 This is Rob Johnson, president for New Economic Thinking. I'm here today with Dr. Glenn Hubbard from the Columbia Business School, who's formally worked in George H.W. Bush's administration and in the U.S. Treasury. And secondly, he was the head of the Council of Economic Advisers under George W. Bush, H.W. Sun. He, from my perspective, has a tremendous awareness of both the nature of markets and economics, the history of economic thought, as well as a deep comprehension of that intersection and inseparability between politics and economics. He has a new book that's coming out that is absolutely extraordinary. Yale University Press has talked about it and John Lennon used to sing about it when he wrote his Walls and Bridges album in 1974. Glenn, I was inspired to learn of what you were writing, but as I read it, I became more inspired and I want to thank you for joining me today. I know my young scholars will be very deeply nourished by our conversation. Well, thanks, Rob, and thanks so much for having me. What, you know, I really like to start with, you're looking at the world. You have a lot of awareness and intellect and experience and scholarship. Like all these receptors, I'll call them. What inspired you to write this book and this message right now? And then we'll talk about what is within the message. But what tickled your fancy? Made you reach into yourself and go after this book? Well, thanks. I think it's a great question. You know, one of the reasons I became an economist was I actually believed what classical economists and enlightenment thinkers like Adam Smith believed in mass flourishing in a society. And it requires no deep insight on my part to observe that we're not seeing mass flourishing right now in society. I saw this up front close and personal as an economist in George W. Bush's administration. You know, I led a battle against steel tariffs. The president made the opposite decision. He told me perhaps just to be nice that he wasn't disagreeing with me on economics, but he felt I had the wrong idea. I had all of these ideas about maximizing national income. But what was I going to say to people in Wheeling, West Virginia or in other places? That put me on the road to thinking about things in a different way. I've taken MBA students over many years to parts of a heartland that have been left behind by change. And economics really does have an answer here. It goes back to Smith and it's not capitalism versus socialism. It's walls and bridges. There's the seduction of the wall. If you don't like change, whether that changes from technology or globalization, we'll build a wall. We'll lock it out of your life. We'll make it 1955 again if you'd like. That doesn't work. It never worked. Smith wrote The Wealth of Nations to say that idea was crazy and doesn't work. Yet doing nothing isn't the answer either. The modern Smith would build bridges, helping people compete, helping people to adapt. There are tangible things government can do, business can do, and individuals can do. That's the debate we need to have. The antidote to the wall is the bridge. And I want to add a little more nuance or texture. What's a wall and what's a bridge? How do they differ? Well, I think of a wall as sand in the gears for change. So it could be literal. Go back to Roman times, the idea of building a wall to guard against the other. It could be metaphorical, but we'll simply block out or high tariffs and trade against other parties. Smith, when he wrote The Wealth of Nations, was reacting to mercantilism, which was the standard economic view of the day. Trade surpluses are good. The purpose of the trading system is to bolster the golden silver that the sovereign would have to fight wars and personal luxury. Smith stood all about on its head. He said, no, no, no. It's consumers. It's average people that are the center. And the wealth of the nation is their ability to consume. And that ability to consume needs efficiency. It needs openness to change, whether that's to trade or the adaptation and adoption of new methods. That's a very important method. But you know, economists have talked about that for generations. And I've written a freshman textbook. So a lot of people hear my own views on this. We talk about the gains from openness. And we do also, at least mumble, that there are people left behind as a result of that openness. To winning on average doesn't mean that everybody wins. And there's always the expression that gainers can compensate losers. But the question is, do they? And how do they? And that's why we're in a thicket of populist wall discussions. And discussions of trying to protect people as opposed to empower people to compete. So in one sense, the wall is just trying to stop the transition. The bridge might be to use public resources to facilitate the transformation and bring them along with the higher level of prosperity. Exactly. Because if we stop the dynamism to use my colleague Ned Phelps, Nobel War, the economic term, to use Ned's term about dynamism, if we stop that, we are literally killing the golden goose of our future prosperity. And one shouldn't believe populist demagogues who say, well, you know, we can just shave a little bit off the margin, a little bit off that dynamism. We don't want to do that. At the same time, we do have to be prepared to help people compete. Now you mentioned government. Again, I don't think of this as capitalism and socialism or welfare versus no welfare. It's what do you want government to do? So two big examples I use in the book were the genius of the land grant colleges in the moral lab. Lincoln, in the middle of a civil war, believed that we needed to jump start opportunity. The nation was making a transition from agrarian to manufacturing and commercial. It needed help across regions to do that. It needed to be able to prepare people. Franklin Roosevelt had a similar insight with a GI bill. With all of these soldiers returning from force to the United States, how would they be prepared to compete in the new economy? So government doesn't have to provide extra welfare. It doesn't have to own things in a socialist model, but it does have to be a battering ram for opportunity. Smith himself saw that in the wealth of agents when he talked about the importance of infrastructure and public goods and education. His economy, of course, was much simpler than ours. The Smith today would be more focused on a bolder use of government, but in the way Lincoln or Roosevelt might have done. So in the spirit of transformation, the disruptions that have been with us, our globalization and technology, and so I'm going to ask you kind of two questions because the one on the horizon is climate change. What should we have done? Let me let me back over a second. I've made a lot of podcasts with people about what's going on in West Virginia, Bob Pollan and others, and they say in West Virginia, if you're watching social media, people will say, perhaps sponsored by the fossil fuel industry, look at what they did to Cleveland and Detroit. They went through that change, globalization, automation, whatever, and you got nothing. That's what they're getting ready to do to you because they're trying to mobilize, which you might call more support, against the transformation. And my intuition as I was listening to these arguments is you're right that we didn't succeed in Cleveland, Detroit, or what you might call the automotive transformation, but what do we do now credibly for the people of West Virginia? So that's the forward-looking, the slightly, I wouldn't even call it backward-looking, the contemporaneous look is how with globalization and how I grew up in Detroit. I watch people talking about you can't raise taxes, you got to reschedule in the Detroit bankruptcy what's happening to women who've worked 45 years in municipal government, we're going to cut their healthcare and cut their pension from 19,000 to 12,000. Bankruptcy in the private sector when you don't have revenue, bankruptcy in this context, which was authorized by the courts, is when people are afraid to ask people to pay because they think they're going to leave the region. What do we do right now? Looking at what happened with globalization and technology, what do we do vis-a-vis climate change is the one making everybody most anxious now? What does the bridge look like that we should have done? What does the bridge look like we should do next? It's a great question, Rob. If you go back, what we should have done is remember the admonition that Nicholas Caldor, a great economist, had said that when you're making a change, it makes us, on average, better off. And by the way, globalization and technological change do that. They make us better off. We should not ever forget that. You need to compensate people left behind. And what Caldor meant was not write people a check or pinch them off, he meant in Smith's sense, you know, giving them that ability to compete. So we had programs going back in the day from the late 60s on called trade adjustment assistance. They're pennies on the dollar. They were nothing. In fact, politicians rarely even spoke of them unless they wanted to expand trade agreement. We could have had bolder initiatives. And in my book, I mentioned the idea of applied research centers to borrow from the land grant moral act colleges, a block grant for community colleges, which nationally are the foot soldiers of training people for a different economy. Both of those ideas, like the moral act, build on the need to make decisions at the local level. There isn't a one size fits all problem and solution. Detroit is not the same as Youngstown, which isn't the same as Wheeling, West Virginia. We need to let local business people do it. Now, we know it can happen. So Pittsburgh is an example of a city and area that did in fact reinvent itself. The steel industry's demise was met with a big investment in education and healthcare. In the case of Pittsburgh, that was led by local business people who were trying to make that pivot. I don't think we can count on that everywhere. I do think government has to provide regions that means so economists used to be very suspicious of what you might call play space eight. We used to say, well, we should just move people to wherever the jobs are going to be. Well, for a variety of reasons, people aren't moving. And we do need to think about communities that are distressed and giving them the chance to adapt to new industries. So that takes me to West Virginia. So you could be forgiven in West Virginia for not worrying, why am I not going to meet the fate of Detroit or Youngstown? And I think the idea is not to promise people that we're going to continue to use a lot of coal forever because, you know, frankly, we're not. It doesn't matter whether you're coming at it from solutions from the left to the right. I'll come to those in a moment. That's not going to happen. But what you can say is, what are ways we can prepare you for a different economy? And I think there are abundant ways to do that. Again, it goes back to the kinds of training programs in play space, aid and luring, luring businesses. You know, climate change is a great example. What government should could do is use a price on carbon as a way to get business to innovate. Business is more efficient at deciding how we're going to decarbonize than government. But businesses aren't necessarily going to come to that on their own without the incentive of a price on carbon. So you need both. And it would be entirely appropriate to use some of the revenue from a carbon tax to find transitions, you know, so that individuals and areas are there. And they use the word transition guardedly because, you know, one of the things I learned in researching the book, to my chagrin, talking with a lot of people affected by change is, you know, they're just alarmed when economists refer to things like transition costs. Would you like to be called a transition cost? I don't think I would. I think I'd rather believe that I'm a human being with hopes and aspirations. And maybe I'm not going to be a great entrepreneur, but maybe I have my own aspirations. And I think that that kind of dignity goes very much back to Smith, the Smith of the theory of moral sentiments and economists lose it at their peril. So I think we have answers going back and we have answers going forward. And walls I know will fail. Bridges I believe can succeed. Well, I think there was a key word you said at the outset. When you said technology and globalization can make us better off. I agree with that as long as us is defined correctly. Who is us? Because a lot of people experience being outside of us, like you said, called the transition cost. And we've got to we've got to establish in the private sector and we're watching a lot of evolution towards multi stakeholder awareness, ESG kind of work and so forth. We got to understand that the dynamisms, which am I called vitality and possibility, is at risk at this juncture of social rebellion. That is exactly the case, Rob. I think too often business leaders, and frankly, economists as well, assume that social support for the system or capitalism is given. And then we use policies to tweak it around the edges. I think that's up for grabs. Even teaching in a business school, I have many students in political economy who would question whether capitalism is really working for the economy. And they would raise it in the same way you did of who's us. So if your definition of us is all of us on average, it's definitely working. But of course, none of us is exactly average. Some of them, hopefully including all my students, will be decidedly above average. Same is true of you and of me. But it's not true for everybody who's influenced by change. Yet we all are part of the same community. You know, another thinker that I mentioned in the book is Carl Polanyi. You talked a lot about markets is needing to realize that there's a tissue, if that's the right word, of connection from communities and values. And you can't operate in the neoliberal way that the market system totally away from those communities. So I think that the debate is much more subtle than this capitalism, socialism debate in Washington, and much more about what kind of bridges can we defy to beat the wall flavor of the month and the left has its walls, the right has its walls, but they're all harmful. Yeah, I'm sure you'll understand what I'm saying. Years ago, when Occupy Wall Street was unfolding, a friend of mine, the late James Cohn, that uni theological seminary, challenged me to come teach a thing I called the title of course was economic symbology to the graduate students. And my code word for that, my code phrase was means and ends. And what I was trying to show them was why people at that distressful time were so adhering to the market logic. But they'd almost made an error in deifying the market as opposed to seeing it as a tool to reach moral and philosophical ends, of which it is a very valuable tool. And it was very interesting to watch them unfold and also see the promises. I remember teaching them a book by a famous author Christopher Lash called The True and Only Heaven. And it was about how when you tell people to delay gratification, meaning wage demands, it creates capital formation and productivity for the future. But Lash, who wrote the book in the late 80s, came with a very interesting perspective, which was that was working until there was globalization. Because now in that 70s, 80s period, which you refer to in an early in the book about, you know, when you began your awareness and education, people started asking you to delay gratification for foreign direct investment that came back to compete with you. And which you might call that salvation in the future, that secular salvation was postponed or eradicated. And there's also a lot of discussion in that course about Martin Luther King, a Philip Randolph and others, who didn't go out and create a civil rights budget. They created something called the freedom budget for all Americans. In the last three years of his life, King spoke of racism, materialism, and militarism. And in particular, they were advocating, rightly or wrongly, that militarism was eating a big hole out of things that all Americans would consider essential to their well-being. And so I watched the kind of mindset and I invoked chapters from the theory of moral sentiments to go to the place where you are right now, which is at the Union Theological Seminary. The market wasn't a deity that you had to get out of the way of. It was a vital and important part of a process toward achieving social ends, which the early Adam Smith articulated, of which you're bringing back to the surface. Well, I very much agree with that, Rob. I also think it's something perhaps more subtle that economists and sometimes policymakers treat this market worship as a very technocratic set of problems. So you mentioned Occupy Wall Street. So the view of the bank bailouts at the time were that they were very important for the plumbing of finance and the economy, and I share that view. I shared it and share it today. At the same time, our failure to do other things, a colleague of mine, Chris Mayer, and I wrote a proposal in 2008 for a mass refinancing of home mortgages once all the credit risk had been taken on to the government's balance sheet. Secretary Paulson did so for Fannie Mae and Freddie Mac. We didn't do that. And so you could forgive a lot of average people from saying, you know, huh, how come Wall Street got bailed out, but I got stuck paying mortgage payments that were very high, and it really undermines this trust in the system. You know, I thought the most thoughtful comment during the financial crisis actually came from the Queen of England. When she said, why did nobody see it coming? She said it to a group of faculty at the London School of Economics. I expect with a little bit of regal condescension that you guys are so smart, how come you didn't see it coming? I'm glad she didn't come to Columbia because I would have been just as embarrassed probably as the LLC colleagues. And I think part of the answer is we don't get out much. You know, Smith did. He talked about a pen factory for God's sake, not abstract intuition. We need to get out and see the concerns of average people and of average business people rather than retreating to worship of the equations of the market. Well, I know because of my proximity here in New York to Columbia University that you and people like Ned Phelps who you mentioned and Joe Stiglitz and others nourish one another. There's a dynamism to the debate there. I just went to Ned's conference recently and it was a very open-minded conference about the challenges and it wasn't a defensive, you know, circle of my wagons conference. These people really high calorie, Eric Maskin, everybody was going for it. But I remember when Joe and I were working on a UN Council on Commission on Global Economics and Finance 2010, 29, 2010 and Joe said we're going to have a real problem. It became a famous quote because the polluters are getting paid. He was drawing an analogy to climate change, which was we bailed out the people, but we didn't do the transformational things. And by the way, that part, I know you worked with Paul Sen, you worked in the Bush administration. That part was largely the responsible of the Obama administration. Right, of course. And they didn't realize that, which I might call fairness or distributional vision. And I know, I don't know the man, but I've heard Steve Bannon give speeches where he said what brought you Donald Trump was the failure of the structure of the bailouts of the 2008, 2009 financial crisis. That's got to be at least partly true because again, what President Trump brought, and you know, frankly, he's not alone. He has competitors on the left doing it too. We're walls, you know, very seductive stories that I can make the change go away. That of course isn't true. And it isn't going to serve people's interests. But you know, if the alternative is an economist who simply says, trust me, the market will work. Well, that's not making me say I'll leave it. Yeah. But in Detroit, right after, and my guests on this podcast have heard this before, but right after the nomination of Donald Trump, I believe it was in Cleveland in a convention, he went to the Detroit economic club and he wailed on the big three management for losing jobs in Michigan. And he said, this system is rigged. Now the state of Michigan has obviously been through a lot, but all of my friends with graduate degrees, JDs, MBAs, CPAs, MDs, the whole thing all voted for Trump because he's somebody's finally calling out this. Right. And they were disappointed in me because I didn't. I was at a dinner with them on election night in Detroit as it turned out. And they said, Rob, you know, you brought up your family in New York and so if you don't understand how stagnant this is, et cetera. And they were critical, obviously of Obama's restructuring of the auto industry, albeit allowing plants to be built in China and Mexico with the money, protecting the white flight, as they called it, upper management service class, but not the manufacturing class. And there was a lot of discord and they felt like Trump was the solution. I told them, well, at this dinner, I lost seven to one in terms of who I voted for. But I don't think you're going to be happy with the outcome. Because like I said, he'll build walls and he'll seduce and abandon, but he's not going to do the dynamism. We know, of course, it's an old story. And again, this was the very story that got Smith angry enough to write The Wealth of Nations, a canard of mercantilism. But you know, we just need to block out the other and trade and it'll help the domestic economy. Of course, nothing could be further from the truth. But if the only counterpart to that argument is what a rip, which would be sort of the neoliberal version of the story, I think that's a problem. We need to put the liberal back in neoliberal, i.e. Smith and the classical thinkers who did care a lot about mass flourishing and the dignity of every person, not just the most successful. Yeah. No, I mean, he had a what I call a holistic view. And as you described, and I really enjoyed that part of your book, because when I'm asking myself what are walls, you're what you might call passage through mercantilism and how Smith saw beyond it was very important. It was very illuminating as to what you meant and what we shouldn't be doing. Well, ironically, it was falling walls that got us into a lot of the modern mess. It was the collapse of the Berlin Wall, the so-called death of distance, the lower cost transportation, communication, all these are good things. But suddenly they made the economy hyper competitive at a time when we really had not prepared people for that competition. And so our only solution was either tiny little programs like trade adjustment assistance, or ultimately just saying, well, we'll pension you off or put you on disability. None of that plays to the dignity. Nobody wants that. They want to be part of a society. And unless and until we do that, we're not going to have broad social support for the system. And we shouldn't be surprised if we don't. I've spent a lot of time, I went into the private sector in 1989 and was involved in the hedge fund industry. And for a number of years, I ran the Don Japan Asia portfolio for George Soros. In that process, just after Tiananmen Square, I got very involved in visiting and dialogue that's always going on. And what's really interesting to me is when Donald Trump came into power, a number of the Chinese leaders, and I'm talking, not I don't have a magician pain, but all the next layer would say to me confidentially, I'm watching this guy demonize Mexico and China. But it's wasn't we, they said they were very coherent about this. We had one 40th of the capita income of Americans at the starting gate, say 1979, 1980. Deng Xiaoping comes in. We're transforming. We're four times the size of the American population. It is going to be the globalization, the integration of our two sites is going to be changing relative prices sectors. It's over the profoundly, but it wasn't within our power, meaning the Chinese to create that transitional sexual movement assistance support education. And the anger that is now directed at us is something we could we understand where it is. But it was the responsibility of American elite governments to handle that transformation. And I think that's actually very insightful and true. And that fall was dropped. And it's not a partisan comment. It was dropped by Democrats. It was dropped by Republicans. You know, people think of Republicans as being the champions here, but you know, no one was more neoliberal than Bill Clinton, who talked about globalization as being like the rain. You know, you can't stop that. I think Tony Blair said something to the effect of it's like autumn following summer. You know, it's just, it is what it is, which is a kind of hands off, we're not going to help you every person for himself or herself. And that doesn't work. You know, China and its transition was heavily influenced by Janos Kornai in trying to gently wean away the state sector. So when Deng Xiaoping opened up the economy, there was a more gradual incremental change rather than what today we might call shock therapy to use the Russian or Eastern European example. And I think it benefited China and in the US, you could have imagined a system that used maybe very large wage credits for a creative time or things that would give firms a transition as people moved from one industry or type of work to another. Of course, we didn't do any of that. Yeah, I'm really inspired by what you just said, because there are people like Julian Gourwitz who wrote the book about Kornai and the transformation and, you know, people from Milton Friedman to James Tobin and everybody were involved. And then people like the, she was born in Germany, the scholar, Elizabeth Webber, they are talking about a transformation process in China that's neither state alone or markets alone, but it did have a social awareness. And the reason I'm underscoring that right now is I don't have a, I have a lot of fear of some of the things that Chinese leadership thinks are legitimate to do. But in that realm of economic adjustment, there are lessons to learn in how they transform themselves in a way where, I mean, it wasn't like you said, shock treatment, like Kornai won't just let it go, let everything collapse and then rebuild the wreckage that created the transformation, a transition that's not unlike the challenge we probably have to make right now related to fossil fuels. That's the thing, you know, it's fine to go back and say, well, we had the issues with the steel industry or manufacturing generally, but, you know, there are at least two major challenges confronting us. One is on artificial intelligence, which is probably the latest general purpose technology, perhaps along with another robotics that could completely change the nature of work for many more Americans, including some Americans who would consider themselves very skilled, maybe even somewhat professional people. The other is climate change, which is probably one of the big social problems of our age. Both of those call for innovation, both of them call for perhaps at least looking at where the boundary is between the market and the state, and both would benefit from the Lincoln's and Roosevelt's of the world saying, what's a way that I could use what I have in power as kind of a battering ram to open up opportunity for people in this transition, and then let the private sector work out that transition as efficiently as it can. Let's talk a little bit. I think I've mentioned to you at times that in our preparation for this, that a lot of times people treat the market in the state like they're separable domains. There's a lot of concern now about the role of money in politics, which you might call, I've used this phrase in previous part, the commodification of social design and enforcement. And I'm very nervous that at times there is no sense of what you might call the incentives of governments, that allow it to represent the we rather than donors. So while I see exactly the pathway that you're, how we say, putting into the mix with the markets, how do we allow that governance to shape things in a way that is for the moral purpose of the collective? Well, you know, this is one of those where I could be very naive, not being a politician, where the right thing looks like a political winner. If you do think more collectively about everybody in the same boat, then it becomes easier to think about a policy of a different kind of approach to community colleges or to federal aid that helps communities, all of that should be possible. So I think this is actually a winner, not a loser in the political process, particularly up against the liberal vision of what it read, but also against the vision of what's built walls around the country. I just don't think it works. So, Glenn, when we're talking about how to build bridges, and there's been such little trust in government, there's concern about capture and so forth. What historical, which you might call experiences, would you point to, to give people a guiding light as to how to do it again? I know you talked about Lincoln and you talked about Franklin Roosevelt. How did they jumpstart confidence in them? And what can we learn from that now? Well, Roosevelt's a great place to start, Rob. You know, people normally think about the Roosevelt of the early New Deal, but I think apropos of the bridge, more the Roosevelt of the GI Bill, and the huge desire to reintegrate returning service people into a dynamic economy, the same was true of the big Lincoln era reforms. You know, doing the right thing of using government as a battering ram, really to make sure everybody has the ability to compete, to use Smith's terms, is the right answer. And I think it's not that people quote, trust government or don't quote, trust government, it's a matter is government using its energies to empower people or to frustrate them. If it's empower, that trust will come. So at this juncture, let's look, let's look on the horizon, that climate change. I know the technology issues, but how do you see coming down the path? Let's just say President Biden or his successor brought you back into the White House. What are the pieces? I know, you know, from reading your book, there's private sector engagement, understanding, there's government sending incentives, there's transformational support for the population so they go along with the plan. But give us the vision of how you would be if you were the czar of achieving climate change and perhaps have a little international collaboration because this isn't just an American problem. It's a global problem. It's a great question. You know, climate change like artificial intelligence will be one of the forces that shapes and transitions our workforce, our economy, our public policy, and our well-being, frankly, for decades to come. I think what government can do is first, in the case of climate change, put a price on carbon. If we want business to do what it does best, which is innovate different solutions, it needs a price on carbon to do that. But government can't simply do that and then assume that everything else will take care of itself. That would be repeating the same mistakes of globalization and technological change and forgetting people and transition. So there's still a large role in place-based aid and individual assistance to help people get ready for that new economy. We're certainly up to that. We've done it at other transitions and turning points in our economy and we could certainly do it again. Climate change, in a sense, offers a tailor-made example. Because it involves a tax putting a price on carbon, it also offers some of the funds that might be needed for exactly that purpose. I know people like the economist James Boyce who talked about a carbon dividend where the angst of the body politic can be offset a little bit by using some of the proceeds to assure them that they won't be devastated or left behind. But I would also say we really need that engineering expertise related to the new technologies that are necessary. And then the final piece that lots of people are knocking on my door about that I'm curious of your perspective is they're saying let's just use Africa as an example. Africa is an equatorial region can benefit a great deal from solar power. But the risk premium people pay for private investment on that continent is very high. Should we be creating governmental guarantees to put those, in other words, any default risk premiums or fear of the integrity of their capital markets? Should we all bear that together because we're all going to receive benefits if they do realize that climate change technology? Well, you know, that's a that's actually a difficult question. I would think before doing that one wants to make sure you have the kind of governance of projects and economies that make sure that you're getting the right investment. But yes, you know, one of the things that's got to be true, not just of climate change, but frankly the pandemic, rich countries have to realize that we are all in this together. Where you're talking about the pandemic or climate change, there's no America only pandemic or America only problem with climate change. So some kind of transfers have to happen. I like to think of them as mainly being in the technology area, or in the case of the pandemic vaccines, that this is an area where we have a responsibility. And frankly, it helps us.