that at some time in the future, Belarus would have a political
crackdown or an explosion and that's what's happening. Same thing did happen in China in 89 in Tiananmen Square and it will happen again. It may not happen in Tiananmen Square, it may happen in Hong Kong. But at some time in the future China will have some kind of a political upheaval or an explosion. And the same thing will happen in North Korea. The
wants and desires and wishes of the population will be so antithetical to the wishes and desires of the very, very small ruling elite that the system will break down. And you say ruling elite, but as far as I know communism is supposed to be a system where everyone is equal. And you also mentioned that in the Soviet Union the doctors had favorable service to the people who are members of the political party. Right. But then is that not real communism?
Real communism is kind of like real free enterprise, where there's no government and there's no monetary system and everybody is a voluntary trader. That exists maybe in heaven or hell, I'm not sure, but it doesn't exist on earth and never will. But in the off-quoted phrase of George Orwell, we're all equal, some are more equal than others.
In the Soviet Union, for example, the leadership up until the Gorbachev administration, the leadership were very old men. And it was a very small number. It was in the Politburo 12 or 13. And those people exhibited almost complete control over the entire economy and the entire society.
How do you think the Cuban system is doing? What's your evaluation of it? Because some people will say it's great, there's free healthcare, there's no homelessness.
People have homes, people have education, the literacy rates are one of the highest in the world. And actually, the literacy rate is the Achilles tendon of dictatorial regimes because when people get literate, they can read and they can realize that they don't live in paradise. Yes, there's free healthcare,
But that would only be if they're able to see what's happening in the outside of the world like East Germany for West Germany. So given that Cuba doesn't have freedom of press or freedom of information. There are tourists, there are relatives of Cubans that live in Chicago and there's the internet these days.
In some sense, it may be the last but also it could be one of the sooner implode just because the system is so dictatorial and so dysfunctional.
And so the most brittle, you would say. The advantage for Xi Jinping and the leadership of the Communist Party is that since 1978, of the billion Chinese, somewhere between 100 million and 200 million have done rather well, right? Still half of the population still lives in what may be called
near poverty, right? Very, very substandard housing, not much access to medical care, very limited access to jobs and nutrition. So it's not a relatively large part of the population in China that's well off and if not supportive of the
current Chinese government at least accepting of it. What's the difference between an economic collapse and a depression? Depression simply means that economic activity declines. The system doesn't disappear. Collapse means the system is fundamentally changed. So when East Germany collapsed,
The government-owned East German enterprises all disappeared and McDonald's and Burger King moved in. I remember being on a subway in East Berlin right after the fall of the wall and the Ninja Turtles were advertising Burger King. How soon afterward? One month. The wall came down in November the 9th, 1989 and I was visiting a friend in East Berlin
in early December of 1989. And Burger King was already on the way.
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What are Galbraith's conditions for depression?
That's one of the books that I talk about in the Great Court and one of the books that when people ask me, well, what should I read about economics and especially the stock market and collapses and things like that, I always recommend Albright's The Great Crash, which is his analysis of the 1929 stock market crash and still to my
the best analysis of why the stock market crash of 1929 occurred and why the subsequent great depression was so serious. I'll differentiate which ones we have and which ones we don't have. The first thing he mentions
Gross wealth and income inequality, which obviously we still have. Just to butt in, were they able to measure the Gini coefficient back then? Is it comparable to what it is today? That's a different question, Kurt. Well, they could have measured the Gini coefficient because Corrado Gini invented it in the 1930s. So they could have, right? Can we do an analysis like a retrospective? Yeah, we can do it now.
tax records and income statements and wills and so forth. In fact, Kurt, that's just on a sidelight. That's one of the real advances in economic history research is that there are now really, really good sources of microdata that economic historians are using to analyze the 16th and the 17th centuries, especially in
the British colonies of North America and looking at things like wills and baptismal records and church records and some tax records. And so there are Gini coefficients for pre-revolutionary America in the 1700s, right? So the Gini coefficients for the
have just hit in the last year or so what they were in 1929. The reason that wealth inequality is so damaging and so predictive of stock market crashes is that the more money you have, the more risky you can afford to be. If you have $100, you really can't afford to lose anything because you need all of that to pay for food, clothing, and shelter.
If you have a couple of billion dollars, you can gamble three or four million in a risky stock. And if it goes bust and turns into zero, you're really not going to be harmed that much. So one of the things that extremely wealthy individuals do is they have a much higher appetite for risk, for junk bonds, for mortgage-backed securities of questionable value.
The country becomes more risky because those with wealth take more risks. It's not because of the perception of injustice from those who are on the lower end of the income distribution having riots and overturning the system. And the people at the lower end of the income distribution? The reason why I say that is that the Gini coefficient is highly correlated with the amount of crime in a given region. Crime isn't necessarily correlated with
The other end of the wealth distribution for people in order to have to borrow money, have to get loans, have to take out payday loans or title loans on their car or their motorcycle or as in the case of the US great recession of 07-09, working class people took out home
Home equity loans are what middle class and working class people in the United States in the early 2000s used to support their standard of living. It's what they used to pay rent, to buy cars, to
They default on their loans.
One of the things that didn't exist in 1929 was the Securities and Exchange Commission.
That wasn't instituted until Roosevelt's New Deal. The Securities and Exchange Commission regulates sometimes well, sometimes not so well, the financial reporting and the information at publicly traded corporations' seminary. So, for example, as I think I mentioned in my Great Courses course, the only company that I actually own stock in myself is Starbucks.
So as a stockholder, I get an annual report. It tells me how much money they make, what their expenses were, and how much money they have in the bank. And I have a pretty good feeling that those numbers are mostly accurate. Now I think for Starbucks, they're mostly accurate because Howard Schultz, the founder and the CEO, is in charge of that.
They're mostly accurate because of Howard Schultz? Yeah, the CEO. He's a good guy, right? But even if he wasn't a good guy, the Securities and Exchange Commission on pain of imprisonment audits those reports and makes sure they're accurate. So when you buy stock in Starbucks or Google or whatever, you're relatively assured that they're
In the 1920s, there were companies issuing stock that the only thing the company had was the paper that they issued stock on and they had all kinds of
fictitious assets. And Mr. Ponzi, there really was a Ponzi behind the Ponzi scheme, was selling real estate titles to land in Florida that he didn't own. So people were buying real estate in Florida and didn't exist. So that kind of corporate criminality was widespread in the 1920s.
Okay, so you said that Galbraith's first condition is the genealogy of economic right. And then the second was corporate structure, lack of regulation. Okay, lack of regulation. Now it seems like today we don't have that. We have regulations. Yes, exactly. Which is one of the things that's going to prevent a kind of the stock market crash a la 1929. We still have stock market volatility and certain stocks will
collapse for economic reasons, not for criminal reasons. For example, right now, Kurt, that's just a scratch, that's not a sign. When people ask me about what stocks to buy, the first thing I say, Kurt, is that if I really knew what stocks to buy, I'd be on my yacht in the Mediterranean. I wouldn't be here in Chicago in my little two-bedroom apartment. But in general, these days,
Because of COVID, right? Airline stocks, hotel stock, cruise line stocks are not the thing to buy. Not because the cruise lines or the airlines have done anything criminal or they've been misrepresenting it, their business is just bad. But vicissitudes of life. Yes, exactly. The third cause, according to Alpeth, was the lack of regulation of banks and the lack of
of limitations on what banks could do. In the 1920s, banks themselves could buy stock. And so if banks were taking my money and buying stock in a worthless corporation and that corporation disappeared, then my money disappears too. There was no federal deposit insurance corporation. The Federal Reserve had very, very weak supervisory powers. And so today we have
deposit insurance and active monetary regulation by the Federal Reserve. Okay, we're still on point number two, that is the corporate... Point number three. Banking structure. I see. I see. Corporate and banking structure. Yeah. And of those two, the banking system is more important than individual corporations. Because if a bank goes, then not just one corporation is hurt or one
It's one of the reasons that Canada had a much better experience during the Great Recession of 1709, because Canadian banks were much more regulated and limited in terms of their mortgage lending.
And unlike American banks who were lending all kinds of money and buying mortgage-backed securities, when real estate crashed in the United States in 07, then the banks would have crashed also and there would have been bank runs without the Federal Reserve and without our Federal Deposit Insurance Corporation. So banking structure is critical, right? The fourth
And this is one that we have today are large balance of payments, deficits, and international debts.
And is it worse today than it was back in 1929? No.
It's a little bit less serious, but unlike 1929 when the United States was running a big trade surplus, right now the United States is running a big trade deficit, and a lot of U.S. government debt, corporate debt is held by Chinese, Japanese, Germans, countries that have large trade surpluses.
And those trade surpluses and deficits cause unemployment in the United States. I think one of the key variables that explains the Trump election in 2016, and this has been done by political scientists and economists using census data and Federal Reserve data,
Those counties in the United States that had manufacturing that was adversely affected by Chinese imports voted 80 to 90 percent for Donald Trump. So small towns, rural areas, medium-sized cities that had one or two businesses that were put out of business by Chinese imports
Those were the places and are the places that are the most Trump favorable parts of the American electorate. That kind of political division still exists. To take a quick aside,
You mentioned that in South Korea and a few of the other Asian tigers, they had protection on the infant industries in the form of tariffs. Do you see what Trump is doing with tariffs on China as akin to that? Do you see it as salutary? No, because these aren't infant industries. These are declining industries. So protection on things like steel in the United States. Steel industry is not an infant industry. In many ways, it's a declining industry.
And also, we're in a much more complicated economy. Steel isn't just something we produce in the United States, it's also something we use, right? So manufacturers in the United States who produce appliances, who produce automobiles, who produce aircraft, use steel. So putting the tariff on steel makes their cost of production higher. And so
Yes, there may be a few steel jobs on tariffs, but there are lots of manufacturing jobs that disappear because automobiles and appliances and aircraft are cheaper other places where they don't have tariffs on steel. And plus, what always happens is that in this day and age where there's much more communication and knowledge,
When we put tariffs on Chinese products, the Chinese put tariffs on our products. When I was an undergraduate in the 60s taking my first international econ course, my professor, Professor Saylor, always loved to tell stories about the chicken war. And the chicken war was between the United States and the European Union. It wasn't a war of chickens?
Yeah, it wasn't chickens fighting chickens, no. That's what I first thought. I thought, oh my God, we're going to have some bloody chickens and, you know, some real feathers flying. But the United States, believe it or not, still is a major exporter of frozen chickens, right? And a lot of chicken farmers in Europe were upset because they were being harmed by the chicken imports. So the European Union put a big tariff or a quota on, not sure which, on US chickens, right?
So the chicken farmers in America went to the US government and saying we're being harmed by the European Union discriminating against our chickens and the US government put tariffs on Danish cheese and
French wine. We always pick on French wine. So there were arguments back and forth and eventually it got settled somehow. The Europeans agreed to buy a few more American chickens and we agreed to buy a few more pounds or kilos of Danish cheese. So the problem with tariffs these days is that they always generate retaliatory effects. And I always, when I teach courses in international trade theory,
Students always bring up the point, well, tariffs will protect American jobs, and yes, they'll protect some American jobs, but the corollary is that they'll also cost some American jobs as well. And that gets me to Galbraith's fifth point, which we don't have today, fortunately, and that is a much better knowledge of international economics. In the 1920s,
With the stock market crash, there was a belief that the federal government should always balance its budget and the Federal Reserve should only do policies that restrict the money supply and fight inflation. So when the Great Depression started in
The US federal government raised taxes and cut spending to balance the budget and the Federal Reserve decreased the money supply, which of course all of those things do nothing but make a recession. What happens when there's a recession or a depression is that the money supply should increase
Interest rates should go down. The federal government should cut taxes and raise spending on deficits and expand aggregate demand to compensate for the declines in private demand. And all of that knowledge we owe to John Maynard Keynes and his followers. It was Keynes who in the general theory in 1936 laid out perfectly the theory for
So do you see the American economy as going or headed towards a recession, a great recession akin to 1929? I'm a little bit worried, Kurt, these days because when COVID first hit in March,
The Federal Reserve did and still does execute very beneficial and intelligent monetary policies. And Congress, the U.S. Congress, in an amazing display of speed and intelligence, passed what was called the CARES Act. And that provided for
the $1,200 checks that went out to everybody, the expanded unemployment benefits, the subsidies to businesses, and all of that served to mitigate the recession effects of COVID. Now, a lot of those fiscal policies, the
budget transfers, that expanded unemployment benefits, ending federal outlays. In the United States, those are all set to end either this month or next month. And if they end without being extended or replaced, then there is a fear that the United States could go back into a more severe recession than the one we're already in.
Is it going to end or do you see signs of it being extended? I don't see signs of it being extended. I see signs of the Republican leadership in the Senate and the White House and the Democratic leadership in the House of Representatives not agreeing on much of anything in terms of what the next
Forgive me for this somewhat rudimentary and maybe a sophomore question. I'm just a foolish physicist. Think of me as that.
Does not the distribution of money, let's say $1,200 checks to virtually everybody, then lead to inflation a few months, if not years down the line? Probably not for all kinds of reasons. One is that inflation occurs mainly when the simple
formula is when there's too much money chasing too few goods, meaning that production is at a maximum and there's still an increase in the money supply occurring. The main problem in the U.S. economy is not that there's insufficient production, there's insufficient demand. There are all kinds of factories that are shut down, restaurants that aren't operating hotels and aren't occupied,
It sounds like there's less of a demand in certain sectors.
But there's greater demand in some sectors and no change in demand in other sectors. So when people get money, if they spend where there already is high demand or where there's no change in demand, then it doesn't go towards
It actually grows to a little bit. I mean, there's a little bit of price pressure in the US right now. I'm not sure about Canada. My guess would be the same thing. There's a little bit of price pressure in grocery prices, right? So people are not going to restaurants. So restaurant prices are either going down or not going up. But grocery store prices, because of the increase in demand, are going up. But people aren't, at least after the initial wave
When it comes to hyperinflation, you mentioned that you just cancel the currency that will lead to a depression, but then that also leads to a decrease in the prices.
Now, why the heck are you cancelling a currency when there's hyperinflation? And then second, when you say there's a decrease in price, to me, you need a currency to evaluate a price, but you just cancelled it, so I'm unsure how that happens. Okay. Best example, I'm in Bucharest in Romania in 2001, right? And the new Romanian government is printing money like a bandit, right? Just printing money and printing money and printing money.
And the inflation rate is 100 or 200 percent a month, right? My first meal in Bucharest, I get the check and it's for 600,000 Romanian Lai. I go, oh my God, this is terrible. And then I realized that I'm getting 25,000 Romanian Lai to the dollar. So the check is really about $14. That's for me and the guy who glommed onto me as my
We had a very lovely meal and wine and cognac and what have you. Incredibly cheap. Incredibly cheap and literally baskets full of money that's pretty much worthless. What the Romanian government essentially does and the Yugoslav government did this or the governments in the constituent republics, the Soviet government
Even the money that's in the bank that's virtual? There's no virtual money in those kind of economies. It's all paper money. That's no good.
I have some leftover Russian rubles that were issued in 1993 that were nullified in 1998.
But when I lived in Russia in 94, I accumulated some Russian rubles from 1993 and now they're no good. So for those of your listeners who somebody's going to pay you in Russian rubles, you want to check the date of those 1993 that it's post 1998.
So yes, it's very harmful, especially for ordinary people who don't have access, who don't own gold mines or silver mines or factories or what have you. So the money is cancelled and the government issues a new currency, has new pictures on it and instead of maybe a hundred million of these
They only issue a million, right? So what used to cost $25,000 now only costs $25,000 because that's the ratio of the amount of old currency to the amount of new currency. So you're able to exchange your old currency for the new currency? No. So you just have to start from scratch? Start from scratch, right? If you're working or let's say you're a student and you get a little bit of a shocker, instead of getting
Okay, I'm going to give you some broad platitudes and you can tell me what you think of them. Communism has caused tens of millions of deaths. Now, is that true or false? The Ukraine famine of the 1930s, the
Would you say that that was a result of communism though? Yes. No, that was deliberate policy of the Stalin government to starve the Ukrainian population in order to feed the Russian population. One of the arguments of enmity between Ukrainians and Russians because of the history of that famine that was
It was engineered by the Soviet government under direct orders from Stalin to requisition food from Ukrainian peasant farmers to feed the industrial working classes in Moscow and Stalingrad and Leningrad and so forth, and created mass starvation. There's some really good new books on that, one by historian Anne Applebaum,
Okay, here's another phrase or another sentence. Capitalism has lifted more people out of poverty than virtually any other economic system. Probably true, right?
but done so at great cost lives as well as opportunity that most people I'd say the majority of people in societies that move from feudalism to capitalism benefited right but you'd have to say the children that were put to work in the textile mills of Birmingham and Manchester England
Probably didn't benefit from capitalism, but their great-great-great-granddaughters and grandsons probably did. We have this discussion in the United States right now, a very important discussion around the Black Lives Matter movement. Capitalism in America was essentially financed by slavery.
that yes, capitalism in America created industrial jobs, created a manufacturing center, a transportation center, but the initial investment, the initial funds that paid for that came from the export of cotton from the south to England, to Germany, to the Netherlands,
American capitalism lifted people in the working class and the middle class into a decent standard of living
But at the lives and the freedom of millions and millions of African Americans who literally paid for it. Right. Now, is there a way of measuring the amount of deaths caused by capitalism in the same way that some people spout off deaths caused by communism? Sure. Yeah. And that's part of the discussion of reparations and slavery in the United States.
Probably death might be a bit too strong, but you would have to say life expectancy. One of the, actually the book that I use in my European economic history course, looks at life expectancy in Europe over 2000 years, from the Roman Empire until the 20th century. And the advent of urbanism and capitalism, if you will,
societies in Europe in the 15th and 16th century dramatically reduced life expectancy for most of the population because in the 600s, 700s, 800s in Europe people lived and people were farmers, agricultural producers, lived outside. In the 1400s and the 1500s when urban societies and urban capitalism was being
had people getting close together and they didn't wear masks and they didn't social distance and they bred plague and typhus and cholera and dysentery and died relatively young. And that life expectancy increase really didn't happen until the end of the 19th and the beginning of the 20th century that capitalism eventually with social
democracy and the provision of clean water and public health programs raised people out of disease and death at an early age. I should tell you a joke among economists, right?
Economists have physics envy, right? So there's a joke that if you're a really bad, and if you believe in reincarnations, right? So if you're a really bad economist, when you die in the next life, you will come back as a sociologist. If you're a really good economist, and you're highly educated and technically proficient, when you die in the next life, you'll get to come back as a physicist, right? All right, cool, cool. Well, maybe I was a good economist, I don't know. Yeah, yeah, there you go.
Part of the problem that I had when I was making this previous documentary called better left and said about the right versus left or extreme left. What delineates moderate left from extreme left is of definitions in math. That's my background. It's like definitions are clear cut. Here's what a topology is. Here's what a fiber bundle. Okay. Yeah, there's no ambiguity. Now when it comes to what, what defines socialism, what defines communism, what defines Marxism, it's, it's amorphous, it's indistinct.
However, when it comes to capitalism, there does seem to be generally more agreement and it seems to be even from the left and the right. It seems to be centered on three that I could find it was like private property, profit motive and voluntary exchange. Most people would agree on that now, given that that's what capitalism is defined by.
Can we say that the child labor and the slavery is part of capitalism, given that children can't consent, so there's no voluntary exchange, and slaves are not voluntarily being slaves? That would be strange if some voluntarily said, let me be a slave. Can those ills be attributed to capitalism or some bastardization of capitalism instead? If you really believe in a free market economy, then you should be able to sell your children and buy and sell slaves, and you should be able to
Okay, so then is it true that those ills that you mentioned, which are slavery and the decrease in life expectancy for the slaves as well, and child labor, is that a result of capitalism or something else? And what would you call that something else? I would say that that's a result of the early developments of a market economy, of a capitalist economy. That's part of its origin.
There were many, many people that suffered in the beginnings of capitalism in the factory system and resource extraction. Just think of what coal miners went through before there was any kind of safety legislation or protection from all of the diseases that they got from their occupation.
The capitalist mine owners resisted any kind of regulation because they said that's government interference and that's socialism and that you're restricting my rights as a mine owner to tell the workers that have agreed to work for me. The problem is if you're the mine owner in some
He'll part of West Virginia and you're the only employer, then your employees don't have a voluntary choice to make for the exchange of their labor. If they're not coal miners, then they don't eat, they don't live.
And that's an argument that I hear plenty from those on the extreme end of the left and even the left generally is that you say you have freedom but you don't have the freedom to not work because and you don't have a freedom in the amount of jobs that you can choose from given that if you don't choose from one of these select few because you have a certain amount of intelligence or expertise or whatever. And then there's the whole question of wealth inequality and the opportunity
The
Excellent housing. And then there are people born not too far from where I am here in the city of Chicago who were born with no opportunity for a decent education, decent healthcare, decent housing, decent nutrition, minimal protection from crime. And so you can't say that freedom is an absolute or
Freedom is something that should take precedence over any other kind of social policy or economic policy. Yeah, there's actually two different types of freedom, and I think that part of the whole discrepancy between the left and the right, when both are saying we just want more freedom, is they're using different kinds of freedom. So there's positive and negative. I don't know if you're aware of the plot. Yes. So one is like, just for the people listening, one is positive. I believe it's positive is positive. Someone has a gun to your head. You're like, I don't have that. So I have positive freedom.
The negative freedom is that you have more choices or that you freak from even social conditioning. Like the expression of your complete individuality if that even exists. Okay, you spoke of physics envy. Let's talk about that black envy versus white envy in Russia. Can you delineate to the audience what those are? Yeah, and that's one of the reasons why for Russia especially
It's been a very difficult transition to some kind of a market economy, some kind of a commercial economy, to use Adam Smith's phrase, because under feudalism and under communism, any kind of transaction was almost always a zero-sum game. If I got something, it means you didn't, right?
One of the hardest things when I was teaching in Russia, one of the hardest things I ever tried to explain and I was never really successful in doing this was explaining what? Around what year was this that you were teaching in Russia? 1994. I was explaining to them the concept of a Pareto optimal transaction. That's a fancy phrase that's any transaction where you benefit and I benefit, where both of our utilities rise.
So when I go into my Starbucks every morning, I'm all the way to the cart with $2.50 and Starbucks happily accepts it and they give me a Grande Hold Misto, which makes me much happier than holding on to the $2.50. So we both benefit from the exchange, right? Ordinary Russians had no experience with that. Their parents had no experience, their grandparents
But even with bartering, is there not that operator improvement there? But they didn't really even barter. 90% of the Russian population of the Filth Revolution were serfs, were peasants, and they were given a certain amount. Anything more than they expected, that meant the landlord got less.
Or if one group of peasants got more and the other group of peasants got less. So it was very much a static economy. Holstroy writes about this in Anna Karenina a lot. I had to buy a copy of Anna Karenina when I was in the Soviet Union because one of the things the Soviet Union made you do... Sorry, sorry, I just cut off. At least for me, you had to buy a copy of Anna Karenina.
Yeah, well, I had to buy something because when I was in the Soviet Union in 85, the Soviet Union, they made you buy Soviet currency when you went in, but you couldn't take it out. So I had all these Soviet rubles and I didn't know what to do with it. And on the last day in Moscow, I found a bookstore, right? And the bookstore had a copy of Anna Karenina, and I hadn't read it. And
This is a real good story about Bronx and his dad Ryan, real United Airlines customers. We were returning home and one of the flight attendants asked Bronx if he wanted to see the flight deck and meet Kath and Andrew. I got to sit in the driver's seat. I grew up in an aviation family and seeing Bronx kind of reminded me of myself when I was that age.
That's Andrew, a real United pilot. These small interactions can shape a kid's future. It felt like I was the captain. Allowing my son to see the flight deck will stick with us forever. That's how good leads the way. It was all about sex and violence. It was about Anna Karenina having an affair with Count Vronsky and so forth. So I bought it. There's no sex and violence in Anna Karenina, but there are hundreds and hundreds of pages about serfdom,
and social issues and economic progress and all kinds of things like that, which turns out to be, at least for an economics professor, just as exciting as sex and violence, right? That's a horrible thing to admit. So the Russian soul that went through feudalism and orthodoxy and so forth had no knowledge of voluntary exchanges or market exchanges.
And so having an economy where people make a profit means that to the Russian, they're taking advantage of somebody, right? And so that generates black envy. Black envy is if somebody does better, I want them to do worse, right? So if two Russian farmers, right? And one of them has two cows and the other one only has one cow, right?
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I'm jealous. If I have black envy, then I want one of his cows to die. He's worse off and we're back to equal. White envy is I'm envious and jealous that he has
but the way I'm going to solve that is I'm going to try to figure out how to get another cow myself so that I don't diminish his success but I try to to equal it right or at least get on some kind of a par right. For most of Russian history and for the initial decade or so after the fall of communism
There was a lot of black envy. So if somebody in a Russian town had a successful little shop, quite often that shop would be firebombed or looted or somehow destroyed because that person was rising above everybody else in the village or the town.
That's Black envy. Every society has some of that, but in Russia it was in some ways the predominant cultural value with regard to quality and inequality. Is Black envy something that you find pervasive in communist societies? Yes, right. Do you think that's because of the underlying Marxist philosophy that it somehow promotes or says that
It promotes an ideal of equality, but the people in the society see that there's cognitive dissonance between the ideal and the actual nature of society. The people that run the communist society, Mr. Lukashenko in Belarus, in Minsk, Mr. Brezhnev in the Soviet Union, they actually, they're not equal. They live much, much better.
When East Germany collapsed, one of the real big scandals was how well the East German Communist Party leadership had lived. There was a compound outside of Berlin that had a special hospital, special grocery stores, special cinema, special swimming pools, and many of the East Germans who had internalized this belief that we're all equal, that that's what
separated us from those greedy capitalists in West Germany is that in East Germany we had solidarity and everybody else was more or less equal. Certainly some people got a little bit more, doctors got a little bit more than truck drivers, but it was a difference of maybe the doctors got 400 marks a month and the truck drivers got 350 marks a month. When they saw how well the leadership of the SED
the East German Communist Party had been living and how critical they were, then that was one of the things that completely, for most East Germans, invalidated their belief in communism. And most of those people went from believing in communism to believing in Ronald Reagan and Milton Friedman.
In some ways, rather capitalistic because most of the resources, most of the productive resources in Germany are owned privately. BMW is owned privately
They call it
Sozialmarktwirtschaft, it's all one word. Germans pull everything together and make one word out of seven or eight. So they call it a social market economy, which means that every German citizen has health care, has education, has some minimal standard of living. But the income inequality in Germany is quite significant.
Right. Something I was thinking about is people like to praise Sweden and when you look at Sweden's trading partner, the largest is Germany. And so if some people say who are on the left end will say that it's because of Sweden's socialistic policies that they're so wealthy or that they have such high standards of living, but they're predicated on a large part to some other nation, which is capitalistic like Germany. So it's not like you can view them in a vacuum. Right. Right. Yeah.
What are your biggest differences and disputes with Richard Wolff? Probably more favorable to markets and private enterprise for at least a certain sector of the economy, consumer goods and services and less favorable to
government control or government ownership. I think there are certain things that governments ought to own, like in the United States, the postal service, right? And probably public health care. I think the American health care system is much too capitalistic and much too private enterprise and needs to be much more socialistic, if you will.
If you had one question for Richard Wolff, I'll take this and I'll ask him, what would it be?
social or political policy or law that you would enact. Fix the American economy. Great. Professor, where can people find out more about you? They can go on The Great Courses. I'll repeat that once more. I don't know if it's me that's cutting off. I think it's my computer. The Great Courses, alloneword.com.
The problem with economics and the reason that economics can't beat physics is that lots of things in economics you can't measure
There are some things you can measure, but there are lots of things you can't measure. Freedom you can't measure, individuality you can't measure, quality of life you really can't measure. You can get proxies for it, but physics you can measure energy, you can measure momentum, you can measure mass, you can measure all those kinds of things. Economists have lots of numbers, but they're all approximations.
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"text": " All right. I was born and raised in Houston, Texas, so I'm a native Texan. I teach here in Chicago at Northeastern Illinois University. I'm mostly retired, but not retired from traveling, taking students to Europe and teaching an occasional online class. And my main interest is"
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"text": " Comparative Economics, a subject of my Great Courses series on capitalism versus socialism, and with particular emphasis on the former Soviet Union, Eastern Europe, and Western Europe. Great. There's a few terms that need delineating because many people mix them up, such as social democracy, socialism, communism. Why don't you go through those three and disentangle them?"
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"text": " It might be easier to start with the most extreme first and that's communism, especially as practiced in the Soviet Union and its former satellites in Eastern Europe and to some extent it still exists in places like North Korea and for all intents and purposes, Cuba. Full communism means the government ownership, the public ownership,"
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"text": " Social democracy means more social control of the economy but has some room for private enterprise and also has some room for political diversity. Under Soviet style communism there's really only one political party and one political direction and it's very centralized and non-democratic. So"
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"text": " to contrast former Eastern European countries. And to some extent, Kurt, we still have a little bit of that going on right now in Belarus. What's happening in Belarus is that to some extent is a kind of a descendant of Soviet communism. The government still owns almost everything in the economy, and there is one political party and essentially one political ruler, Mr. Lukashenko,"
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"text": " who is under some, shall we say, protest right now. And so that's complete ownership and centralized political non-democratic control. Social democracy, socialism that exists in Western Europe and Scandinavia means that the government has a large role to play in the economy and may own some parts of the economy, but there's large scope for private enterprise and political"
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"text": " How does social democracy and socialism differ from the welfare state? Probably in the degree of ownership and social control. A welfare state, which we could describe to some extent as the United States or Canada"
},
{
"end_time": 398.319,
"index": 15,
"start_time": 372.79,
"text": " means that there's mostly private enterprise, in fact, preponderant private enterprise, but a lot of social redistribution and social safety net. So, welfare state is probably the least intrusive into a market economy and the least concerned with ownership of economic resources."
},
{
"end_time": 428.268,
"index": 16,
"start_time": 399.718,
"text": " When I hear people describe China, sometimes they'll call it state capitalism. What is state capitalism for the people who are listening? China presents a strange mixture that's impossible to categorize. Because in one sense, it has the hallmark of the Soviet economy in that there is one political party and centralized leadership and no"
},
{
"end_time": 457.568,
"index": 17,
"start_time": 428.814,
"text": " political contest or political democracy. However, unlike the Soviet Union, there is a relatively large private sector in the Chinese economy that produces goods and services for profit and the owners earn profits and in some cases billionaires. The difference between say the Chinese economy and say the"
},
{
"end_time": 486.203,
"index": 18,
"start_time": 458.114,
"text": " Swedish economy or the French economy is that the French economy has guaranteed property rights and political contest so that the people that own Louis Vuitton, Moet, Hennessy, for example, President Macron doesn't have the power and certainly beyond the realm of French politics for him to unilaterally expropriate the owners"
},
{
"end_time": 516.561,
"index": 19,
"start_time": 487.415,
"text": " and re-transfer the ownership back to the state. That doesn't happen in China. Xi Jinping and the Communist Party of China has the ability and the power to immediately socialize or take away the property of any so-called Chinese capitalist. So the state is more important in China than capitalism. So it's a kind of a hybrid"
},
{
"end_time": 545.742,
"index": 20,
"start_time": 516.869,
"text": " and state capitalism to some extent is a misnomer. State capitalism is probably a better description of Nazi Germany, where there was one political leadership, one political party, no democracy, but the government of Hitler wasn't about to and probably couldn't nationalize Mercedes-Benz or Volkswagen or"
},
{
"end_time": 572.312,
"index": 21,
"start_time": 546.408,
"text": " What would you describe China as? A mixed economy? I would describe it as limited communism because the state, the Chinese government still owns a large proportion of the Chinese economy and still directs the Chinese economy"
},
{
"end_time": 600.555,
"index": 22,
"start_time": 572.585,
"text": " either directly through state ownership of enterprises, most of the big industrial enterprises, the steel companies, the coal companies, the power companies are owned by the Chinese government, or there are there are directions instituted through the People's Bank of China, the Central Bank of China, and to whom it lends money and to whom it doesn't lend money. Those aren't made on the basis of"
},
{
"end_time": 620.691,
"index": 23,
"start_time": 601.254,
"text": " When you talk to people who are more on the capitalist leaning end of the capitalist versus communism spectrum,"
},
{
"end_time": 647.073,
"index": 24,
"start_time": 621.084,
"text": " They'll tend to say that to the degree that China is successful, it's because of their capitalistic tendencies, their free market proclivities. And then the deleterious aspects are because of the state. And then when you talk to the people who love communism or love socialism, they'll say, actually, capitalism is what's wrong with China. And to the degree they were successful, it is because of their redistribution of wealth or their more state controlled properties. What do you say? What do you think? What do you see?"
},
{
"end_time": 676.34,
"index": 25,
"start_time": 647.449,
"text": " Hurt, you've just described why comparative systems is a great subject for four and five hour bar conversations late into the night that never reach a conclusion. And the answer I say to that being a good professor is that they're both right. In some sense, what China had to do initially was to achieve its independence from Britain and the colonial power in Japan that occupied it, educate the population,"
},
{
"end_time": 704.445,
"index": 26,
"start_time": 676.988,
"text": " improve the basic infrastructure. But then in 1978, as I talk about in my great courses, Deng Xiaoping began the process of allowing some kind of market forces to operate initially with regard to agriculture, but then eventually let Chinese business people exercise their entrepreneurial or"
},
{
"end_time": 732.125,
"index": 27,
"start_time": 704.753,
"text": " capitalistic, if you will, talents and build up very impressive industries. I will say, Kurt, the Chinese had a little bit of an advantage over the Russians because when the Soviets took over in 1917, Russia really wasn't a capitalist economy and there were no real Russian capitalists. It was a feudal economy run by the Tsar and the Orthodox Church."
},
{
"end_time": 762.312,
"index": 28,
"start_time": 732.705,
"text": " The Chinese have the benefit of the Chinese diaspora, Chinese business people all over Asia, in India, in Indonesia, in Vietnam, in the Philippines, and to some extent even in the United States. So there was a kind of entrepreneurial knowledge, a kind of business acumen that the Chinese state, the People's Republic of China, could draw on"
},
{
"end_time": 791.067,
"index": 29,
"start_time": 762.637,
"text": " in terms of human resources. My view of economic development is that the most important resource in any success story in economics is people. You can have all the machines and all the gold and all the silver and all the trees and water, but if you don't have people that are motivated and educated, then you won't have any economic development."
},
{
"end_time": 821.391,
"index": 30,
"start_time": 792.329,
"text": " The Chinese state kind of laid the foundation for a Chinese economy, and then the entrepreneurial talent of the indigenous Chinese and the Chinese diaspora were responsible for turning China into an economic powerhouse. And I must admit, I've taught in Beijing on three separate occasions"
},
{
"end_time": 846.032,
"index": 31,
"start_time": 821.817,
"text": " and the Chinese have have always been for thousands of years very very favorable to education and to learning and so there's a kind of a native drive that's deep in their history for learning and education which pretty much absent in my homeland"
},
{
"end_time": 875.862,
"index": 32,
"start_time": 846.834,
"text": " Hi, I'm here to pick up my son Milo. There's no Milo here. Who picked up my son from school? Streaming only on Peacock. I'm gonna need the name of everyone that could have a connection. You don't understand. It was just the five of us. So this was all planned? What did you get it to? I will do whatever it takes to get my son back. I honestly didn't see this coming. These nice people killing each other. All Her Fault, a new series streaming now only on Peacock."
},
{
"end_time": 906.954,
"index": 33,
"start_time": 877.671,
"text": " The Chinese revolution under Mao happened in 1949 and Deng Xiaoping began his reforms in 1978 so that's less than 30 years of pure communism whereas in Russia,"
},
{
"end_time": 929.889,
"index": 34,
"start_time": 908.012,
"text": " I'm going to be a little bit polemical here."
},
{
"end_time": 952.005,
"index": 35,
"start_time": 930.469,
"text": " In the socialist subreddits, I don't know if you follow them on Reddit, but they like sometimes to praise Mao and to praise Stalin, or at least defend them. And part of the reason is because they dislike capitalism and the people who are supporters of it so much, and those people hate Stalin and Mao. Okay, you get the idea. Here's a few. Someone was saying this."
},
{
"end_time": 981.34,
"index": 36,
"start_time": 952.261,
"text": " When it comes to Stalin, he deserves obviously some hate because of what he's done, but also some praise because here's a bullet point list. He's turned an illiterate peasant society into a full nuclear superpower in just 15 years, raised the living standards of his people, raised the employment rates, raised the literacy rates, raised life expectancy, eradicated poverty and homelessness, eliminated food scarcity, gave his people free education, free healthcare, free housing, free electricity."
},
{
"end_time": 1003.729,
"index": 37,
"start_time": 981.561,
"text": " One of the questions in Soviet studies, and that was one of my specialties in grad school at the University of Oklahoma,"
},
{
"end_time": 1034.394,
"index": 38,
"start_time": 1004.411,
"text": " is to try to separate Stalin from Soviet communism and the system that was put in place originally by Lenin and Trotsky and Lukarin and other leaders of the Soviet Communist Party, most of whom Stalin ended up eliminating. And to ascribe agency to Stalin himself,"
},
{
"end_time": 1064.377,
"index": 39,
"start_time": 1034.94,
"text": " gives him way too much credit. Yes, there was employment, full employment, but a large part of full employment was prison labor, the Gulag system. Sorry, do you mind repeating that? It just cut off. Yeah. A large part of the full employment instituted by Stalin was prison labor, the Gulag system that Alexander Solzhenitsyn so graphically"
},
{
"end_time": 1093.285,
"index": 40,
"start_time": 1064.633,
"text": " Why is that? Just because they're not motivated or they're disagreeable people to begin with? They're motivated to do as little as possible, to be as unproductive as they possibly can, to do the minimum to avoid sanction or worse."
},
{
"end_time": 1120.077,
"index": 41,
"start_time": 1093.558,
"text": " Is there not a way that you can incentivize them by saying if you are a great producer of whatever it is, you have a lesser sentence or you get better treatment? Yeah, but that only goes so far. That's not the same kind of incentive that you get for a private person having individual satisfaction or group satisfaction that he or she voluntarily achieves."
},
{
"end_time": 1149.497,
"index": 42,
"start_time": 1120.845,
"text": " One of the great successes of the Soviet system was its math and science education, more or less, although the Stalin system distorted education tremendously. The biology"
},
{
"end_time": 1180.111,
"index": 43,
"start_time": 1150.111,
"text": " development was distorted by Lysenkoism. If you haven't heard of Lysenko, Lysenko was Stalin's pet biologist and really destroyed the field of Soviet biology by insisting on kind of cockamamie hairbrained theorems of heredity and environment. And speaking as an economist, Soviet economics was"
},
{
"end_time": 1210.162,
"index": 44,
"start_time": 1181.015,
"text": " not only worthless but anti-growth because you had to believe in Stalinism. Kind of an eclectic view of economics. The same thing with sociology, history, anthropology. It was all in the service of the state. So while primary and secondary education in the Soviet Union was pretty good, higher education was abysmal. Same thing with healthcare. Yes, you had free healthcare,"
},
{
"end_time": 1237.329,
"index": 45,
"start_time": 1210.776,
"text": " But for the common person, it was pretty awful in the sense that it was hard to get, right? Why was it hard to get? Well, because there were not many physicians for ordinary people. The only real good physicians were assigned to treat Communist Party members and physicians"
},
{
"end_time": 1265.896,
"index": 46,
"start_time": 1237.858,
"text": " One of the real problems with the whole Soviet economy is that yes, everybody was guaranteed employment and guaranteed a salary, low salary. There was very little incentive for anybody to produce anything or to provide any service. So if you were a physician in a local clinic, you got a salary no matter how good you were as a physician, how many people you treated or how many people you didn't treat."
},
{
"end_time": 1296.015,
"index": 47,
"start_time": 1266.305,
"text": " So if you were, let's say, a mother and your daughter had some kind of illness, like bad, cold, or flu, then the only way to get an immediate care was to have some kind of bribery. One of the things that the Soviet economy generated was a whole system of bribery and favor-doing to get around the planned nature of the economy."
},
{
"end_time": 1323.763,
"index": 48,
"start_time": 1296.408,
"text": " And Stalin also contributed tens of millions of Soviet citizens, first in the Ukraine famine of the 30s and then in his disastrous leadership at the beginning of the Second World War when he either executed or imprisoned most of the Soviet generals and made the mistake of stupidly trusting Hitler and the"
},
{
"end_time": 1355.06,
"index": 49,
"start_time": 1325.128,
"text": " the Soviet Union"
},
{
"end_time": 1377.995,
"index": 50,
"start_time": 1355.52,
"text": " The Ukraine was occupied by the Germans. The Germans went through Belarus and laid siege to Leningrad and Moscow and killed at least a million Soviet soldiers in Stalingrad in 1942 and 1943."
},
{
"end_time": 1406.732,
"index": 51,
"start_time": 1378.319,
"text": " The legacy of Stalin is mainly dysfunction and blood and genocide against his own people. What about Mao? Some of the defense against Mao, or for Mao, is that he lifted hundreds of millions of people. He was a follower of Stalin, and so in the great leap forward of the 50s, there was mass starvation, probably in the tens of millions, we'll never know."
},
{
"end_time": 1430.657,
"index": 52,
"start_time": 1407.21,
"text": " And then the great proletarian cultural revolution in the late 60s and early 70s was a huge setback for the Chinese economy because it destroyed the lives and careers of millions of scientists and intellectuals, the kind of people you need to build a modern"
},
{
"end_time": 1458.234,
"index": 53,
"start_time": 1430.794,
"text": " efficient economy. Probably the one positive thing I would have described to Mao is that he got rid of the Chinese addiction to opium. One of the horrible things about British colonialism is that the British carried out a military invasion of China to force the Chinese to buy opium that was being grown in India"
},
{
"end_time": 1486.391,
"index": 54,
"start_time": 1458.643,
"text": " so that the British could earn some funds to pay for that they were buying from India. And Chairman Mao and the Chinese Communist Party got rid of opium addiction and opium sales. Now, they did it, obviously, with a police state and military dictatorship and capital punishment and so forth, but they did rid the Chinese economy of"
},
{
"end_time": 1507.568,
"index": 55,
"start_time": 1486.749,
"text": " of its opium problem that was created by the British colonial powers. Probably not. He lifted, it may not be a right word,"
},
{
"end_time": 1536.903,
"index": 56,
"start_time": 1508.012,
"text": " He guaranteed a certain amount of food, the Chinese expression is the iron rice bowl, that every every Chinese family was guaranteed a minimal amount of food, primarily rice. So he might have cured some starvation in most of the parts of China. In order to do that, he essentially did what Stalin did in Ukraine, which is mandatorily"
},
{
"end_time": 1556.459,
"index": 57,
"start_time": 1537.363,
"text": " requisition rice crops from rice growing regions and redistribute it to the cities and the northern parts of China and created starvation in the rice growing regions that he had expropriated their crops from."
},
{
"end_time": 1582.824,
"index": 58,
"start_time": 1558.234,
"text": " When talking about capitalism versus socialism, you also mentioned that the North Korea versus South Korea is like a comparative economics professor's dream. Now it's not a double blind test because it would be strange if you didn't know which country you belong to. So you have a control. It's just not blinded. So I'm curious. Tell us about that. And you have a control group because the Korean peninsula"
},
{
"end_time": 1611.459,
"index": 59,
"start_time": 1583.234,
"text": " prior to the 1950s, was essentially one country and one culture. The other comparative systems professor's dream experiment was East Germany and West Germany. It was essentially one country, one culture. And the really good thing about both the East Germany-West Germany comparison and North Korea-South Korea is that when they were divided into"
},
{
"end_time": 1639.974,
"index": 60,
"start_time": 1611.8,
"text": " communist and non-communist. The communist part was the rich part. So in 1949, when Germany was divided into communist East Germany and liberal capitalist West Germany, East Germany was the rich part. And the same thing with North Korea. North Korea, at the time of division, North Korea was the rich part and South Korea was the poor part."
},
{
"end_time": 1668.899,
"index": 61,
"start_time": 1640.623,
"text": " In Germany, the region around Berlin and Leipzig and Bresden and those parts of what had been Prussia, that was the industrial part of Germany. That's where the German war machine came from. And the western part of Germany, especially southern Germany, Bavaria, I sometimes insult my German friend Bavaria,"
},
{
"end_time": 1698.183,
"index": 62,
"start_time": 1669.258,
"text": " as the hillbillies of Germany. They were rural, they were poor, they were Catholic, they were illiterate, all of those things go together. Really, until the post-war 1940s, when the U.S. Army came to southern Germany and the Marshall Plan and the Konrad Adenauer government and the beginnings of the EU lifted,"
},
{
"end_time": 1728.558,
"index": 63,
"start_time": 1698.865,
"text": " Southern Germany out of poverty into the terribly, terribly wealthy part of the world that it is today. South Korea, the same thing. In the 1950s, South Korea specialized their major fish paste and t-shirts and hair that South Korean women would grow their hair, cut it off, and send it to Japanese women for wigs. And that's what South Korea produced."
},
{
"end_time": 1758.012,
"index": 64,
"start_time": 1729.48,
"text": " To jump in, that's to say that because generally wealth begets wealth when you have two states that are similar except for wealth and then you follow them across time and that flips then and obviously only one trait was different. The only trait that was different was the system."
},
{
"end_time": 1786.067,
"index": 65,
"start_time": 1758.183,
"text": " If North Korea had stayed wealthy, then the people who believed in communism would say, well, it's because of communism, but you could say, well, it's also because they were wealthy to begin with. The beauty for a comparative systems person is that you impose two different systems and the"
},
{
"end_time": 1802.261,
"index": 66,
"start_time": 1786.51,
"text": " Capitalist system was imposed on the behind part. You started a race and the winner was the guy who started 10 yards behind. You have to say that he was a better runner."
},
{
"end_time": 1822.995,
"index": 67,
"start_time": 1804.172,
"text": " Does that make it decisively clear that capitalism is as a whole better than communism? Yes, I would say yes. What about socialism? South Korea is a great example of state capitalism."
},
{
"end_time": 1852.295,
"index": 68,
"start_time": 1823.422,
"text": " One of my favorite economists these days is a Korean economist who teaches at Cambridge. His name is Ha-Joon Chang, and he's written several books on economic development. And he's also written a kind of primer on economics called the ABCs of Economics. And from him I learned the real story of the South Korean development. It wasn't private enterprise, free market capitalism that all of a sudden"
},
{
"end_time": 1882.227,
"index": 69,
"start_time": 1852.858,
"text": " There was no regulation, no government, and these industries just developed out of entrepreneurial zeal and private enterprise. The South Korean government in the 1950s and the 1960s had a real, you could say Hamiltonian, Alexander Hamilton, economic plan. And that plan was to use tariffs and quotas, economic protection, and state-directed development"
},
{
"end_time": 1910.742,
"index": 70,
"start_time": 1882.841,
"text": " So the South Korean government told the Samsung company that they couldn't make fish paste anymore. That was not going to be their primary product. That's hilarious that Samsung used to grow vegetables or it was a food company. Yes, and a very primitive company. And the leadership, to some extent a military dictatorship in South Korea said, no you are going to make electronics, simple electronics."
},
{
"end_time": 1938.643,
"index": 71,
"start_time": 1911.954,
"text": " And we will protect you. We will put tariffs and quotas against Japanese electronics, German electronics, American electronics, and we will invest in, the Korean government will invest in education by producing engineers and scientists and metallurgists and so forth. And that's what you will do. The South Korean government told the same thing to Korea and Hyundai."
},
{
"end_time": 1965.162,
"index": 72,
"start_time": 1939.036,
"text": " that you will start to produce cars and we will protect you from Japanese imports American imports in the 50s and 60s as America were making horrible cars. From Japanese imports and German imports and the original Korean cars the Kia's and the Hyundai's and the Daiwos that were produced in the 70s and 80s were terrible. You wouldn't want to buy them. But Korean"
},
{
"end_time": 1988.268,
"index": 73,
"start_time": 1965.606,
"text": " South Korean consumers had to buy them because they had no choice. And eventually, as we know, Samsung and Kia and Hyundai and LG. LG was actually two companies. Lucky was making electronics and Gold Star was making home appliances. And the South Korean government told them to merge and to"
},
{
"end_time": 2018.251,
"index": 74,
"start_time": 1989.514,
"text": " realize economies of scale and so LG now produces television sets and TVs but also home appliances as well. When you say the government told them to merge, are you saying that they incentivized them to merge or actually mandated them to merge and if they didn't they would go to prison? They did both, exactly. They said the Korean government"
},
{
"end_time": 2048.319,
"index": 75,
"start_time": 2018.422,
"text": " ran the monetary system, so we will lend you money to build an electronics factory. We will not lend you any money to make fish paste, and if you make fish paste, we'll put prohibitively high taxes on it so nobody will buy it. So, probably didn't have to threaten to send them to prison. The Korean government forced for all practical purposes a change of direction for the large"
},
{
"end_time": 2075.657,
"index": 76,
"start_time": 2048.848,
"text": " Now, how did North Korea fare? Well, the difference between Samsung as an automobile producer, and I'm not sure North Korea produces automobiles, but the people at Samsung, they did a good job, earned profits and had big incentives."
},
{
"end_time": 2102.227,
"index": 77,
"start_time": 2076.169,
"text": " The people that work in a real communist enterprise, no matter what they produce or not produce, they get the same money. All they have to do in a communist economy is meet the quota for that month. One of my favorite stories in my great courses course is about the"
},
{
"end_time": 2131.817,
"index": 78,
"start_time": 2102.619,
"text": " The Soviet shoe factory, right? That it's given a quota of producing 10,000 shoes. So it produces 10,000 size 10 left shoes, right? Because that's the easiest thing to do, to produce one size, one half, and one color. So the capitalism- That's the true story that actually happened? Oh, yeah. Oh, it happened in all kinds of Soviet enterprises. And they don't get penalized for that?"
},
{
"end_time": 2161.049,
"index": 79,
"start_time": 2133.148,
"text": " No, they don't get penalized. The director might get replaced or there might be more directions. That's a lot of the output. It reminds me of the monkey paw where you have to be careful of exactly how you word what you wish for. I want to become rich and then you become money yourself. That's one of the reasons why"
},
{
"end_time": 2191.049,
"index": 80,
"start_time": 2162.09,
"text": " communist central planning system to break down is that in the Soviet Union if you told one factory to produce 10,000 size 10 black boots and another factory to produce 10,000 size 10 white boots then everybody's going to get boots and if you have no shoes no matter what size you are you're happy to get a size 10 right maybe you're a size 3 or a size 11 but"
},
{
"end_time": 2220.026,
"index": 81,
"start_time": 2191.323,
"text": " Having boots is better than going barefoot, right? But once you get a certain level of development, and for something as complicated as a little transistor radio, right? There are different components that have to fit together, and it's really hard to plan complicated production. So you need some kind of incentive. It could come from the state. It could come from"
},
{
"end_time": 2250.452,
"index": 82,
"start_time": 2220.674,
"text": " The Japanese did the same thing with their automobile industry. The first Japanese cars that were exported were horrible. But the Honda I drive today, I always tell my students dollar for dollar Japanese cars are the highest quality per dollar that you could possibly buy."
},
{
"end_time": 2275.896,
"index": 83,
"start_time": 2252.739,
"text": " Okay, so now in North Korea, you also mentioned that you believe it's going to have an economic collapse at some point. Yes, and a political collapse, because they all do. It's just essentially a straight line projection, right? You would have predicted, you would have been accurate to say that at some time in the future, Belarus would have a political"
},
{
"end_time": 2304.872,
"index": 84,
"start_time": 2276.169,
"text": " crackdown or an explosion and that's what's happening. Same thing did happen in China in 89 in Tiananmen Square and it will happen again. It may not happen in Tiananmen Square, it may happen in Hong Kong. But at some time in the future China will have some kind of a political upheaval or an explosion. And the same thing will happen in North Korea. The"
},
{
"end_time": 2334.087,
"index": 85,
"start_time": 2305.35,
"text": " wants and desires and wishes of the population will be so antithetical to the wishes and desires of the very, very small ruling elite that the system will break down. And you say ruling elite, but as far as I know communism is supposed to be a system where everyone is equal. And you also mentioned that in the Soviet Union the doctors had favorable service to the people who are members of the political party. Right. But then is that not real communism?"
},
{
"end_time": 2363.797,
"index": 86,
"start_time": 2334.548,
"text": " Real communism is kind of like real free enterprise, where there's no government and there's no monetary system and everybody is a voluntary trader. That exists maybe in heaven or hell, I'm not sure, but it doesn't exist on earth and never will. But in the off-quoted phrase of George Orwell, we're all equal, some are more equal than others."
},
{
"end_time": 2392.073,
"index": 87,
"start_time": 2364.974,
"text": " In the Soviet Union, for example, the leadership up until the Gorbachev administration, the leadership were very old men. And it was a very small number. It was in the Politburo 12 or 13. And those people exhibited almost complete control over the entire economy and the entire society."
},
{
"end_time": 2421.271,
"index": 88,
"start_time": 2392.739,
"text": " How do you think the Cuban system is doing? What's your evaluation of it? Because some people will say it's great, there's free healthcare, there's no homelessness."
},
{
"end_time": 2442.329,
"index": 89,
"start_time": 2421.596,
"text": " People have homes, people have education, the literacy rates are one of the highest in the world. And actually, the literacy rate is the Achilles tendon of dictatorial regimes because when people get literate, they can read and they can realize that they don't live in paradise. Yes, there's free healthcare,"
},
{
"end_time": 2470.811,
"index": 90,
"start_time": 2442.807,
"text": " But that would only be if they're able to see what's happening in the outside of the world like East Germany for West Germany. So given that Cuba doesn't have freedom of press or freedom of information. There are tourists, there are relatives of Cubans that live in Chicago and there's the internet these days."
},
{
"end_time": 2499.548,
"index": 91,
"start_time": 2471.305,
"text": " In some sense, it may be the last but also it could be one of the sooner implode just because the system is so dictatorial and so dysfunctional."
},
{
"end_time": 2527.722,
"index": 92,
"start_time": 2500.043,
"text": " And so the most brittle, you would say. The advantage for Xi Jinping and the leadership of the Communist Party is that since 1978, of the billion Chinese, somewhere between 100 million and 200 million have done rather well, right? Still half of the population still lives in what may be called"
},
{
"end_time": 2556.834,
"index": 93,
"start_time": 2528.985,
"text": " near poverty, right? Very, very substandard housing, not much access to medical care, very limited access to jobs and nutrition. So it's not a relatively large part of the population in China that's well off and if not supportive of the"
},
{
"end_time": 2583.882,
"index": 94,
"start_time": 2557.227,
"text": " current Chinese government at least accepting of it. What's the difference between an economic collapse and a depression? Depression simply means that economic activity declines. The system doesn't disappear. Collapse means the system is fundamentally changed. So when East Germany collapsed,"
},
{
"end_time": 2613.285,
"index": 95,
"start_time": 2584.275,
"text": " The government-owned East German enterprises all disappeared and McDonald's and Burger King moved in. I remember being on a subway in East Berlin right after the fall of the wall and the Ninja Turtles were advertising Burger King. How soon afterward? One month. The wall came down in November the 9th, 1989 and I was visiting a friend in East Berlin"
},
{
"end_time": 2622.858,
"index": 96,
"start_time": 2613.865,
"text": " in early December of 1989. And Burger King was already on the way."
},
{
"end_time": 2649.94,
"index": 97,
"start_time": 2623.797,
"text": " That's the sweet sound of success with Shopify. Shopify is the all-encompassing commerce platform that's with you from the first flicker of an idea to the moment you realize you're running a global enterprise. Whether it's handcrafted jewelry or high-tech gadgets, Shopify supports you at every point of sale, both online and in person. They streamline the process with the internet's best converting checkout, making it 36% more effective than other leading platforms."
},
{
"end_time": 2675.981,
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"start_time": 2649.94,
"text": " There's also something called Shopify Magic, your AI-powered assistant that's like an all-star team member working tirelessly behind the scenes. What I find fascinating about Shopify is how it scales with your ambition. No matter how big you want to grow, Shopify gives you everything you need to take control and take your business to the next level. Join the ranks of businesses in 175 countries that have made Shopify the backbone"
},
{
"end_time": 2701.8,
"index": 99,
"start_time": 2675.981,
"text": " of their commerce. Shopify, by the way, powers 10% of all e-commerce in the United States, including huge names like Allbirds, Rothy's, and Brooklynin. If you ever need help, their award-winning support is like having a mentor that's just a click away. Now, are you ready to start your own success story? Sign up for a $1 per month trial period at Shopify.com slash theories, all lowercase."
},
{
"end_time": 2730.64,
"index": 100,
"start_time": 2701.8,
"text": " Go to Shopify.com slash theories now to grow your business no matter what stage you're in Shopify.com slash theories. Razor blades are like diving boards. The longer the board, the more the wobble, the more the wobble, the more nicks, cuts, scrapes. A bad shave isn't a blade problem. It's an extension problem. Henson is a family owned aerospace parts manufacturer that's made parts for the International Space Station and the Mars Rover."
},
{
"end_time": 2759.121,
"index": 101,
"start_time": 2730.64,
"text": " Now they're bringing that precision engineering to your shaving experience. By using aerospace-grade CNC machines, Henson makes razors that extend less than the thickness of a human hair. The razor also has built-in channels that evacuates hair and cream, which make clogging virtually impossible. Henson Shaving wants to produce the best razors, not the best razor business, so that means no plastics, no subscriptions, no proprietary blades, and no planned obsolescence."
},
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"end_time": 2775.486,
"index": 102,
"start_time": 2759.121,
"text": " It's also extremely affordable. The Henson razor works with the standard dual edge blades that give you that old school shave with the benefits of this new school tech. It's time to say no to subscriptions and yes to a razor that'll last you a lifetime. Visit hensonshaving.com slash everything."
},
{
"end_time": 2798.78,
"index": 103,
"start_time": 2775.486,
"text": " What are Galbraith's conditions for depression?"
},
{
"end_time": 2821.493,
"index": 104,
"start_time": 2799.121,
"text": " That's one of the books that I talk about in the Great Court and one of the books that when people ask me, well, what should I read about economics and especially the stock market and collapses and things like that, I always recommend Albright's The Great Crash, which is his analysis of the 1929 stock market crash and still to my"
},
{
"end_time": 2851.067,
"index": 105,
"start_time": 2822.261,
"text": " the best analysis of why the stock market crash of 1929 occurred and why the subsequent great depression was so serious. I'll differentiate which ones we have and which ones we don't have. The first thing he mentions"
},
{
"end_time": 2880.998,
"index": 106,
"start_time": 2851.374,
"text": " Gross wealth and income inequality, which obviously we still have. Just to butt in, were they able to measure the Gini coefficient back then? Is it comparable to what it is today? That's a different question, Kurt. Well, they could have measured the Gini coefficient because Corrado Gini invented it in the 1930s. So they could have, right? Can we do an analysis like a retrospective? Yeah, we can do it now."
},
{
"end_time": 2905.776,
"index": 107,
"start_time": 2881.152,
"text": " tax records and income statements and wills and so forth. In fact, Kurt, that's just on a sidelight. That's one of the real advances in economic history research is that there are now really, really good sources of microdata that economic historians are using to analyze the 16th and the 17th centuries, especially in"
},
{
"end_time": 2931.783,
"index": 108,
"start_time": 2906.493,
"text": " the British colonies of North America and looking at things like wills and baptismal records and church records and some tax records. And so there are Gini coefficients for pre-revolutionary America in the 1700s, right? So the Gini coefficients for the"
},
{
"end_time": 2963.063,
"index": 109,
"start_time": 2933.677,
"text": " have just hit in the last year or so what they were in 1929. The reason that wealth inequality is so damaging and so predictive of stock market crashes is that the more money you have, the more risky you can afford to be. If you have $100, you really can't afford to lose anything because you need all of that to pay for food, clothing, and shelter."
},
{
"end_time": 2990.486,
"index": 110,
"start_time": 2963.848,
"text": " If you have a couple of billion dollars, you can gamble three or four million in a risky stock. And if it goes bust and turns into zero, you're really not going to be harmed that much. So one of the things that extremely wealthy individuals do is they have a much higher appetite for risk, for junk bonds, for mortgage-backed securities of questionable value."
},
{
"end_time": 3018.643,
"index": 111,
"start_time": 2990.913,
"text": " The country becomes more risky because those with wealth take more risks. It's not because of the perception of injustice from those who are on the lower end of the income distribution having riots and overturning the system. And the people at the lower end of the income distribution? The reason why I say that is that the Gini coefficient is highly correlated with the amount of crime in a given region. Crime isn't necessarily correlated with"
},
{
"end_time": 3048.404,
"index": 112,
"start_time": 3019.189,
"text": " The other end of the wealth distribution for people in order to have to borrow money, have to get loans, have to take out payday loans or title loans on their car or their motorcycle or as in the case of the US great recession of 07-09, working class people took out home"
},
{
"end_time": 3077.739,
"index": 113,
"start_time": 3050.333,
"text": " Home equity loans are what middle class and working class people in the United States in the early 2000s used to support their standard of living. It's what they used to pay rent, to buy cars, to"
},
{
"end_time": 3099.172,
"index": 114,
"start_time": 3077.944,
"text": " They default on their loans."
},
{
"end_time": 3131.084,
"index": 115,
"start_time": 3102.005,
"text": " One of the things that didn't exist in 1929 was the Securities and Exchange Commission."
},
{
"end_time": 3160.811,
"index": 116,
"start_time": 3131.664,
"text": " That wasn't instituted until Roosevelt's New Deal. The Securities and Exchange Commission regulates sometimes well, sometimes not so well, the financial reporting and the information at publicly traded corporations' seminary. So, for example, as I think I mentioned in my Great Courses course, the only company that I actually own stock in myself is Starbucks."
},
{
"end_time": 3186.118,
"index": 117,
"start_time": 3161.476,
"text": " So as a stockholder, I get an annual report. It tells me how much money they make, what their expenses were, and how much money they have in the bank. And I have a pretty good feeling that those numbers are mostly accurate. Now I think for Starbucks, they're mostly accurate because Howard Schultz, the founder and the CEO, is in charge of that."
},
{
"end_time": 3213.677,
"index": 118,
"start_time": 3186.459,
"text": " They're mostly accurate because of Howard Schultz? Yeah, the CEO. He's a good guy, right? But even if he wasn't a good guy, the Securities and Exchange Commission on pain of imprisonment audits those reports and makes sure they're accurate. So when you buy stock in Starbucks or Google or whatever, you're relatively assured that they're"
},
{
"end_time": 3244.07,
"index": 119,
"start_time": 3214.172,
"text": " In the 1920s, there were companies issuing stock that the only thing the company had was the paper that they issued stock on and they had all kinds of"
},
{
"end_time": 3270.947,
"index": 120,
"start_time": 3244.701,
"text": " fictitious assets. And Mr. Ponzi, there really was a Ponzi behind the Ponzi scheme, was selling real estate titles to land in Florida that he didn't own. So people were buying real estate in Florida and didn't exist. So that kind of corporate criminality was widespread in the 1920s."
},
{
"end_time": 3297.619,
"index": 121,
"start_time": 3271.698,
"text": " Okay, so you said that Galbraith's first condition is the genealogy of economic right. And then the second was corporate structure, lack of regulation. Okay, lack of regulation. Now it seems like today we don't have that. We have regulations. Yes, exactly. Which is one of the things that's going to prevent a kind of the stock market crash a la 1929. We still have stock market volatility and certain stocks will"
},
{
"end_time": 3326.92,
"index": 122,
"start_time": 3298.422,
"text": " collapse for economic reasons, not for criminal reasons. For example, right now, Kurt, that's just a scratch, that's not a sign. When people ask me about what stocks to buy, the first thing I say, Kurt, is that if I really knew what stocks to buy, I'd be on my yacht in the Mediterranean. I wouldn't be here in Chicago in my little two-bedroom apartment. But in general, these days,"
},
{
"end_time": 3356.032,
"index": 123,
"start_time": 3327.858,
"text": " Because of COVID, right? Airline stocks, hotel stock, cruise line stocks are not the thing to buy. Not because the cruise lines or the airlines have done anything criminal or they've been misrepresenting it, their business is just bad. But vicissitudes of life. Yes, exactly. The third cause, according to Alpeth, was the lack of regulation of banks and the lack of"
},
{
"end_time": 3385.589,
"index": 124,
"start_time": 3356.425,
"text": " of limitations on what banks could do. In the 1920s, banks themselves could buy stock. And so if banks were taking my money and buying stock in a worthless corporation and that corporation disappeared, then my money disappears too. There was no federal deposit insurance corporation. The Federal Reserve had very, very weak supervisory powers. And so today we have"
},
{
"end_time": 3414.94,
"index": 125,
"start_time": 3386.032,
"text": " deposit insurance and active monetary regulation by the Federal Reserve. Okay, we're still on point number two, that is the corporate... Point number three. Banking structure. I see. I see. Corporate and banking structure. Yeah. And of those two, the banking system is more important than individual corporations. Because if a bank goes, then not just one corporation is hurt or one"
},
{
"end_time": 3445.384,
"index": 126,
"start_time": 3415.401,
"text": " It's one of the reasons that Canada had a much better experience during the Great Recession of 1709, because Canadian banks were much more regulated and limited in terms of their mortgage lending."
},
{
"end_time": 3473.899,
"index": 127,
"start_time": 3445.725,
"text": " And unlike American banks who were lending all kinds of money and buying mortgage-backed securities, when real estate crashed in the United States in 07, then the banks would have crashed also and there would have been bank runs without the Federal Reserve and without our Federal Deposit Insurance Corporation. So banking structure is critical, right? The fourth"
},
{
"end_time": 3490.043,
"index": 128,
"start_time": 3474.718,
"text": " And this is one that we have today are large balance of payments, deficits, and international debts."
},
{
"end_time": 3520.691,
"index": 129,
"start_time": 3492.875,
"text": " And is it worse today than it was back in 1929? No."
},
{
"end_time": 3549.48,
"index": 130,
"start_time": 3521.135,
"text": " It's a little bit less serious, but unlike 1929 when the United States was running a big trade surplus, right now the United States is running a big trade deficit, and a lot of U.S. government debt, corporate debt is held by Chinese, Japanese, Germans, countries that have large trade surpluses."
},
{
"end_time": 3575.947,
"index": 131,
"start_time": 3549.855,
"text": " And those trade surpluses and deficits cause unemployment in the United States. I think one of the key variables that explains the Trump election in 2016, and this has been done by political scientists and economists using census data and Federal Reserve data,"
},
{
"end_time": 3600.862,
"index": 132,
"start_time": 3576.391,
"text": " Those counties in the United States that had manufacturing that was adversely affected by Chinese imports voted 80 to 90 percent for Donald Trump. So small towns, rural areas, medium-sized cities that had one or two businesses that were put out of business by Chinese imports"
},
{
"end_time": 3624.292,
"index": 133,
"start_time": 3601.152,
"text": " Those were the places and are the places that are the most Trump favorable parts of the American electorate. That kind of political division still exists. To take a quick aside,"
},
{
"end_time": 3655.094,
"index": 134,
"start_time": 3625.094,
"text": " You mentioned that in South Korea and a few of the other Asian tigers, they had protection on the infant industries in the form of tariffs. Do you see what Trump is doing with tariffs on China as akin to that? Do you see it as salutary? No, because these aren't infant industries. These are declining industries. So protection on things like steel in the United States. Steel industry is not an infant industry. In many ways, it's a declining industry."
},
{
"end_time": 3683.541,
"index": 135,
"start_time": 3655.572,
"text": " And also, we're in a much more complicated economy. Steel isn't just something we produce in the United States, it's also something we use, right? So manufacturers in the United States who produce appliances, who produce automobiles, who produce aircraft, use steel. So putting the tariff on steel makes their cost of production higher. And so"
},
{
"end_time": 3711.869,
"index": 136,
"start_time": 3684.735,
"text": " Yes, there may be a few steel jobs on tariffs, but there are lots of manufacturing jobs that disappear because automobiles and appliances and aircraft are cheaper other places where they don't have tariffs on steel. And plus, what always happens is that in this day and age where there's much more communication and knowledge,"
},
{
"end_time": 3737.517,
"index": 137,
"start_time": 3712.193,
"text": " When we put tariffs on Chinese products, the Chinese put tariffs on our products. When I was an undergraduate in the 60s taking my first international econ course, my professor, Professor Saylor, always loved to tell stories about the chicken war. And the chicken war was between the United States and the European Union. It wasn't a war of chickens?"
},
{
"end_time": 3767.654,
"index": 138,
"start_time": 3737.978,
"text": " Yeah, it wasn't chickens fighting chickens, no. That's what I first thought. I thought, oh my God, we're going to have some bloody chickens and, you know, some real feathers flying. But the United States, believe it or not, still is a major exporter of frozen chickens, right? And a lot of chicken farmers in Europe were upset because they were being harmed by the chicken imports. So the European Union put a big tariff or a quota on, not sure which, on US chickens, right?"
},
{
"end_time": 3785.299,
"index": 139,
"start_time": 3768.49,
"text": " So the chicken farmers in America went to the US government and saying we're being harmed by the European Union discriminating against our chickens and the US government put tariffs on Danish cheese and"
},
{
"end_time": 3813.541,
"index": 140,
"start_time": 3785.572,
"text": " French wine. We always pick on French wine. So there were arguments back and forth and eventually it got settled somehow. The Europeans agreed to buy a few more American chickens and we agreed to buy a few more pounds or kilos of Danish cheese. So the problem with tariffs these days is that they always generate retaliatory effects. And I always, when I teach courses in international trade theory,"
},
{
"end_time": 3840.486,
"index": 141,
"start_time": 3813.899,
"text": " Students always bring up the point, well, tariffs will protect American jobs, and yes, they'll protect some American jobs, but the corollary is that they'll also cost some American jobs as well. And that gets me to Galbraith's fifth point, which we don't have today, fortunately, and that is a much better knowledge of international economics. In the 1920s,"
},
{
"end_time": 3859.36,
"index": 142,
"start_time": 3840.998,
"text": " With the stock market crash, there was a belief that the federal government should always balance its budget and the Federal Reserve should only do policies that restrict the money supply and fight inflation. So when the Great Depression started in"
},
{
"end_time": 3890.265,
"index": 143,
"start_time": 3861.681,
"text": " The US federal government raised taxes and cut spending to balance the budget and the Federal Reserve decreased the money supply, which of course all of those things do nothing but make a recession. What happens when there's a recession or a depression is that the money supply should increase"
},
{
"end_time": 3917.483,
"index": 144,
"start_time": 3890.503,
"text": " Interest rates should go down. The federal government should cut taxes and raise spending on deficits and expand aggregate demand to compensate for the declines in private demand. And all of that knowledge we owe to John Maynard Keynes and his followers. It was Keynes who in the general theory in 1936 laid out perfectly the theory for"
},
{
"end_time": 3947.79,
"index": 145,
"start_time": 3918.114,
"text": " So do you see the American economy as going or headed towards a recession, a great recession akin to 1929? I'm a little bit worried, Kurt, these days because when COVID first hit in March,"
},
{
"end_time": 3976.732,
"index": 146,
"start_time": 3948.439,
"text": " The Federal Reserve did and still does execute very beneficial and intelligent monetary policies. And Congress, the U.S. Congress, in an amazing display of speed and intelligence, passed what was called the CARES Act. And that provided for"
},
{
"end_time": 4002.841,
"index": 147,
"start_time": 3977.159,
"text": " the $1,200 checks that went out to everybody, the expanded unemployment benefits, the subsidies to businesses, and all of that served to mitigate the recession effects of COVID. Now, a lot of those fiscal policies, the"
},
{
"end_time": 4029.053,
"index": 148,
"start_time": 4003.439,
"text": " budget transfers, that expanded unemployment benefits, ending federal outlays. In the United States, those are all set to end either this month or next month. And if they end without being extended or replaced, then there is a fear that the United States could go back into a more severe recession than the one we're already in."
},
{
"end_time": 4058.66,
"index": 149,
"start_time": 4030.623,
"text": " Is it going to end or do you see signs of it being extended? I don't see signs of it being extended. I see signs of the Republican leadership in the Senate and the White House and the Democratic leadership in the House of Representatives not agreeing on much of anything in terms of what the next"
},
{
"end_time": 4082.705,
"index": 150,
"start_time": 4059.206,
"text": " Forgive me for this somewhat rudimentary and maybe a sophomore question. I'm just a foolish physicist. Think of me as that."
},
{
"end_time": 4103.865,
"index": 151,
"start_time": 4083.097,
"text": " Does not the distribution of money, let's say $1,200 checks to virtually everybody, then lead to inflation a few months, if not years down the line? Probably not for all kinds of reasons. One is that inflation occurs mainly when the simple"
},
{
"end_time": 4133.797,
"index": 152,
"start_time": 4104.241,
"text": " formula is when there's too much money chasing too few goods, meaning that production is at a maximum and there's still an increase in the money supply occurring. The main problem in the U.S. economy is not that there's insufficient production, there's insufficient demand. There are all kinds of factories that are shut down, restaurants that aren't operating hotels and aren't occupied,"
},
{
"end_time": 4160.077,
"index": 153,
"start_time": 4134.138,
"text": " It sounds like there's less of a demand in certain sectors."
},
{
"end_time": 4172.722,
"index": 154,
"start_time": 4160.606,
"text": " But there's greater demand in some sectors and no change in demand in other sectors. So when people get money, if they spend where there already is high demand or where there's no change in demand, then it doesn't go towards"
},
{
"end_time": 4200.367,
"index": 155,
"start_time": 4173.541,
"text": " It actually grows to a little bit. I mean, there's a little bit of price pressure in the US right now. I'm not sure about Canada. My guess would be the same thing. There's a little bit of price pressure in grocery prices, right? So people are not going to restaurants. So restaurant prices are either going down or not going up. But grocery store prices, because of the increase in demand, are going up. But people aren't, at least after the initial wave"
},
{
"end_time": 4226.647,
"index": 156,
"start_time": 4202.022,
"text": " When it comes to hyperinflation, you mentioned that you just cancel the currency that will lead to a depression, but then that also leads to a decrease in the prices."
},
{
"end_time": 4253.285,
"index": 157,
"start_time": 4226.92,
"text": " Now, why the heck are you cancelling a currency when there's hyperinflation? And then second, when you say there's a decrease in price, to me, you need a currency to evaluate a price, but you just cancelled it, so I'm unsure how that happens. Okay. Best example, I'm in Bucharest in Romania in 2001, right? And the new Romanian government is printing money like a bandit, right? Just printing money and printing money and printing money."
},
{
"end_time": 4281.647,
"index": 158,
"start_time": 4254.377,
"text": " And the inflation rate is 100 or 200 percent a month, right? My first meal in Bucharest, I get the check and it's for 600,000 Romanian Lai. I go, oh my God, this is terrible. And then I realized that I'm getting 25,000 Romanian Lai to the dollar. So the check is really about $14. That's for me and the guy who glommed onto me as my"
},
{
"end_time": 4311.22,
"index": 159,
"start_time": 4282.005,
"text": " We had a very lovely meal and wine and cognac and what have you. Incredibly cheap. Incredibly cheap and literally baskets full of money that's pretty much worthless. What the Romanian government essentially does and the Yugoslav government did this or the governments in the constituent republics, the Soviet government"
},
{
"end_time": 4335.998,
"index": 160,
"start_time": 4311.459,
"text": " Even the money that's in the bank that's virtual? There's no virtual money in those kind of economies. It's all paper money. That's no good."
},
{
"end_time": 4365.469,
"index": 161,
"start_time": 4336.527,
"text": " I have some leftover Russian rubles that were issued in 1993 that were nullified in 1998."
},
{
"end_time": 4387.039,
"index": 162,
"start_time": 4365.93,
"text": " But when I lived in Russia in 94, I accumulated some Russian rubles from 1993 and now they're no good. So for those of your listeners who somebody's going to pay you in Russian rubles, you want to check the date of those 1993 that it's post 1998."
},
{
"end_time": 4415.418,
"index": 163,
"start_time": 4387.466,
"text": " So yes, it's very harmful, especially for ordinary people who don't have access, who don't own gold mines or silver mines or factories or what have you. So the money is cancelled and the government issues a new currency, has new pictures on it and instead of maybe a hundred million of these"
},
{
"end_time": 4444.224,
"index": 164,
"start_time": 4416.732,
"text": " They only issue a million, right? So what used to cost $25,000 now only costs $25,000 because that's the ratio of the amount of old currency to the amount of new currency. So you're able to exchange your old currency for the new currency? No. So you just have to start from scratch? Start from scratch, right? If you're working or let's say you're a student and you get a little bit of a shocker, instead of getting"
},
{
"end_time": 4471.613,
"index": 165,
"start_time": 4444.838,
"text": " Okay, I'm going to give you some broad platitudes and you can tell me what you think of them. Communism has caused tens of millions of deaths. Now, is that true or false? The Ukraine famine of the 1930s, the"
},
{
"end_time": 4497.739,
"index": 166,
"start_time": 4471.869,
"text": " Would you say that that was a result of communism though? Yes. No, that was deliberate policy of the Stalin government to starve the Ukrainian population in order to feed the Russian population. One of the arguments of enmity between Ukrainians and Russians because of the history of that famine that was"
},
{
"end_time": 4526.169,
"index": 167,
"start_time": 4497.978,
"text": " It was engineered by the Soviet government under direct orders from Stalin to requisition food from Ukrainian peasant farmers to feed the industrial working classes in Moscow and Stalingrad and Leningrad and so forth, and created mass starvation. There's some really good new books on that, one by historian Anne Applebaum,"
},
{
"end_time": 4553.49,
"index": 168,
"start_time": 4526.544,
"text": " Okay, here's another phrase or another sentence. Capitalism has lifted more people out of poverty than virtually any other economic system. Probably true, right?"
},
{
"end_time": 4581.237,
"index": 169,
"start_time": 4554.497,
"text": " but done so at great cost lives as well as opportunity that most people I'd say the majority of people in societies that move from feudalism to capitalism benefited right but you'd have to say the children that were put to work in the textile mills of Birmingham and Manchester England"
},
{
"end_time": 4611.305,
"index": 170,
"start_time": 4581.544,
"text": " Probably didn't benefit from capitalism, but their great-great-great-granddaughters and grandsons probably did. We have this discussion in the United States right now, a very important discussion around the Black Lives Matter movement. Capitalism in America was essentially financed by slavery."
},
{
"end_time": 4635.606,
"index": 171,
"start_time": 4611.954,
"text": " that yes, capitalism in America created industrial jobs, created a manufacturing center, a transportation center, but the initial investment, the initial funds that paid for that came from the export of cotton from the south to England, to Germany, to the Netherlands,"
},
{
"end_time": 4665.947,
"index": 172,
"start_time": 4636.305,
"text": " American capitalism lifted people in the working class and the middle class into a decent standard of living"
},
{
"end_time": 4695.742,
"index": 173,
"start_time": 4666.374,
"text": " But at the lives and the freedom of millions and millions of African Americans who literally paid for it. Right. Now, is there a way of measuring the amount of deaths caused by capitalism in the same way that some people spout off deaths caused by communism? Sure. Yeah. And that's part of the discussion of reparations and slavery in the United States."
},
{
"end_time": 4725.776,
"index": 174,
"start_time": 4696.698,
"text": " Probably death might be a bit too strong, but you would have to say life expectancy. One of the, actually the book that I use in my European economic history course, looks at life expectancy in Europe over 2000 years, from the Roman Empire until the 20th century. And the advent of urbanism and capitalism, if you will,"
},
{
"end_time": 4753.66,
"index": 175,
"start_time": 4726.084,
"text": " societies in Europe in the 15th and 16th century dramatically reduced life expectancy for most of the population because in the 600s, 700s, 800s in Europe people lived and people were farmers, agricultural producers, lived outside. In the 1400s and the 1500s when urban societies and urban capitalism was being"
},
{
"end_time": 4782.159,
"index": 176,
"start_time": 4755.128,
"text": " had people getting close together and they didn't wear masks and they didn't social distance and they bred plague and typhus and cholera and dysentery and died relatively young. And that life expectancy increase really didn't happen until the end of the 19th and the beginning of the 20th century that capitalism eventually with social"
},
{
"end_time": 4810.64,
"index": 177,
"start_time": 4782.91,
"text": " democracy and the provision of clean water and public health programs raised people out of disease and death at an early age. I should tell you a joke among economists, right?"
},
{
"end_time": 4840.401,
"index": 178,
"start_time": 4810.879,
"text": " Economists have physics envy, right? So there's a joke that if you're a really bad, and if you believe in reincarnations, right? So if you're a really bad economist, when you die in the next life, you will come back as a sociologist. If you're a really good economist, and you're highly educated and technically proficient, when you die in the next life, you'll get to come back as a physicist, right? All right, cool, cool. Well, maybe I was a good economist, I don't know. Yeah, yeah, there you go."
},
{
"end_time": 4867.005,
"index": 179,
"start_time": 4841.305,
"text": " Part of the problem that I had when I was making this previous documentary called better left and said about the right versus left or extreme left. What delineates moderate left from extreme left is of definitions in math. That's my background. It's like definitions are clear cut. Here's what a topology is. Here's what a fiber bundle. Okay. Yeah, there's no ambiguity. Now when it comes to what, what defines socialism, what defines communism, what defines Marxism, it's, it's amorphous, it's indistinct."
},
{
"end_time": 4885.589,
"index": 180,
"start_time": 4867.875,
"text": " However, when it comes to capitalism, there does seem to be generally more agreement and it seems to be even from the left and the right. It seems to be centered on three that I could find it was like private property, profit motive and voluntary exchange. Most people would agree on that now, given that that's what capitalism is defined by."
},
{
"end_time": 4915.077,
"index": 181,
"start_time": 4885.913,
"text": " Can we say that the child labor and the slavery is part of capitalism, given that children can't consent, so there's no voluntary exchange, and slaves are not voluntarily being slaves? That would be strange if some voluntarily said, let me be a slave. Can those ills be attributed to capitalism or some bastardization of capitalism instead? If you really believe in a free market economy, then you should be able to sell your children and buy and sell slaves, and you should be able to"
},
{
"end_time": 4944.445,
"index": 182,
"start_time": 4915.674,
"text": " Okay, so then is it true that those ills that you mentioned, which are slavery and the decrease in life expectancy for the slaves as well, and child labor, is that a result of capitalism or something else? And what would you call that something else? I would say that that's a result of the early developments of a market economy, of a capitalist economy. That's part of its origin."
},
{
"end_time": 4974.019,
"index": 183,
"start_time": 4944.599,
"text": " There were many, many people that suffered in the beginnings of capitalism in the factory system and resource extraction. Just think of what coal miners went through before there was any kind of safety legislation or protection from all of the diseases that they got from their occupation."
},
{
"end_time": 4997.841,
"index": 184,
"start_time": 4975.794,
"text": " The capitalist mine owners resisted any kind of regulation because they said that's government interference and that's socialism and that you're restricting my rights as a mine owner to tell the workers that have agreed to work for me. The problem is if you're the mine owner in some"
},
{
"end_time": 5013.933,
"index": 185,
"start_time": 4998.49,
"text": " He'll part of West Virginia and you're the only employer, then your employees don't have a voluntary choice to make for the exchange of their labor. If they're not coal miners, then they don't eat, they don't live."
},
{
"end_time": 5044.36,
"index": 186,
"start_time": 5015.572,
"text": " And that's an argument that I hear plenty from those on the extreme end of the left and even the left generally is that you say you have freedom but you don't have the freedom to not work because and you don't have a freedom in the amount of jobs that you can choose from given that if you don't choose from one of these select few because you have a certain amount of intelligence or expertise or whatever. And then there's the whole question of wealth inequality and the opportunity"
},
{
"end_time": 5065.725,
"index": 187,
"start_time": 5044.684,
"text": " The"
},
{
"end_time": 5092.602,
"index": 188,
"start_time": 5066.203,
"text": " Excellent housing. And then there are people born not too far from where I am here in the city of Chicago who were born with no opportunity for a decent education, decent healthcare, decent housing, decent nutrition, minimal protection from crime. And so you can't say that freedom is an absolute or"
},
{
"end_time": 5122.244,
"index": 189,
"start_time": 5092.841,
"text": " Freedom is something that should take precedence over any other kind of social policy or economic policy. Yeah, there's actually two different types of freedom, and I think that part of the whole discrepancy between the left and the right, when both are saying we just want more freedom, is they're using different kinds of freedom. So there's positive and negative. I don't know if you're aware of the plot. Yes. So one is like, just for the people listening, one is positive. I believe it's positive is positive. Someone has a gun to your head. You're like, I don't have that. So I have positive freedom."
},
{
"end_time": 5148.592,
"index": 190,
"start_time": 5122.551,
"text": " The negative freedom is that you have more choices or that you freak from even social conditioning. Like the expression of your complete individuality if that even exists. Okay, you spoke of physics envy. Let's talk about that black envy versus white envy in Russia. Can you delineate to the audience what those are? Yeah, and that's one of the reasons why for Russia especially"
},
{
"end_time": 5177.073,
"index": 191,
"start_time": 5149.326,
"text": " It's been a very difficult transition to some kind of a market economy, some kind of a commercial economy, to use Adam Smith's phrase, because under feudalism and under communism, any kind of transaction was almost always a zero-sum game. If I got something, it means you didn't, right?"
},
{
"end_time": 5205.896,
"index": 192,
"start_time": 5177.517,
"text": " One of the hardest things when I was teaching in Russia, one of the hardest things I ever tried to explain and I was never really successful in doing this was explaining what? Around what year was this that you were teaching in Russia? 1994. I was explaining to them the concept of a Pareto optimal transaction. That's a fancy phrase that's any transaction where you benefit and I benefit, where both of our utilities rise."
},
{
"end_time": 5237.278,
"index": 193,
"start_time": 5207.432,
"text": " So when I go into my Starbucks every morning, I'm all the way to the cart with $2.50 and Starbucks happily accepts it and they give me a Grande Hold Misto, which makes me much happier than holding on to the $2.50. So we both benefit from the exchange, right? Ordinary Russians had no experience with that. Their parents had no experience, their grandparents"
},
{
"end_time": 5262.927,
"index": 194,
"start_time": 5237.688,
"text": " But even with bartering, is there not that operator improvement there? But they didn't really even barter. 90% of the Russian population of the Filth Revolution were serfs, were peasants, and they were given a certain amount. Anything more than they expected, that meant the landlord got less."
},
{
"end_time": 5292.312,
"index": 195,
"start_time": 5263.37,
"text": " Or if one group of peasants got more and the other group of peasants got less. So it was very much a static economy. Holstroy writes about this in Anna Karenina a lot. I had to buy a copy of Anna Karenina when I was in the Soviet Union because one of the things the Soviet Union made you do... Sorry, sorry, I just cut off. At least for me, you had to buy a copy of Anna Karenina."
},
{
"end_time": 5317.363,
"index": 196,
"start_time": 5292.483,
"text": " Yeah, well, I had to buy something because when I was in the Soviet Union in 85, the Soviet Union, they made you buy Soviet currency when you went in, but you couldn't take it out. So I had all these Soviet rubles and I didn't know what to do with it. And on the last day in Moscow, I found a bookstore, right? And the bookstore had a copy of Anna Karenina, and I hadn't read it. And"
},
{
"end_time": 5338.251,
"index": 197,
"start_time": 5317.995,
"text": " This is a real good story about Bronx and his dad Ryan, real United Airlines customers. We were returning home and one of the flight attendants asked Bronx if he wanted to see the flight deck and meet Kath and Andrew. I got to sit in the driver's seat. I grew up in an aviation family and seeing Bronx kind of reminded me of myself when I was that age."
},
{
"end_time": 5364.991,
"index": 198,
"start_time": 5338.251,
"text": " That's Andrew, a real United pilot. These small interactions can shape a kid's future. It felt like I was the captain. Allowing my son to see the flight deck will stick with us forever. That's how good leads the way. It was all about sex and violence. It was about Anna Karenina having an affair with Count Vronsky and so forth. So I bought it. There's no sex and violence in Anna Karenina, but there are hundreds and hundreds of pages about serfdom,"
},
{
"end_time": 5393.951,
"index": 199,
"start_time": 5365.282,
"text": " and social issues and economic progress and all kinds of things like that, which turns out to be, at least for an economics professor, just as exciting as sex and violence, right? That's a horrible thing to admit. So the Russian soul that went through feudalism and orthodoxy and so forth had no knowledge of voluntary exchanges or market exchanges."
},
{
"end_time": 5423.029,
"index": 200,
"start_time": 5395.299,
"text": " And so having an economy where people make a profit means that to the Russian, they're taking advantage of somebody, right? And so that generates black envy. Black envy is if somebody does better, I want them to do worse, right? So if two Russian farmers, right? And one of them has two cows and the other one only has one cow, right?"
},
{
"end_time": 5431.732,
"index": 201,
"start_time": 5423.695,
"text": " Hear that sound?"
},
{
"end_time": 5458.763,
"index": 202,
"start_time": 5432.671,
"text": " That's the sweet sound of success with Shopify. Shopify is the all-encompassing commerce platform that's with you from the first flicker of an idea to the moment you realize you're running a global enterprise. Whether it's handcrafted jewelry or high-tech gadgets, Shopify supports you at every point of sale, both online and in person. They streamline the process with the internet's best converting checkout, making it 36% more effective than other leading platforms."
},
{
"end_time": 5484.906,
"index": 203,
"start_time": 5458.763,
"text": " There's also something called Shopify Magic, your AI-powered assistant that's like an all-star team member working tirelessly behind the scenes. What I find fascinating about Shopify is how it scales with your ambition. No matter how big you want to grow, Shopify gives you everything you need to take control and take your business to the next level. Join the ranks of businesses in 175 countries that have made Shopify the backbone."
},
{
"end_time": 5510.623,
"index": 204,
"start_time": 5484.906,
"text": " of their commerce. Shopify, by the way, powers 10% of all e-commerce in the United States, including huge names like Allbirds, Rothies, and Brooklynin. If you ever need help, their award-winning support is like having a mentor that's just a click away. Now, are you ready to start your own success story? Sign up for a $1 per month trial period at Shopify.com slash theories, all lowercase."
},
{
"end_time": 5537.944,
"index": 205,
"start_time": 5510.623,
"text": " I'm jealous. If I have black envy, then I want one of his cows to die. He's worse off and we're back to equal. White envy is I'm envious and jealous that he has"
},
{
"end_time": 5564.155,
"index": 206,
"start_time": 5539.241,
"text": " but the way I'm going to solve that is I'm going to try to figure out how to get another cow myself so that I don't diminish his success but I try to to equal it right or at least get on some kind of a par right. For most of Russian history and for the initial decade or so after the fall of communism"
},
{
"end_time": 5589.053,
"index": 207,
"start_time": 5564.462,
"text": " There was a lot of black envy. So if somebody in a Russian town had a successful little shop, quite often that shop would be firebombed or looted or somehow destroyed because that person was rising above everybody else in the village or the town."
},
{
"end_time": 5618.592,
"index": 208,
"start_time": 5589.531,
"text": " That's Black envy. Every society has some of that, but in Russia it was in some ways the predominant cultural value with regard to quality and inequality. Is Black envy something that you find pervasive in communist societies? Yes, right. Do you think that's because of the underlying Marxist philosophy that it somehow promotes or says that"
},
{
"end_time": 5647.517,
"index": 209,
"start_time": 5619.087,
"text": " It promotes an ideal of equality, but the people in the society see that there's cognitive dissonance between the ideal and the actual nature of society. The people that run the communist society, Mr. Lukashenko in Belarus, in Minsk, Mr. Brezhnev in the Soviet Union, they actually, they're not equal. They live much, much better."
},
{
"end_time": 5677.858,
"index": 210,
"start_time": 5647.995,
"text": " When East Germany collapsed, one of the real big scandals was how well the East German Communist Party leadership had lived. There was a compound outside of Berlin that had a special hospital, special grocery stores, special cinema, special swimming pools, and many of the East Germans who had internalized this belief that we're all equal, that that's what"
},
{
"end_time": 5707.312,
"index": 211,
"start_time": 5678.268,
"text": " separated us from those greedy capitalists in West Germany is that in East Germany we had solidarity and everybody else was more or less equal. Certainly some people got a little bit more, doctors got a little bit more than truck drivers, but it was a difference of maybe the doctors got 400 marks a month and the truck drivers got 350 marks a month. When they saw how well the leadership of the SED"
},
{
"end_time": 5734.514,
"index": 212,
"start_time": 5707.79,
"text": " the East German Communist Party had been living and how critical they were, then that was one of the things that completely, for most East Germans, invalidated their belief in communism. And most of those people went from believing in communism to believing in Ronald Reagan and Milton Friedman."
},
{
"end_time": 5764.753,
"index": 213,
"start_time": 5734.889,
"text": " In some ways, rather capitalistic because most of the resources, most of the productive resources in Germany are owned privately. BMW is owned privately"
},
{
"end_time": 5790.896,
"index": 214,
"start_time": 5766.869,
"text": " They call it"
},
{
"end_time": 5815.862,
"index": 215,
"start_time": 5792.159,
"text": " Sozialmarktwirtschaft, it's all one word. Germans pull everything together and make one word out of seven or eight. So they call it a social market economy, which means that every German citizen has health care, has education, has some minimal standard of living. But the income inequality in Germany is quite significant."
},
{
"end_time": 5845.794,
"index": 216,
"start_time": 5817.381,
"text": " Right. Something I was thinking about is people like to praise Sweden and when you look at Sweden's trading partner, the largest is Germany. And so if some people say who are on the left end will say that it's because of Sweden's socialistic policies that they're so wealthy or that they have such high standards of living, but they're predicated on a large part to some other nation, which is capitalistic like Germany. So it's not like you can view them in a vacuum. Right. Right. Yeah."
},
{
"end_time": 5872.722,
"index": 217,
"start_time": 5846.408,
"text": " What are your biggest differences and disputes with Richard Wolff? Probably more favorable to markets and private enterprise for at least a certain sector of the economy, consumer goods and services and less favorable to"
},
{
"end_time": 5903.507,
"index": 218,
"start_time": 5873.524,
"text": " government control or government ownership. I think there are certain things that governments ought to own, like in the United States, the postal service, right? And probably public health care. I think the American health care system is much too capitalistic and much too private enterprise and needs to be much more socialistic, if you will."
},
{
"end_time": 5934.189,
"index": 219,
"start_time": 5904.497,
"text": " If you had one question for Richard Wolff, I'll take this and I'll ask him, what would it be?"
},
{
"end_time": 5961.886,
"index": 220,
"start_time": 5934.531,
"text": " social or political policy or law that you would enact. Fix the American economy. Great. Professor, where can people find out more about you? They can go on The Great Courses. I'll repeat that once more. I don't know if it's me that's cutting off. I think it's my computer. The Great Courses, alloneword.com."
},
{
"end_time": 5991.51,
"index": 221,
"start_time": 5962.466,
"text": " The problem with economics and the reason that economics can't beat physics is that lots of things in economics you can't measure"
},
{
"end_time": 6019.599,
"index": 222,
"start_time": 5991.852,
"text": " There are some things you can measure, but there are lots of things you can't measure. Freedom you can't measure, individuality you can't measure, quality of life you really can't measure. You can get proxies for it, but physics you can measure energy, you can measure momentum, you can measure mass, you can measure all those kinds of things. Economists have lots of numbers, but they're all approximations."
}
]
}No transcript available.