 This is Rob Johnson, president of the Institute for New Economic Thinking. I'm here today with Rana Faroohar from the Financial Times, a good friend of Inet, a teacher, an illuminator. She stirs the drink, and today we're here to celebrate Homecoming, the path to prosperity in a post-global world. Not surprisingly, written by Rana Faroohar. What was that little inner voice that came to you and said you've got to write this book? Where did this book's inspiration come from? You said to me once, nothing really resonates in the real world unless it matches people's felt experience at some point. And you know, as I have moved through the world for over three decades reporting in three different continents on economics and business, there have been so many times where the market orthodoxy and what we were being told by policymakers, experts, business people was not matching my own felt experience. And my felt experience comes from being born and raised in Indiana. I had immigrant parents, but I grew up in farm country in the Rust Belt. My dad ran manufacturing plants. And so I really saw the fallout through the 80s and the 90s of both the Reagan Thatcher Revolution and the unleashing of sort of animal spirits with capital. But then later the changes in trade policy, the sort of neoliberal trade policies that were adopted by the Clinton administration and how those affected my community. And you know, just to stop and say I work for the world's biggest business newspaper, I'm well aware that the last 40 years have seen the creation of more global wealth than ever before. But as we all know too well, there have been huge pockets of inequality that have grown in almost every country, but particularly in developed countries in the industrial base. And so that experience of seeing we're being told one thing, but I'm seeing and feeling another thing on the ground was really an inspiration for this book. I've always had a sense that the global economy had moved a little too far ahead of national politics and that those two things needed to be remored just as wealth and place needed to be remored. That wealth was traveling and locating in too few places, geographic and institutional, and that there needed to be a greater dispersion. I sense there are a number of people who kind of had that felt awakening. I remember Ragu Rajan writing a book saying there's something missing here and a book that I read right after Donald Trump was elected. I come from Detroit, not too far away from Indiana. And I remember being in Detroit, where the enthusiasm that Donald Trump could create. Now obviously the Clintons had been behind NAFTA welfare reform and criminal justice reform and various things. And in a 73% black city, you'd understand their unhappiness. But I watched the Trumpian kind of energy take hold. And I watched how which might help people thought the system was rigged and it wasn't sustainable. And you know there's an old Chinese adage, I can't quote it exactly, which is people do not engage in revolution for their own well-being. They do it for their children's well-being. And when people started feeling in this country that things were happening, they were being justified, I know you're coming up on a very very interesting seminar series on the neoliberal order in the next week or so I guess. In this sense that what you might call what's being projected on top of us might satisfy certain elite power centers, but it's not being felt. And I'll tell you one of your predecessors in journalism who's no longer alive, William Greider, sensed that when he wrote with David Stockman about what was happening with the Reagan Revolution, when he wrote about the Federal Reserve and his question was independent from whom. And I think you're, how would I say, I won't say you're following their footsteps, but I think you're resonating with very similar concern. Well, I appreciate that. I mean, I try to blend real data and analysis and big picture with the felt experience and you know I'll just share one of the anecdotes in the book and I put it up front because I thought it really encapsulated what I was trying to get at was a conversation I had with Richard Trumfga who was the former AFL-CIO. Yeah, lovely man, really a lion of the American labor movement. He's passed now, but I had a conversation with him a few years back because I was trying to understand what was, what was the conversation being had between labor and policymakers at the time of NAFTA, at the time of the movement of China into the WTO which eventually happened in 2001. And I said, you know, what did folks tell you? And he said he remembered a policymaker from the Clinton administration coming to him and saying, you look, you know, we know this is going to kill you guys, but it's going to get better after time, you know, but wages are going to level out, leveling up, you know, the whole, whole notion of equalization of wages over time globally. And he said to the policymaker, well okay, but how long is that going to take? And the policymaker said three to five generations. And that's the kind of thing that really, you know, it's hard for people to not think, wow, I'm not a human being to you, I'm a, I'm part of an algorithm that you're running, and we haven't had a national conversation about how this is going to go. So there's an old adage that free trade was good because you could make everybody better off and nobody worse off. But the asterisk, which Chinese leaders often shared with me, is you've got to do transformational assistance for that to be true. And Donald Trump has got everybody mad at China right now, as though we did it. But what was missing was the transformational assistant, particularly in the Rust Belt in the United States. And so it doesn't require three generations. It's three generations if you don't do transformational assistance. It can be not at all. It's a displaced group, but with assistance in moving schools, reorienting businesses, you know, there are a lot of movie theaters and restaurants in Detroit that shut down. If they'd been assisted in moving to other places, their vitality would have been maintained. We all know this, and you know, I would add that there was something else that was left out of the equation. You know, I grew up on factory floors. As I said, my dad ran businesses all over the Midwest. And I had another felt experience, which was shared by, interestingly, a lot of people in engineering, a lot of people that are real business practitioners that, you know, put aside Ricardian economics, maybe it's okay for Portugal to make wine and Britain to make cloth. But I don't think Ricardo thought about the entire industrial supply chain of whole industries being outsourced and what that would mean not only for a community, but for competitiveness and innovation. Because some, particularly at the, I would argue, the period we're moving into right now, where the consumer, the innovations of the consumer internet are beginning to come into the business space, which is going to be profound. You know, the internet of things, the industrial internet, I see that just, and we can go into it, just some of the incredible innovations that are coming. It's mind-blowing. In order to really reap the rewards of those things, you do need to have a certain level of hubbing, I believe, of production and consumption, iteration between scientists, researchers, machinists, manufacturers. And this goes to something else, which, you know, countries like Germany and Japan never really forgot, which is the respect and the knowledge of labor and how you bring labor and management and business together to everyone's benefit. That's kind of a micro part of this, but it's a very important part of it. China never forgot that. I think that's what dual circulation is actually partially about. One of the things I want to add just to this dimension is a lot of people are very concerned now about racial polarity. So on one side, talking about wokeness, others are saying, we guys abuse us for 400 years, and they're right. But one of the things that's not being said frequently, though the scholar Peter Timmon in his book on the declining middle class that he did, he emphasized that when in regions the economy turns down, people become afraid. And in the survey data, their fears about their future go up. Those fears are in walks that correlated with rises in racial animosity. And other people like Shannon Monant, who is a fabulous, what I'll call, social scientist related to health. We talked about Angus Deaton and case diseases and despair. She did a study for INET on the geography of where austere local budgets, machine learning and automation or globalization or financial crisis impinged and created fear. That's where the diseases of despair are located and you can locate the diseases of despair with where Donald Trump outperformed his Republican predecessors against Hillary Clinton. And then you take it internationally, the AFD in Germany, the Brexit vote, Marie Le Pen, all of these things correlate with the diseases of despair and the economic, which I might call shocks or disturbances. And so our social cohesion, in this case I'm talking about black and white or black, white and Asian, is in the balance. It is endogenously provoked by the fear that's engendered by the economy. Yeah, there's something else that's interesting in that too. For starters, you're absolutely right. Any place where there was prosperity, Biden either took that area or did better. Any place there wasn't, Trump took it. My county that I grew up in went 76 Trump, 76% Trump. I actually remember, it's funny just as a side note, when the Republican primaries were happening in 2016. I was at our mutual friend Gillian Tetz House and there was a group of big Republican donors. Paul Singer was there amongst other people and the Indiana primary was going on the back of the on the TV and back and at that point nobody thought Trump was going to win. No conservative thought Trump was going to win. They were all sort of figuring out what's the strategy and I kind of piped up and said, I think he's going to take Indiana and everybody was like, no, no, no. And I said, what do you all have to offer these people? What is your message? What is your message? You don't have a trickle down? But the problem, of course, as you and I know, was that the left had not connected yet the issues of race and class in a way that they needed to and they had not redeemed themselves, I would say, amongst some of the working population as I believe they are now doing and I would look at people like even someone like a Ro Khanna who's speaking up and saying, you know, we can't have a diverse democracy unless we get the economy right. You know, I mean that connection of class issues and race issues I think are very important to getting back onto the right track. It's very, very haunting in the sense that these distributional issues intentions have arisen. The polarity has arisen which makes politics of consensus harder to achieve. At the same time lays daunting challenges like the pandemic and climate change have descended upon us and I don't know if there's a higher spirit or not, but if there is, they're really raising mistakes by bringing these things to the table all at the same time. I mean they're raising mistakes, but they're also in a way providing the solution. I mean, you know, one of the things I talk about in the book, I quote Bill Janeway who's an Inet, another friend and Inet co-founder and board member and you know he has the wonderful theory he's iterated about productive bubbles. In fact, I think I saw him first at an Inet conference with you years and years ago talking about his book and I remember my mind was kind of blown at that point. But his take, which as I've done more research I totally agree with, is that the times that you get shared sustainable productive growth across all levels of society are when there is a big transformative technology that can be underwritten by the public sector, you know, put some put some floor under it and then it's privatized and people are brought along. This happened with railroads, it happened with the internet. It is so clearly clean tech today and we have the pieces in place to get this right. I'll give you an example from the book that I think connects a lot of the dots that we've been talking about here. In addition to looking at agriculture, I looked at the textile supply chain quite closely and I picked textiles because of all the industries in the US that were hollowed out when China joined the WTO, textiles and furniture were the top two for obvious reasons. Low margin industries, you know, they went abroad right away. But I wanted to see, okay, what was left and what could we learn from that? So what was left of this textile supply chain in the Carolinas is almost like a Darwinian case study of how you want to run a good business. They tend to be and interestingly they tend to be mid-sized, family-owned, private. They're not having to deal with the pressure from the street. They are investing and really investing for the future because these are four or five, six generation family businesses and they're very rooted in the community and in almost, you know, sh-t guardian kind of way. Like there's a, you know, the head of the business knows that if he doesn't treat somebody right, he's going to go down the street and, you know, get called on it. So these folks know how to work together as competitor collaborators. And during, during COVID, it was interesting. They came together at, you know, t-shirt sales and cheap underwear sales fall off a cliff. So they think, well, we've got some people to keep on the payroll. What can we do? Let's try and make some masks. Well, it was interesting because they called up for all Peter Navarro's bluster. They call up the Trump White House and, you know, he has no plan. He had no idea, no coordination, no understanding of what these, you know, these people could do for them. So they kind of got together and they did it themselves and they, they made a plan and they made a bunch of masks and some of them trucked them up to the north themselves. And there is an example right, right there. Okay. How about, since these folks have learned how in this 16 month period how to take the price of an American made mask from 30 cents to 10 cents, and a Chinese mask is three cents. So when you factor in labor and environmental, there's not too much air in between those. Let's have the federal government or the state government set a floor under that. Let's, let's give them that market and help them to continue to move into other product areas like perhaps connecting with EV manufacturers in South Carolina that are getting federal subsidies because that's a more strategic industry. These are just basic bits of dot connection, you know, but we have had such a mindset. I mean, it's such low hanging fruit. Like I feel like you and I could go down there in a truck and get this done in a week. But, but, but we have had such a mindset about, oh, you can't touch anything. You can't nudge anything. Public policy has no role in business. It's, it's just so atypical. The rest of the world just doesn't think that way. And, but I think things are changing now. And I think, you know, what we've seen with semiconductors, for example, which I also talk about in the book, you know, this is not about, about China. I mean, even from China's perspective, I think the idea that we had a neoliberal system where it was all about driving down prices and efficiency to the extent that 92 percent of high-end semiconductor chips end up being made on one very contentious island. That's not good for anybody. You know, that's just kind of basic. We need a little more resiliency in the system here. And so I feel like in some ways COVID and also the war in Ukraine, you know, which kind of awakened us to the idea that maybe getting your energy supply from an autocrat is not such a good idea. It's been a bit like a scrim that's been pulled back on some of these fragilities in the system that we're beginning to see now. It's interesting when you talk about that, which you might call hiding in plain sight or all these collaborative weaves that could be done. I was, I'm reminded in 2017, the writer Peter Goodman, who I know you know, we used to sit together at Davos and talk in the cafeteria area. None of us will be invited back. He's obviously gone on and written a book about his experience. But I remember him coming to see Lee Krogrotsky, who was the Swedish attache, excuse me, in New York. And he had an article about the robots are coming and Sweden is fine. And the reason I underscore this today is that I think you're traveling in a terrain now that's very important. The terrain is, in America, we were viewed as having the flexible supply side. And so you could reallocate things efficiently and transform the economy and Europe was quote, sclerotic and stagnant. And what Peter was alleging in this article was, and this is after this is December of 2017, was his article I talked to him in the first quarter of 2018. But what he was saying was with Donald Trump having fomented the legitimacy of all this despair, the system is rigged and what have you, we're now at a place in America where the resistance to technological transformation is going to grow out of suspicion that we'll lose like West Virginians losing on climate change because nobody takes care of them like they didn't take care of Cleveland or Detroit. So then you're in a place where in Sweden, they say the possibility frontier of incorporating robots is great. We'll all keep our health care, our pension, our children stay in school, and we'll get some transformational training. Let's do it because they still feel like they're part of the society. In the United States, that dynamism was part of what we advertised but there's there's now what I might call a cloud over it. That may be resistant to the progress that we could make and some of that may be what you might call a little bit of what you're experiencing. People aren't reaching out to each other to the extent that they could. Well I think that there is something to that and you know one of the things I'm very curious about, I touched on it a little bit in the book but I'm watching it play out in real time, are some of the is some of the technological displacement of workers that's happened in the blue collar space in part because in this country we have not trained them as well as say Germans have or Japanese have is that going to come to the to the white collar space now? I had a very interesting conversation actually in Davos this past year where there was a round table of CEOs and we were talking about work from home and it was really interesting who was into it and loved it and who didn't want any part of it and it kind of spoke to different corporate cultures. A lot of women thought this was the greatest thing ever and they were so happy and this was a way to keep talent and you know awesome. A lot of the Silicon Valley bros were just like no you can't run a business like this you've got to go back but you know some of the larger tech companies like Google etc or Facebook were saying okay you know you can work anywhere one of the CEOs turned to me and said you know I actually think it's kind of diabolical the tech folks what they're doing letting people work everywhere because they figured out if you can do it in Tahoe you can do it in Bangalore and they're going to just send everything away and that's interesting to me and I'm this is very much a live conversation right now in trade policy circles and labor circles as you know as we start to think about what is America's trade path in Asia going to be the IPEF stuff you know are we going to see a race to the bottom with data and with digital services and with privacy that we saw in a manufacturing sphere in an earlier generation. We cannot get this wrong. You know Rob I'm thinking about something else you told me or you shared with me couple years ago we were talking about the the talent war competitiveness war different economic models China v us and you said which I have come to totally agree with that the country that wins is going to be the country that curbs the elites best and that's true because if you feel that the system is rigged and it is rigged in certain ways let's face it I mean I see that every I see that every day around me I you know I get to play in both sandboxes and we we've got to fix that or otherwise we're yeah we are we're going to have a major social catastrophe on our hands I think. Yeah Evan Osnos who writes for the New Yorker and I once had a conversation about the haunting feeling that with the system rigged we can't unrig it and the evidence that he cited was the number of billionaires that are building getaways whether in oh gosh ones yeah in New Zealand or what have you yeah and you're saying instead of feeling powerful yeah and then working for the public good to transform things they are so frustrated yeah about systemic dysfunction even though they have billions of dollars in their pockets yeah that that's a daunting how they say smoke signal about the very systemic reform that we need and we can't do it's so Panglossian because you know I mean who's gonna smelt their steel eventually and who's gonna who's gonna fix their utility grids in in New Zealand but you know you're putting me in mind of a a conversation I had that I had recently with a labor advocate and a friend of mine that that is a little tangential to this so I had done a column I spent a little time in the Hamptons this summer a couple weeks of my family on vacation and you know I do not own property there but I can afford to go and spend two weeks there and I wrote a column about how there was this hyper spot inflation there that I had noticed in other very wealthy places like Jackson Hole or certain you know parts of the west where what was already happening in in the inflation environment was just on steroids so I I had an anecdote about walking into the IGA to do my shopping and filling up a cart and having it cost $800 at the IGA not at the fancy boutique well I wrote that because to me that was I was thinking about it in just a very data-oriented way I thought it was it said something interesting about monetary policy about how the wealthy were spending about how long it might take for the Fed to get ahead of inflation if there were enough if there had been enough asset creation that that that people could just keep spending like that you know indefinitely but my friend called me and said you have to stop writing about buying $800 carts of groceries and I was like oh okay why you know well if you ever want to you know be a progressive politician or if you ever want to you know be be confirmed people don't want to hear that and I thought well golly that's interesting because is it my job now to pretend to be someone I'm not in order to be accepted amongst my tribe yes and that pressure with the concentration of wealth and power vis-a-vis universities expertise like we talked about earlier the commercial media among politicians if you want appointments consulting contracts all those kind of things maybe it's not even conscious but there's this little echo like are you becoming self-destructive and I thought gosh I don't actually want to be the kind of person that pulls a punch because I'm worried about getting appointed something you know I think that's that's the you know the path that you go down and your journalism just starts to fall apart but it was interesting I mean I think it spoke to the polarization that you're talking about there is according to my young scholars initiative which has studied this among graduate students and assistant professors there are increasing mental health issues yeah because what I would say maybe not entirely consciously strategy like you and I're talking about but the awareness if you will that Rome is burning and we're just fiddling is very very intense yeah it's not uh it's how would I say uh I I've had beautiful seminars with Nobel laureates who are instructing the young scholars on how to maintain your integrity and keep going forward towards a successful career and it's it's not a simple pathway it's there's these people are not wearing rose colored glasses well I'm curious just on the economics profession for a minute I'd be curious what you what you would say to this because your business for the last decade plus has been to try and change the economics profession both at the level of academe but also within the media and you know I've watched you and you've made some important changes I feel like we are at a bit of a tipping point finally because you're hearing words like neoliberal in the mainstream media you are you're starting to see all kinds of organizations you know jump into this conversation you know from big universities the Hewlett Foundation's funding a bunch of stuff you know you've got open-minded economists saying hey we need help here we need we need inductive thinking we need other practitioners coming in so are we are we at a change point and what will it look like on the other side to you what I can't give you the similar answer but I'll clean the picture of the scenario that I perceive when we started on it the vision was the financial sector had engaged in extreme access financial theory with its pretend knowledge of the future we were just doing what they call backward induction from the mathematics of a known future was a was a false consciousness and we thought to restore expertise credibility and confidence in governance we'll go to work people by George Soros and to a great degree myself being involved in both Senate banking governance that we would address this challenge Andy Haldane all kinds of people from all over the world came in and helped us address the queen's question but what's happened subsequently and some people would say the bailouts where they as Joe Stiglitz said they paid the polluters created a disintegration in faith in governance and a disintegration in faith in expertise and so the early Inet was involved in if we do some things with Harvard Princeton Yale Cambridge Stanford Oxford whatever and those guys realized we're not hostile to it them but we want to evolve things that could work what's happened now is whether it's in it or whether it's the elite universities expertise has been kind of thrown in the garbage can and so we're in a place now where the situation is wide open because nobody's deferential to the to the profession but in a tumult and this is why i don't have a clear answer for you in a tumultuous emotional climate all kinds of different unconscious cautions raised their head and trying to maintain as i said about you in the opening of this conversation a constructive agenda for a pathway forward is a necessary condition to healing rather than deepening the void that we're all experiencing so it is an opportunity but it's a dangerous time at the same time and we really have to fill that void you use very psychological terms and it is a very psychological moment i mean what we need is empathy real empathy real listening you know i'm i'm i'm thinking about another anecdote i had in reporting my book you know i was i was walking down the street just the other day in fact in my extremely progressive blue neighborhood of park slope brooklyn and i heard a i heard a mother i heard a little girl ask her mother are there still really racists in the world and the mother said which was kind of amazing i like i thought that was profound because she was thinking about it really in a kind of a deep way you could see from her voice and the mother said yes in the south i thought oh boy we're in park slope brooklyn here and that put me in mind of a of a reporting anecdote when i was down in the carolina is doing this work on on textiles and manufacturing i visited a ginning facility there was a older working class white woman who was sort of managing the facility and on her team were four latino men and they were working with their hands side by side all day long you know and i watched them to at the end of the day in loud noisy conditions to produce a block of ginned cotton that she then took and they carried together onto a little scale and weighed and she then used a handheld calculator to calculate the value of it was like four hundred and fifty eight dollars and i had watched them do that over the course of two hours and i thought wow this is this is something that people don't understand that are writing about these places a that these people don't want to be told how to um how they behave how how you know they they have a felt experience of their own working in this diverse community um that they want to be able to articulate in their own way and not be labeled in a certain way and it's it's funny you know she even reminded me so much of some of the women i grew up with the guy who was running this um it's a textile company who was taking me around comes up to her and says um oh i want to get you and your whole team some hoodies i'll send them up over for free and she sort of nods and i turned at her and i caught her eye and she sort of smiled at me and she goes he knows i'm not going to do that i'm not going to take that and i thought so this quiet pride you know that was just very present and that people i think i find it a great privilege to experience that in my reporting and i think that people who are making policy would do very well to spend more time in places like this yeah uh there's a wonderful scholar who's looked at both history and contemporary racial animosity he's at Stanford University i believe and he's Gavin Wright spelled with a w uh w-r-i-g-h-t and he has contributed to some inet conferences and work and uh i would encourage our listeners as well as she too i'll i'll send you the love to say it to him of his work but he he's very much understood all kinds of the different cross courts another person who i greatly admire and i'm glad to say is on the inet board is john paul at berkeley university who runs something called the Othering and Belonging Institute which really gotten into what you might call the um foreshadowing of the kind of social design that we need for the common good yeah with with race gender and other other dimensions of polarity you know i'm hopeful just to just to add one hopeful note too i know we're almost out of time but i'm hopeful that the shift that we're going to see demographically and structurally towards the care economy is going to be an opportunity to bridge some of these gaps because you know we're talking about to david goodheart right head heart hands you know it's it's about bringing it all together and the care economy which is going to be very local how there's an opportunity to really elevate and enrich those jobs um and to bring along women to bring along people of color to um connect services and manufacturing i mean you could imagine if i wanted to be really optimistic which i'm feeling like right now you could imagine a real win-win not just economically but but uh in terms of our culture there