Banishing the Ghosts of the Great Recession

For decades, economic policymakers have viewed full employment as a scourge to be avoided at all costs, betokening as it does the grim specter of inflation. If his words are to be believed, Joe Biden wants to break with that consensus and aim for full employment. Economist James Galbraith joins Ryan Grim to discuss.

[Introductory theme music.]

Ryan Grim: On Thursday, the Consumer Price Index for the last month was released, and the headlines were grim: “Prices Jumped 5 percent in May From Year Earlier, Stoking Debate in Washington.” That’s from The New York Times. The subhead spelled out the doom even more clearly. “The CPI showed the strongest year-over-year reading since 2008, and a core index popped the most since 1992.”

Much lower in the story, we learn that one reason the year-over-year increase was so high is that it was a comparison, of course, to last May. And last May came at the depth of the early days of the pandemic, when prices had fallen to record lows.

We also learn that economists have expected a price bump as the economy re-opens and people travel and spend money they’ve saved the past year. All of this is happening while rickety supply chains are still themselves recovering from the panic. And because we’ve allowed so many of our industries to become so concentrated, supply-chain problems are felt more acutely than they used to be.

The thing that might actually be more dangerous than inflation, however, could be the reports of inflation, and the response from Washington that those reports produce. The knee-jerk move in D.C. whenever we hear the word inflation is to hurry up and throw people out of work by raising interest rates.

This is Deconstructed. I’m Ryan Grim. And later in the show, we’ll be joined by economics Professor Jamie Galbraith to explain how wildly wrong that is, but first, a few words about the loudest economist who is being so loudly wrong. I’m speaking, of course, of none other than Larry Summers.

The Washington Post recently reported that President Biden had a private phone call with this exceedingly influential economist and gave him a chance to air his criticisms of the administration’s economic policies.

So does this mean Biden is actually listening to Larry Summers? Or to economists like him? If Biden really wants to know what happens when you let Larry Summers guide your economic policymaking, he could just call his old boss, Barack Obama.

Summers, for those of you who don’t remember, was Obama’s top economist at the height of the financial crisis. Before that, he was a treasury secretary for Bill Clinton, whom he helped push through the very Wall Street deregulation that ended up fueling the 2008 crash.

The idea that Larry Summers thinks anybody should be listening to him at this point doesn’t speak well of his judgment. The good news is that, no, it doesn’t seem like either Biden or his economic team are actually listening to Summers. More on that in a moment.

But first, let’s talk about Larry Summers’ economic policy beef with the Biden White House. Basically, it boils down to inflation. Summers thinks that Biden is doing TOO MUCH to juice the economy and that all this government spending is gonna drive up inflation. He’s called inflation “the primary risk” that we face.

It’s true that real inflation that gets too high can be a big problem for regular people — that is, if wages don’t keep up with it or you’re on a fixed income. But when people like Summers talk about inflation and an overheating economy, it’s not just rising grocery prices they’re talking about.

What this is all really about is a power struggle in the workplace. In the 1970s, according to mainstream economists, workers had gotten too powerful. Their unions were driving up wages not just for them, but at non-unionized companies, too.

The solution was to destroy the unions and fire the workers. And so Jimmy Carter brought in Paul Volker to chair the Federal Reserve and do just that. He jacked interest rates up to the sky, bringing about a vicious recession.

By the early ’80s, inflation was coming down. Since so many people had been fired, they had less money to spend and, as a consequence, there were way more jobseekers than there were jobs. Wages went down, and it became much harder to form a union. Those unions that survived had to accept lower wages.

In 1981, Ronald Reagan fired the air traffic controllers when they went on strike. It was a signal to big business that they could do whatever they wanted to unions and the government wouldn’t stop them; it might even help them. Wealth and power flowed upward. Inequality skyrocketed. And wages were kept low to guarantee that things would stay that way.

Any time real wages showed even a hint that they were thinking of going up, the Fed would jack up interest rates and slow down the economy. It got so bad that the market started getting spooked if there was even a rumor of a good jobs report.

If it looked like workers were doing a tiny bit better, investors thought: Well, now the Fed’s going to raise interest rates, so we better sell everything now and slow down hiring. That’s why the words of the Fed chairman or the president actually matter if they’re talking about inflation. In most cases, when politicians talk, it’s just talk. But if they’re talking about wages and inflation, what they say filters immediately into the real world, and into people’s paychecks.

The fight over wages and inflation is at the very heart of the class war. And what’s interesting is that even to those who say race- and gender-equity dynamics should be prioritized ahead of a class analysis, wage pressure is still the most important game in town.

Think about it this way: If there are ten unemployed workers for every job opening, bosses can pay the bare minimum and treat workers like garbage. In a country shot through with racism and sexism, that means racism and sexism will flourish in the workplace.

But if there’s only one worker for every job opening, companies have to treat that worker a lot better. If a boss messes with the schedule, or harasses you, or treats you as less-than because of who you are or who you love, you can just quit and go find another good job. That’s power. You can’t do that if it’s harder to find another job. And your boss knows that, so he’s less likely to treat you that way.

The name for that situation is “full employment,” and full employment is the biggest fear of the ruling class. When an economist on CNBC or Fox Business warns about inflation, what they’re really worried about is workers getting too much power.

Now, back to Biden and Summers. Let’s pretend for a moment that Summers’ grievance is sincere and grounded in real economic data, instead of just his bitterness that he’s no longer an insider. The fact that Biden made that call to Summers at all is worrying. The official line on the call, however, is more encouraging.

The Post quoted a White House official who said that Biden is seeking “a wide spectrum of views” and that the Summers call was “brief and informal.” The same official said that the call took place before the president’s speech on the economy in Cleveland on Friday. They explained that Biden “has spoken to a number of voices outside of the administration, including many with whom he has disagreements,” and added that he has also been speaking with Bernie Sanders.

As somebody who’s covered White Houses over the years, let me parse that for you. When a mainstream news outlet refers to a “White House official” like that, and the quote is a bit robotic, it means it came from a spokesperson, which means it was approved up high and represents the White House’s public position. And Larry Summers knows that.

But the most important detail there was that Biden’s brief call with Summers happened right before Biden went on stage to give a major address on the economy. Let’s take a listen to the speech he gave right after talking to Summers.

President Joseph R. Biden: I’m a capitalist. But here’s the deal. From 1948 after the war to 1979, productivity in America grew by 100 percent. We made more things with productivity. You know what the workers’ pay grew? By 100 percent. Since 1979, all of that changed. Productivity has grown four times faster than pay has grown. The basic bargain in this country has been broken.

RG: OK. That’s a fairly standard progressive understanding of the 20th Century. So far so good. Here’s where he takes it next:

JB: Along the way, we started seeing the stock market and corporate profits and executive pay as the sole measure of our economic success. Let me tell you something: My sole measure of economic success is how working families are doing, whether they have jobs that deliver dignity.

RG: Alright, great. Working families, jobs that deliver dignity, all fine stuff, but we’re still in the realm of standard Democratic campaign talking points. But he goes on:

JB: That means we have to focus on wages like we used to.

RG: OK, now we’re talking.

JB: That means we have to focus on wages like we used to.

RG: “We have to focus on wages like we used to.” And it gets even stronger:

JB: When it comes to the economy, rebuilding rising wages aren’t a bug; They’re a feature.

RG: To repeat: “Rising wages aren’t a bug, they’re a feature.”

That is exactly right. Too many conventional economists think of rising wages as something bad, something that the government needs to fix. Rising wages are a feature, not a bug. They’re what we want. This right here is the speech he gave just moments after that call with Larry Summers.

Back to Biden one more time. Why does he argue that rising wages are a “feature and not a bug”?

JB: We want to get something that economists call full employment. Instead of workers competing with each other for jobs that are scarce, we want employers to compete with each other to attract work. We want the companies to compete to attract workers. That kind of competition in the market doesn’t just give workers more ability to earn a higher wage. It gives them the power to demand to be treated with dignity and respect in the workplace.

And it helps ensure that in America, when you walk into work, you don’t have to check your right to be treated with respect at the door. Full employment also means more options and opportunities for workers, including Black, Hispanic workers, Asian-American workers, women who have been left behind in previous economic recoveries.

RG: Again, that’s exactly right, and that’s also the perfect intersection of the class war and the increasingly toxic debates about wokeness.

This might sound too obvious, but the way to actually help marginalized communities is to make them less marginalized — to get them off the margins. The way to do that is to give them power that they can use however they see fit in pursuit of their own dignity and their own vision of a good life; full employment gives them power.

You think that factory owner during World War II hired Rosie the Riveter because he got woke on gender equity? Racist factory owners during the war didn’t start hiring Black workers because they suddenly saw the light on civil rights. It was because they had no choice. Black workers have historically been the last to be hired, and the first to be fired, which means that the closer the economy is to full employment, the better they are doing — the more power they have.

Now, economic power alone is no guarantee of civil rights or human rights. But it creates a political base of power you can use to fight for those rights. The greatest advance for civil rights, in the ’60s, came after two decades of rising wages. That’s not a coincidence! The white backlash made its most serious inroads in the ’80s and ’90s, when wages were flat and declining for communities that were becoming ever more marginalized. That’s not a coincidence either.

With prices rising, we’re going to be seeing an awful lot of people arguing that we need to raise interest rates to tame it. What they won’t say is that they want to do it so that workers lose power and can no longer command a decent wage or dignity on the job. To stop that from happening, it’s important to understand what’s really going on. For that, I’m happy to welcome back Jamie Galbraith, an economist at the University of Texas.

Professor Galbraith, welcome to Deconstructed.

Professor Jamie Galbraith: Thank you very much. Good to be with you.

RG: Sure thing.

And first of all, there’s been some news in the Galbraith family.

JG: [Laughs.]

RG: You’re no longer perhaps the most celebrated Galbraith in Texas. Tell us a little bit about what’s going on with Emma.

JG: Yes. So my daughter Emma is the star of a film “Inbetween Girl,” which is making the rounds of festivals. It was given the Audience Award at South by Southwest and the Jury Award at the CAAM, the Asian-American festival in San Francisco a couple of weeks ago. It’s been very, very well-reviewed. And needless to say, the family has a new star.

RG: Well, congratulations, Papa.

On the subject of today’s Deconstructed, there’s a conventional understanding of why the U.S. saw inflation in the 1970s and ’80s. And you’ve consistently argued against that, to a degree. What do you think really happened? How do you explain inflation during that period?

JG: Oh, well, prices started rising in the late 1960s. And that’s generally associated with a very strong economy and the Vietnam War.

But in the ’70s, the international system that existed kind of broke apart. There was a stabilizing exchange-rate regime called the Bretton Woods system, which was basically dismantled in 1971. And that was followed by a fall in the value of the dollar, and then the big rise in oil prices, which happened in 1973 and again, in 1979.

And those things, and basically the commodity price increase, is fed through into the wage system in the United States, which had a very strong component of cost of living adjustments in union settlements. And that generated a decade where prices were rising reasonably rapidly through the whole system. That whole structure of the economy is very, very different from what it is today.

So the story of what happened then is not really one that one can learn a great deal about the present situation from.

RG: And yet, it seems like people are trying to kind of learn from that system and apply it to today?

JG: There are people who would say: Well, we’re just going back to the 1970s. Well, I think that’s very, very unlikely. The structure of the U.S. economy is much more internationalized. The pass-through mechanisms that existed in the ’70s are basically nonexistent at this point. And so while we will get, or you can see, some increases in prices that are occurring as we transition out of the pandemic and there’s a shift in some structures in the economy, the mechanisms are different, they are much less likely to be a lasting phenomenon.

RG: So, in March, you wrote an essay arguing that inflation fears were overblown for one reason, and that was China. Can you walk us through why that is and how our relationship with China and with global commerce has changed the structure such that we think about inflation differently now.

JG: Well, it’s actually a couple of things. That China situation is very much in the forefront right now. But from the middle-1980s onward, with the collapse of the Soviet Union, we entered a period when commodity prices were really very stable, and they remain that way, and those prices, set on global markets, were not very strongly influenced by what happens inside the United States.

China came along a little later, providing a very large share of the manufactured consumer goods at very stable prices. So with those two things, you basically have the price level affecting most American consumers, a more or less internationalized phenomenon. That’s not to say it can’t be disrupted by what’s going on basically right now, which is the transition out of the pandemic. But that situation is a feature of life that we live with.

Now, I did write that the one risk you could run is if you disrupted those international patterns of trade. Well yes, you’re going to get pricey consequences of that in the United States. So that was the point of the essay a few weeks ago.

RG: And so one virtue for Wall Street and the CEO class of believing in the idea that labor power in the ’70s was the real problem, that was the thing that kind of solely drove inflation and that crushing labor unions was a regrettable, but necessary response to that. If they can convince themselves that they’re in a similar situation, and wages are rising too quickly now, then that would seem to justify another crackdown. There aren’t as many unions to crack down on, but there are workers that could be punished. Are you seeing some of that develop?

JG: We’re certainly seeing that story being told that people don’t want to work because they have savings piled up, or because they’re on unemployment insurance, and businesses can’t find the workers at the price they’re willing to pay. But the reality is, of course, businesses have been paying miserable wages to workers, American workers, for years. And the worst of them have been apparently quite happy with being able to get away with that.

And it’s a very good thing right now, that if they have to raise wages, to bring people back into the labor force — then great, let them raise wages. This is not a problem that we can describe as an ongoing problem of inflation, which is related to the value of the currency and the stability of the economy. It’s simply a market adjustment that needs to be made, and that should be made, to the benefit of the working population.

I mean, you have to ask yourself, if you’re going to go with that argument, would you be in favor of the Fed intervening and raising interest rates, if Congress raised the minimum wage? That would be an absurd conclusion. These things happen, and they involve a change in the relationship and the society? And if you’re a conservative economist, you say: Well, that’s the market! Get used to it.

RG: And so in the ’70s, and ’80s, you argued for a different response to inflation at the time. What policies did you argue for then and are any of those applicable today, if we do see inflation?

JG: Well, there was a very substantial tradition, going back well before that to the ’30s and ’40s, that the way you manage these pressures was by having a negotiated arrangement, a social contract, between labor, business and government, essentially. And that was the policy of the 1960s. That was Kennedy’s policy; that was Johnson’s policy.

The strategy of using employment to bash labor into submission was basically started in the 1970s and then really applied with ferocity in the 1980s. That was a very destructive policy. It not only damaged, of course, a whole generation of working Americans — the casualty on the side was the entire American industrial base in the upper Midwest, which was deeply damaged by the high interest-rate policies and the very high-dollar policies of the early 1980s, destroyed their export markets, gave an enormous leg up to the Competition, which at the time was the Germans and the Japanese that opened the door for an enormous amount of outsourcing.

This is not a set of mistakes we should be making again.

RG: So you’ve advised congressional Democrats in the past. And, hypothetically, let’s say that they come to you again and they say: Professor Galbraith, I’m getting killed back in my district over lumber prices, and I’m being told that milk is too expensive. You’ve seen some Republicans point to like a 4-cent increase in burrito prices at Chipotle to say that the world is ending. They say maybe the world isn’t ending, but this is a political problem for me, at least. What are some policy responses that Democrats could implement to target inflation without driving people into unemployment?

JG: Okay, so first of all, we have to look at what has happened. I was just looking at the inflation numbers that were released this morning and they recognized that underlying them were basically two elements — an increase of about 50 percent in gasoline prices, in basic energy prices, year over year. That’s not gonna happen again.

So one can say: OK, we can clearly see that’s a transitory phenomenon. And then there’s an increase in other commodity prices, in things like use cars and trucks. And I can’t do much about the used car market. But with respect to commodity prices, metals and things of that nature — lumbers, you mentioned — one can look to see whether there’s an element of financial speculation going on here. Because there is an incentive in this situation, if you’re invested in the Goldman Sachs Commodity Index, to bid up the prices of commodities and keep them off the market for awhile, hoping to sell them later, at a higher price, that happens in this situation.

So I would, first of all, mobilize the regulatory authorities to go after the financiers. Now, that is, by the way, one approach that is being taken in China, where they’re very conscious of the danger of price increases from social stability. So if you’re looking at those particular commodities, yeah, there are things you can do. And you can also ask: What can we do to increase the available supply, so that the price increases are limited. Those are things that you can, in fact, address, without going after the workers. They’re the consumers here, and they’re the ones affected by the price increases, but they’re not driving.

RG: What would a regulatory targeting of speculators look like? Who would lead that?

JG: Well, you have regulatory authorities that are responsible for that. You look at the Fed, you look at the SEC, you look at the regulators of the various institutions, the Commodity Futures Trading Commissions probably have jurisdiction in this area. So I would like to know what they have to say about this, what’s going on.

I’m not saying that I have the specific numbers on these.

RG: Right, sure. But it’s worth looking at.

JG: But these things do happen. You had it very clearly happen in the run-up to the crash in 2008, when the oil price was driven up to $148 per barrel — there was a strong speculative element behind it.

RG: Would they need new legislation? Or do they have an ability to curb speculation on their own?

JG: I think they have that authority — yes, sure. I mean, there are things like raising margin requirements and so on, where they can intervene directly because they need new authorities that they can ask for.

RG: So back to the question of smashing labor and driving workers into unemployment, can you walk people through what the Phillips curve is, and what its influence has been on American and global economic policymaking?

JG: The Phillips curve was, let’s call it an alleged statistical relationship that was originally based upon, actually, the United Kingdom in the late 19th century, early 20th century. And then, in the United States, those economists actually just chart it by hand, essentially, for the U.S. in the post-war period by two very important 20th century economists Paul Samuelson and Robert Solow, who published an article on it in 1960. So this is the Phillips curve.

And it became part of the folklore of economics of this period. And the idea was that as you push the unemployment rate down, which was considered, by the way, to be a good thing, you would have to pay a price in terms of the rising rate of inflation — basically based upon a historical, alleged empirical relationship.

There was never any very strong reasoning behind this, there were a number of economists who, in the tradition I grew up in, who would never accept that as a serious argument. But it became very much embedded in the way in which a particular generation of economists calculated their forecasts for the economy.

And it was also very controversial on the Right, that basically said that if you push the unemployment rate down, you get runaway inflation, so it’s not a stable process. And that became the dominant view for a while.

But the reality which has emerged in the last 40 years, and was always the case in almost all other countries, was that as the unemployment rate goes down, nothing much happens to prices until some moment when some other event happens, like the price shocks from the oil cartel or events of that nature.

And, at that point, what happens depends upon the institutional structure of the society. In the U.S., those effects tended to be drawn out over a period of years. This was never the case, for example, in Japan. I don’t think it was ever the case in Germany. And the result was that, when a price shock happened, it tended to pass through in a year, and then nobody said there was going to be an ongoing conflation.

And I think we are now much closer to the situation that was historically relevant everywhere else, where we may see some price increases, and we are seeing some price increases, but first of all, they may simply go away. And second of all, the prices go up and then they come down again. Or they may simply stop rising. And in neither case do you expect to see a prolonged period in which you have a generalized inflation and an expectation that it’s going to continue.

This kind of worry, which is almost a fetish of a certain part of the economics profession, is really based upon a set of historical circumstances dubious enough at the time, but certainly not, I think, applicable to the situation we’re in now,

RG: How widely held is this fetish in today’s kind of mainstream economics? Because it feels like it is still the conventional wisdom among the media.

JG: That’s hard to judge. You have some influential economists, and Larry Summers is a leading example here who makes a big deal out of it. And the media, as you say, picks them up, so there’s an echo chamber there.

I think the number of economists who express this view and hold it and who have an independent opinion on it, based on their own serious thinking is actually pretty small. But they’re influential.

RG: How has Larry Summers continued to believe this? He’s a smart cat. He can see data. Why has he held on to this idea long past its expiration date?

JG: Oh, well, you’d have to ask him that. Of course, if you pick up textbooks, the Phillips curve is going to be found in the pages of textbooks. So someone who takes the textbook seriously, they said, “Well, gee, the fact is that economics textbooks were just repositories of a history of old ideas.” But the fact is economics textbooks are just repositories of a history of old ideas. And that’s really unfortunate, because new generations of students have kind inculcated various ideas; I tended to descend from them to begin with, but they certainly haven’t held up well. Why Larry Summers is aligned with them is a question for Larry Summers.

RG: And back to what you mentioned earlier, and you hinted at this in your essay, that a real driver of inflation could be hostilities between the United States and China. And when we talk about hostilities, what level? Are we talking about shooting wars or simple trade disputes? Because both the Trump and the Biden administration are — and I think rightly so — now trying to assert some U.S. authority here in this trade relationship. What are they flirting with?

JG: Well, I don’t think there’s going to be a shooting war with China. There’s no basis for one. There’s no place for one to break out really, short of some really dramatic developments with respect to, let’s say, Taiwan, and it’s not even clear we would be involved in them.

But what we’re talking about here is the disruption of the supply chains. And there has been some disruption in the supply chains. There was some in the initial phases of the pandemic, and there could be some as a result of a concerted policy on the part of the United States to break off dependence on Chinese suppliers for all kinds of things, which are components of things that we use here.

And to do that, you’re going to drive up prices. Some of that is maybe strategically correct. You may want to say, look, for certain sets of goods, the pandemic taught us this with respect to basic health supplies, you want to have a reserve capacity in your own country, so that you’re not going to be caught out if there’s not a real shift of global demand.

But then you just say: OK, we’re going to pay a higher price! Then turn around and say that when you looked at that price, as it turns up in the Consumer Price Index, that that’s something we’re going to call inflation, and the Fed should react to it by raising interest rates and throwing people out of work, that makes no sense at all. If you have a strategic reason to put up the higher prices for something, then that’s a reason you do that for that purpose, and you live with it.

RG: And finally, what do you make of the huge run-up in housing prices? And what do you think the effect on the broader economy is going to be of that development?

JG: Well, what we’re seeing is a huge run-up in land prices. There’s some increase in construction prices as well, but the price of housing is, by and large, the price of land in particular places.

And what’s driving that are a number of things. One is that people are relocating, they’ve changed their patterns of where they want to live — that’s partly a result of the pandemic. If you’re moving into the core of the city, you may find that the prices are not all that high at the moment. So there’s that.

And then there’s the demand for people who are refinishing and expanding the houses that they live in, and they’re building new houses, and you’ve got some pinch on the construction supplies. That is driven, in part, of course, by the fact that people came through the pandemic with quite a lot of savings, which was thanks to the very effective policies that were put in place both early last year and again, early this year, which were there for the purpose of giving people the financial means to get through this.

I would regard that as a transitory phenomenon, by and large, because it’s a stock of savings. And there are two ways it will be reduced over time. One is possibly slowly as people are cautious about increasing their spending, in which case it will have very little effect, or it can be spent down, as Larry Summers thinks it will be, very quickly, as people rush out to do things that they couldn’t do for a year, and compete to buy new houses and so forth.

But if it’s drawn down quickly, it’ll be gone that much sooner. I mean, there’s only a certain amount of water in the bathtub, and if you drain it slowly, it’ll be there for a while; if you drain it quickly, it’ll be gone. So neither case does it make sense to think of this as the source of something that we would describe as an inflation problem.

An inflation problem is one in which is likely to be sustained over a substantial period of time. That’s when you start worrying about it and you start worrying about people really having their economic lives disordered by not being able to effectively predict and manage their incomes and their expenditures.

But that’s not what we’re looking at here, to panic about them, and to say the problem is that we need to tighten up the economy, and leave people, who’ve been out of work for a year, out of work even longer is bizarre. That just doesn’t make any sense at all.

RG: And when you last joined us on the program, you outlined a number of transformational things that you thought Democrats ought to do to transition the economy into a healthier place post-pandemic. Have you changed your thinking on any of that, and have you seen any of that begin to happen?

JG: Ah, well, let’s see. There were a number of issues. The one that comes to mind immediately is the problem of household debts. And I think that problem is still lurking out there. It helps if people have enough money to pay rent and to keep up with their mortgages, but there are still, according to reports I’ve seen, quite a lot under forbearance, and quite a lot of backlogs built up. And you have an issue here, which is a real issue of conflicting equities, because a lot of the people who are owed rent are small landlords who have taxes and mortgages to pay. And so this issue strikes me as something that really needs attention, and we need to understand its full dimensions and have some way of dealing with it, not to have a lot more people basically tossed out, evicted, or foreclosed on when these moratoria come to an end. That’s one area where I think we still have a substantial set of issues.

One of them has to do with the nature of the markets for the most advanced sectors, and I still think we have not faced the need to transform things in this. You look at what’s happening with the infrastructure bill and I don’t think we’re gonna see a lot of major transformation. But the fact is, as a society, we’re spending far too much, for example, on the military, and a lot on certain kinds of advanced industries, which are where resources are, where the markets just are not that promising, while what we need to do is address the climate question and the urban reconstruction question in a major way. And I don’t see that happening. It’s obviously very difficult to make it happen, when you have the kinds of divisions in the Congress that we see now.

One example of what we’re seeing now is the bill that’s just went through the Senate on information technology and advanced industries and so forth. It was set up as a competition with China, but who were the beneficiaries there? One of them is the military sector. Another one is the automotive sector, which needs chips for all the GPS systems and electronic controls that they have in cars nowadays. Now, that’s all very well and good, except that’s not really a transformational set of investments. [Laughs.] It’s the same old car industry, which is the same old fossil fuel industry that we had before.

So there are issues here that we need to deal with. And I think the third issue has to do with employment. And I still believe that if we had a job-guarantee program that people could have a secure base of employment offers, then we would be through the problems we’re facing much more quickly.

There are a lot of people that are coming back to work now, but there are a lot of people who have not. And the employment-to-population ratio is still, I think, four percentage points and about five million people lower than it was even a year ago, and a good deal lower than it was 15 years ago.

RG: Well, Professor Galbraith, thanks so much for joining us again here on Deconstructed.

JG: Always a pleasure.

[Musical interlude.]

RG: That was Jamie Galbraith.

Some of you may remember that Galbraith’s brush with European fame came when he and his friend Yanis Varoufakis, the outspoken radical Greek economist, advised the Greek insurgent governing party of Siriza in its showdown with Germany over austerity measures.

Varoufakis later wrote a delightful memoir, and in it he recounts an exchange he had with Larry Summers that helps explain the anger Summers is feeling now. I’ll read the passage:

“Finally, after agreeing our next steps, and before the combined effects of fatigue and alcohol forced us to call it a night, Summers looked at me intensely and asked a question so well rehearsed that I suspected he had used it to test others before me.

‘There are two kinds of politicians,’ he said. ‘Insiders and outsiders. The outsiders prioritize their freedom to speak their version of the truth. The price of their freedom is that they are ignored by the insiders, who make the important decisions. The insiders, for their part, follow a sacrosanct rule: never turn against other insiders and never talk to outsiders about what insiders say or do. Their reward? Access to inside information and a chance, though no guarantee, of influencing powerful people and outcomes.’ With that, Summers arrived at his question. ‘So, Yanis,’ he said, ‘which of the two are you?’

Instinct urged me to respond with a single word; instead I used quite a few.

‘By character I am a natural outsider,’ I began, ‘but,’ I hastened to add, ‘I am prepared to strangle my character if it would help strike a new deal for Greece that gets our people out of debt prison. Have no doubt about this, Larry: I shall behave like a natural insider for as long as it takes to get a viable agreement on the table – for Greece, indeed for Europe. But if the insiders I am dealing with prove unwilling to release Greece from its eternal debt bondage, I will not hesitate to turn whistle-blower on them – to return to the outside, which is my natural habitat anyway.’

‘Fair enough,’ he said after a thoughtful pause.”

So now Larry is on the outside, and he knows he can speak his mind, but insiders are free to ignore him. That’s gotta sting.

[End credits theme.]

RG: That was Yanis Varoufakis, and that’s our show.

Deconstructed is a production of First Look Media and The Intercept. Our producer is Zach Young. Laura Flynn is our supervising producer. The show was mixed by Bryan Pugh. Our theme music was composed by Bart Warshaw. Betsy Reed is The Intercept’s editor in chief.

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