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[00:00:01]

What in the world is happening on Wall Street? The economic indicators, who knows where this is going to end up?

[00:00:07]

You understand the economy. You have to understand human nature. This podcast is powered by a cost. So how's it going? They're hopeful as well, John, his hair is dancing, which is a kind of a vaguely dancing dad dancing to Miley Cyrus. Yeah, I didn't realize you were a Miley Cyrus. Always. Did you hear her cover of Zombie? It's pretty good. It's very good, actually. Very, very good. Look for all the shtick that she gets.

[00:00:45]

She's actually a very good singer. She is a good singer. We could go down the Taylor Swift Road as well. Steady on there. Now, all I have again, you have to be very, very broadened. Our musical tastes indeed is the 54 year old man. Exactly. Speaking of music, I believe you've got a song for us. Have a listen.

[00:01:02]

Reasons to be cheerful. Part three health service policies around Austin. To take him on to Paris. No, Charlie, we really Harris you to the people listening to the of your cheek cheddar cheese and people having to not and want to. That's in January, and blockheads actually passed away not that long ago, enduring about four or five years ago.

[00:01:35]

Yeah, well, he probably survived longer than he possibly should have yet given his lifestyle. He actually interesting. But he contracted polio. Yeah. Which was eradicated by a vaccine. We want to talk about vaccines because that's actually what happened to to injury. This is your reason to be here for the vaccine? Absolutely. Well, I think there's there's three reasons. This is a good week, by and large, in possibly the worst year since five thirty five to the Justinian plague.

[00:02:07]

It Justinian plague brought on by Krakatoa. But that's that's for another part. The Justinian plague. Are we go in Byzantine? Are we going back? Are we going to be 20-20? Are we going to Byzantium? No, no. Let's stay 20-20 because of going. OK, all right. Fair enough. So you know my weakness for this. I know. I know. We're trying to pull you away from that just for now. So we've had this week, we've had well, of course, Biden and the whole Trump thing.

[00:02:31]

Yeah, that's a reason to be cheerful. We've had the vaccine, which is a massive reason to be cheerful. Absolutely. And then we have Brexit. Well, what we have coming up in Brexit is the crunch negotiations. Also rats leaving the sinking ship. Well, that's what I was referring to. Dominic Cummings and the other the fellow who actually looks like the member Khazali, who used to play football for Ireland, played for Everton skinhead lads.

[00:02:57]

You know, the other family can you are doing it looks like one of those. You know, there's a certain a certain type of football to the premiership that has moved around by clubs trying to avoid relegation. And he always is that he's a solid workman like, you know, holding midfielder like leaker's history. Looks like they all look like you. But, you know, your point is very valid and it is true. But by the way, how you doing?

[00:03:22]

Welcome to the podcast. We all use usual luck. We just forgot about that. We just turn on the mikes are having a chat. I hope life as well. I hope you have good weekend or a good week, all that stuff. We're not going to mention the soccer. We might mention the rugby. We're not gonna mention the soccer. But there's been lots of reasons to be. Actually, there is just one thing I have to mention about the soccer, OK, just before the match, you know, when they do the national anthem, the whole lot, did you see on ITV, they're playing the Irish national anthem, our own live in our on the VIENE.

[00:03:51]

But very helpfully, they decided they'd put up the subtitles to the lyrics to the song and they put up the wrong song. What did they put off the shoulder to shoulder Ireland? I was really, really good. Yeah. The shows, I don't get the shoulder to shoulder when I don't get a but look, we will move on. We will move on Brexit. Let's talk about bribes. Why don't we talk to a brilliant, brilliant economist.

[00:04:21]

Adam Posen is the head of the Peterson Institute of International Affairs.

[00:04:28]

It's the number one. Think tank in the world on international affairs, really. This is a guy in Washington. This is a guy who was on the monetary policy committee of the Bank of England for three years, deep in policy making, deep in the in the establishment when he was under Mark Carney's. So I don't know. But, oh, yes, he was very, very recently. Adam is an amazing economist, expert on Japan, expert on international relations.

[00:04:57]

Again, as I was saying, worked at the epicenter in the U.K. and is now the head honcho of the number one think tank in the world on international affairs. So let's talk to Adam. Adam.

[00:05:11]

Adam, you are in the States. Tell me, what do you make of the latest before we do Brexit, before the UK, before we do anything? Tell me about the United States. What's your take?

[00:05:24]

We're a divided society, David, and that's not good, especially since I with that one, is uncute. I think the cause of truth and justice is all on one side. There's a bunch of people who are really not happy about change, about. Diminishing police violence and treating people of color and women equally. So it's bad and we are all sort of looking at things and saying, oh, that's better than I feared. So there was very little open, violent voter intimidation ahead of the election.

[00:06:00]

So then there's been very little violent protests since then. And you saw Farage pointing to the boarded up shops in D.C. and it turned out none of them had to be boarded up. So that's good. OK, that's good. A terrible baseline.

[00:06:14]

The firings of the top Defense Department, Defense Department officials by Trump do not seem to have actually been a coup. That's good. That's good.

[00:06:25]

OK, but, you know, we're sort of clutching at straws here. I mean, obviously, I'm very excited and in favor of President elect Biden. And they've announced a transition. And we can talk about the economic implications of the policy and the health implications. And they're all positive. But the underlying stresses and problems in the US government and U.S. society are still there. And you know, when you say the underlying let's, you know, brief, because, I mean, we've talked about the US a lot on the podcast, but it's critical for us to have that, dare I say it, that American broad brush few.

[00:07:00]

I mean, what is wrong in your like your top four or five? What is wrong with the United States? What's wrong with the United States, which is kind of scary, is divisions, geographic and racial. Go back. One hundred and fifty years are still with us. And in recent years, there's been a huge further geographic sorting. And I know you've talked about this conceptually and in economic terms with some of your guests over time. And there's a lot of evidence now that the sorting of who's rural, who's urban and how it how it plays out and has happened has intensified.

[00:07:45]

And so, you know, there are all kinds of figures out there on the interweb. You can pick up like the fact that Biden may have gotten, you know. Fifty to fifty three percent of the voting public, but where Biden won has over 70 percent of GDP. So the winners are with Biden, the winners are with Biden for the most part. I mean, the very, very top winners are trying to keep their taxes off their wealth or not.

[00:08:14]

But except for them, they are. But that's not quite right either, though, because the real working class people still voted majority four four two. And so it's really along racial and cultural lines, not economic lines.

[00:08:31]

Well, can we just stick before we go? Because we're going to talk to you about Brexit, because Brexit is clearly a racial cultural project.

[00:08:37]

It's not as we know, it's not. It's very analogous.

[00:08:40]

It's so, so so, you know, we know in the UK that Brexit comes to a nationalist perspective. It's largely an English notion, you know, maybe a bit of ways to come to it. But I mean, it's an English idea. Yeah, it's a national idea. You can argue in the broad sweep of history, it's the end of the English project that started, let's say, in the 16th century here in Ireland that, you know, you can you can look at it that way, that that was a big, long four hundred year adventure project, imperial efforts.

[00:09:12]

And now it's kind of on its last legs. You can think of what's the American equivalent.

[00:09:18]

It's a very fair question. The American equivalent is the enormous disenfranchisement, but the displacement of the less educated white male from a safe space in the hierarchy. So that sounds very disembody in the social sciences, but it's very visceral. OK, it's about the the less educated white male being able to lorded over people, whether it's his female family members or people who look different from him or people who are pencil pushers or whatever, and they are no longer able to do that and or they are increasingly unable to do that until they retreat to smaller and smaller, more homogeneous communities where they can try to maintain.

[00:10:04]

So it's the imperial project. It's the it's the racial segregation and associated right wing values are finally being fundamentally challenge.

[00:10:15]

So the picture you're painted, you know, I was thinking in pictures, you know, like you've got the the John Wayne sort of character from the 1950s America. I've even, you know, recent like Netflix series like Mad Men. You know, you're you're you're looking at a sort of a historical or even a musical. It's like a West Side story. It's all sort of that type of America where white Working-Class Guy, Irish, Italian usually are English, Protestant, Tobolsk could go out to work, could earn a decent wage, could, as you say, lorded over people around him.

[00:10:47]

And largely that is a 40, 50 year project that has actually ended, I think, to being too nice to these people.

[00:10:55]

David, OK, they're not behaving badly.

[00:11:00]

I'm a nice guy every day. I've always been a lovely evening. They're not you know, this was the phrase that got bandied about after the 2016 election. They're not behaving badly because they've been economically hurt, because they can't make a living. They're behaving badly. They resent people who don't look like them and don't believe, as they do getting ahead. If you look at the actual numbers, did this this constant story about all these poor people can't make a living.

[00:11:35]

It's it it's a vast exaggeration at best. And it's in it's fundamentally not true. So you've had a certain set of iconic or iconic jobs in certain places, like the fetishization of steam of shipbuilding in Northern Ireland. In Belfast. Yeah. You've had you've had certain specific kinds of jobs, auto and steel workers in certain states that are not as plentiful as they once were. Well, you know, a lot of people didn't have those jobs in the first place.

[00:12:12]

A lot of people who lost those jobs have gone on to other things. A lot of places have risen up in place. Of those, Pittsburgh died and came back, died and is coming back. Charlotte, North Carolina, Tempe, Arizona, came out of nowhere. And then the two other points. First, some of this is even on the economic to the Greens, driven by economics. It's very fundamentally about perceptions, not reality. So after tax and benefits, right.

[00:12:41]

So is miserly is the US welfare state. But after tax adjustments and benefits given to people, and especially by the time you put in Obamacare, people were genuinely better off the wage bill. They were getting may not have gone up very much, but their actual real income had improved a lot over the last few decades, but that doesn't happen. Similarly, there's high frequency polling data out there about high quality, high frequency polling data about people's perceptions of the economy.

[00:13:12]

The economy doing well. Is the economy doing badly? Well, the polls taken since the election a week and a half ago. Suddenly, Republicans perception of the economy on that questionnaire plummeted by 20, 30 points and Democrats rose by almost as much.

[00:13:28]

So this isn't about don't make this something about all those poor these days. It's not just about. Well, it's you know, it's funny.

[00:13:37]

You mentioned when we go up, we all go off on this tangent. But it's interesting. You mentioned Belfast and shipbuilding because I was watching Northern Ireland play football last night. They lost in Windsor Park at home to Slovakia. Right. But what I was it was intrigued was the chance. And also the Northern Irish displaced loyalist guys who follow the Northern Ireland football team are very, very similar, very analogous to the people you're talking about. It's not so much that their position has been eroded, but other people's positions, you know, basically the Catholics have done much better than them over the last 30 or 50 years, you know.

[00:14:13]

And so the songs they sing is that's quite interesting. If you look at football songs and what they sing, Northern Ireland sings this extraordinary song called Ten German Bombers, which is basically an English right wing, very, very much national front thing, talking about the orif shooting down German bombers in the Second World War. So what you have is that Chavez people from Northern Ireland and of course, they were involved in this because they were they were British.

[00:14:39]

But rather than talk about something vaguely hopeful, something vaguely joyous, something vaguely material to Northern Ireland, they talk they sing 10 English bombers shot down by the Orif who happen to come from Ulster, which is not know.

[00:14:54]

And that's sad, horrifying and perfect because the analogy in the US are all the Civil War reenactments and the people who kept the Confederate flag alive, even if their parents immigrated to the US after the Civil War or they were they were not within the office. They didn't participate in the Civil War on the Confederate side. And they used to be that a lot of there were certain cultural things. Talk about sport. So NASCAR the. Oh, yes, we know NASCAR.

[00:15:22]

Yeah. Yeah.

[00:15:23]

Well, so NASCAR had been resolutely good ol boy explicitly about where these people, not those people. And then because it got more popular and because the drivers and the owners decided to get more enlightened, they started losing their core white supporters because an interest because they were saying, no, it's OK to have a black driver. No, it's not OK to have a Confederate stars and bars on your car and so on.

[00:15:47]

So, yeah, it's the same it's the same thing. No, it's it's actually funny because, you know, sports, as we know, as economists. Right. Because we've got to open the door wide to look at societies and we've got to look at all these other things. Sport is always, for me, a fantastic leading indicator of where the tribe is moving and how you can gather things, you know. So let's let's talk speaking. We're talking about ten German bombers, right.

[00:16:08]

Which is, again, as I say, the English national, not the English national section of the English football crowd. Sing it all the time. Brexit, English bombers, German bombers, Second World War, fight them on the beaches, yada, yada. Let's talk about the pickle the Brits have got themselves into. Yeah, which, of course, has enormous spillover effects on Ireland as. Yeah, as we know, an audience nods. Yeah.

[00:16:34]

So you were at the Bank of England, you were making policy. Tell me what from an economic perspective is Brexit going to do to the United Kingdom economy in very straightforwardly Brexit?

[00:16:48]

Is the UK declining a trade war on not just its closest partners, but itself? So you have a situation where there is barrier free trade and movement between the UK and the rest of Europe, and now you're having a negotiation about which barriers to put up, which is which is a which is unheard of.

[00:17:09]

You've never had a negotiation, basically unprecedented for a democracy with a cup of coffee. And in most places it's just a precedent. You throw in the fact that the there's so much it's not having to do with trade and goods and stuff. Right. So, you know, obviously, Ireland, it's enormously affected by physical goods, trade, agricultural goods, in particular, other things. But, you know, the UK economy is hugely based on services, cultural goods, exports of university, exports of professional services, the city of London financial services, its role as a headquarters for various European operations of global multinationals and by not being part of the single market.

[00:17:55]

Whether or not Boris makes a deal or no deal at this last minute by not being part of the single market, they're going to lose all that over time. They're not going to have their qualifications recognised. They're not going to have an attractive place. Ireland may gain from this, in fact, of companies saying, OK, I want to have an English speaking role of our country, low tax place to be in Europe. UK isn't dead anymore.

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OK, Ireland's next best thing along with that one.

[00:18:21]

So, yeah, no, I think ourselves and the the wily, canny Dutchman will do well as the Dutch always do not always do well in this case.

[00:18:28]

So those are the big picture things I think conditionally. So the the argument is about, you know, it's essentially an anti-immigration argument. And we know I referred to the work of my friend and colleague Jonathan Portus at King's College London, who's done huge work on this after being in the government. We know that immigrants have in general been good for societies and not that bad, if at all, for low wage workers in the UK. It's even more so.

[00:18:57]

It's been a huge net payments from the Polish plumbers and the French hotel workers into the Social Security system, doing jobs in agriculture and retail and hospitality that the English are too well paid to and to study to do. It's been making UK more attractive by making it more diverse, lively place. It's been paying for their universities by bringing in foreign students, paying for freight. So, you know, it's motivated by throwing up barriers to immigration. Really, if you look back at what the campaign was about, scare tactics.

[00:19:33]

And so then finally you're reduced to people are doing well. The real reason we're doing this is because the euro or Europe is in trouble. And, you know, starting in 2010, that does may be a better argument to make, but then you shouldn't be lying that there are the sunny uplands or whatever the hell they're saying at the moment as a result of Brexit. And I think the European problems are exaggerated in the sense that the UK was not going to have to be part of the euro and was already a low tax, low regulation jurisdiction compared to the rest most of the rest of the EU.

[00:20:10]

One final thing is one of the few things in economics that's that's real is what we call gravity gravity models of trade that you trade over time with places you've interacted with historically and you're close to. That's why there's more trade with Ireland and almost anybody for the UK except China. I know it's kind of extraordinary. Right.

[00:20:32]

And then that's gravity. That's historical and geographic proximity. And so you can join the Trans-Pacific Partnership. The UK can try to make itself Singapore on the Thames, but it's not going to work.

[00:20:44]

Yeah, I mean, it's always struck me is that if you look at the countries that are much more really integrated with the UK, it's Ireland, Netherlands, Denmark and that bit of northern France that feeds lots of the UK and western Germany. So basically this neck of the woods, this part of the world. And I do think it's very fanciful when I hear that we're going to trade deals with Japan and Korea and we have trade deals with Indonesia and Malaysia and all this.

[00:21:11]

But I want to I want to come back to the economics of it. What do you think? Is going to happen when it becomes apparent, let's say, this year, next year, two or three years, that Brexit economically. Is shambolic that Britain ends up having to go backwards, that Britain has. I'm not I'm trying to figure out what their what their model is, what where do they see themselves? What what's their big vision of this?

[00:21:39]

I mean, is there any country that's ever done anything like this to give them, like one trying to give them their dues, that they're actually is there any place we can say, well, hold on a second, here's a model Britain could follow?

[00:21:52]

Short answer is not really. I mean, in a sense, you know, as you and I have discussed in the past, Ireland ran a very aggressive policy on taxes, on getting Americans in and other companies and on multilateral profit shifting on various things. And it paid off for Ireland and Ireland got away with it in part because it had certain virtues, in part because it was small and in part it had buddies in the US Congress. And so you could make it work.

[00:22:22]

And now Ireland starting to run up against the limits that the UK can't really do that. It's too big. It's got its own alienated most of its friends and the kinds of things that they want to do, which are higher employment. When would require more than one eye, only this and so the island sort of a model and so you can come up with, if you'll forgive the expression, race to the bottom models where instead of Singapore on the Thames, the U.K. becomes Cayman Islands on the Thames.

[00:22:57]

And so even more than the Guardian and others have been reporting on, it becomes a haven for oligarchs and chics. And you've just as you've just described, Kensington really well. The money is now. Yeah. And, you know, you can go down that path ways, but that's in addition to its moral distinctions. It it has political foreign policy implications that you may not like. But I mean, it's just on the economically and politically the English majority.

[00:23:29]

And you're right, it's English with a few benighted people in Wales can decide, you know, this is more important to project to us than whatever the economic costs are. But coming up with a model is very hard. I mean, so there are fanatics who believe that Europe is fundamentally socialist, corrupt, nationalist, bad, and that getting out from Europe will somehow liberate the economy in an enormous way. But what we've seen is repeatedly, even under the Johnson or the main governments, that they were going to do heavily interventionist government policies to make up for things that they were getting from Europe.

[00:24:07]

And some of the regulations that they were complaining about were ones the UK had advocated for or even initiated in Europe. So, you know, there's plenty of fantasies out there, but you can't make the economics.

[00:24:19]

Well, you know what strikes me? I mean, it sounds like a very extreme version, but every now and then, a kind of four or five times over the last 10 years, maybe maybe the last 12 years I've visited Argentina and Argentina always is a shocking warning of bad things that can happen to very good countries when leaders get notions. And, you know, if you if you look at Argentinians who emigrated after the Second World War, Italians in particular, who emigrate to Argentina, they the choice of one particular family in mind.

[00:24:50]

And they went to Buenos Aires and the other part of the family went to Boston. And their lives turned out profoundly different. When I hear Johnson talk about sort of intervention to create national champions in the north of England and the Midlands and to create this new Silicon Valley. And when I hear the rhetoric of patriotism and when I hear the big state, is this sort of red trousers and blue collar idea, it sounds to me and it sounds so extreme, it sounds like Peronism.

[00:25:24]

Yeah, that's good.

[00:25:25]

That's good line. It's also true of some colleagues of mine in the Peterson Institute. Monica Ball maybe starts by having some some people who've gone elsewhere. I've been doing and are about to finish a book length big project for us, what we call economic nationalism. And we think that's a better term than Peronism or populism for capturing these common threads. But I mean, we sort of got through or I should say we, the authors, go through various of these cases going back to the late 18th century, going back to the US is the development case.

[00:26:02]

Obviously, Italy and Germany and Spain in the third 20s, 30s, obviously Argentina, Peronists and so on. And what you find is you get these situations of economic nationalism by at home and you usually get a boom bust cycle because you can get a little bit of a growth burst at the start if people are willing to extend you credit. But you're you're eating away at the economy and you end up not generally improving the working classes situation for a very long time.

[00:26:38]

And you end up with a lot of corruption. And this is the cycle. But we've seen it repeatedly and the UK is going to try to do that in a situation where they're already suffering from the pandemic. And they never really got back from the. Entirely from the global financial crisis of a decade ago, because this is what I mean, this is what really strikes me, I know is that, you know, if you walk around Buenos Aries, you walk around, you say, wow, this place was a real boom town.

[00:27:08]

At some stage. You look at the architecture, you look at an indie architecture, you have the ambition of the society, ambition of the oligarchs of that society. And you look at and you say these guys had everything going for them and they got it wrong and they got it incredibly badly wrong. So much so that I don't think there's a country on Earth that has performed as badly as Argentina over the last 40 or 50 years period. What I'm saying is this could happen.

[00:27:34]

That's very that's very insightful. And again, going back to our earlier conversation, that kind of thing could apply to large parts now, whereas it used to be the patriotism was within one of the highest voluntary compliance with taxes in the world, voluntary military service, willingness, Clie. And now, of course, we've got people fighting against Obamacare, ACA, because they don't want to be compelled to pay into the mandate. And we've got people refusing to take vaccines and we've got people refusing the tax.

[00:28:04]

I don't want to exaggerate. I mean, even a majority of the Trump voters, not that. But I think sort of going back to Thatcher that you can't you say there's no society. You say there's no state, and yet you're trying to be nationalized. You end up with a very poor situation.

[00:28:21]

Yeah, but I think that's where the UK I think that's where England is going. And there are many examples around the world of good countries that went. But many in fact, that's one of the the great histories of all civilisations, is they they peak in the Ashrafi and they start again, but they start again at a much, much lower base. But which much loftier notions. I think we should come back to the immigration issue because it's it's crucial that a counter narrative is developed on a podcast like this and in discussions to actually tamp down the anti-immigrant feeling, which, again, we can see all over Europe, it's not here in Ireland, it doesn't really exist, is some great.

[00:29:01]

But our experience is very, very, very novel with immigration. Alison, thank you so much for your time.

[00:29:07]

Thank you for having me. I mean, I've been a fan and I look forward to keeping to be a year to take care.

[00:29:13]

Bye bye. We could talk to Adam for hours. It's great, isn't it? He's brilliant. And what insights? Although apparently you've got some great advice. I just want to say, you know, as the as the recordings, never hear the end of it. Podcasting tank, number one, way to think tank into Larry, not even the number one career to, though he brought up a whole load of really interesting points. But the thing that interests me about the whole Brexit thing now is the leaving of Cummings Rasputin.

[00:29:53]

Yeah. And what it like I'd love to I'd love to be a fly on the wall there when he was leaving in his resignation. There must be some morale or some sort of shenanigans going on, but. We don't know what up there, but what does it actually mean? Well, I think that the the critical thing is the this week is Brexit week. This is the week in which Barney has said either we've got a deal or no deal, OK?

[00:30:17]

Now, it's also the week in which the British, the personnel involved, the British side have changed. Profound comments has done. Yeah. The question is, what does that mean? What's going on now? It's very, very clear that there has been a battle for the heart and soul of the Tory party going on in the U.K. So you have the Tory party prior to Brexit are prior to Johnson one nations. They get eased out in the sort of rebellion in the last year.

[00:30:45]

Well, what you have, obviously, is this battle between the advisers coming has been the main one and the party. Right. And of course, Johnson is the head of the party as well as being the prime minister. So what you have is this battle between the two. It strikes me that the timing is not unrelated to Joe Biden. There has been a mood music change in the world. And all the little Bidens or what I called the Biden deniers in terms of Biden denier think Devecser something and the Biden dynamic climate change dynamic.

[00:31:19]

Biden, it doesn't exist. The Biden deniers are Hungary, Poland. You can argue. Modie Very much so. Yeah, definitely. Boss Arrow in in Brazil. Putin, of course.

[00:31:32]

And finally, of course, Johnson Johnson decided rightly or wrongly, clearly wrongly, that he was a little Trump. That's what he would actually go. Maybe he was a little Trump. Now, obviously, when Biden comes in, the first phone call was to Mickey Martin, which is quite interesting. But the second or third phone call would have been to the United Kingdom. And I'm sure Biden said to Johnson, what if you're a sovereign nation, you can do what you want whenever you know, I'm not usually supportive.

[00:32:00]

So the mood music changes or was it the cumming's just misjudged the American election and was pushing a particular agenda? I think.

[00:32:09]

Yeah, it's it is possible. But I mean, at the end of the day, the Brits do not want a no deal Brexit. And Johnson does not want a no no deal Brexiteer, really, Cummins did want one because for comments, it's part of an ongoing revolution. This is the idea that he wants to break up the British state. He wants to smash the judiciary. He wants to smash the education system. He wants to destroy in order to rebuild.

[00:32:34]

And that's his sort of slightly infantile view of how to run a reasonably well off social democracy. Yeah. Now, if they keep going down this road and I mean, these guys are not gone. They're just gone for now. Yeah, yeah. A lot of the issues that Adam Posen was there talking about will come back to the fore in the U.K.. Oh, I think so, definitely, because, you know, populism doesn't go away.

[00:32:58]

It's just hibernating and regrouping. And it's the same in America as well. And also, populism is a consequence of something else. Yeah, but I mean, I know it sounds extreme. To say that Britain or England could be the new Argentina, but I actually believe it could and that was my idea. So baserunners of Argentina was the seventh richest country in the world in the 1920s. It's now the 17th, seventh richest country. So this is a country that has everything.

[00:33:30]

But because of extraordinarily bad economic management, the country has collapsed. And generation after generation after generation of Argentineans now. Look to a country that our grandparents had and that country was much, much more resourceful and much wealthier. Think about England, right? England is not going to go off on its own to try and find its way, it's got no anchor, right? Who's to say that Sterling, the currency of the United Kingdom, won't end up like a Mickey Mouse currency wedged between the dollar and the euro?

[00:34:06]

And if they employ this boom bust cycle all the time, OK, they rev up the economy, right? Yeah, which is what the Brits have a good tradition of doing. They do this with no anchor, with no ballast. Yeah, it's not inconceivable. You know, great empires collapse. No, we're talking about our friends, the Byzantines, right? Yeah, but you think about the Byzantines that they were rooting for 100 years and eventually they lose to the Turks and that empires destroyed.

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And there's nothing there's no there's there's no legacy. There's no heritage that doesn't destroyed. Big countries do go bad. This is the lesson of economics, is the lesson of everything. If you look at economic history, what you see is that you make a few wrong decisions. And certainly you're not the country you were anymore. Britain is highly dependent on mobile capital. It is highly dependent to finance its current account deficit. It's highly dependent on the goodwill of outsiders, even though it's a big country.

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What what Adam was saying there, you know, you can go down the Cayman Islands on the Thames. Ideally, you can go down. Yeah. What does he mean by that, actually? So Cayman Islands is a tax haven? More or less. Right. And what what what Cayman Islands did? You know, I've always argued that all countries are a bit like Malas argument a few months ago. All countries are entitled to deploy their tax system as part of their economic armoury.

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I think it's it's a legitimate. SYRETT So the Cayman Islands are looking to Cayman Islands is a tiny place that was basically an adjunct to Jamaica for most of its life. OK, listen to two islands, Cayman Islands and Cayman BRAC, which is a tiny little island. Right. And there's a tiny place, part of the English Caribbean of which Jamaica was the central place. So in the 1960s and 70s and 80s, Canadians all went to Jamaica to find work.

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If you go to the Cayman Islands now, it's full of Jamaicans. Coming to Cayman to find work is always the best way to look at how a country is doing. So what the Cayman Islands figured out was, look, we have a tax system. What we'll do is we will set up an offshore financial system here and we will ask questions or we won't ask as many questions as possible. We'll get money will come in. The money will then be recycled in the Caymans.

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And you know what happens? We'll end up having the highest standard of living in the Caribbean. Right. Which is what they did.

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OK, and if you look at the Cayman Islands, only 40 or 50 miles away is Cuba, which is the other model of what you can do. So it's wedged between Jamaica. Yeah. Which up until very recently was incredibly dangerous. But Jamaica's turned around dramatically and Cuba. And then this little place, the Cayman Islands. Right. But what he's saying, the criminals could do this because it had a population of thousand, right? It's tiny.

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Yeah, right.

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But what he's saying is Britain ain't going to be Singapore because it doesn't have the intellectual capital to do it. And in fact, what has happened is Ireland has got there first. So we've actually got there before them in attracting into foreign companies, in the manufacturing and all that sort of stuff. But he's all you have to do, all they'll have now become the Cayman Islands are Caymans on the Thames, which is to reduce profoundly the regulatory oversight. Right.

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Which basically means Latin in Russian oligarchs, too. But they're already there. They are already a little bit like that. Yeah, but even more so it is. It is like that. So that's what he's saying is and I think it's interesting, it's their model. They're too big to do. Little countries do and they're too little to do with big countries, too. And that's their problem. Right. And if you come back to the Argentinian example is if they get this wrong, if, for example, they they go into a not even a spiral, but a progressive period where you're sitting on past victories, which is really the populist play.

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Yes. And you allow Peronism to emerge. So Peronism is all about Juan Peron, Vita Peron, which is the ideas. Argentina will basically create its own industries. We don't necessarily need the world because we're quite rich. And you know what? We were rich before everybody else. And they look down their nose at the rest of Latin America. Right. Which has always been the case in Argentina. It's a great country. But if you talk to other Latin Americans, they said the Argentines are a real snobs in terms of and a bit like the Brits in Europe.

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Exactly. And also the Argentineans are white. Right? Right. They eliminated their native populations. They've no black population, unlike Brazil or Colombia or whatever. So there's a lot of stuff going on that a lot of Christian brothers there, too. There's a lot of Christian Brothers there, too. Newman College is actually where they.

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All right. Yeah, but that's another story. The Christian Brothers are actually in Montevideo, in Uruguay. Do you remember the movie? This is a real, tangible God. This is there was a rugby team in the 1970s alive. Alive in that rugby team were from Montevideo. Yeah, but the rugby team were called the old Christians.

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Right. This is your Christian brother, Reformatories. And those guys went to a school called Stella Maris Christian Brothers School in Montevideo, Google it. And it was created in the nineteen fifties Irish Christian Brothers. And they brought rugby to Uruguay. Right. They brought the charges now beaten the All Blacks, which is just great. So let's the big picture what Saddam Hussein is Brexit economically, as we've always been saying, it's a nonsense, but it's a nationalist project of a country or a section of the population that resents that's come back to this, that resents the fact that people who don't look, speak and act like them are doing quite well.

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So it's not that he was talking about, you know, the white working class Brits actually don't really bad, they've just been bad relative to the people who used to do really bad. So to black people or brown people are immigrants or whatever. And this goes back to the Northern Irish loyalists point we were making. You know what what really a greeves these people is not that they've slipped back. It's actually the other guys have actually come up and that's what so they resent other people's success.

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So rather than saying, OK, here's the new world, how do we deal with it? They say, can we recreate the old world before these people were successful? So what do we want? We want red, white and blue. We want it to be white. We want to be homogenous. We don't want immigrants. We don't want Europeans. So it means that we don't want anything that represents modernity. Because if you go back to modernity, I think about the concept of modernity in the modernist movement.

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Modern art, modern architecture over modernism is about an ability to adapt, to change and go with the flow and embrace the new. And if you can't embrace the new. You embrace the ancient and the reason you embrace the ancient, like our friends and Brexit is because you were afraid of the new. So what is actually going on in the world is this extraordinary pull and tug and battle between countries and individuals who embrace the new world and countries and individuals who hate the new world because it threatens them and they want to go back to something else.

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And I think that's the way we should see Brexit. So this week, do you think it's a bit late getting rid of Dominic Commons now? That lot. But actually, it was interesting what Adam was saying there about free trade is is not the same as a single market. Well, again, let's go back to the city between the ancient and the new right. Only people who don't understand modernity think that free trade and a single market are similar.

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Right. So somebody who actually believes that economics is about making ships and exporting the big stuff, as it was in the 1950s. Yeah, right. Because there was no service economy. Right. Think about it. Right. Only people like that. Can equate a free trade deal, which is a very ancient old fashioned concept with a single market, not a single market is is it's something that says your goods, but not your goods, your services, what you sell in the world.

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I will recognize your norms, your standards, your requirements, et cetera. Right. That's quite different to a trade deal where England is strong, the three biggest industries, they have finance, advertising and the Premier League.

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Yeah, I'm serious. That's right. They're very good at sports franchises. Yeah. OK, so finance, it's all services not covered by trade. It's covered by the single market. Right. Advertising. I want to say advertising. I mean the sort of the persuasion game which I'm really good at. Yeah. Yeah. All industry. Yeah. All about standards for people selling buying players. It's all about the marketing of a game. Yeah. All this stuff is not covered by trade because it isn't actually trade and stuff.

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Yeah. Yes. I mean concepts, ideas, soft power, all the stuff we talk about, you know, and the modern countries that do well trade and stuff John. That is light, not heavy. Think about this, right. Yeah. Poor countries trade in heavy stuff. This is actually physically heavy. OK, ok. Rich countries trade in light stuff in brain, in ideas, services, patents, market products. Yeah. That's where the value added is.

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So the Brits, God bless them, still think of trade has been heavy coal, metal, big things. Right. Where in actual fact the world has moved on and they're going to be left behind.

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It is really interesting what he was saying about this whole concept of the gravity of trivia. I never heard that before. Well, I mean, it's one thing is you tend to trade the people who live close to you, but more importantly, don't think about all business. Right? You do business with people. You know, that's the way. Yeah, yeah, yeah. You buy off people, you know, you sell to people you know.

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Right. The chances of knowing somebody's career are much less the chance of knowing somebody up the road. Yeah. So in actual fact, it's not even a great it's a it's a common sense idea. So the the British idea that global Britain will be, you know, the talk buccaneering Britain. Yeah. They forget that the Buccaneers were pirates, the Buccaneers, because they actually went to the Caribbean and robbed the gold. The Spaniards that the gold and robbed from the Indians.

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Yeah, but the Spaniards and the Buccaneers are actually mercenaries.

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They were mercenaries. They actually robbed and stole with the state's blessing. Yeah. So think about it. So gravity makes complete sense and business not just because of physical proximity, but because of emotional proximity. And it's this the idea of networks, network economics is so important. Right. You never see this in economic textbooks that. Your network, the people around you, the people speak to each other, that whole idea is phenomenally important in terms of the final decision.

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Who do you do business with? Yeah, right. So this is that's where the ideas you cut the network you have and you put up barriers against the network you've already established in order to build a network of people you don't even know to make any sense.

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Yeah, just to finish off then I just want to come back around to kind of populism and what you were saying there and what Trump has been pushing. Was this the end of globalism? Yes. Which, you know, this all this whole Brexit thing feeds into now as well. But where does it leave populism now with Biden in soon to be anointed? You know, where is populism? Well, it's funny. I think that the mood music change is important.

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It's not absolutely critical, but it's important because it takes away the permission from the many trumps. Yeah. To behave badly as a general rule, because they're looking over the shoulder at the White House and the same way for the last four years, I had the blessing of the White House to go down this patriotic, this exclusionary route.

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Now they're looking over, but maybe I don't have the permission to. America's still enormously important and whoever sits in the White House is crucially important. But to actually summarize for populism is my old mate. No tuneless, though. Yeah, OK. Argentinean former ambassador to the United States, he runs his own political. He's the head of the Senate now in Argentina. Yeah, yeah, yeah. He's got his own Greisman first. Fascinating guy, but he said a great thing about populism in Argentina.

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He said the populist in Argentina make great patriots and shit citizens. I thought it was a beautiful night, right? And he said, so beware the great patriot and the terrible citizen, because they're usually one of the same thing. Yeah.

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So he says the great patriot puts on the flag and talks about this and that. And we are you ask him to pay tax or volunteer or do something properly for the citizenship. No way I'm going to run away. So if you look at all the populist's, they say things like, we are the most patriotic people out there, right? Yeah, but we're going to cut taxes for really rich people. Think what they ought to do this right.

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And we're going to destroy the social welfare for poor people and we're not going to have any jelling agent that pushes the society together. Right. So they make great patriots and terrible citizens. Right. The U.K., the U.K., England is at risk of having been taken over by a cabal of great patriots and terrible citizens, when you look around the world as a political philosophy, John, I think on the basis this is the best thing to do.

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Of course, I think we should probably aim for the opposite to be great citizens and kind of lukewarm, wishy washy patriots.

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I would do me fine while I have it. John and I put this together with Jim, as you know, every week. It's great fun and we're really enjoying it. However, it does cost it costs a lot. So it would be great if you could support us on it.

[00:48:25]

You know what you get a patriot is number one. If you don't like ads, you get no us. Number two, you get Q&A, which is basically almost like our own little conversation about each episode. After the episode, you ask the questions, didn't get that. Explain that a little bit more. I answer on the episode. You also get every two weeks a bespoke economics tutorial on an issue, a concept, a theory of economics that you ask me and I answer last Mike.

[00:48:58]

And of course, finally you get all the economic content over the course of the lecture notes, all the reading lists on the David McWilliams global economics course.

[00:49:11]

So of some petchem at Haidian dot com forward slash Dave McWilliams chairs.