Prof David McWilliams is an Irish economist, broadcaster and author and has recently launched a new podcast. McWilliams is ranked as one of the World’s most influential economists according to rise.global. The podcast is not wholly about Ireland and diverse topics are discussed. What is interesting is that McWilliams is very much on the progressive side of economics and much of the content is on themes championed by Progressive Pulse. To give a flavour of the Pod a few episodes (1, 4 and 7) are summarised.
1. Is Brexit Good or Bad for Ireland?
Is the UK fissile and going to break up after Brexit? McWilliams draws the analogy with Yugoslavia, with England being Serbia, Croatia Scotland, Wales Montenegro and Northern Ireland Bosnia. The UK could break up, but likely without the violence of Yugoslavia. He thinks Scotland will break away, but in a manner more like the velvet divorce in Czechoslovakia. The instability in the UK will likely see a flight of capital and talented people. (Also discussed in his Irish Times Article).
Ireland should be in a prime position to benefit from this flight of capital and talent, but the main impediment in Ireland is the high cost of land, property prices and rents. This leads to what McWilliams calls a “drone class” – what has often been referred to as a “rentier class” in PP, for example by our own Charles Adams here. Knowledge and creativity needs to be more valued.
In Singapore 85% of the land is owned by the government, we don’t want to go that way, but how does Ireland change its “feudal mentality” to make land ownership less important? Land prices are sky high, but in a growing economy should be falling in comparison to wages. McWilliams proposes a land tax and for developers a “use it or loose it” policy. [I remember Dublin in the ’80s where there were lots of city centre plots lying idle for years.] He proposed that if a developer had planning permission for building then if it is not built upon within two years it reverts back to agricultural land. Some of the political difficulties are discussed and the historical background. It is not at all dissimilar in this regard from the UK. Indeed Charles Adams has argued powerfully for a Land Tax to be introduce in the UK.
4. US Politics the FED, AOC and Quantitative Easing
Is there a link between the GFC, subsequent economic policy and huge swathes of the US moving to the Left, as in the surprise election of Democratic Socialist Alexandria Ocasio-Cortez (AOC) to the House? Where does the “left behind” class look to for hope? Why do both Bernie Saunders (interviewed by McWilliams in episode 5 of the pod) and Trump both seem attractive to this class?
America goes into recession in 2008. The then head of the Fed Ben Bernanke introduces QE. Give the banks money by buying up loads of bad assets and putting them on the Fed’s balance sheet. Asked if this is ‘Makee up Money’ McWilliams replies “Money is always made up – it’s the greatest cash for thrash scheme the world has ever seen – this is America my friend!” Bernanke was essentially reflating the assets and then dropped interest rates to zero. The hope was a form of trickle down economics, but seems to be working no better than in the ’80s under Regan.
Raising the price of assets obviously helps people who own assets (houses etc.) – the rich. Driving up inequality. People who own assets are also older people and an unintended consequence was that the policy also drove generational inequality. Housing prices and rents are going through the roof in the US. Data shows that millennials and in particular generation Z in the US have moved very much to the left. The young feel they have little stake in society and are moving towards Socialism.
McWiliams argues for massive public works to return to the US – a return to larger government infrastructure and house building as in the 1950’s. It seems that the trend of young professional Democrats turning Republican in their late 20s and 30s has stalled. Is the US going to more resemble a European social democracy in the next few decades? It is ironic that a policy that helped the Baby boomer’s most may result in a wealth tax and a massive redistribution of resources in the US.
7. Trumps Tariffs explained and the new Tech Cold War.
The US/China trade war is big economic news at the moment. Trade theory means that if two countries trade it makes both better off, but that there are winners and losers. The losers must be compensated somehow by government. Using the example of cars and largely Japanese car imports in the 70s, initially regarded at tin cans on wheels, eventually destroyed sections of the American car industry – devastating Detroit. For the average American however it was a boon as they got better cars cheaper. For the people in Motown it was a disaster. When the auto factories closed, if you could get a job it would be a low productivity, low wage job.
Now it is the Chinese. McWiliams argues that the left behind cohort is the consequence of 40 years of US policy (what PP would term Neoliberal) but Trump blames the Mexicans and the Chinese. The problem in the US is that they never looked after the losers caused by their Globalisation policy.
Trump is ratcheting up the trade war with China, as it will go down well politically with his supporters, even though there is a big argument that his punters will not benefit at all.
The root of the problem is that unlike in Europe, the Americans have not learned to share their wealth. It is a very much immigrant mentality. “Greed is good” and has been in the US since at least the mid 19th cent as observed by Alexis de Tocqueville.
The work ethic is still prevalent in the US but far too many people are working far too hard for too little.
The US has an enormous trade defecit with China of c$400bn pa. Tariffs however are essentially a tax on the consumer and will only work if there is an American replacement product. The US however has ground down its manufacturing base so much, that such products often no longer exist and it may take decades for the US to rebuild. Replacement goods are likely to be from say Japan, Korea or Germany. McWilliams also predicts an increase of payday loans. Trump actually doesn’t care if the policy actually works and is only interested in winning the next election.
China finances the US. Chinese goods sold in the US make dollars. These dollars are not returned to China but used to buy American Treasury Bills. Republicans in opposition worry about the defecit but when in power spend like drunken sailors. Japan did this in the ’80s. They want the US to grow even if via debt finance. The trade war helps nobody. Possibly China will let its currency rise?
The episode ends with an analysis of how power has shifted from the Military Industrial Complex to Silicon Valley. The new cold war will be fought over the web through information. The Huawei battle is part of a much larger war. Rather than Apple, Google etc. having their wings clipped McWilliams argues they will become so central to American power they will in fact be expanded and strengthened, as an arm of American espionage, and will be more closely linked to the CIA.
There is a lot of interesting material which should be very much of interest to Progressive Pulse readers. There is also a lot of Irish banter and stories, for example how McWilliams enticed Malcolm Gladwell over to Dublin for the Dalkey Book Festival and an interesting Dinner with George and Amal Clooney. I wish the Podcast every success.