Is it ‘economic Halloween’ in the US?

MARK BLYTH: The old system’s run its course. When you basically start saying, “We’re not producing any climate data anymore and we’re going to make up the jobs numbers,” that’s deeply troubling because you can’t price things. The whole purpose of markets is pricing. No information, no prices, bad. So this makes as much sense as a fish in a privet hedge, but that’s what it is.

BOB SAFIAN: You make it sound fun, but it’s hard, you know?

BLYTH: Yeah. I can make a house of horror sound fun. And in many ways it is, that’s why we love Halloween. So maybe we’re living through the economic Halloween.

SAFIAN: That’s political economist Mark Blyth, a professor at Brown University and author of the new book, Inflation: A Guide for Users and Losers. I wanted to talk to Mark to better understand whether a new economic order is forming amid continuous tariff turmoil and Trump’s beefing with the Fed and the Bureau of Labor Statistics. Beyond the noise of today, Mark offers a bigger picture outlook on the outdated economic models that still underpin our understanding of the economy, why MAGA is taking us back to the ’50s and ’60s, and what we still misunderstand and underestimate about China. We also discussed the Democrats struggle to craft an engaging story about the economy, why it’s so hard to predict a recession, and what Brown’s recent settlement with the Trump administration tells us about higher education’s need to pivot from its reliance on federal funding. Now, economics can sometimes seem dry or daunting, but Mark manages to explain even the most complex theories in a clear, concise, and cheeky manner. So let’s get to it. I’m Bob Safian, and this is Rapid Response.

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I’m Bob Safian. I’m here with political economist Mark Blyth, professor at Brown University, and author of the new book Inflation: A Guide for Users and Losers. Mark, thanks for being here.

BLYTH: Oh, it’s a pleasure to be with you.

Copy LinkHow we got here: Looking back to 1977 in America

SAFIAN: This has been a zany year for the U.S. Economy, for U.S. policy, tariff wars, the president putting pressure on the Federal Reserve Chairman Jerome Powell and so on. But now it feels like we’ve sort of reached an inflection point. The stock market’s near an all-time high. You’ve got Tim Cook at Apple just announced another 100-billion-dollar investment in U.S. chip manufacturing. We’ve seen some trade deals. CEO sentiment is turning up.

Is there a new economic order that’s actually emerging? Does all this sort of chaotic Trump activity add up to something cohesive? Do you have a big picture for us on all of this?

BLYTH: Oh, do I have a big picture for you. Absolutely. So imagine the following, right? Imagine, you’re probably not old enough to remember this, Bob, but there was a year called 1977. And in 1977, I think the U.S. was still telling people if their license plate ended in an even number, they could gas up on a Monday, Wednesday, Friday. It was just a few years before that they actually had price controls in peacetime on beef, lamb, and pork. Wages were in a freeze across the economy, and there was no war going on. If you look at the commentary of the time, people thought we had a terrible amount of federal debt. The government couldn’t stand up to anyone. We were adrift, we were ungovernable, and it was all going to go to hell in a handbasket.

And what happened was by 1985, there’d been a complete shift in how we do everything. We deregulated, we integrated financial markets, we got rid of New Deal regulations on banking and finance. We cracked down on labor, we outsourced, we began globalization as a process. And by 1985, Reagan could declare its morning in America and everyone would believe him, and it was an entirely different world from the one that we lived in.

So where are we today? We’ve run the set, the experiment that we began with Reagan in ’85 of integrate, privatize, deregulate, et cetera. We’ve run that to exhaustion. Has been some good results, particularly for people who sit in the top 20%, 10%, 1% of the income distribution. But for large parts of American society, it was a process of hollowing out. It was a process of stagnant wages for 30 years. MAGA has a huge amount to do with this, the hollowing out of industrial base in the Southeast and the Midwest.

So what are we doing now? Well, both parties, people forget this, gave up on free trade around 2015 with the collapse of the Trans-Pacific and Trans-Atlantic trade talks. And when we got Trump, Trump put up tariffs. There was a feeling of the people around him that, essentially, by basically being the savings asset for the global economy, you’ve got an export surplus coming from Asia and Europe and everywhere. It’s great, we get free everything and we pay them back with Treasury bills and they have an unlimited desire for Treasury bills. But at the end of it, the biggest employers in the United States today are Amazon Logistics and Walmart. We realize that we didn’t make anything.

And Biden kept up all of the tariffs that Trump put in place and extended them and tried to do green re-industrialization in new sectors. And for reasons we can go into, Trump gets back in and really hates the green stuff, is shutting all that down, and is basically trying to do carbon-based reindustrialization. And he’s putting pressure on everybody. Tim Cook sits atop one of the world’s largest cash piles and one of the world’s richest companies. He’s not immune to the pressure.

Now, whether this can actually work is a big question, but that’s the direction of travel, that’s the big picture. We’re rolling back a lot of the bad consequences, attempting to deal with the bad consequences of the regime that we’ve been living in for the prior 30 years.

SAFIAN: This phrase of making America great again, obviously the goal is not to move back to 1977 when, as you describe it, things were pretty crummy.

BLYTH: No, I think it’s more 1965 or maybe ’55. The imaginary here is actually quite amazing. It is a bunch of old white dudes, and basically they don’t like a lot of stuff that happened culturally, politically, economically in the past 10 to 15 years. You’ve very much got this with Bannon and others, that we need an economy whereby one dude can work in manufacturing and get paid enough money that his wife doesn’t have to work. She can then have more kids. That’s why we don’t need immigrants, we can strengthen the family. And then what we’ll have is this 19th century foreign policy spheres of influence where we run this giant carbon-based economy that goes from Greenland to Canada all the way down to our satraps in Argentina and Brazil. And the rest of the world can go do the hell what they want.

So I think there really is a kind of regressive modernization built into this, and that’s its weak point. Nobody’s asking women in the United States, “Hey, how do you feel about the kitchen and more babies?” There’s nothing in place to make this work, so that’s where the tensions start to come out on this.

SAFIAN: The idea that globalization can be stopped or reversed or whatever, how realistic is that? It’s strange with the tariff war, the bad guys now seem to be Canada, India, and Switzerland.

BLYTH: Yeah, no, go figure. I’m surprised it’s really not the EU because Trump’s always had a thing about German cars. I just figured that he must have a thing about Swiss watches because that’s basically what they export to the United States. So all those people buying Patek Philippe, et cetera, are going to have to pay a bit more, but I think they can afford it anyway, right? No, the tariff stuff is basically a reindustrialization project that he gets to ratchet up and ratchet down for other foreign policy measures.

So when we did Liberation Day on April 2, the top market had a heart attack, and the bond market freaked out. And then it went, “Ah, we’re going to pull it back, we’re going to pull it back.” We’re basically back up to where it was. What they’re really good at is basically playing the Overton Window, right? We’re here, I want to go all the way out there. In order to go all the way out there, I’m going to go even further than that and everyone’s going to freak out, and then I’m going to dial it back to there and you’re going to call it a win.

And what the markets have been doing is normalizing this for the past six months that now they’re just completely on the hook for it. So if you think about it, we’ve got 2.7% inflation just now, which if you’re in 1977, you’d bite your hand off for that, right? You’ve got a long bond of just below five, right? They’ve been going down. Back in 2006, that was about the same level. People forget we’ve been here before and nobody died.

The corporate stuff, it’s kind of worrying that you’ve got all this incredible over-valuation in a very few technical tech companies all based on something called AI, which nobody can quite tell us what it’s really for yet. And we’ve invested trillions on this, and it’s an arms race to generalize the AI, which is probably never going to happen. The energy costs of this and environmental costs of this are catastrophic, right?

So yeah, there’s plenty there in the mix that we can pull apart and say, “This is good, this is bad,” whatever. But to me, this is a moment like 1977. The old system’s run its course, and we’re moving in a new direction. Now, can we completely undo globalization? No, we don’t want to completely undo it. But there’s certain things you want back, and there’s certain things you want to be able to do yourself. And it’s an open question, even with tariffs and all the rest of it, if you can get that stuff back, not because you can’t undo globalization, of course you can’t. States allowed globalization to happen. States can disallow globalization.

The question is when you decide that you want it back, can you do it? Because if you haven’t made something for 20 years, where is it you’re going to get the skills for the people who know how to make that thing? So Biden ran into this problem with the Inflation Reduction Act. He’s getting Hyundai to build these big factories. They start building the factories, they’re like, “Right, great. Where do we get the skilled labor?” And they’re like, “We don’t have any.” And then the factory’s mothballed. So this is a very interesting moment for lots of reasons.

SAFIAN: The biggest beneficiary of globalization has been the United States, right?

BLYTH: I just came back from Moline, Illinois. Drive around there for five minutes and tell me they really benefited from the past 30 years. American corporations made out like bandits. 40% of the stuff still coming out of China as exports are actually American multinationals. It’s still us doing it. So C-suites have never been better compensated, right? Share values have never been higher. Corporate profits have literally never been higher. They’re 12.5% of GDP, alright?

But at the same time, when we have a mild inflation by historical standards, people are thrown into poverty because the income distribution in this country has gone to hell in a handbasket. So we have to be very careful when we say nobody benefited like us. It’s like, which us are we talking about?

Copy LinkIs China “eating our lunch?”

SAFIAN: The parallel argument that goes on around the spread of wealth and equity in the U.S. is like, well, some of the stuff we have to do because if we don’t, China’s going to eat our lunch. Are there things that people misunderstand about China and that relationship between China and the U.S.?

BLYTH: I’ve never understood what “eat your lunch” actually means, right? The president’s really fond of saying that we’ve been ripped off for years, and a particular part of this is his scorn for the EU. And the funny thing is, in 2008, the EU and the American economy were almost exactly the same size, about $17 trillion. Now the United States economy, basically because of weird effects of healthcare spending on GDP and the Mag Seven, is a third bigger. Now, they’re the ones that are ripping us off. They’re now a third poorer. How could they have been ripping us off?

Now it’s the same thing with China eating our lunch. Our corporations left our workers to take their capital to China so they could make super profits by selling stuff back to us cheaper. Who’s ripping who off? What does that statement even mean? It’s American companies that did this. There are no big Chinese companies that are doing this. They’re all part of the supply chain, right?

SAFIAN: But China is sort of looking at the way the U.S. is pulling back from some of its global engagement and kind of stepping into those places, right? And there’s anxiety about that, there’s anxiety that China’s going to, whatever, beat the U.S. in the battle to have AI and serve the next wave of technology. Are those concerns unimportant?

BLYTH: I think the concerns are coming from the right place, but I think they fundamentally miss what’s going on. China is engaged in the largest industrial experiment in human history. The sheer scale of what they’re doing dwarfs any conception of what we’ve got.

The United States has three urban conurbations, LA, Houston and New York, that would qualify as a kind of mega-city in China. China has 25 of those, and they’re on their way to having 150 cities between one and two million. The scale, it’s just incredible, right? In five years, they have taken over every green tech sector. They have perfected EVs. Their standard EV now has a range of 400 miles. All this stuff that we fret about, oh, they’re going to run out of juice, right? It’s all solved.

The reason we have 100% tariff on them is because if people could get access to them, they’d never buy another gas-guzzling SUV in their life. They’ve completely got battery technology wrapped up, which basically is far more important than godlike AI that we don’t know quite what we’re going to do with if we ever get it.

And as for filling in the United States’ overextension militarily, one of the things that’s interesting about the Trump administration is they’re the ones that don’t want to do this. And is China filling in the gap? Well, the United States has around 200 military bases around the world, permanently staffed, that are real imperial military outposts. China has about six. They’ve got a ways to go. Not that they really care about that sort of stuff. They’re far happier just sitting back and making money and intimidating the neighbors.

SAFIAN: Boy, you make this sound pretty troubling, all of this. Although you’ve said it in the long term, you’re an optimist, so can you square that for me?

BLYTH: Well, an optimist about whom? I’m an optimist about the human race in the sense that we haven’t managed to kill each other yet, so that’s always a good start. Am I an optimist in terms of the United States actually making a positive contribution to the most important thing for the 21st century, which isn’t AI, it’s living in a warming world? No, we’ve decided to double down on the very cause of that. Drill, baby drill, three million barrels and 3%, all the anti-woke stuff on green investment, shutting down NOAA, literally trying to get rid of two satellites in orbit just now that actually make carbon data, pulling out of international agreements on us. We’re basically like, “Screw you. We’ve got Ford F-150s. We don’t give a shit,” right? Meanwhile, the rest of the world’s like, “I don’t think this is the right path. No, I don’t think so.”

And I think unfortunately, the more that we do this, the more that we will become isolated, this kind of island of carbon-based profitability that, over the long run, is going to be in trouble if the rest of the world no longer needs your carbon outputs, it doesn’t need oil, it doesn’t need gas, if the rest of the world moves away from that. So in a sense, the China stuff, we’re handing it to them. We’re literally putting it on a plate and saying, “Go on, take the future. Take the sectors that matter.” We’re going to be basically building huge trucks and playing with something called AI.

SAFIAN: Wow. Mark really doesn’t mince his words, does he? I’m not sure I’m as convinced as he is that AI is just a sideshow. But when he talks about handing China the future when it comes to the energy economy, I’m right there with him. Now, Mark is only getting started. Coming up, a lightning round about the Fed, immigration policy, the Big Beautiful Bill, and more. So stay with us, we’ll be right back.

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Before the break, political economist Mark Blyth talked about how the Trump administration is trying to remake the economic order. Now he digs into some of the inconsistencies and the opportunities in the still unfolding transformation. We start with a lightning round around the Fed, immigration policy, and the Big Beautiful Bill, and we end with what he calls a house of horror and fun. Let’s jump back in.

Copy LinkExamining the pressures on the Federal Reserve

There’s so many topics I want to ask you. I want to give you a rapid fire round. Alright, Trump pressuring Fed Chair Jerome Powell?

BLYTH: That’s what you do when you basically want to have structurally low interest rates, which will enable you to basically dictate the structure of the Treasury market. I wouldn’t be surprised if what they also try and do is force big American banks to hold many more government bonds. That will relieve the pressure on that. That will push down rates, that will help them do the rest of the stuff that they want to do, which with tariffs is inherently inflationary.

SAFIAN: Just if I follow up on that, and have U.S. banks own more Treasuries so that we’re less reliant on foreign governments and other folks not owning them? Or just having more buyers?

BLYTH: Just forcing more buyers and then also basically kind of dictating what the long end of the curve looks like through purchases. That’s essentially how it would work. It’s called financial repression. That’s what it’s called in literature, financial repression.

Copy LinkReacting to Trump firing the head of the Bureau of Labor Statistics

SAFIAN: Next topic, Trump firing the head of the Bureau of Labor Statistics when the numbers weren’t what he wanted them to be.

BLYTH: Well, this is very similar to essentially pressuring the Federal Reserve. You don’t really want the Fed to be independent, you want it to be dependent and to do what you want through the Treasury, right? That’s what you want, it’s a very different relationship. I’m not applauding this, I’m just explaining it.

The similar one with this one is a bit more sort of Trumpy in the sense that you can’t produce stats I don’t like, alright? Both of them are worrying for different reasons, but this one is a kind of petulance that really troubles people in markets. If you’re pressuring Powell, if they know that he’s going to be out 18 months from now, if they understand that what they’re going to get is not some gold bug, but somebody who’s more aligned with the president’s goals, but at the same time will respect certain things, the market could adjust all its expectations of them. When you basically start saying, “We’re not producing any climate data anymore and we’re going to make up the jobs numbers,” that’s deeply troubling because you can’t price things. The whole purpose of markets is pricing. No information, no prices, bad.

SAFIAN: If you don’t trust the data and the numbers that you’re getting, then how do you assess where we are?

BLYTH: Well, you don’t, you just have to take their word for it, which is exactly what they want. The people putting together these stats are dedicated career people. They’re mathematicians and statisticians, they’re not political actors. And that’s why the markets trust that, even if it’s imperfect. We know it’s imperfect. But when it becomes, you don’t like the number, make it up and fill in anything you like, that’s qualitatively different.

Copy LinkReassessing U.S. immigration and labor markets

SAFIAN: Let’s try this one. U.S. immigration policy?

BLYTH: To me, it doesn’t make any sense because ultimately, the fundamental problem, if you think that the problem to be solved are the wages of basically white working class American men, let’s call it what it is, then yeah, you can tighten labor markets by mass deportations. But you’re going to have a bit of a problem because those white working class men are kind of maxed out in the job market. And basically an economy’s nothing more than the number of people, the number of hours they work, and the quality or quantity of capital we work with.

If you remove 12 million people, either everybody else has to work a lot more hours or you increase the capital component, which is called AI, which will lead to unemployment of the people you’re trying to employ. So this makes as much sense as a fish in a privet hedge, but that’s what it is.

SAFIAN: Your book about inflation, are we going to see inflation again?

BLYTH: It turns out that most inflations are actually caused by supply shocks. So even the 1970s, the oil shocks, the commodity shocks, et cetera, all those things were in there and it wasn’t just the government spent too much money. So are we in line for more supply shocks? Yeah, because we’re deglobalizing. Yeah, because of tariffs. Yes, because of climate change. Yes. Are the inflation numbers what people personally perceive as their inflation rate? No, because basically if you’re at the bottom end of the income distribution, you spend 80% of your income on consumption goods, then you’re much more sensitive to it than if you’re at the top 20% where that’s reversed as 20 rather than 80. So there’s reasons why people perceive their personal inflation rate to be higher. And in fact, it is.

Copy LinkThe realities of the Big Beautiful Bill

SAFIAN: Alright, the Big Beautiful Bill?

BLYTH: It wasn’t that big, and it’s not my definition of beauty. Essentially it’s another round of tax cuts from Republicans, who saw that coming? They’ve never done that before. Tax cuts skewed to the top, say it ain’t so.

And interesting that they’re willing to actually sacrifice their own base because the only place they could find any money was in Medicaid. And as Steve Bannon said at the time, there’s a lot of MAGA on Medicaid and come January next year, they’re going to find out exactly how painful that is.

SAFIAN: A pillar of Republican policy has long been smaller government versus bigger government. Is that happening?

BLYTH: So if you look at the size of the federal government in the 1970s and then control for population growth, it’s actually smaller than it was in the 1970s. So I guess that’s mission accomplished.

So when you go in and you do DOGE, you basically randomly fire people, you end up having to hire half of them back, it causes a great deal of disruption. It makes the skilled people that you have in those organizations go, “Stuff this, I’m out. I’m not putting up with this sh!t.” So you’re still level drops down, you’re still unable and unwilling to invest in technology in the government itself. They’re still running Cobalt at the IRS. These people tell me that they’re worried about the national debt and then part of what they do is they cut the budget of the tax collectors and fire the tax collectors. These are not serious people.

Copy LinkTrump’s economic policy and the national debt

SAFIAN: You mentioned the national debt. What’s your quick take on the national debt?

BLYTH: Do we really think the Fed is going to allow the collapse of the American economy? Every time there’s been a bump in the road since Greenspan, they cut rates in order to make things okay. If there was ever a serious panic in the Treasury market, as they showed in 2020 and 2022, they’d walk in and solve the problem.

Is it unsustainable? Yes. If every bond that they had in their portfolio was now at 7%, we might have a bit of a problem. But historically, what we’ve done is grown faster than everybody else. And if the rate of growth in the debt stock is smaller than the rate of growth in the economy, the debt shrinks.

Yes, $37 trillion is an enormous number of 43 or whatever it is, but it’s also like almost 90% of the size of the economy. The reason there’s so much debt out there is because everybody wants to buy it. There’s never been a failed Treasury auction. All these people are constantly freaking out, “Oh, the debt, they’re there.” Well, who are the morons on the other side of the trade that keep buying this stuff for pennies, like for literally 3%? If it’s such a toxic asset, why does the whole world fill up with it constantly? So I’ve got lots of things to worry about, but that’s not one of them.

The issue is every time that there’s a big financial crisis, 2008, debt jumps by 30%. COVID, we chucked out another 20%. This is why it’s up where it is, it’s reacting to these crises. If you are where we are and there’s a ginormous financial crisis, they’re going to be buyers at that point. That’s the one that I worry about in a crisis. Everybody wants to run to the safety of bonds.

What Trump did, and this is singularly important, is that with the tariff announcement, he told everybody that what was once an informationally invariant asset, the Treasury, doesn’t matter when the news flow is, Treasury is now a risk asset because we can and we will screw around with things that will affect its value. And once you’ve done that, you do not get to put that genie back in the bottle. And once you’re a risk asset, you behave like a risk asset. And that’s when bailing things out becomes more problematic. That’s what I worry about.

Copy LinkDemocrats’ struggle to shape a compelling economic narrative

SAFIAN: The story that Trump tells about the economy and the world that the Republicans now tell, the other party, the Democrats don’t seem to have a particularly cohesive story of their own.

BLYTH: That’s right, isn’t it? Now, isn’t that telling, right? Because if what these guys are doing is so wrong, you can pick them up individually on why they’re wrong. So tariffs are wrong because… Immigration is wrong because… Alright, fine. But simply pointing at the error of their ways is not to posit an alternative.

And the reason it’s difficult for them to do this, and Henry Farrell, who’s a very smart guy who writes a blog called Programmable Mutter, which I recommend, made this point a year ago now, which is that the Democrats have become the party of the status quo. The Democrats are essentially the party of people who go to Whole Foods. It’s the people who are in the top 20%, as Bannon derisively calls them the managerial professional globalist class.

And for us, everything’s going great. It’s fabulous. Our wages are through the roof. We’re the ones that own all the stocks. Don’t stop this. We’re really sorry we hollowed out the Midwest and all these people are on Medicare and there’s no future for them, et cetera, but that’s just-

SAFIAN: Get with the program. This is the future. Just join us.

BLYTH: That’s just technology. Yeah, no, the way that we… It’s just technology, as if technology was given to us by God and dictates what we do with it. So no, these guys have got a very powerful set of rhetorical weapons and the Democrats are just completely unable to handle it. And what they did is they doubled down on identity politics as a way of carving out and building a coalition that ignores all those facts. And that just becomes inherently fragile. And it’s no accident that the other side is completely targeting that sort of identity politics because it reinforces their base and weakens the other side. So if you take that away from the Democrats, what have they got left? That’s the silence that you hear now.

Copy LinkInside Brown University’s deal with the White House

SAFIAN: I have to ask you about the recent deal that your university, that Brown made with the White House, sharing admissions data, agreeing to donate $50 million to local business development, all in order to unlock federal research grants. What’s the buzz on campus among faculty? Do you have any visceral personal reaction?

BLYTH: We weren’t formally charged with anything. We hadn’t done anything, they just stopped paying the grants. And then we have to pay the people who are doing the work. And we were a $1.4-billion shop losing 3.5 million a week, i’s completely unsustainable.

My colleagues will say, “Well, it’s not really a deal because we didn’t really do anything and what’s to stop them the next time there’s a protest on campus and we’re not in agreement?” Et cetera, et cetera.

And my point is like, okay, so basically what happened was we went into the casino and we decided we were going to play poker. We didn’t really know we were doing this, but we started playing poker. And we’ve got two pair. Turns out the guy on the other side of the table has an infinite deck and always pulls a flush. How long do you think you’re going to last?

Have we sold our soul down the river for this? I don’t know. At the end of the day, we work for universities, we’re employed by them. Even if they’re nonprofits, they have a bottom line. They can, unlike countries, particularly big countries with their own currencies, go bankrupt. And the people who are the officers of the university have a responsibility to make sure that doesn’t happen, for not just the faculty, for the staff, for the research, for everything.

SAFIAN: Yeah. And is there any discussion, if you were a business and your cash flow is so dependent on one customer, you might be like, “Oh, I’ve got to change my cost base. I got to diversify my business, so I’m not so dependent on that one customer.” Are those kind of re-thinkings happening at the university?

BLYTH: I think through the entire sector this is happening. You got a confluence of things. One is for the first time ever, rather than being a source of support, the federal government is a source of challenge. That’s difficult because it’s the U.S. federal government. This is a big thing, right?

For certain universities that aren’t so dependent on federal funding, and we weren’t that dependent on it, it was an area we were growing into because that’s where the research funds are, it’s changing because this government, and if they get another term, this will be solidified, they really don’t care about research, and they think it should be done by tech firms. My basic line on this is that they want to take the money away from us and give it to all the people who are overextended on AI, who have decided that universities are the enemy because we breed liberals who come to Silicon Valley and care about woke issues. This is the Marc Andreessen view of the world, and I think it has a great deal of currency.

So I think the sort of 50, 60 year relationship between the private sector, universities doing basic research, private venture capital funds capitalizing that, bringing it to market, et cetera, that sort of loop that’s brought us biotech and a lot of the tech sector, et cetera, that’s going to change. American universities are, when it comes to absolute basic research, superconductivity, quantum computing, a lot of these breakthroughs are not happening in Silicon Valley, they’re happening in universities. And we’ve been doing this for 50 years.

That’s going to change. And it’s going to change, I’m not sure that basically a bunch of man baby firms in California are the ones that are really going to do that. Whatever money they’re going to – remember Zuckerberg, the Metaverse? What a way to spank money. We would’ve never have done that. We would’ve literally started with a focus group that said, “How do you feel about spending most of your working life with a pair of goggles on your head?” And everyone would’ve went, “No,” and it’d stop there, right? But you can’t stop Zuck, so he gets to spend billions on something that clearly nobody wants. So that’s the way that it’s trending.

And then you’ve got the government also saying that, “You take in too many foreign students.” Well, the reason we’re taking foreign students isn’t just intellectual diversity or pluralism, it’s the fact that they pay full freight. And then we can tax them and actually give more money to the domestic students. You cut that off, you’re not solving the problem, you’re making it worse. So we have huge challenges right across the board. And it’s coming from our own government.

Copy LinkCan we tell if a recession will hit in the near future?

SAFIAN: For those who kind of get overwhelmed by the pace of the economic news, by all the changes, I don’t know, is there a specific number or metric or topic that you would say, “This is what you really got to pay attention to?”

BLYTH: I got a call from a network yesterday, one of the network news guys, and they said, “Look, Mark, just a quick one, do you think there’s going to be a recession?” And I said, “I have no idea.” And they’re like, “But you’re an economist, you’re meant to know.” And I’m like, “Okay.” So I can anchor on last week’s jobs report and the scandal around that and say, “Oh, unemployment’s going up,” and then we’ll revise the next one and then it’ll go up or down or whatever it happens to be. Can I tell you, from looking at three or four numbers, if there’s going to be a recession? Maybe some people could do this, it’s never made any sense to me. It’s always after the fact that we’re smart on this sort of stuff.

Big recessions in the United States. Okay, so two quarters of negative growth. Do people really notice this? I know it’s the technical definition, right? But when we think about recession, what you’re talking about is 2008 through 2012, right? That’s a recession, right?

SAFIAN: Well, and the question, will there be a recession? Yeah, at some point there’ll be a recession.

BLYTH: Right, exactly. No, exactly. Right, right. If you could actually do that, right? What you are saying is I can predict the stock market, right? Because by definition, a recession is when profits go down, values go down. So what you’re saying is I can tell you when the market’s going to go down. If you really could do that, you wouldn’t tell anyone and you would make more money than God.

And that’s why it’s fascinating and that’s why some of the most interesting people I’ve ever met work in markets. That’s why I like coming on shows, talking to you, all the rest of it, because people think about this. But there’s also this thing that they don’t understand sometimes, which is their thoughts about it are part of the system. We like to pretend that we step outside of the system.

It’s sort of like the weather. So, oh, I don’t like the weather, it’s too hot. Well, the weather doesn’t care. It’s either going to be hot or cold. But I don’t like tech stocks and I’m somebody who’s really important and I don’t like Warren Buffett anymore, I start to sell. Those things have consequences, right? You’re actually part of the system. And that’s what makes it super fascinating and much more complicated.

Copy LinkInside the U.S. economy’s relationship with risk

SAFIAN: And for each of us individually, sometimes that system seems so big and so hard to get our arms around that it’s like we control what we can control, but we’re never really sure whether we’re leading that system in what we’re individually doing in a good way or a bad way. Do I just do what’s good for me? Or is there something that I do that will be good for me in the long run, but I can’t even see it?

BLYTH: 100%. In finance, the incentives are always pro-cyclical. If you lose money when everyone else loses money, you keep your job. If you make money when everyone else loses money, they give you a firm. If you make money when everyone else makes money, you keep your job maybe, unless there’s a downsizing. But if you lose money when everyone else makes money, you’ll never come back. So your incentives are always pro-cyclical. Take the bet. Take the next step. Take on the risk.

There was an advert just before the dot-com bust, and I’m pretty sure the actress in it was Jennifer Connelly. And she was in this hotel in the middle of the desert. And then comes a guy who’s like my age with the snakeskin bag in the leather jacket and much more handsome than I am, and drops it down on the floor. And he says, “What have you got for entertainment around here?” And she looks at him and says, “Any movie you would ever want to see on demand whenever you want it,” or words to that effect. And he goes, “How is that possible?” And I think it was a company called Quest, and it came up and went, “Quest.” And it turned out they went bankrupt a few months later because we didn’t have the tech to do that. But then once you do develop the tech, we get Netflix.

So there are busts which harm the companies and harm the investors. Downside risk, that’s why you get reward on the other side. But there are busts that leave behind good stuff, busts that drive out the old and bring in the new, and it’s really productive. The worst type of busts are financial busts, because not only do you bail out the people that really should be paying the cost at the expense of everybody else, this is the book on austerity I wrote a decade ago, right? What you’re also doing is you’re licensing ever-increasing risk-taking.

SAFIAN: Well, Mark, this was great. I don’t want to say it’s fun because it’s hard. There’s stuff about this that’s just kind of scary and overwhelming and you make it sound fun, but it’s hard. You know?

BLYTH: Yeah. I can make a house of horror sound fun. And in many ways it is, that’s why we love Halloween. So maybe we’re living through the economic Halloween.

SAFIAN: Mark is a spark plug. He’s got my brain buzzing all over the place. I need to take a deep breath to try to absorb his ideas, first, to admit to myself that I may be more out of touch than I like to think. The enthusiasm for Trump and MAGA isn’t born from thin air, but from decades of economic dislocation that I’ve been fortunate enough to largely sidestep. I see tech as good, and I still think it is. But it’s also important to recognize that the tech era hasn’t been good for everyone, and there are ramifications.

The relationship with politics and the economy, Mark’s area of expertise, it’s so tricky. Businesses control their own fate, but only to a point. If the success of the US proves anything, it’s that the environment you operate in really matters. Of course, businesses also play a role in creating that environment. And if we take Mark’s perspective to heart, business leaders may need to be more assertive in shaping that environment. A Halloween house of horror and fun, indeed. I’m Bob Safian, thanks for listening.