The Capitalism Conundrum

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Zachary Karabell: What’s one lesson from history that policymakers should heed today?

John Cassidy: Circumstances always change. So what seems to be a sort of constant in the system when you’re making policy tends to change over time.

Zachary Karabell: What Could Go Right? I’m Zachary Karabell, the founder of The Progress Network joined as always by Emma Varvaloucas, the executive director of The Progress Network. What Could Go Right? is our weekly, longer forum podcast where we interview scintillating, fascinating, deep thinking humans about some of the most pressing issues of our day through the lens of what are the problems that beset us and what are the solutions that we can have to make the world a better place.

And one of the ways that we try to do that, one of the ways in which we all, I think need to do that is to have a clearer understanding of the antecedents to our present, IE look at history, look at how we got here, look at the ideas that framed our present systems, and in many ways caused our present problems, meaning most, most of our problems are the result of ideas. Most of our ideas in the past were, were meant to be solutions to problems that in turn often create new problems that in turn beget new solutions.

That is one of the real dialectics of the past and also of our present, and therefore of our future. And certainly one of the big questions today is wither capitalism, not that capitalism is withering, just to be exotic about what is going on with capitalism. Are we at the end of days in terms the system loosely defined, has run its course, it is no longer able to deliver the goods, and what goods is it supposed to deliver?

Is it supposed to just deliver goods and services? Is it supposed to deliver contentment and happiness? Is it, what is it supposed to do? What is it done? What is it going to do? How do we get here? And that is an essential set of questions to try to figure out where we go from here. So we’re gonna talk to someone who’s just written a marvelous book that covers that particular waterfront.

Emma, who are we going to talk to today?

Emma Varvaloucas: We are going to talk to John Cassidy. He is a longtime staff writer at The New Yorker, and as Zachary mentioned, we’re gonna talk to him about a book that he’s just written called Capitalism and Its Critics: A History: From the Industrial Revolution to AI, which is exactly what it sounds, covering a very long period of time, a whole history of capitalism viewed through the lenses of some of its challengers, both from the right and from the left. And if you’re interested in any of his previous books, he’s also the author of How Markets Fail: The Logic of Economic Calamities, as well as several others. So give him a Google if you’re interested.

And for now, we’re going to talk to him about wither capitalism.

Zachary Karabell: All right, let’s, let’s wither away.

Emma Varvaloucas: John Cassidy, welcome to What Could Go Right? It’s a very well timed book, Capitalism and Its Critics, because it does seem that capitalism has quite a bad reputation right now. I’m not entirely sure how that compares to its reputation throughout time, but it does seem like right now there is a lot of pessimism around capitalism in the younger generations in particular.

So I’m wondering if you just give us your thoughts and analysis around why right now we’re seeing such a rise in people thinking that capitalism has not delivered on what it promised or what people think that it should deliver.

John Cassidy: Well I don’t think it’s particularly new feeling, Emma. One of the reasons I wrote this book was about 10 years ago, nine years ago, back in the 2016 campaign, there was a bunch of polling done then. At the time, Bernie Sanders was running with a critique of capitalism from the left. Donald Trump was running with a sort of critique of globalization from the right, and there were polling then showed that if you just asked American people under the age of 35, which isms they preferred, capitalism, socialism, fascism, or whatever, capitalism scored lower than socialism, which. I’ve been reporting on the US for 30 years. That was a surprise to me and I thought, you know, there’s something happening here. And that’s what, that’s one of the things that got me thinking about doing a, a whole book on this subject. So now here we are nine years later, and I don’t think the polling’s changed that much. you say, people have ambivalent feelings about capitalism. I think. I think most Americans sort of instinctively still think it’s the best system available, but there are definitely a lot of anger and disappointment with how it’s working, particularly for young people.

Zachary Karabell: It’s an interesting question of what is capitalism actually supposed to do? I had a conversation earlier this week on another podcast about kind of critiques of capitalism, and one of the issues for the contemporary generation is sort of a misunderstanding of what it is capitalism is actually supposed to deliver.

And obviously you’ve written about the entire history, intellectual history of what people who are articulating this system thought of it as. And I had posited that it is a system that has been able quite successfully over the past several hundred years to deliver massive amounts of material goods and services to a massive number of people, but that it wasn’t systemically ever conceived of as a equality producing engine or an equity producing engine. And I wonder if that’s part of the problem. Like it works materially. It just doesn’t, you know, it doesn’t make people happy. It doesn’t make people rich.

John Cassidy: Number one, you know, what’s capitalism supposed to do? I, I mean, I think that’s a sort of abstract question. I mean, it’s a economic system which emerged, right, because of a set of historical circumstances. It’s not supposed to do anything. It just is capitalism. People pursue profit in the private market.

Defenders of the system say that, as you say, it leads to large increases in productivity and living standards over time. If you just look back over the last 250 years, that’s certainly true. I’ve got very few charts in my book, but one of them just shows the hockey stick of world GDP, and basically from the year dot to 1800, it’s a flat line and then it zooms up. So. There’s no doubt about it. Capitalism has been the sort of biggest wealth producing machine that, that the world has ever seen.

Now, question is, can it be justified just because of that? Or does it have to be justified on the basis of sort of some level of inequality, some, you know, with a long-term environment? There are lots of other issues invol involved with it, but I don’t think it actually exists for any particular reason. It’s, you know, it’s just a, it’s like a social system and a, and an economic system. It exists because it exists and because it’s guaranteed by a set of government property rights.

Now the question is, you know, it’s based on politics. Politics comes before economics wouldn’t be a capitalist system if there wasn’t a guarantee of property rights. So I guess in that sense, it comes out of the Enlightenment. Enlightenment and John Locke, Adam Smith, thinkers like that. And their feeling was, you know, if you do give free markets their reign, it will outperform other systems.

And I think, you know, that’s still the basic argument for the system. 250 years later.

Emma Varvaloucas: I think there is this sense though that it is supposed to be the mechanism still of like delivering us a better life, like consistently, right? I think you talk about Keynes in your book that he thought that the main problem however many years from when he was writing was gonna be too much leisure time and he thought that everyone was gonna work 15 hours a week.

And I think like, kind of, that’s the thing that people have in their minds. Like however many years later we’re still working 40 plus hours a week, and like what do we have to show for it?

John Cassidy: I think there are two, two issues there. Number one, does getting richer make you happier? That’s a big question and the evidence shows up to a point. It does. If you’re very poor, you tend to be very unhappy. As you get richer up to a certain threshold, there’s certainly a pretty close correlation between income and self rest, happiness.

But after you get to a certain level, sort of, um, middle class American standard. Additional wealth and income doesn’t see, it does go up. There’s a big debate among economists, whether it goes up at all. I think the current consensus is, it still goes up a bit, but basically it doesn’t go up much.

They call it the hedonic treadmill. You’re on this treadmill, you know, you can try harder and harder, get more and more money, and in terms of increased happiness, it’s just not very high.

So that’s one issue. The other issue, which I think you’re also raising is does it actually deliver the material? As Zach said, it’s incredible at producing goods and services. But does it produce the sort of vital goods at an affordable price that you need to live a sort of, you know, a happy lifestyle in terms of, think of the big things at the moment. Housing, healthcare, education, I think one of the big critiques in the US is that, you know, a lot of those things are now either extortion expensive or increasingly out of, you know, out of grasp for, for, especially for young people.

So I think that’s also underpinning the backlash. I think Americans were brought up with this idea. I mean, I come from Europe where people have had a darker view, but I think Americans were brought up with this idea that, you know. Each generation is richer than the preceding one and you know, quite substantially. And there have been a lot of studies of this by Raj Chetty and people up at Harvard, I know they’ve shown that, uh, that actually doesn’t hold in general anymore. It holds sometimes, but you can’t, over the last 30, 40 years it hasn’t held in general. So I think that’s a big shock to the system, because you’re right. I mean, Zach, I mean the reason capitalism still survives industrial capitalism is because it delivers the bacon. That’s always been the argument for it. And you know, if you just look at the overall aggregate figures, it still does deliver growth, but perhaps not as much as it used to be. And the growth is a lot more unevenly distributed than it used to be.

So I think that that’s the issue. And some basic goods, you know, it seems to struggle with.

Zachary Karabell: There is an argument that essentially because of that hedonic treadmill and that idea of, which I guess is William Easterlin and Easterlin’s Paradox of wealth creates happiness to a point and then sort of plateaus. And yes, you’re right that there’s also been a lot of pushback against that hypothesis, right? That maybe that’s true, maybe not, but that you’re still left with people are clearly not content.

The world is essentially capitalist, right? China may be authoritarian, but it’s capitalist. The United States may be democratic, but it’s capitalist. You know, Russia may be kleptocratic, but it’s capitalist. There’s a, there’s not a lot of areas outside of perhaps North Korea, and also potentially areas of Sub-Saharan Africa where there are failed states, which essentially don’t have rule of law that aren’t capitalists at core.

If anything, it keeps succeeding at the material level, right? But people seem to be increasingly less happy or less content, or less satisfied with those material rewards and, and that’s certainly true in the United States. The average person today lives in a much larger home with much more food and much more conveniences and more entertainment.

To what degree was that presage? I mean, you wrote a lot about in the book people like the Luddites, who obviously objected to what they saw was the on rush of technology, but their objections were pretty justified in that they were just worried that their way of life was gonna get disrupted which, which it was, right?

John Cassidy: The social bargain in capitalism has always been, that is not a real. A critic of capitalism. He was a big supporter of it, came up with a phrase, creative destruction. And the defense of capital has always been that the creative side of it in the long term know the benefits are bigger than the costs of the destructive side of it. And that goes back to the very beginning of the system. You refer to the Luddites. I, I did make the, and I did bring them, try and bring ’em back to life in, in one chapter, but they lost. I mean, that, that, that, that sort of view that you’ve got to stop technical progress because the losers are going to lose their livelihoods. That basically got squashed. The, uh, Luddites themselves, some of them were hanged, the rest of them were sort of just drummed out of existence over generations. So think outside, you know, maybe a narrow group of people on the extreme left who would say, we have to go back to Ludditism. But I think the issue of how to manage technical progress and job displacement, et cetera, is another issue from the sort of start of the system, which is now coming back in spades, especially with the rise of ai.

Emma Varvaloucas: Yeah, I mean it seemed to me, I think this is the chapter that you’re talking about, Steeles and Clin, that they didn’t take job retraining very seriously and I, I do fear that we’re repeating these same mistakes with climate change and also with AI. Like we’re just not taking seriously that unless we make a concerted effort, there are gonna be people that are gonna be out in the cold losers. Myself among them, right? As somebody who writes for a living.

John Cassidy: I mean, a, it’s a very good sort of political economy question because in the, in the 1990s and 80, eighties, nineties, and 00s, most of the people who lost were, you know, working class people, working in manufacturing, et cetera. Traditionally, the American system has reacted more to sort of the concerns of the middle class and the upper middle class and the rich, if the economists and a lot of the technologists are right, and that AI is going to basically, you know, hit the professional class, educated people, people like us. What’s the tical backlash to that going to be, I think is a big political question for the next sort of 20 or 30 years. Now, you can see two outcomes, which I discuss in the book. You can see one optimistic outcome where there is a lot of displacement, but in the aggregate, AI makes us more productive, wages go up, you know, doctors earn even more because they’re using AI tools.

In the pessimistic one, no, AI just displaces the professional class. So we don’t have doctors, you just have an AI program and the doctor is, well, I dunno what he’s doing. He’s out in Florida on UBI or whatever. It’s very unclear. And I mean, I, I, I say that sort of, you know, in jocular fashion, but Elon Musk and, you know, Altman have both said that we’re going to need a universal basic income to deal with the cons, social consequences of AI. And that of course raises the question of how do you pay for it, how do you structure it, et cetera.

So again, that’s, you know, obviously the Luddites didn’t have any UBI and neither did the manufacturing workers in, you know, Cleveland and North Carolina in the 1980s. So as you, the example you, you cited is that in the Clinton administration, the start of the Clinton administration, there were people in there who were very concerned about the losers from globalization and they said we should invest a lot of money in job retraining programs. But they never, they didn’t really have the political will to do it. It’s very expensive job retraining and the results, the empirical results so far haven’t been that great. It’s very hard to retrain somebody who’s been working on a production line, you know, and turn them into an electrician or whatever.

Zachary Karabell: Yeah, it always struck me that the fiction of that was really somewhat delusional. You know, the idea that a 48-year-old welder with a high school degree was gonna suddenly become proficient in COBOL.

I mean, again, no knock on their intelligence. Just like most people don’t make that kind of shift at that point in life.

John Cassidy: Yeah, I mean, I mean, I think retraining can work, but it’s gotta be more structured. You know, a 48-year-old welder could become a car mechanic, you know what I mean? I agree with you. It’s very difficult. The evidence from Europe shows that too. But there’s never been a huge effort, you know, with a lot of government money put into it.

It’s always been done on the cheap. know, people who come program, COBOL programmers, they go to. Undergraduate for four years and then they go and get a master’s degree in economics. Or, sorry, in programming. So that’s, you know, a five, six year education. We’ve never had anything, you know, like that. These retraining programs, they’re sort of six weeks in a workshop somewhere and you know, go out into the world,

You’re gonna do it, you have to do it seriously and it’s very expensive.

Zachary Karabell: And of course today you’re gonna have to have job retraining programs for the COBOL engineers because AI is, is, you know.

John Cassidy: Turn them into massage therapists or.

Zachary Karabell: Or maybe make them welders.

Emma Varvaloucas: It is interesting what you say though, about it being taken more seriously if it’s affecting the, the educated classes, so to speak. ’cause you are seeing, I think, Derek thompson, I saw this in The Atlantic. You are seeing now, it’s theoretical at this point, but like a slowdown in the job market for recent college graduates.

John Cassidy: Yeah, no, there has, and. Just straight computer programmers, the number’s fallen, I think, you know, by 25% in the last three years or something. Now that’s, you know, that’s not software developers. Software developers are still increasing, but the sort of low level just programmers who manage the pro, manage the programs, the AI, AI systems can do that just as well. And yeah, they’ve been, you know, they’ve been eliminated pretty quickly.

The question is how far up the value chain are these AI programs going to go? You know, the people who invent, the people who work on them seem to think they’re gonna go a long way.

Zachary Karabell: The week that we’re recording this was an op-ed in the New York Times by a LinkedIn executive saying that at least he was beginning to perceive sort of massive, not just the college graduate, but sort of all entry paralegals, physician’s, assistants, sort of every, everything that used to be your, your pathway into a profession.

John Cassidy: Right.

Zachary Karabell: Which is an interesting problem in and of itself, meaning if you, if you don’t become trained in the culture of a profession, because that layer has been removed, it, it’s not clear what your entry is.

John Cassidy: Going back to my book a bit, you know, you think of the, the first industrial revolution was built on steam. Steam engines, which could power machinery basically because all the preexisting artisanal workers used hand power. Now that steam engine was very revolutionary, but it took 50 or 60 years to spread across the economy. Technological revolutions used to take a long time. Electrification took a long time. AI seems to be, you know, coming, looks like the whole revolution might take place in a decade or so. We haven’t really had a historical example of that. I think the closest example probably is globalization and the arrival in the global economy of India and China and other developed economies and that, you know, that was very, a huge shock to a certain sector of the American economy. So I, if the technologies are, you know, if this sort of techno pessimism is right, it, it is a huge, a huge thing we’re gonna have to deal with in the next generation.

Emma Varvaloucas: I wonder if you could talk a little bit about the shock of globalization. so much debate out there about like how shocking really was the China shock, right? I, I just read an op-ed this week also about how they think that the manufacturing jobs that left the Rust Belt around that time actually went to the south of the United States.

I mean, not the global south, the actual south. So I’m curious.

John Cassidy: I mean, there’s a lot of debate about this. I mean, the standard for a long time. You’ll remember most American economists, especially trade economists made the argument that globalization just wasn’t big enough. Trade wasn’t a big enough part of the US economy to cause a huge shock relative to the UK and most European countries.

Trade, America’s always been a relatively closed economy, even in 1980s. You know, sort of, I remember when I was studying economics at Harvard, like in the uh, eighties, it was like less than 10% of GDP exports and imports. And I remember going up to the professor after class and saying, this is all very interesting, but what about in the open economy? He said, oh, we treat America as a closed economy. So you know, the theory is for it.

So even, you know, back in the sort of 1990s when the post Cold War globalization started the economic consensus was, it would, it’d be some losers, but it wouldn’t be hugely shocking. But that, that consensus changed in sort of 2006, 2010, when a whole, a whole set of new studies by David Autor at MIT and his colleagues actually did it by a zip code basis. And they proved, you know, zip code by zip code, that there’s a very close correlation between the jobs lost and the import penetration in those zip codes. So that sort of, those papers overnight changed the consensus of opinion in the economics profession. Even the previous supporters of globalization had to say, yeah, you know, the social costs are bigger.

Now what the papers you are talking to, I think are saying, okay, the old Rust Belt and North Carolina, et cetera has been devastated. But at the same time, there’ve been some job growth in manufacturing in various sort of, you know, Sunbelt states, et cetera. That’s true to some extent. I mean, in recent, you know, there’s been under the, and in the Biden administration, obviously they gave huge subsidies for manufacturing plants, EV plants, green manufacturing, and there has been some pickup in, in the southern states, but I know that I’d interpret that more as a product of sort of recent policy rather than, rather than globalization.

Zachary Karabell: Do you feel like that sort of state driven capitalism, status model of capitalism. Are there intellectual proponents of that in the past, or is that really more of a.

John Cassidy: Well I know there are, well, I mean, you know, you go all the way back to, you know, Alexander Hamilton, right? And the report on manufacturers. You know, just after American Revolution, who made the argument that you need to protect infant industries from, because if you’re just startingan industry try to start the car industry, you’re never gonna be able to compete with the Chinese and Japanese right now, or the American.

And the back in time, the American, it was a cotton textiles industry and they couldn’t compete with the British ’cause the British had had a lead. So Hamilton’s argument was, we have to protect native industries until they develop. And that argument is still made. In fact, the Biden administration are making it or made it for their electric vehicles. They were effectively saying, look, EV’s a new industry. It’s not part of the existing car industry. So we’re justified in, in slapping a hundred percent tariffs on Chinese, on Chinese vehicles.So yeah, there, there are, I think, you know, it’s called new industrial policy. I think there are big defenders of it. I think what’s fascinating at the moment is that Trump’s trying to row it all back, but he’s getting, he’s running into blowback from a lot of red state Republicans who say, hang on a minute, I mean. Biden for some political, strange political reasons, put most of the manufacturing, new manufacturing plants in red states.

You know, the idea was they’d win back the working class. But of course the Republican voters now, so a lot of Republican senators and representatives are saying, hang on a minute, Mr. President, you know, this South Korean company’s just built a huge plan in my constituency. If you take away these incentives, tax breaks, et cetera, subsidies, the factory’s going to go away.

So I, I think despite all the rhetoric, a lot of Biden’s industrial policy will survive. I think they’ll just dial it down a bit. But I don’t think they’re going to go to the extent, where they’re gonna actually shut down these factories.

Emma Varvaloucas: And there are a lot of red states that are renewable energy leaders, like Texas is the leader in wind, I believe.

John Cassidy: Exactly. Yeah. You know, and a lot of the, well, the Biden thing was renewable energy. That’s the thing. It was, they were building renewable energy in Republican states, which, you know, economically was smart thing to do. Politically it turned out to not be that smart because they got. You know, they didn’t get any benefit from it so far from, from the Republican, you know, voting, working in, in those states.

Zachary Karabell: Who knew we would be at a time where a hundred percent tariffs looked quaint and mild.

John Cassidy: Dialed it back a bit, but yeah, I mean that was, I mean, I think the big difference between Biden and Trump was just, you know, obviously the Biden tariffs, some of them were very high, but they were narrow, relatively narrowly targeted. But what’s new about Trump is he came in and said, look, we’re just having Fortress America. We’re gonna have huge tariffs on everybody. And I think Wall Street said, yeah, he is gonna say that, but he is not actually going to do it. So the market went up and then, you know, Liberation Day, April 2nd comes along and says, well, we actually, we are doing it and we’re not just doing it on, you know, China, we’re doing on everybody.

And then the markets went haywire, not just the stock market, but the bond market and Trump had to roll back. So we’re in a sort of interregnum period now where nobody really knows how things are going to turn out.

Zachary Karabell: What about the argument that it’s not capitalism per se, that that is a cause of contemporary discontent with our economic systems, but it’s financialization.

John Cassidy: I mean, I think that’s a very good question. I think you have to, when you, you just the phrase capitalism doesn’t really mean that much. There are many, many different aspects of capitalism and as you say, outside a few sort of small precinct, I don’t think there’s anybody who’s advocating going back to relaunching Gosplan and a sort of central planning, communist model.

You know, the Chinese don’t do that. They left their, some of their public sector companies in place, but they led the sort of free market capitalism to build on top of it. So then the question is, what variety of capitalism should we have and how do the various varieties work? You know, should be a Scandinavian model, should be an Anglo-Saxon model, should be Chinese state capitalism. And I think one of the critiques of the Anglo-Saxon model is that finance has had, has been given too much free reign. If you go back to the Kingian era, which a lot of the second half of this book is about, from 1945 to about 1980, we basically, the phrase was financial repression. And we basically regulated the financial sector quite, quite severely because it was a widely seen to have contributed to the blowup in the 1930s.

Since then, since the eighties, we, it has been, you know, free reign for the financial sector, basically hedge funds, private equity, et cetera, to transforming the economy. I know, I think a lot of the current, you know, criticism of capitalism are tied to that financialization, you know, I’ll give you an example In, in, in the whole debate about real estate and affordability. There’s obviously a lot of opposition to private equity funds buying up, you know, buying up apartment buildings during the pandemic, all over the country, raising rents, et cetera. Rolling up small industries like even vets. You know, I just got a note from my optician, who’s been in Midtown for 30, 40 years saying it’s changing the name, and I looked up online and he’s been taken over by a private equity company sponsored by Goldman Sachs. I think the user experience of private equity funded businesses, they don’t hold the interest of the consumer necessarily at heart.

Emma Varvaloucas: John, that makes me wanna ask about how you feel about the ethics of capitalism as it’s evolved across time. You have this line, I think it’s in the intro, that criticism of capitalism has remained stable across time as solace, exploitative, inequitable, unstable, and destructive.

Zachary Karabell: Other than that, Mrs. Lincoln!

Emma Varvaloucas: I mean, I think it’ll, it’ll re that’ll resonate with people still today for sure.

I mean, that’s your point, but also I think it was in your first or second chapter. You know, you tell this story of the, the British in Bengal, when there was a famine and they just went and bought up all of the rice plots and then sold it back to the Indians at exorbitant prices and just basically let a lot of people starve to death.

And it does seem like in comparison, you know, private equity, buying up real estate, not great, but not quite as destructive.

John Cassidy: I would say Americans support competitive capitalism, the idea that you can set up a company, go into business. If you do a good job, you produce a good product, you, you grow wealthy. I don’t think there’s, I think there’s still blanket support for that idea. What people don’t like is when it’s anti-competitive capitalism, and I think that’s the rap on private equity. The whole business strategy is built on the roll up strategy. You buy as many small businesses you can. You acquire market power. Once you’ve got market power in a community, for example, if you own, you know, all the vets in a certain neighborhood of New York, then you can raise prices and you can incentivize the staff to sell things to people that they don’t need, et cetera. So, I mean, I think that’s of predatory capitalism. you go back to Adam Smith, Adam Smith himself warned about predatory capitalism. He was in favor of competitive capitalism, but he also said, know, if you get three businessmen together, then within 15 minutes the discussion will turn about how to raise prices. he he saw the sort of incipient in know dangers of not allowing, not having a comp, fully competitive system. So the whole point of a competitive system is if you raise prices too much, somebody else comes in and undercuts you. You know that, I don’t think that’s happening in the vet industry in Boerum Hill.

‘Cause there are, there are small ones left, you know.

Zachary Karabell: So in the current framework, I mean, you, you wrote a lot about AI. We touched on it earlier in some of the, you know, the questions about its disruption. Do you think, I mean again, we’re all sort of guessing, trying to read digital tea leaves when it comes to prognostications about the technological future and AI, but sort of within the rubric of the system.

So there was always a concern, and I think some of the concern about the way AI developing with its incentives is the, the paperclip conundrum, right? That if you, if you simply focus on maximizing, I guess in this case, profit, the paperclip problem was if you tell a robot to maximize the efficiency of producing paperclips, and that’s its only directive, and if they take over the world, they’ll essentially subsume everything, all humanity, all production to just the endless production of paperclips.

So is, I mean, is, is that a risk within AI that’s simply a human construction?

John Cassidy: I should presage my answer by saying I’m not a technologist, so I, I don’t want to.

Zachary Karabell: We’re thinking about this in terms of the financial incentives that are kind of built into.

John Cassidy: Obviously we’re just in an arms race inside the, inside the AI industry now to deploy systems as quickly as possible, you know, it’s, it’s a gold rush, right? So you need to get out to try and establish some sort of first mover advantage. And it seems, you know, after DeepSeek that perhaps the argument that these things can’t be replicated is not true.

So. actually is good from an economic point of view because it would suggest that there’s not going to be as much monopoly power. I don’t claim to be a huge expert on the industry, but I’ll cite some people who have been studying this very closely. Some economists who I spoke with recently, if you go back sort of five or 10 years, I think there was a feeling among economists that AI was basically just the new steam energy. All the new electrification. It was this huge technology, they call ’em general purpose technologies in in economics, which would cause a lot of disruption early on, but over time would raise productivity, raise living standards, and raise economic growth. So it would be a good thing, even though there’d be short term costs.

Recently when I was writing a piece with New Yorker, I went back and spoke to some of these people up at Harvard, MIT, Stanford, and places, and I got a much darker sort of view from them. They seem to think that since the OpenAI conversion and the sort of launches of all these quick models, basically the industry is just it. It’s deploy, deploy, deploy without thinking about actually the social consequences of it. And apparently in testing they just, even the way you test these things, it’s just against a very narrow set of metrics as to, you know, what calculations they can do quicker than others. It doesn’t seem to be any sort of consideration of the broad economic and social consequences of them.

So economists who I spoke to, as I said, who seemed more optimistic, relatively optimistic four or five years ago, I think they think that, you know, this thing is a real threat now and it’s just been sort of sprung on us and allowed to sort of roll out there without any safeguards. I mean, there are no regulations at the moment, right?

The Biden administration put out a, a sort of general set of principles, but we’re just relying on the market completely at the moment.

Emma Varvaloucas: Oh, another crisis to look forward to, I suppose.

You have this great line. I think this is also in the intro, you say that capitalism is always in crisis, recovering from crisis or heading towards the next crisis, as we see, as we were just talking about. Why is that? I mean, is that?

John Cassidy: I think historically it’s true. It, it’s just in it, it isn’t, doesn’t proceed in a, in a straight line capitalism. It proceeds in cycles and the various types of cycles, which I discuss at length in the, in the book, the most, one way, probably most familiar is the financial cycle, often driven by credit, you get a credit boom, you can get a, a crazy sort of blow up at the end of the boom, as we did in real estate in sort of 2003 to 2007, as we did in internet stocks in sort of 1997 to 2001, as we may be doing now in sort of secondary debt markets, some people think. We know that, and then you get a bust and there’s, you know, that’s, that’s a cycle.

But there’s also longer cycles driven by technology, you know, these general purpose tech cycles. And they, I think, you know, run over longer periods. I referenced the work of a Russian economist called Nikolai Kondratiev who was killed by Stalin, who came up with a theory of long waves, that on top of the short waves there are longer waves, which you have as a long period of growth, and then you have a much slower period. So the optimistic argument now is that we’re just entering a new long wave of growth driven by AI. The pessimistic thing is, the argument is, well, before that starts, maybe, you know, there’s gonna be a bust of everything, which was competing with where AI is, is going to be. But you know, capitalism just doesn’t proceed in, in a straight line over time. It does, if you eliminate all the trends, there’s a sort of upward line of GDP, productivity, wages, et cetera, but it, it, it proceeds in cycles.

So those cycles have a, have a crisis period. I mean, the big, big debate among most of my critics has always been, will one of these crises be the final one and, you know, actually bring the system down? So far that hasn’t happened, obviously.

Zachary Karabell: For years. I think still, still to some degree true Wall Street traders love Kondratiev’s Cycle. It’s like they feel it some sort of alchemical secret key to understanding the universe. And if you can, if you can identify the wave at the right time, it’s, it will unlock untold riches.

John Cassidy: Yeah, I know. Well, there was a fellow famous you, you’re probably all enough, Zach to remember it. Remember the Elliott Wave theory? Elliott Prechter back in the 1980s.

Zachary Karabell: Yes.

John Cassidy: One of the first stories I ever did was the stock market bust in 87. Prechter was a, you know, this sort of guru of the time and he was a big Kondratiev long wave going.

Zachary Karabell: Yeah, they all feel like if you can just understand the, I mean, it’s almost like Illuminati mason type.

John Cassidy: Right? I mean there’s, there’s some sort of craziness there. You sort of go in, look, I mean there’s obviously cycles, epicycles, with a lot of randomness, so you gotta be careful. But I think the general idea that there are long, long-term waves of growth driven by technological progress. It is not that controversial.

I think most economists would accept that, and most business leaders.

Zachary Karabell: I wrote a book a bunch of years ago about Brown Brothers Harriman, about the kind of the rise of American capitalism through this investment bank, and one thing that struck me was. If you had asked someone like Andrew Mellon, one of the richest people in the early part of the 20th century treasury secretary, known for his kind of humorless rectitude about what he thought capitalism was, he would’ve talked about benefits for his family. He would’ve talked about benefits for the workers at whatever factories he owned. He would’ve talked about community, and he also would’ve talked about profit, but he would not have said that the purpose of a corporation, surely full stop, was to provide maximum returns to shareholders.

John Cassidy: No, I think you’re right. I mean, I actually walked down Broadway the other day and I noticed Brown Brothers Harriman have still got their building there, right?

Zachary Karabell: They have a small portion of that building. It’s got their name on it.

John Cassidy: Yeah, they have a small portion of that, but the name is still outside it. But anyway, no, I think you’re right. I mean, again, it goes back to your question about financialization. I mean, I wrote a lot about this in my previous book about the great financial crisis, but the rise of the shareholder value movement is a big development in modern American capitalism. And it’s now, you know, spread to Europe. There is same sort of incentive structures and funds and even Japan now, you know, the. That’s why Warren Buffet bought into Japan because a lot of these big Japanese conglomerates have adopted the idea of shareholder value.

Now in the, in the abstract, it doesn’t really mean that much. The question is, what’s the time cycle and I think what the old people like Melon, et cetera, what they would object to is this not maximizing profits over the long term, but the sort of short term crash and burn. Apple’s stock buybacks massively exceed its investments over the last, you know, 10 years or so. The sort of culture of, again, it’s a culture of financialization chasing short term stock price increases. That’s the critique I think. So you got a lot of, you know, it’s, it’s got to the extent that a lot of the sort of real innovation in the system comes from startups. We rely on them to do the innovating.

Whereas the big corporations are basically there to milk their existing franchises and sort of, you know, buy back stock and ramp up the stock prices as far as they can.

Emma Varvaloucas: Yeah, or Boeing comes to mind, or just the airplane industry in general.

John Cassidy: Yeah, Boeing’s a classic example of that, I think. And you know, again, the CEO structures, what we basically did, again, this is more about my old book than new one, but we turned CEOs into sort of private equity partners basically by, you know, a lot of them actually do go into business with private equity companies, and it used to be called leveraged buyouts and you bought a, you know, you got rid of the CEO, but the CEOs realized that actually you know, leveraged buyout is great for them ’cause they get a huge incentive package.

So the sort of values of the old LBOs now rebranded as private equity have basically taken over much of corporate America.

Emma Varvaloucas: Yeah. John, I have a purely fun question for you. For those who are interested in reading the book, especially broken into chapters that go over a certain time period through the lens of a prominent critic, do you have a favorite critic?

John Cassidy: It’s a good question. I mean, I’ve got a few, I mean, one of the ones I, I think the ones I prefer most are the ones which aren’t too familiar. Obviously, in a book like this, you have to do some familiar people, Adam Smith, Keynes, Marx. Even Lenin’s in there somewhere.

I tried to find some people who weren’t as well known and a couple of, a couple of the women actually. I also tried to find some women, ’cause economics has always been very male dominated, but a lot of women have made important contributions and women are half the workforce. So it’s crazy to write a book about the history of capitalism without having more women in there.

So for example, Flora Tristan, who was one of the early socialists in France that I think has got an amazing life story. She was a sort of Peruvian, a Peruvian French person who wrote novels, had a tumultuous and sort of disastrous marriage at the end of which her husband tried to assassinate her and shot her on the streets in the sort of Left Bank.

Emma Varvaloucas: That’s pretty bad.

John Cassidy: Yeah. And it’s terrible. Yeah. And anyway, got he got sent to jail and finally she got away from him and then she became a great, she sort of hung out with the Fourierists and the sort of trendy lefties of the time in the Left Bank.

And then, but then she went out by herself and promoted this idea of a universal union. At the time, there were some labor unions, but there were men only, male only. She had this idea of a universal union encompassing men, women, and sort of the broader community as well. She saw it as a sort of way to build local municipal governments, providing services for people.

And it was a big, you know, her big vision, which I, I really wasn’t aware of until I started studying it. So I guess I’d, somebody like her, I’d probably pick out as my favorite. Because it’s an un, I’m a journalist. It’s not unknown story, but it’s a much lesser known story than Senator Owens in the book.

Emma Varvaloucas: Certainly not a household name.

John Cassidy: Certainly not a household name. Other, maybe now.

Zachary Karabell: So is anything about the present, I mean, one always writes a book somewhat trying to anticipate a present. And again, you, you do write about AI and the challenges of it, and you talk a bit about more sustainable capitalism toward the end of the book. Has there anything about the past year, the Trump administration, the kind of the evolution of Brexit?

I mean, obviously you wrote the book after Brexit had already happened, that has, I don’t know, shifted your perspective for the better or worse about the future?

John Cassidy: I think the big development I would point to in the last 10 years. I mean, Brexit and Trump, obviously, I, I deal with ’em sort of at length. I mean,the last third of the book really is a sort of history of the rise and fall of neoliberalism and the rise of economic nationalism. So I think that’s in there.

But I think we haven’t really touched on at all is the whole climate change story and environmentalism, I think for people. I mean, Emma may be able to speak to this more than, Than we can. But for people of a younger generation, people under 40, under 30, especially on the left and center left, environmentalism and climate change is absolutely central. They sort of look at economic, a lot of them look at economics through the lens of what’s it doing to the climate, rather than the sort of framework I was educated in in terms of the class conflict, wages. You know, sort of narrowly economic things.

So, and I, I quote Greta Thunberg in there, she’s obviously the great fireball out there making this a big issue. But I think her basic argument, how can you talk about eternal growth when the planet’s burning? That sort of argument I think resonates with a lot of, with a lot of young people. And the way I try to chuck, chuck it in the book is I try to trace the origins of sort of the Degrowth movement back to this guy Nicholas Georgescu-Roegen, who was a professor at Harvard, and then a professor at a Vanderbilt, he was a Romanian economist, and he was involved.

We had these debates. People have forgotten it. Part this function of this book is to try and remind people of debates that we’ve had in the past, the whole limits to growth debate in the 1970s. Remember the Meadows, et al report? He was part of that whole thing, basically the Orthodox economists won that debate.

They said, we can deal with this with technology, but the, the arguments that were made by the catastrophes in the 1970s have now come back and, and I think that, in the last 10 years is what I guess is the most shocking.

Emma Varvaloucas: I mean, I think you’re spot on about people my age and younger vis-a-vis climate change and all the existential anxiety around that. I think for me, the big question around Degrowth is like whether people would be willing, whether it’d even be wise to accept the kind of sacrifice that I think would go along with that.

Right? I mean, people aren’t even, they don’t even wanna sacrifice in terms of flying less, right? So.

John Cassidy: I mean, that’s the thing. I mean there, I think there are, especially I think in Europe and the UK, there are people who are changing their lifestyles to moving to Degrowth, for example. Fast fashion is very controversial in the UK now, and you know, a lot of young people don’t buy fast fashion anymore. They go to thrift stores, they’re in a recycling economy. But you’re right in the sort of in the aggregate, people are very reluctant to give up their material goods and accept that. I mean, if you take Degrowth seriously, it is sort of deprioritizing GDP, deprioritizing wage growth, et cetera. It would be a huge change to the economy.

And so far, I think you’re right. There isn’t mass support for it, but I think there is significant support for the ideas among young people. The other big problem with Degrowth is what do you do with the developing countries? Are they supposed to adopt Degrowth before they’ve even got rich? That’s a big issue. So if they’re going to be allowed to grow, you would just on an aggregate basis, if you’re going to try and cap emissions, that would involve more severe restrictions on rich countries.

Emma Varvaloucas: Yeah. In that vein too, I, my observation around fast fashion and the trend towards not wanting to buy fast fashion, I usually live in Greece. I’m in the States right now. There’s a huge difference between how my friends in the States who make a certain amount of money versus my friends in Greece who make a far lower income than them talk about fast fashion.

Like it is a, a trend in the US and in Northern Europe, but in places like Greece or other places in the world, like, I don’t know if that conversation is really popular.

John Cassidy: If you’re not really rich, obviously being able to buy stuff from China for $10 is actually, you know. It’s, it’s fantastic. No, that’s what I mean. It’s, there’s always a, there’s always a balance here, but, and as I said, my coverage of Degrowth, I think is actually relatively skeptical in the book. I think the people who are in the movement will sort of be grateful that I get, I take it, I do take it seriously, and I try to give the arguments as they express them.

I try to do that with everybody. I try to be fair with everybody. At the end of the day, I think you, you’re right. Materialism is a very, very strong force. Are we willing to give up materialism? And the answer from history is, I’m afraid that so far we haven’t been.

Zachary Karabell: But the other answer in history, which your book does highlight is that from Malthus onward, the Neo Malthusians and the Club of Rome and Paul Ehrlich and the population bomber, essentially we are gonna collapse under the weight of our own needs.

John Cassidy: Neo Malthusians, they call ’em. Yeah.

Zachary Karabell: And that proved to be wrong, and technology did become a pathway for that not to happen at multiple points in the 19th and 20th century, which of course it’s at least worth considering that we are replaying the same hysteria that will prove to have been overblown.

John Cassidy: People like Andresen, the Silicon Valley people. I think there’s a big feeling there that climate change is a huge issue. Emissions are a huge issue, but we’re gonna have a technological solution for them at some point in terms of, I don’t know, firing stuff up in, you know, particles up into the atmosphere or modular nuclear reactors everywhere to replace carbon.

The argument that there is a technological solution there, I think has still got strong supporters, especiallyin Silicon Valley, et cetera. And you know, there has been some progress made. If you just look at Britain, the amount of power now generated from sustainable sources, you know, is more than half on a lot of days.

Britain, when I was a kid, it was coal mines everywhere. There are some hopeful things, and I wouldn’t totally rule out technology, but it does seem just looking around the world that the sort of impact of climate change is accelerating and if you look at places like the Sahel in Africa where the, you know, the desert is expanding and there’s like lots of displaced people that could have, you know, potentially catastrophic results. just, not just in those places, but as they try to move into Europe or just escape from the impact.

Zachary Karabell: So as a valedictory question, you have two young adult children. Do you argue with them about capitalism or?

John Cassidy: No, not really. Although, you know, I try to get them to promote my book on TikTok, so I’m a good. I am a good catalyst. I mean, I would say they’re sort of genera. I I lose track of the generations. I mean, if you’re born in.

Zachary Karabell: They’re Gen Z, right? Emma? Is that.

John Cassidy: Generation Zers, yeah.

Emma Varvaloucas: How old are they?

John Cassidy: 17 and 18.

Emma Varvaloucas: Yeah, Gen Z. Yeah.

John Cassidy: They’re both Generation Zers. I would say they’re socially concerned, but they’re not ultra woke.

It seems to me, you know, the generations, I know from my generation, you always react to the generation above you, and there’s a bit of a, sort of a reaction against it. But I think they are, they’re certainly concerned about the environment. That is one thing they’re, they’re definitely concerned about. I’m not saying that concerned enough to give up their Shein accounts, in fact. So far they haven’t been. They’re both girls.

But I do point that out to ’em when all the packaging arrives. I say, you realize this is a disaster for the environment. They look away and slightly embarrassed.

Emma Varvaloucas: I was ordering Shein too when I was in my early twenties, and then I stopped, so there’s hope for them yet.

John Cassidy: Well, now the de minimis exemption’s gone. Right? So they’re right now they’re complaining about it getting more expensive.

Emma Varvaloucas: Yeah.

John Cassidy: Maybe that’s good from a environmental point of view.

Zachary Karabell: On that note, it’s been good to have a de maximus conversation with you about capitalism, its critics, its past, present, and future. Obviously, this is something that affects all of us understanding kind of where we’ve been, where we are, and where we might be going in terms of this tenticular system that is eaten the world is absolutely vital to our future, vital to understanding our present.

And while as you point out, you’re more of a descriptor than a prognosticator or a offering some sort of, you know, grand solution to whatever ails us, understanding it is the first step to, I guess, charting that course. So I wanna thank you for the book.

John Cassidy: Oh, thanks a lot for inviting me on. Yeah, as somebody said, you have to write volume two, what we’re supposed to do about it all. But.

Emma Varvaloucas: Someone else can write that.

Zachary Karabell: Someone else can write that.

John Cassidy: Thanks very much for inviting me on. I, I’ve very much enjoyed our conversation.

Emma Varvaloucas: Thank you so much, John.

John Cassidy: Thank you.

Zachary Karabell: So Emma, I guess the question is, is the end nigh? Has capitalism run its course and is about to drive humanity into a ditch of climactic despair?

Emma Varvaloucas: Well, it was really funny because as I was preparing for this podcast, I wanted to do a little like peer-to-peer. Gathering of questions. I was curious what people’s reactions were, particularly because I’m in New York right now, to a book called Capitalism and as Critics, so I said, Hey, what questions would you have for an author who wrote a book called Capitalism and as Critics, and the questions I got were all like, What comes after late stage capitalism? So like the final, you know what I mean? It sounds very, the end is nigh, final stage capitalism. That certainly sounds like the end is coming, but I guess we all have the bias that what we know will continue. But I kind of tend to think that we’re gonna have a crisis and then capitalism will will limp forward or gallop forward, or somehow recover itself.

Zachary Karabell: I think that’s really the problem of the question is what alternatives would there be other than a Marxist revolution or a, which we’ve tried and apparently, you know, didn’t work out for societal needs the way the utopian vision of it would’ve. I don’t know what the other thing is. I mean, there’s lots of people who, who’ve written about alternatives to the current flavor of capitalism.

There was a big TED Talk a bunch of years ago about the donut economy, Maria Mascato writing about, you know, different forms of more compassionate capitalism or capitalism that, that meets the needs. There’s the whole Vatican kind of emerging critique of capitalism versus societal bonds, morality, et cetera.

But it’s not clear what you would, what, what would be in its place, right?

Emma Varvaloucas: No, I think that that’s the million dollar question that no one has answered in 250 years. As you said, we have tried, we’ve tried some other things. Maybe I’m completely wrong about this. I mean, maybe people will write an angrily about this, but it kind of feels like, don’t wanna sound like Francis Fukuyama: the End of History, but it does kind of seem like, as you’re pointing out in the beginning of the interview, that everyone’s settled on some form of capitalism right now and you don’t really hear of countries again at the moment saying like, I think we should, we should flip that all on its head.

Zachary Karabell: Yeah, and that’s, I think the, the great challenge, which is there isn’t this robust debate between systems. I mean, there may be a debate between an open and a closed society, insofar as that’s a dynamic that China represents one modality and the west, whatever that means, represents another. Although, as we’re discovering, right, the West is not nearly as open as it preaches itself to be.

The irony of China’s AI model being a product of open source and all of our AI developers being closed. It’s not as binary as simple as that, but it’s a weird contrast, but yeah, it’s not like you have anywhere in the world, unlike the Cold War, where it seemed like these are actually viable different economic systems.

They might be different political systems, and so you’re kind of left with to your friends, you know, what comes after late stage capitalism is more late stage capitalism.

Emma Varvaloucas: Exactly. Just that, repeated until we, you know, the sun blows up, I guess.

Zachary Karabell: Right. So, you know, rinse, rinse, wash, and repeat.

Anyway, to be continued, it was a good conversation. You know, we don’t often look at the intellectual origins of things, particularly in a world where the debates are almost entirely about the politics of these things, not about the framework in which these are emerging and insofar as we try on this to also look at ideas as the germinate of, of the future, not just actions. It’s worth looking at the ideas that were the germinate of our present, and that’s what John Cassidy has done in his book.

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