Michael Lind

Welcome to The Puck, Venture Capital and Beyond, a show that examines the changing landscape of our world. Before we dive in, a quick word about who I am and why we're here. I'm Jim Bier, corporate lawyer and restructuring professional. I've spent the last two decades helping companies navigate their toughest transitions. And about eight years ago, I found myself having fascinating conversations with clients and friends about everything from venture capital to the broader shifts happening in our economy and society.

Those discussions were simply too good, so the puck was born. Now while we started on venture capital, hence the podcast name, the Puck Venture Capital and Beyond, We've naturally evolved to focus more on the beyond portion of the title. Today, we explore how business intersects with the bigger forces shaping our world. I still run my restructuring practice by day, but now I get to host these conversations by night. It has become one of the most rewarding parts of my life.

Today's guest continues that tradition. I think the country needs two strong parties with flexible leaderships and internal dissension and vigorous dynamic debate and we've we've got like anything goes on the right and just absolute chirping crickets on the center left. And I say this to someone sympathetic to a lot of a lot of democratic policies, but but I think they need to loosen up and become a big tent party and allow for internal dissension once again. On today's episode of the Puck, I have the opportunity to have a fascinating conversation with Michael Lynn, a prolific American writer and academic, and the cofounder of the liberal think tank, New America. His latest book is Hell to Pay, How the Suppression of Wages is Destroying America.

We cover many topics including the present global economics, The US political divide, and much, much more. There's a lot to cover, so let's get to it. Michael Lynn, welcome to the puck. It's great to have you. And before we get started, can you take a moment and tell us a little bit about yourself?

Yes. Well, thank you for, letting me join you today. I'm the, economics editor at Commonplace, a new publication launched by the think tank American Compass. I'm a Senior Fellow at New America, a think tank I co founded back in 1999. And before that I was a New Yorker writer, the Washington editor of Harper's Magazine.

I worked for The New Republic. And then going way back before that, I was in the State Department Center for Study of Foreign Affairs. So I'd spent about three decades, mostly in Washington and New York. I'm now in Austin, Texas, both in government and in journalism and also in the nonprofit sector. And I'm the author of, a dozen books on, public policy and history.

Most recently, the New Class War in 2020, hell to pay about wages in The United States, and land of promise in economic history of The United States. Well, I'm excited to get into some of this and talk about the wages and kind of what's been going on with our middle class and so forth. So, again, part of the reason I wanted to have you on the show was that we had Gary Gerstl on the show to talk about the end of the neoliberal order, and you talk a lot about political orders. When I heard you on Ezra Klein's show right after the election, you were talking about the end of the Obama coalition. From where you sit, where are we now?

Well, I think we're several cycles are coinciding. There's kind of an electoral cycle in US politics, which lasts thirty, forty, fifty years that we have these parties called the Democrats and Republicans going back to 1850s, but really they change their coalitions every thirty or forty years. So, you know, 1896, McKinley created a new coalition and 1932 Roosevelt created the New Deal Coalition, fell apart in 1968. So the present so called neoliberal era had Clinton Democrats and Reagan Republicans. And this is kind of broken down with the beginning in 2016 with the insurgencies of Donald Trump on the right and Bernie Sanders on the left.

So what appeared to be a new beginning of the Democratic Party with Obama, which is a coalition of college educated whites and non white voters, and a lot of people expected since immigration and and to some degree fertility, but mainly as immigration is driving the non white share of the population, then this would just put the Democrats on on the road to an automatic majority. But what has happened in every election since 2016, while Democrats still get most, African Americans and Hispanics, they're losing more and more. To the Republicans, while contrary to the story that the Republicans are the white nationalist fascist party, The Republicans and Trump have lost white voters to the Democrats, and they've lost wealthy and highly educated voters to the Democrats. Kamala Harris did better in only two categories, white people and people making, more than a $100,000 a year. And since there are more working class people of all races than there are college educated people and people making 6 figure salaries, this is bad news for the Democrats.

And so that's one cycle. The other cycle that is occurring is geopolitical. It's at the global level. So the Clinton Democrats and the Reagan Republicans all assumed that The US would be the sole military superpower for the foreseeable future that China would accept the offer of being a basically civilian power in the same way that Germany and Japan had done after World War II. They wouldn't make wars.

They would make cars, right? And they would allow The US to police their own neighborhood in The Pacific and Asia the way that the Japanese and Germans have done in Europe as members of NATO, in the case of Germany. Well, China Two things happened. First of all, and well, the other assumption was that The US would maintain an inevitable lead in high-tech industries. That is, so China might be kind of like Mexico and low tech labor intensive stuff could be offshore there.

But so The US would have this unsurmountable lead in high technology and in the military for, you know, much of the twenty first century. And what happened was China has caught up much more rapidly moving up the value chain than anyone anticipated back in 1989 or 2000. And the other thing is China has made it clear. It wants a multipolar world and it wants to be a great power equal to The US if not superior. So the, you know, those assumptions collapsed.

And then finally, the third structural crisis is probably going to be brought about by AI, by artificial intelligence, because we've been living on the diminishing returns of the last general purpose technology revolution. If you follow, the economist Joseph Schumpeter, you get kind of a step case pattern of economic history. There periodically, you get a new general purpose technology like the steam engine, the internal combustion engine, the battery. The most recent general purpose technology is information technology. And it did transform the economy and it led to a lot of productivity growth.

But AI could be that as transformative, if not as much as the automobile or the steam engine, it might be as transformative as the internet or computer technology. So we have these three conjunctures happening all at the same time. Technological, conjuncture, geopolitical conjuncture, and party realignment. So how do you see those playing off each other? Well, I I think historically when this has happened, there has has been international conflict and domestic conflict.

So the international conflict comes from the scramble by the existing powers and by rising powers to apply the new technologies. So for example, up until the late nineteenth century, European imperialism was mostly limited to trading with the natives at, you know, coastal ports. The railroad and the steam engine, steam locomotive allowed you to open up continental interiors. You had to scramble for Africa, right? And the direct British rule in India, which was possible for the first time.

And then the Japanese decided, well, we need an empire too, just like the Europeans. And ultimately this leads to the world wars. And the Germans as well, having been united, they then thought, well, we're going to be left out. The world is carved up among these autarkic empires based initially on the steam engine, then on automobiles and on airplanes. So you get this kind of anxiety driven competition among major powers trying to obtain new technology, but then also to deploy it in order to have access to populations and resources.

Domestically, there's always political conflict with these technological transitions because, the technology eliminates a lot of existing jobs and entire industries, right? Automobiles eliminated, you know, horses and, you know, buggies and trams drawn by mules and things like that. And the workers may go on to better industries, but there's a generation or so, that have lost their jobs and whole regions of the country collapse. Much of New England, is forested today. It's young growth forest.

If you go back a hundred years, these were farms. And thanks to improvements in mechanized agriculture and fertilizers, we grow far more food in The US on far less land than we did in the past. So so AI could have those kinds of disruptive effects. Will it lead to mass unemployment? That's never happened since the Industrial Revolution began.

Mass unemployment is always caused by financial crises. It's never caused by the introduction of a new technology because the technological unemployment is limited to particular sectors and it takes place gradually. So, when people say, well, 40% of people will be unemployed, you know, in the year 2050 and we need a universal basic income and so on. I think that's mistaken, but there will be radical restructuring of all societies, not just The US, developed and developing societies alike. And because politics tends to reflect incumbent interests against new interests, this inevitably leads to clashes, which can be violent in in countries, around the world sometimes.

Well, as we're if I'm playing back what you're saying properly, we are in this competition with China right now. And as we are experiencing this realignment, the the changes politically, and in terms of congress and an ability to get things done, do you see our situation right now in a concerned way that that the types of strategic decisions that we need to make to compete intelligently with China will be limited by our political gridlock? I'm actually more concerned about intellectual gridlock than I'm about political gridlock because what we've seen is despite the the claim that congress is totally paralyzed, when there's a crisis like nineeleven, then there's bipartisan agreement. And there's very quick action. You know, we created the whole Department of Homeland Security and all sorts of policies, maybe wise or not, But Congress does act rapidly.

What we saw with the COVID epidemic was the two parties came together in this huge crisis, acted quickly. We saw this with the stimulus, you know, in the American Recovery Act back in the fiscal crisis. So our system was designed to prevent rapid change unless there's an overriding emergency that creates a bipartisan consensus. So I'm I'm not that worried about that. What I am worried about is the lack of new thinking because naturally, as, you know, animals, you know, we tend to think in terms of experience, right?

And individual experience, historical experience. So So we're always looking for analogies to something in the past. And the present and the future are not going to be like the past. I mean, there would be some echoes, but it's very, very difficult for, I find it difficult. It's difficult for for thinkers, for, experts, for policymakers to look at what is actually going on instead of saying, oh, well, this reminds me of something that happened in the sixties, or, oh, this is Weimar, Germany all over again, you know, or whatever.

So so I think it they that's the challenge is intellectual more than political. So stay with that intellectual, you know, challenge that we're having. Let let's bring it to to the financial realm where we are, over the last twenty years, increasing our money supply in very, very dramatic ways. We're using bubbles and asset inflation and these the wealth effect to kind of try to keep the economy going. If you're trying to think three moves ahead, at some point, that wealth effect can be reduced if in fact some of these bubbles start to come down, which I think would then have an impact on the economy if we've been relying on the wealth effect to keep spending going.

Are you concerned that we don't have an intellectually creative strategy to to plan the next five years, or do you think we're in pretty good shape there? Oh, I I'm concerned that everyone in the private sector, as well as the public sector, has unrealistic projections of growth in the future, of real growth. At the same time, I think people who predict imminent collapse and, you know, dogs and cats, you know, living together and the whole, you know, Ghostbusters Bill Murray apocalypse, that's the other extreme. But if you look at The US and the world economy, but if you look at developed countries, I think growth will take the form of an s shaped curve. It's a plateau.

Right? So there's very rapid growth when you transition from an agrarian society to, an industrial society. And then over time, you can still have growth, but it's going the rate is going to slow down. And the growth I'm talking about is productivity growth. The mistake that all societies are making is to focus on aggregate GDP, on aggregate output growth rather than per worker productivity growth, which is really what makes us rich in the long run.

It's not just so but the thing is aggregate GDP, as you know, can be goosed in various ways, right? It can be goosed by an asset bubble, buying loose money. It can be goosed by importing millions and millions of low wage workers who are going to spend money and buy things and have to pay rent and so on. But if they're low productivity workers, this is not going to increase national productivity. It may even lower it, right?

So I think that The US and other Western countries have been engaged in all of these expedients to boost aggregate growth without boosting, long term productivity growth. So if you and at the same time, their populations are zeroing out or declining absent immigration. Okay? But let's say we have and with some immigration and some pronatal policies and so on, let's say we actually have, you know, a a replacement rate fertility, but the population is not growing. At that point, the sole source of growth in any advanced industrial society would be productivity growth over time, which would probably, absent some radically new transformative technology, maybe be 1% or 2% a year.

Now that's not bad. That's far higher than it was through the last ten thousand years of human history. Okay? It means that the, if if growth is even 1%, which is low, solely as a result of productivity, means the economy doubles every seventy two years. This is, you know, this is great, right?

But I don't know if you remember Jeb Bush when he ran in the Republican primary in 2016, he was promising 4% growth a year, Right? And I just think these and people if all of your expectations of your future wealth as a homeowner, as an investor, as a capitalist, as a tax revenues, all of that is based on these unnaturally stimulated levels of aggregate growth instead of productivity growth, then in the long run, there's gonna be massive disillusionment because I don't think we can sustain those levels of growth in the long term without constantly bringing in warm bodies to expand the labor force, which drives up GDP, but it doesn't help productivity. Or constant rounds of stimulus, which ends up with a lot of wealth in the nominal wealth, paper wealth, as you've said, which will never be realized in the stocks and bonds and housing. Well, I think you've succinctly described why we had so many elections that threw the incumbent out regardless of whether or not they moved to the left or they moved to the right because you're describing, I think, the fact that there is something insidious going on that is eating at people that they're not even aware of because they don't follow this as well as you do.

And because of that, essentially, people know with these aging populations that this this tax, this inflation tax, otherwise, is disproportionately affecting the middle class, and the middle class is clamoring for change. And so if the Republicans deliver on that change in the next four years, then I can see their their coalition growing, so to speak, like, in the same way Roosevelt was able to solidify his. One, I guess I guess a compound question. One is, do you think that the direction which the Republican party is going, that it will allow them to increase the size of the tent, or do you think that Bernie or a successor to Bernie on the left is gonna be able to come back in four years and capitalize on this disillusionment so that if we think we're getting some radical change now, you better get your seat belt on because what's gonna come is gonna be even more extreme. Well, I I think the Republicans have benefited in the last election from bringing together this strange bedfellows coalition of everyone who just does not like the Democratic Party the way it is, which is, as I would describe, it's basically, you know, left wing culturally.

And it has no theory of economic growth other than public investment and soaking the rich and redistributing things to the 99%, right, which is not a serious economic strategy. But what that means is they have alienated and drawn into this Republican temporary Republican majority. It may not last very long. Libertarians, populists, you know, Reaganite, pro business types, old fashioned non woke social Democrats. And so Trump is at the head of this coalition where his followers don't necessarily agree with each other about what to do.

Now, in the first few weeks of his administration, the libertarian tech types like Elon Musk, and, also the kind of old fashioned, I would call them Reaganite fiscal conservatives, like Russell Vaught at the, the OMB, seem to have the upper hand. But the, like, the voters are very populist. They don't want Social Security and Medicare cut. And they didn't vote for Trump in order to get rid of trillions of dollars in government spending, right? They just wanted to get rid of the Democrats.

So, I think there will be an opportunity if the Republicans mess up for the Democrats to come back. But if the Democrats do come back, I don't think they would last very long. I think you quite rightly said the the voters keep throwing the bums out because neither the left nor the right can really address the fundamental question. And it's a psychological question too. That is if I'm correct, even with AI boosting productivity growth, you're not going to see the kind of radical transformation from generation to generation of lifestyles of the working class majority in the middle class, that we did in the twentieth century, right?

My grandparents grew up picking cotton as children in Texas, you know, and then there's they became blue collar workers and then, you know, go to college and upper middle class. That's kind of a one time transition. Right? And if you think that each generation is going to have that dramatic a transformation compared to their parents and grandparents, I just don't think that's the wave of the future. And the New Deal Democrats and there were New Deal Republicans, they actually kind of had the answer to this, I think.

And so their answer was, the working class is going to benefit from long term productivity growth because you'll have cheaper appliances and higher wages. But you're still going to be working class, right? I mean, some things may be automated, but there's still going to be factory workers and janitors and things like that. But the janitor in the year 2050 will, you know, have more leisure time and more money and better gadgets than the janitor in the year 2000. That was kind of 1950.

That was the New Deal vision. I think what messed that up was the neoliberals, and particularly on the Democratic side, they redefined middle class to mean college educated professional, Right? And so, whereas for the New Deal Democrats and sympathetic Republicans, to be middle class was defined by your ever increasing standard of living, which resulted from technological progress, really more than it did from wage increases. But you didn't have to go to school. You didn't have to go to college, right?

You know, the grandchild would be much better off than the grandparent just because everybody, you know, rising tide lifts all boats. The new Democrats redefined the middle class as, college educated professionals. And so, but the problem we've seen is that we've expanded access to universities, but we have not expanded the number of jobs that require university diplomas. According to the Federal Reserve, up to half of recent graduates are working in jobs that do not require college diplomas. And when there are surveys done of employers, even employers who require that new hires have college degrees, BAs, if you look at most of the people doing the jobs they're hiring for, they may have high school educations.

Right? And I think that has increased a lot of the bitterness because you've created a class of college educated people who will never have these, you know, premium wage professional class jobs. It's the, you know, humanities major working as a Starbucks barista. And it's very dangerous politically and socially. What you see in, for example, a lot of third world countries, they train too many engineers and scientists and they can't get jobs.

They're working as bartenders and as waiters and bus drivers, and those are the ones who become radicalized. They become the jihadists, right? You know, they're bitter because they have champagne tastes on a beer budget. So, I think we're going to have to lower expectations both for long term overall GDP growth, which is not bad. I mean, it just means this could be driven mostly by productivity, not by population growth.

But we also have to lower the expectation that your children and grandchildren will have a radically different superior lifestyle to you. It will be better in some ways, but it's not going to be, you can't have a society in which everyone is a doctor or a lawyer. And particularly when doctors, lawyers, and other professionals are going to get decimated by AI because much of what they do involves looking up things in books and memorizing things. And if a chatbot can do that for free, right, then a lot of our, highly educated professionals are going to be as redundant as horse tenders and buggy drivers a century ago. Well, Michael, here here's the question, though.

I hear you saying that we have to have our expectations becoming more realistic in order to presumably build a lasting coalition. But, I mean, how how do how does a democracy accomplish that when the famous quote, are you better off today than you were four years ago, has typically resulted in the the the out of office party coming back and and getting the vote. How how do you run a successful campaign on, I'm gonna, you know, I'm gonna essentially stabilize things, but we're gonna have to lower our expectations. I mean, Carter tried that as well, and it it didn't go over very well. Well, I think the Republicans have a better chance than the Democrats because people can feel better off.

Their real disposable incomes go up in two ways. One is their wages go up. Well, actually three ways their wages can go up. They can get more government redistribution or the prices of essential goods and services go down usually as a result of technological progress. So, you know, if you really focus on affordability, then life is you're getting more disposable income even if wages are stagnant, even if redistribution is not going up.

The problem with the existing central left there used to be a pro growth, pro technology left, but it's more or less extinct, is they only see higher wages and higher redistribution as being the way to make people off. And ultimately, they're simply not including among their own billionaire donors, I should say, right? There is not the willingness to pay the taxes necessary for massive redistribution. You may recall that in 2016, Hillary Clinton said that no one would no taxes would increase on anyone, any household making less than 200,000. And then in 2020, Joe Biden raised it to 400,000.

Okay? So they're kind of trapped between their ideology, which makes them want to massively increase redistribution, and their own political base, which is now in practice, fairly affluent professionals and a large number of very wealthy capitalists who don't wanna pay the taxes for it. So, so I think, if if the the focus of a rational political party should be on affordability, but this violates the the first rule of neoliberalism, which is only the market can do that. The government can't do anything to do that and historically we know that this is just wrong. American agriculture became the most productive in the world and still is because of the alliance between the USDA, the A and M's, the Agricultural and Mechanical Colleges, and the Agricultural Extension Service.

So the agricultural scientists would come up with new crops, new techniques. They would then be diffused to the family farmers by the county extension agents. And it was industrial policy. It wasn't called that, but that's what it was. But food prices plummeted, right?

And output expanded. We saw the same thing, in the New Deal era where the government was subsidizing the purchase of electrical appliances in farm homes in order to pay for rural electrification. Right? So, the government should not pick winners, but the government can create markets, and it can, you know, nudge things towards becoming more affordable. Now what the Republicans get right about this is you also need to have make it easy for businesses and industries to die.

That, you know, they you need firms that can't compete or that can't modernize, need to go out of business and have their assets broken up and their their employees redistributed. That's true of entire industries. And so so I think on the affordability issue, even if they're wrong about Mr. Market being the answer to everything, having more flexible, you know, less regulation that protects incumbents, I think the Republicans have an advantage over, over the Democrats. So regardless of who has an advantage, I mean, you talked about the book New Saving Democracy from the Managerial Elite back, I think, in 2020.

And, you know, you talk about, you know, the triumph of the overclass resulting in high-tech caste system, the empowerment of populists resulting in no constructive reforms, and and a class compromise that provides the working class with real power needs to happen. I mean, how are we doing in this regard? And do you do you think the Republicans get this? Well, I think some Republicans do. You know?

So it's kind of remarkable how first of all, that Trump has been reelected. He he gets a do over, right, from his first term where he essentially was completely stymied by the Reagan Republicans, like Paul Ryan, and just had very little power. And so now he's come in, and it's a bit chaotic. But so look at the things he's doing. For example, he he wants to get rid of the, the hedge fund exemption.

This has been a goal of Chuck Schumer, the Democrat, fought against this on behalf of the York financial community forever. Right? So so things are really breaking up. But let's stay with but stay with that for a second. Trump says a lot of stuff.

You know? We're not gonna tax wages, and we're gonna take over the Gaza Strip. And I saw this about carried interest. And, you know, I all I'm very aware of the the the you know, even no labels was involved in this, and the Democrats and Republicans almost had a deal and a compromise, and it blew up on this interest issue. I mean, do you think with the I mean, do you think that essentially what Trump's gonna be able to do is get the Democrats and the Republicans to come together on a bipartisan tax bill?

Because with the neo Republicans you're talking about, I mean, are they gonna give up on that carry interest deduction? No. They they may kill it for the next few sessions. Right. My my first job was working for the Texas state legislature when I was 19.

And my boss had introduced a bill to pay for railroad crossings because people had so many people being killed because the state wasn't paying for them. And he said, I've been introducing this bill for thirty years. One of these days, the bastards will screw up and pass it. So it takes time. You have to be, you know, think it's kind of like a glacier.

You look at it, and it's not moving. Then you come back in five years, it's hardly moved. They come back twenty years, it's really moved. And and I think things are moving in a direction, and what will accelerate it will be Cold War II. I think we're right in Cold War II right now.

I mean, essentially, the the Ukraine war, I view it as, in a way, a proxy war with China because without China's backing and material, as well as moral support, Putin would not have invaded Ukraine and could not continue this war indefinitely. So this is kind of like the Korean War and like the coldest part of, the early Cold War in the 1950s. And when you have a Cold War and you're a great power, then a couple of suddenly investments, state capitalist investments in technology that you could never do in peacetime for civilian reasons, the Department of Defense can fund all kinds of things. Right? You know, and and and the whole computer revolution came about largely from DOD, funding of IBM and Xerox and other companies during the Cold War.

So I think it opens up the spigot for a lot of investment in our end. Some of it wasted, but some of it will be very productive. The other thing is when you're engaged in a low level world war with a rival superpower, which is kind of what a Cold War is, it's in your interest to minimize domestic conflict, right? So during the Cold War, one of the arguments that prevailed was that we can't afford to have, like, this black and white KKK racism and violence and all of that. Makes us look bad.

It undermines support for our policy. And the same thing. Countries in the middle of wars have to promise the working class that you're paying if you're not being drafted, at least you're paying taxes for it. It, right? And that you're going to see a benefit from this, right?

You're not just cannon fodder. So I think that the great extremes of inequality that we saw and particularly on the right, the utter hostility to organized labor of any kind, that was a luxury of that period of great power peace from the in the 1990s and the 2000s. I think before that business for about, you know, thirty, forty years after World War II, They thought, well, we can push back on labor and so on but we're not going to completely crush them, right? Because we remember what how Hitler came to power and Mussolini and so on. All this popular discontent.

So I think I'm not in favor of, you know, declaring wars in the interest of social solidarity, but I do think these two things, public R and D that benefits the economy and a willingness on the part of of business, labor, different ethnic and and religious groups to tamp down their conflicts. You know, that that can be a side effect of geopolitical rivalry. How do you see us getting, again, the buy in in the middle class? Clearly, fear is one way to do it. But how do we, for instance, demonstrate that we can kind of, you know, compete against China and deal with this, quote, cold war, which I think also includes the Middle East because if China wasn't buying Iran's oil Well, you know, exactly.

Exactly. The Middle East is bipolar now. It's part of this Cold War. Right. So I mean, I think, you know, I agree with your assessment that we are in this, you know, twenty first century major competition with China.

And I guess my question is you you talk about, you know, the hell to pay, how the suppression of wages is destroying America, which your book that came out in 2023. I mean, how do we fix this? Well, the single people talk about neoliberalism in terms of deregulation, you know, in terms of lower taxes. In hindsight, I think the essence of neoliberalism was labor arbitrage. It was global labor arbitrage.

It was something you couldn't do during the Cold War before, you know, 1989. You could move your factory to Mexico. Before the nineties, Mexico did not allow you to do that. Right? They had import substitution policies.

You could move it to China. I mean, you know, iPhones were first manufactured in California, and then they moved it all to China at the beginning of the century. That would not have been possible, right, you know, until the end of the Cold War. So low global labortage means that companies can avoid paying high wages to national workers. And they can avoid dealing with pesky unions.

And then unions cause problems in many cases simply by either transferring the factories abroad or by importing tens of millions of willing somewhat desperate grateful workers from other countries. So if, Trump and the Republicans do nothing else but slow and somewhat reverse some onshoring they're not going to reverse all offshoring but also cut back on the flow of illegal immigrant labor, but also reduce legal immigrant labor if it's unskilled, then that will have two effects, both of which are positive, I think, for the economy. Everyone says, well, both sides lose in a trade war. Well, yes and no. If you have a surplus country like Germany or Japan or China, China and Germany have been the ones with enormous chronic trade surpluses, that means you have this enormously overbuilt industrial capacity for export that you can't sell, you know, products at home, that come out of these factories.

So if you lose those foreign markets because your former trading partner becomes protectionist, that's just a total disaster. You have worthless factories and you have mass unemployment with those workers. If you're a former trade deficit country like The US, yes, you know, the protectionism creates some temporary transitional problems for some consumers, for some businesses that rely on imported inputs. But suddenly, 5% or 10% or 20% of your market that was held by the the surplus countries is open to your own businesses. Right?

You know, so you can have a boom. You can have investment. And the investment can be from foreign subsidiaries of those other corporations, but it's just investment in The United States, like the transplants of Japan and of South Korea. So it's much better in a trade conflict to be the former deficit country that is trying to rebuild its industry, than being the former, you know, export superpower like China or Germany, which suddenly has all of this useless manufacturing capacity. All that makes sense.

And as we navigate this and we try to avoid a hot war, it it seems to me we're balancing a lot of plates to try to kind of not avoid calamities in these kind of surplus countries, which leads them to do something aggressive. We also have elections in in 20 you know, in every two years and every four years. And changing what you're talking about takes time, and the American people have historically not been very patient. It seems to me at least this is a pretty fragile, kind of challenging time that if we don't get this right could lead to some real challenges. No, I think that's right.

And the thing which I think we really lack in addition to having a utopian vision of the prospects for growth in the future everywhere, not just in The US, is we don't have a picture of what would a world of great power peace look like in contemporary conditions. Because the examples of the world wars and the Cold War are are not relevant, right? So in the world wars, Germany was decisively defeated along with its ally. Japan's occupied. It was reconstructed.

To this day in 2025, Germany and Japan are semi sovereign protectors, The United States. That's not gonna happen with China. It's not gonna happen with India, which is catching up. You know, you're going to have these enormous continental countries with a billion people and large many of the middle class, high these would be high-tech societies. And we have to figure out how to coexist with them without, on the one hand, being exploited by their industrial policies.

But on the other hand, in the long run, we're not going to be able to be the military hegemons in their neighborhoods. I just don't think this is realistic to think The US is going to be the dominant power in the East China South China Sea one hundred years from now. Maybe it will happen, but only if China collapses. And there's no one in the foreign policy community, there may be a few realists, who are thinking about this, right? Because the two options, there's been the neoconservative vision which is, well, China just collapses and then, you know, team USA, yay, yay, yay, it's just like 1989 all over again or 1945.

Well, that's not gonna happen. The other definition of victory is the Wilsonian liberal internationalist definition, which is we'll get rid of nation states and national rivalries. We'll have collective security under the United Nations or something and world harmony forever, and we won't have any more conflicts. Well, that's not going to happen either. We need to have some vision where the US president can go to Beijing and can go to New Delhi and can go to Moscow for that matter and say, we recognize your legitimate interests in having not having enemy troops on your borders, you respect ours, We recognize the need for, you to have your own, you know, strategic autonomy when it comes to key military.

You know, India is going to have its own aerospace industry. China is going to have its own aerospace industry. But we can do various managed trade deals, you know, that and we can have arms control agreements and so on. Now I'm not saying we do this right now. I think you have to do this from a position of strength and we lack that position of strength right now, sadly.

We have enormous latent potential power but we were humiliated in Afghanistan. Frankly, we've been humiliated in Ukraine because we we thought we would cripple Russia with sanctions, but partly thanks to Chinese indirect support, you know, they're they're cranking up more munitions than The US and Europe combined. Right? Because we geared our military for nothing but little rogue states like Iraq and and in the future. But so I think we need to have a short run buildup of the military.

But once we do that, then like Reagan at the end of the Cold War and the first Bush, then we negotiate gradual, confidence building maneuvers. We don't disarm. But as I said, right now it's premature, and it's also not clear that we have someone we can negotiate on the other side because the danger when you set out this kind of vision of of peaceful coexistence, to use Christophe's word, is that the other side will view this as an admission of weakness on the part of The United States. And looking back, I think this is how Berezhnev and the Soviet Union interpreted, Nixon's and Kissinger's negotiate diplomacy. That is, Nixon and Kissinger thought they were creating, like, this great power concert that would bring stability to Eurasia.

But what the Soviets did was between then and the eighties, they took this as evidence of American weakness and engaged in this massive massive arms build up. Fortunately, it eventually bankrupted them. So so yeah, it's a very dangerous world. But what happens when you're in a cold war is it's fairly straightforward. I think you you want to be second to none in military power, you and your allies, not just you by yourself.

You want to minimize any dangerous dependence of supply chains on enemies or on neutrals that can be influenced by enemies. And you want to keep the majority of people at home happy because your foreign enemies will exploit discontent and class division and religious and cultural division within your country if they can. So it's kind of realpolitik one zero one in my view. So as as an expert on history, and you talk about how things are not gonna repeat exactly, But when you look at, you know, bipolar worlds, multipolar worlds, when you look at the attempt with the League of Nations and then with the United Nations, do you see realistically an example in history where these nation states are able to avoid the things that Europe went through with the 30 you know, the the hundred year war, the thirty year war war, France and England. Everybody was always, you know, jostling to be on top and, you know, have the most gold, and and then they'd fight a war and they would lose all their gold.

I mean, at the end of the day, I know Kissinger talked about building this bipolar world with China and The US, and he was hoping that would happen. Do do you see that as a realistic, you know, outcome? And if so, how do we get there? Well, international relations theorists distinguish between status quo powers and revisionist powers. The status quo powers, they may want to increase their power a little bit here and there, but they don't want to turn over the table.

They don't want to overthrow the whole system so they could negotiate. The revisionist powers want to destroy the system because it doesn't suit them and create a new one. So the challenge of status quo powers with rising powers is can you make concessions that to the rising powers so that they won't try to overthrow the system? But at the same time, they won't interpret this as weakness and this will, you know, make them more aggressive. Now the the the Concert of Europe so called, Concert meaning cooperation among great powers, between the Crimean War in the 1850s and World War one, it actually was a success.

You know, there were five or six Balkan crises in in what is now the Balkans. It had formerly been part of the dying Ottoman Empire, and there were various wars in the Greek rebellion, various others. And as the Ottomans gradually receded, there was the potential for great power war among Britain, France, Russia, and then after 1871, United Germany. It didn't blow up until 1914 because in the 1870s and 80s and the 1900s, and even earlier in the 1910s, the great powers met. And sometimes rather, you know, brutally, they told these small countries, Okay, Bulgaria, this is what your borders are going to be.

And you're a new country. Carved out the Ottoman Empire and Greece. You know, you're going to stop doing this. And so what caused World War I this is controversial. But but it's my view, it's the view of many, German historians.

It was the decision of the, of Imperial Germany just to overthrow the system and to conquer Europe by force and to in order to become a superpower because they were afraid that a medium sized Germany would be a second tier power in a world dominated by The US and Russia in the twentieth century. So you can you can have negotiations, but you have to have somebody who negotiates with, and if it's a revisionist power, then you just have to get the largest possible coalition of status quo powers to thwart their ambitions and to deter them, and say, if you try anything militarily, you're gonna lose. However, we're open to negotiations. And we want you to be part of our club, but you have to obey the rules of the club. Which is what we've been trying to do unsuccessfully with China.

Right? Because, I mean, the whole movement towards the BRICS citizen, the the whole idea of we let them into the, you know, world health system economics, we we've we've moved them into our coalition, so to speak. But then whether or not it's movements towards Taiwan, whether or not it's belts and roads, whether or not it's taking up minerals, whether or not it's funding Iran and Russia, I mean, how's it working so far? Well, I think this is the why domestic politics ultimately shapes the foreign policy of a country, you know, because that was China really from Deng Xiaoping all the way up to Xi. But Xi has cracked down.

He's become the personalist dictator of China. He he's now teaching you know, schoolchildren are being taught. He's He's the successor of Mao. And he evidently believes that The US is weak and decadent and corrupt, and that China can match The US or displace it in East Asia and the world. And so that's why I don't think all Chinese leaders agree with this.

In fact, it's pretty clear, you know, he's purged the more accommodationist, members of the It's not even the Chinese Communist Party itself, you know. But as long as it's become as long as Xi is in power, I don't think it's gonna change, and there's really nobody to negotiate with. And the same is true of Putin. Putin will be in power until he dies because or he's assassinated because he's afraid that if he falls from power, he will be prosecuted for his crimes or he will have to go into exile. So, the Iranian regime, which is part of this this, Cold War coalition of China and Russia, The public, the Iranian public has been fed up with the mullahs for years, but it's going to hang on by repression as long as it can.

But I think given that being the case, time is on our side. That is, the Russian population is cratering. Russia has managed to mobilize for a war economy fairly successfully. But you can't keep up that kind of warlike mobilization forever. That's why the Soviet Union died after all.

With China, the Xi regime is stifling innovation. And, you know, there as you know, there are a lot of Chinese princelings, you know, children of communist party members, buying property in The US and Canada and Europe and so on. And, you know, because they think they may have to get out, right? So that's not a good sign for the Chinese regime. We don't have a lot of Americans, you know, trying to buy into China in the case The US goes south.

The other thing geopolitically, China's population has or will peak, and then it will go down fairly rapidly, given their low fertility. It's kind of like South Korea and Japan, other East Asian countries. It's much more difficult for these East Asian societies to bring in a moderate number of immigrants. And, they don't know what to do in terms of boosting the native birth rate. So they've peaked demographically.

They have aging population that will require more resources. And the population growth worldwide is limited really to two areas, Sub Saharan Africa and parts of Asia, South Asia. So The US and Europe are declining its shares of world population and GDP, but so is China over time. So in the long run, if our goal is not to dominate the world, but it's simply to prevent a hostile power from dominating it, then power is diffusing away from China over time. And India, as I said, will will be a third great power.

It's it's it's, rapidly rising. It's got it has all sorts of challenges. But unless it completely falls apart, you know, it will rise relative to China. It's already surpassed China in population, and over time it might catch up economically. So if we want a pluralistic world where power is diffusing and it's not being concentrated in one center, including us, then those long term trends, I think, are favorable to us.

So to pick a controversial subject as my last question, you talked about congress coming together and and doing these important bipartisan bills when there's a real challenge. We're in a situation where I think long bond interest rates have gone up. Buying a home for young people with interest rates up is difficult. We can debate whether or not it's the bond vigilantes putting upward pressure on interest rates because they're finally saying enough on the deficit. But at the end of the day, Congress has not been able to get the long bond interest rate down by somehow signaling to the world that we've got our house in order.

Now we've got Elon Musk going in and trying to slash government spending. How and is this gonna play out? Well, to begin with, I've never believed the bond vigilante theory that The US is going to default and and that, therefore, they will put their money somewhere else. Right? If if, you're investing anywhere in safe, assets, US treasuries, what's the alternative?

Right? Your German bonds, Chinese bonds. Right? Well, but I mean, you don't have to go long at 5% if you think inflation's gonna be 7%. Right?

I mean, you don't have to buy the ten year. And and most of our a lot of our economy is priced off the ten year. Yeah. So I think the inflation was a one time thing caused by the tangling of supply chains. And it was the prospect of wage inflation was quite brutally suppressed by Alexandro Mayorkas importing 10,000,000 mostly low wage workers to suppress wages immediately after workers had more bargaining power.

I think in the long run I spent thirty years in Washington, Jim. People always said, well, we have two choices to reduce the deficit, cut spending or raise taxes. And, you know, as you know, there are two others. One is to default. The other is, inflation.

And most countries, given the choice between massive tax increases, which cause civil war, and massive spending, cuts, which cause civil war from somebody else, choose to gradually burn away overhanging debt through moderate inflation, not hyperinflation like the Weimar Republic and so on. And their mechanism for doing so is a financial repression. It's it's forcing their banks to buy treasury debts even though their value is going down with inflation. Right. So my I've I've believed for twenty years that The US, at the end of the day, is going to follow this financial repression that it did after 1945.

As a result of which, The US war bond that my grandfather spent a lot of money on in in World War two and gave me proudly in the nineteen seventies was worthless back in the nineteen seventies. So unless everybody's buying inflation protected debt, then I I think at the end of the day, we'll we're likely to have a gradual soft landing. Now that doesn't mean that you wanna keep cutting taxes and raising spending. Right? I mean, the the debt service is is the main variable.

Right. Right? And if I'm correct that we're looking at long term relatively low growth driven mostly by productivity, that that should make you something of a a deficit hawk and a debt hawk. But but, not to be alarmist about it. I think it's a long term problem that can be gradually solved.

And I guess the only follow-up to that is do you does financial repression that you're talking about disproportionately also affect the middle class? No. Because, when people say, well, you know, it's you're not getting good returns on your bank accounts, most working class Americans have, like, you know, a few $100 in their bank accounts. They have no emergency savings. Right.

Then they say, well, what about the little old lady living off of, you know, her bank account? That hasn't been true since 1935 when they passed Social Security. As long as Social Security is adjusted for inflation by whatever mechanism, then the little old lady in Dubuque is going to get her Social Security check. And the thing about businesses can pass on inflation costs in higher prices and as long as wages go up correspondingly, you can have moderate inflation. This isn't just me, by the way.

People think of William McKinley who's back in the news Sure. As a result of Donald Trump renaming Mount Denali, Mount McKinley. Right. But McKinley was not a gold standard hawk. He was he was not a gold bug.

He was called a straddle bug. And representing the interests of manufacturers, they wanted moderate inflation, which did not hurt them in the long run. And it also burned down some of the outstanding, farmers mortgages. It was kind of a moderate position comparing to the gold standard hawks and to the William Jennings Bryan inflationists. So I guess I'm a moderate inflationist.

Don't put it that way. There you go. I I think one of the problems is that we don't have a functioning center left at this point, you know, of a kind. It's not there's no center left party. There are these NGOs which have single issue causes, trans rights or the Green New Deal or whatever, and then that becomes the Democratic Party platform.

But we don't have what we had in the nineties and even then the 2000s. I mean, you could have debates about growth policy or about foreign policy and so on, and and it's a very weird position at the moment. Most of the intellectual dynamism is to the right of center. There's all kinds of fascinating debates. But there's this utter shutdown of dissident debate on the center left.

And I think that's a danger for the country. I think the country needs two strong parties with flexible leaderships and internal dissension and vigorous dynamic debate. And we've got like anything goes on the right and just absolute chirping crickets on the center left. And I say this as somewhat sympathetic to a lot of a lot of Democratic policies, but but I think they they need to loosen up and become a big tent party and allow for internal dissension once again. Michael, I could you know, I I have to say, I mean, you you really hit the the challenging issues head on.

And I don't know if you're familiar with Nancy Jacobson's and the no labels group. Oh, yeah. People are trying to do what you're talking about, but nobody's you know, in the in the same way Trump was able to capture the Republican party, and in the same way Bernie Sanders has tried to capture the Democratic party, and in the same way Gavin Newsom, you know, and and Josh Shapiro. But you don't have a charismatic, you know, centrist on the the Democratic side that's been able to galvanize the young people. And I think that's the challenge is Bernie got the young people excited, but he lost all the, quote, moderates.

And I don't nobody's been able to thread that needle to get the young people excited and get the centrist excited. You know, Trump's gotten young people more excited. Right. And he's gotten, as you said, all these coalitions. He's he because, you know, Trump has been brilliant in in a sense building a parliamentary system.

Yeah. He he really has patched together all these disparate groups. And because he's got such a strong personality, he's been able to kinda hold it together. But you don't have anybody on the the their democratic side topping that. Well, it's a cultural thing.

I've spent a lot of time in in The UK recently, and you have the same thing in The UK on the left where you had Jeremy Corbyn, who was this kind of Bernie Sanders figure. Crazy. But but, you know, he appealed to young people. He was sort of out of the box. And then he's defeated, thankfully, in my view.

But then you get Keir Starmer, who's just kind of a bureaucrat, right, and very boring. And the problem is, since the professional classes have captured the center left, which used to be trade union, like working class people and so on. But the professional culture, as you know, this culture I spend my life in, is one on being soft spoken and quiet and polite and courteous and not being too loud and belligerent in meetings and all of that, right? Which is very good if you're like in corporations and NGOs and so on, but it doesn't rev up the crowd. And so in Europe as well as in The US, you see two the demagogues, the populists come from two groups.

They're either rich guys like like Berlusconi in Italy or Trump in The US where Mark Cuban, they just say whatever they want. Right? Elon Musk sort of taken it to extreme. They don't care. Right?

They have total impunity because of their wealth. Or they are TV celebrities like Pepe Carrillo in Italy and and Nigel Farage, who's a TV celebrity, mainly because they say outlandish things. Right? And the right gives permission to its leaders to say outlandish things. And as, Selena Zito, the the journalist, said about Trump, they take him seriously but not literally.

Right? They know. It's kinda like fake wrestling. The Ivy League educated professionals, you know, credentialed bureaucracy members on the center left, they just think this is out. They they cannot support anyone.

And you remember Howard Dean, the Dean's scream back when he was running for president? It was the mildest, most milquetoast, minor scream you could give in a mass rally, and he was loud because he was trying to be heard, right, through this huge you know, so every politician has done that. Maybe not George Washington. He was kind of stiff, but pretty much everybody else. And so already by Howard Dean, well, he wasn't just being quiet and soft spoken.

See if you can find it on YouTube. There's this wonderful clip of Trump from his first term where he's he's addressing a rally, and, you know, he's relaxed. He's waving his arms. He's saying, you know, they say I'm not presidential. I can be presidential.

I'll show you. And then he goes like this. Hi. I'm the president of The United States. I'm glad to meet you.

God bless. So thank you. That's part of the problem. It's it's a style thing. Yeah.

Well, I mean, look. Right? I mean, Kennedy did it. Roosevelt did it. Teddy Roosevelt did it.

I mean, you know, in terms of, I mean, he was a Republican. But Yeah. I mean, it just it just takes the right leader, I think. And so it's gonna be it's I think we're living in really interesting times. Well, I I work with people on the Hill behind the scenes, Democrats and Republicans on on on some issues.

And, there are, you know, people looking at 2028, right? And and and Democrats realize that they have to do something different. Absolutely. Right? So I I think you're gonna see a new generation of ambitious younger Democrats, and and that's that's healthy.

Michael, again, thank you so much for your time. Okay. Thanks a lot. Everybody have a wonderful day. The top venture capital beyond is produced by CMVG Advisors.

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