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Transcript
Rob Johnson:
Welcome to Economics & Beyond. I’m Rob Johnson, President of the Institute for New Economic Thinking. I’m here today with our INET’s research Director and scholar, Tom Ferguson. Tom, thanks for joining me.
Thomas Ferguson:
Thanks, Rob. Glad to be back as it were. I mean, we’re never too far, but that’s, yes.
Rob Johnson:
The new paper that you and your colleagues have put out on the INET website they, how would I say, is early results on the role of money in the most recent election as you point out in the introduction. People had all kinds of impressions about a democratic landslide, but they lost seats in the House. They basically had a dead heat in the Senate when the expected substantial majority, and when you look at the diagrams, the role of money seems to have played the usual, as you call it, linear model role on winners versus losers, and the fact appears to be, and you’ll have to explain to us all, that the money flowed to the republicans pretty hard in those legislative elections. Why don’t you tell us the story of what you found.
Thomas Ferguson:
Okay, let me preface my remarks though by saying, hey I didn’t do this all by myself. My colleagues, Paul Jorgensen and Jie Chen did a huge amount of work. We worked together on this. Question, how did we describe the role of money in that? Well, truthfully it looks exactly very close to it, not quite exactly the same, but what we found years ago was that if you just drew a graph on a piece of paper and just grabbed a percentage of money and looked for correlation with the percentage of votes, this is now the two major party votes, you’ve got almost straight one. That finding just astounded people. They just couldn’t believe it could be that simple.
Rob Johnson:
So Tom, let me ask just for clarification, on that linear graph you have the percentage of votes for one candidate versus the other, or the difference, and that’s plotted against the difference in the money that they get?
Thomas Ferguson:
Yes. The party split on the money closely follows, drives the party split on the votes. I mean, one reason people didn’t notice this, although I want to say since after almost two generations of work on elections, somebody should have, but they were all messing around with various weird ways of doing it. Like the amount of cost per vote or something like that, which varies all over the place between congressional districts. You’ve got a big congressional district with more trees than people, you’re going to have a harder time reaching folks and things like that. Just we effectively solve that problem by an effect, normalizing, just standardizing, just take the percentage from money. I mean, just forget how much you actually spent per vote, big district, small district, whatever, weird gerrymander district, just take the percentage of money and then plot it against the votes.
Thomas Ferguson:
I guess I can tell this story, he’s dead. And he was a close friend of mine. I took after we had worked this out over to my friend Francis Bader, the former deputy security advisor for Lyndon Johnson. And I was beginning the standard political scientist at conolist ritual dance and purity to explain, well, of course it couldn’t be this simple. And he said to me, “Look, it probably is this simple.” But spent a while trying to analyze what, when you’ve got things that fit that closely together, somebody is inevitably going to say, “Well, you know what? It’s really the poles that are driving the money, the need with a winner.” How do you deal with that?
Thomas Ferguson:
There are several levels of response. One response is it’s not like people are so clear they know the winner and the world isn’t so centralized that you can just, everybody turns on a dime. But beyond that, you could see immediately that there were some elections the 1992 house takeover, for example, I remember seeing you actually, the morning of after that election. I just happened to appear in Wall Street as though by an invisible hand. And I believe some of your colleagues were jubilating because well, they felt responsible for some of this anything other than that. But everybody was in shock and I mean, everybody was in shock. Nobody really thought that was going to happen. And it did, there were a few other cases like that, but then we worked on this for a while and I remember reading a dutch thesis by Peter Epps.
Thomas Ferguson:
I mean, this is the standard way you work this stuff up is you use an instrumental variable to try to solve the two-way causality problem, is it money votes, or votes, money? Problem is that, if you think patriotism is the last refuge of scoundrels, no. Instrumental variables in the social, those are the last refuge of scoundrels. It really is true. And so like, I just didn’t trust anybody’s instrumental variables. And so I was looking for an option. I found emphasis thesis and I took it over to my colleagues. And I said to Jie Chen we need a spatial version of this. And she comes back to me two weeks later and says, “Oh, I think this will do.” Of course, she was right. And so the thing about the approach was you didn’t need to know the instrumental variable that was what’s so cool about it.
Thomas Ferguson:
And then later I renewed a great paper for INET on the whole method. And now it’s pretty standard, not much in economics, but in a lot of other fields, including a lot of business related stuff where they can’t get all the variables that are interested in, but they want to do a serious job of it. And so we tried that and we got, actually even better results. And then, you had all this, but we’ve never seen this, we can’t understand this, et cetera. I mean, pretty standard, especially if you, like I did. And I taught in Cambridge, Massachusetts, and you went to school there and you’re familiar with that problem. And so it was just basically a version of not invented here. And so I thought that one for a while, I admit there because I’ve worked on event analysis, I’ve written some papers on it.
Thomas Ferguson:
And then I realized, hey, we could use gambling odds to show us what people expected. Because we were getting [arguments from political science people at Yale I won’t mention any names trying to say, “Well, they have secret polls.” And I’m thinking to myself, if I said these people have secret stuff, they all say I was out of my mind or something. But okay, I guess it works if you’re trying to say conventional political science. Anyway, you could then use gambling odds to show that on average, I mean, we’re not claiming that gambling odds are perfect betting, which you can find through betting markets. We’re not claiming that this is always right. I mean, there are people who think that or used to think that all 2016 was a real problem for a lot of those folks.
Thomas Ferguson:
And there are other outcomes there. But if you want to know what expectations are, those are really good ones, right or wrong, those were the expectations. And lots of people have used them for that. There’s a whole large literature on this. So we were able to take the case of the 2016 Republican race for control of the Senate. And I remember at that point, I mean, I think I have to do this from memory, but my memory is you could buy depending on how you price it, either $1 for the seven or 8 cents for $1 or $8 for a hundred. You have way out of the money in effect, they’re way out of the money options on Republican hanging on to control of the Senate. I mean, eight bucks would get you about a hundred dollars is my memory.
Thomas Ferguson:
That’s in late October 20th, whatever, it’s all in our paper and structural change and economic dynamics that we cite INET piece on our website. And you could see that in effect, it was hopeless, but the Republicans were desperate because Trump looked like a loser in 2016. So there was a mammoth effort, to throw money in there, even though everything said you couldn’t win. And that conventional expectation was clear, that was hopeless for Mitch McConnell. They put in enormous sums of money, a lot of private equity money, we wrote this up and they won. And so when people came to me and my colleagues in this year earlier, and I saw stuff, I was reading things. I read it in the New York Times, the Financial Times, I read a lot about how there was this lopsided democratic advantage.
Thomas Ferguson:
I just said, “Look, folks, you got to remember, this is all mid, late October reporting. There is going to be a ton of money in the last week or two, it’s going to be an exponential increase and you don’t know what that is. And you won’t find out until after the election.” That didn’t keep people from rushing up the diving board. And, then all you had to do was just go to the places we tell you we went and our data appendix there, put it in there, and then you can say, “Well, that’s embarrassing.” No, there wasn’t a huge democratic fundraising advantage in the congressional races in the house, in the Senate, now there were some races. I mean, when you graph these things out, there’s always a scatter around the line.
Thomas Ferguson:
And so there are exceptions. And there’s some really weird exceptions, occasionally. And this year there were some races that probably the Democrats might’ve won normally they lost, but doesn’t change the overall fit. It barely budgets. I mean, that is still for a simple one variable approach. I mean, it’s a fantastic regularity. I admit, look, I’m partial to this when Noam Chomsky says the other week. Well, there aren’t very many regularities in the social sciences and the linear model looks like one, I admit I was prone to agree with them, but-
Rob Johnson:
What happened in the last three weeks of the money? Did it go to one side or the other?
Thomas Ferguson:
I haven’t tried to parse it out day by day like we did in 2016. It’s obvious a lot of late money went in. It must have favored the Republicans in a lot of cases. But I’m not claiming either I or anybody else has worked it out day by day. It didn’t seem like a type of problem we had what we needed were for the totals for our pass on this. We’ll be back with a great deal more, we’re working on various election analysis and things like that. But that’s the story.
Rob Johnson:
Do you have the data on the two January Georgia elections?
Thomas Ferguson:
Yeah did it.
Rob Johnson:
[inaudible 00:13:12].
Thomas Ferguson:
We actually grafted and we weren’t, I mean, look, this is a technical problem in house elections almost always, but sometimes in Senate elections, you have to take account of the fact that some of these states are next to each other, the effects spill over onto the others, which you got to do with spatial regression. And in the Senate you don’t want to be doing statistical tests on stuff that are days apart. I mean, that is to say the Georgia elections were one-offs and the final elections were one-offs, we treated them like that. And so we plotted them. Yeah, we do. And it was a perfectly reasonable thing, it wasn’t [inaudible 00:14:08] anything greatly off.
Thomas Ferguson:
But there we are. Yeah, no, my take on this is pretty simple. You can see, like if you look at the amount of money tossed, [inaudible 00:14:20] AOC, for example, you can see she’s doing better than the money. And Bernie Sanders usually always does better than his cash. So neither of these folks have had a lot of trouble raising funds recently, Paul Sanders did it in the presidential race. That’s a big thing there.
Rob Johnson:
Well that was in part because he refused the big money working from the website.
Thomas Ferguson:
They weren’t going [inaudible 00:14:50].
Rob Johnson:
No, that might well be, but he made that part of his platform or his policy that he wouldn’t accept it.
Thomas Ferguson:
It’s only slightly more probable that have given to him than if I had announced I would accept contribution to run for the Senate and the house. It’s like, how nice that you have made that, who cares.
Rob Johnson:
Let’s accept your result. What did we do to make America more representative of a broad base of the public? What kind of reforms would you advocate?
Thomas Ferguson:
Well, you got to get money out of politics, basically. I don’t mind if you give people, a hundred dollars tax credits or something like that, although that leaves you with large numbers of people that don’t have to file income, because they don’t have any. I mean, income inequality is now so lopsided in the United States has given people, tax credits is going to leave a substantial block of people completely out of that’s one problem. I used to like that now I don’t, guess what? I mean for that reason. But I certainly think that like an absolutely rigorous contribution limit of a hundred bucks and I like public financing, I always have, I think it improves politics in the few states that have tried it. And obviously you don’t allow folks to go around that, say corporations to write checks, claiming their people too. And things like that. I mean, that’s all nonsense, but-
Rob Johnson:
When I was younger, as you know, and I worked with the Pete Domenici on the Senate budget committee, I once was in a conversation with he and Bob Dole and said, “If you guys are really budget hawks, and you want balance in the budget, you should have public financing of elections because then all the pork and rent seeking would be diminished substantially.” And you can’t resist it now. So bugdet hawks, ought to be trying to reduce the influence of money, which you might call prize, open the coffee can for ability to dig their hands into.
Thomas Ferguson:
Well, I agree, but if I thought budget hawks were going to be consistent I’d probably have to do something else for a living, but yeah you got to get money out of politics and then obviously you got to make it possible for people to vote easily, cheaply and safely. Now, some of the one-off measures adapted for COVID probably were a significant improvement and it’s contributing [inaudible 00:17:37] was far from the only one. This election was an extraordinarily interesting and a lots of people on all sides realized that there were enormous stakes. I mean, there, but yeah, look, you need basic reforms on ballot access and you got to get money out of politics. I mean, that’s just the long and the short of it. And it drives me slightly crazy the way folks go crazy about any possibilities of foreign money in American politics, and there’s a lot for money in American politics through various ways, much of illegal, some it probably illegal.
Thomas Ferguson:
But then act like, okay, so we’ve now secured our borders like, that’s our problem no. I mean, most of this stuff is made in America and it needed a serious reform on this, I just talk something positive and straightforward. The Democrats now have for at least two years, unless somebody gets hit by a bus, which no, this is, I mean, I almost feel like one of those old insurance company things, my insurer [inaudible 00:18:55] life of course, and I see the Democrats coming out of the Senate or something. But you could very easily use the SEC securities exchange commission where they’re putting in a chairman that was said to be relatively tough on Wall Street and with some qualifications, I think that might be true.
Thomas Ferguson:
They could tell the public companies that they’ve got to lift all of their political contributions, including dark money stuff, 527 contributions and all these weird things. And they should also make them list their charitable donations because we now have very good research that shows you how corporations use charitable giving through their philanthropic foundations that they controlled for political objectives, I think it’s also clear. That only solves the public and won’t solve the problem, first thing you can see the dimensions of it. But here, you need a basic electoral and monetary reform. I mean, this really matters.
Rob Johnson:
Is there also a basis in addition to public financing and limits for making which you may call the cost of an election. For instance, television advertising and other things less expensive and what I mean by that is making a segment of each network or radio stations airtime, because they do get a charter from government set aside for public service announcements including qualified candidates after a certain point.
Thomas Ferguson:
Yeah. Let me back up though a bit, I realized I was somewhat imprecise and in the question possibly we ran together a few things. There’s an issue about limits. I favor them, I don’t see any reason why we should have arms races for how much money each candidate can get from various folks. I’ve known people. Some of them worked in the Senate who’ve said to me, “I’ve watched these guys go in and ask groups for contributions and [see 00:21:29] just which way the money is coming down, imagine that.” And I would favor limits, but even having public money without limits is a very good thing, because it means you can get some cash to get your message out, and you don’t have to just spend all your time dialing for dollars.
Rob Johnson:
That’s right.
Thomas Ferguson:
One reason I mean, getting that initial bump up, I think is actually by itself, public financing, even with the idiotic and well, frankly criminal, almost a rocket system that we have, is a big step forward it’s one reason it’s so strongly opposed, almost everywhere by money interest.
Rob Johnson:
Well, one of my former senators that I worked with who retired from the Senate, I’ve met him a couple of years later in New York. And I asked him, what did he feel about leaving the Senate? And he said, “Well, when I was in the Senate, I would drink too much alcohol, I would spend 75% of my time chasing money. And most of the money I chased was for policies that I felt terrible about inflicting upon the American people, but that’s what I had to do to survive. And I decided not to live my life that way.” So I think there were some people who understood the toxicity from the inside.
Thomas Ferguson:
I have a bad feeling about what we might call the development of a censored sample. That is to say, guess who, would the folks who feel bad about it, the guys and ladies who really like it probably had to stick around that’s, our winning aspect of this over 20 or 30 years, which I actually think you can see in the numbers. I think it’s clear that Congress has become a crazy racket in many respects where the goal of getting rich on both sides is absolutely paramount. But let me come back to your point about the question, can we do something to make campaigning cheaper? And yeah, your point, I think is exactly right. Corporations are not natural entities. I mean, even though, you’d think the Supreme Court, the way it wants to trade them, they really take them real seriously, a sort of 14th amendment persons or something there they are not really.
Thomas Ferguson:
And, you shouldn’t have to be well, I mean, you shouldn’t have to be all that bright to see it. And we can put restrictions on corporations that the Congress votes and yeah, I think they ought to start putting much tighter restrictions on corporations for that. And it certainly the public airwaves which are after all auctioned off, you can tell them anything you want and I think it would be rational to tell people, give everybody all the major parties and candidates, sometime the campaign free. And a lot of countries do that.
Rob Johnson:
That’s true.
Thomas Ferguson:
And similarly I would add too with the right to the internet. I mean, I would just stop internet advertisements with two weeks to go. For example, I just wouldn’t allow. And I would prefer that as a publicly stipulated condition rather than one that gets imposed by the current owners of said internet, right in the major platforms. I think that for me talking about the notion that just leaving it all to a bunch of private platforms to decide what they’re going to that’s crazy. And they clearly use it to make money and it’s like, okay, we’re given this stuff away under the wrong conditions.
Rob Johnson:
Yeah. Well, let me ask you a couple other dimensions of this. You’ve inspired INET to support some research on how the performance of the so-called blind trust portfolios of legislative members perform relative to market averages and to put it simply if I were to paraphrase, as I recall, Warren Buffet and George Soros would be quite envious of the performance of some of these portfolios.
Thomas Ferguson:
Yeah. Well, all right. This is a complicated question. The original research was Alan [Zabrouski 00:26:14] and his colleagues, first in the Senate, then in the house. There were one or two later negative papers and things with different times, using different time spans. And there were some suggestions by people. Well, everybody became more sensitive to the appearances. I am unclear about the current state of that stuff. I mean, I want to actually have, INET do more research on this, I think it’s quite worth testing out.
Thomas Ferguson:
What we do know from INET research the much more recent that Ahmed [Tahoone 00:26:52] and his colleagues did is they showed you that individual representatives votes on the famous TARP bail off bill in 2008 that you and I both worked on there from a public interest perspective, I hastily yet for folks who may not remember that bill. And it turned out that representatives who were down in the market are if their spouses were down in the market were a whole lot more likely to vote for that bill. And I love that research because well that makes the point. Yeah, we have some other research going right now, but it’s too early to tell where that one comes out yet.
Rob Johnson:
Yep. Let me ask you another question. When you talk about having to reform campaign fundraising, isn’t there a sense in which incumbents would be reluctant to vote to limit funding because their ability to sell policy gives them an advantage and therefore, a higher probability of re-election.
Thomas Ferguson:
Well I think that the incumbents may indeed have an advantage there, though you can see these folks who in effect spend five, seven years climbing ladders and trying to become understood it’s completely reliable. I think a lot of political science campaign called quality challengers are actually that and the folks doing these indices do not realize that because they don’t think about that as a problem. But in that sense yeah, it’s also the case these days in this system it’s getting twirly, as we all know, and being an incumbent, sometimes you get these waves of public anger as things really fall apart.
Thomas Ferguson:
It’s unfortunate but true that a lot of things seem to be falling apart in the last few years. One interesting point about 2020, people forget how many people retired in that elect was quite a large number of folks that were not running. And then they just left. And then-
Rob Johnson:
You’re talking about incumbent politicians.
Thomas Ferguson:
Yeah just steps Republican politicians right now in the Senate are pulling out. I mean, there’s several two or three, I think actually three as of this moment, which is an extraordinary number for something two years away.
Rob Johnson:
Yeah. Well, so if we look at this I’ll ask another question, let’s say you and I had a business and we thought we knew what we were doing, and we were going to make money. Isn’t there some basis for being afraid that the system is going to disintegrate and we won’t get to play out our brilliant idea. In other words, are we in a socially unsustainable place where money may not be able to control the environment with the certainty that it has because the breadth and depth of despair related to climate change and pandemic and poverty are starting to drag people a little bit zany.
Thomas Ferguson:
Yeah. You’re sketching the conditions for one of these classic model where you appear to be in a rough equilibrium for years, and then suddenly it blows out.
Rob Johnson:
And I would also add, there may be a danger that the response to that discord in despair could be an authoritarian response, not a democratic response.
Thomas Ferguson:
Well yeah. And looking over the last four years from American politics, I think you might, without getting into that one, that’s another podcast. I think there might be some excellent basis for thinking that surprise, surprise. I do think this, you’ve got a climate disaster building that’s clear.
Rob Johnson:
Yes.
Thomas Ferguson:
I also think that the gap between rich and poor has become so overwhelming, both in wealth and in income that the whole structure of the system has transformed, is transforming, it has transformed. And I’ve taken the calling of affluent authoritarianism.
Rob Johnson:
Well, even city group has put out research reports on plutonomy. When Wall Street starts naming it like that-
Thomas Ferguson:
Plutonomy I agree.
Rob Johnson:
You know you’re on your way.
Thomas Ferguson:
Yes. But I think it is the case, this stuff probably degenerate as it goes, takes a while to slowly go down and then greatly accelerates. I have in mind this make up a list of big finance and for that matter little finance and a guy’s doing corner borrowing and lending, finance-
Rob Johnson:
Payday loan companies and things.
Thomas Ferguson:
They loan, but also lots of business companies are building a model based on stiffing their clients over the long run. I mean, you get medicine, in my opinion a lot of the biggest sectors medicine, health some large businesses that even sell fairly high ticket items. They just think they can squeeze people forever if they got them in payments, for example.
Rob Johnson:
So they have to use the economic power launch. Someone in despair has inelastic demand, and you can squeeze them in their distress.
Thomas Ferguson:
Or they simply have no way to hit you back. I mean, lots of banks, for example, I think clearly profiteer off older folks. And people just simply trying to get bank overcharges, for example, have become very substantial parts of bank income. There’ve been some efforts stamping that down, but the former Finance Protection Bureau didn’t work well under Donald Trump, even though it was set up to control, things like that, and you had Wells Fargo and other banks actually making up people’s account name, just putting accounts, opening accounts in their name, they had no idea of. And as you try to undo these things, its enormous amounts of time. I want to add to it telecom. I mean, if you have a battle with your internet provider, it’s going to take you 35 minutes to find maybe even a machine to talk to or a human.
Thomas Ferguson:
And lots of people have realized you can just stiff people. And I think that number is frankly accelerating. The burden is throws on ordinary people and institutions generally have found out that they can, I mean one, I’m not a big fan of Barack Obama’s administration, but one thing he did do was he put good people in the labor department that actually did try to stop wage theft. Now, the Trump people, as far as I can tell, had no interest in that at all. When companies know they can just stiff their workers, especially immigrant workers or illegal immigrant workers. I fear that they actually often try to do that. People are building business models, how to just grinding people down, knowing they probably can’t sue you. A rule of law has in a basic way just fallen off the charts in the United States for a large chunk of the population and you can’t get the state and the other officials that should do something about this, they won’t.
Thomas Ferguson:
I mean, nowadays state attorneys generals take enormous amounts of money running for office. There are even formal Democratic and Republican Party, state attorney general super PACS and things. The Republican state attorney general super PAC was said to be helping out in the Trump rally though, the guy who ran it said he didn’t know anything about it. And I guess somebody left mayor, I don’t know any of the particulars for that, but what I read in the papers was, well, somebody did something and then they were disputing who did it. But the point is you scarcely have a classical situation of what the Germans, just to call [RX. 00:36:41] a society build on law. This is really eroding for the average human. And this is by the way, it’s not, reduceable in the short run to any simple calculation of monetary costs. So it costs people [inaudible 00:36:58] every year.
Rob Johnson:
Let me shift the focus for a second. So the area where you work, you spent your life as a professor involved in educational administration. I recently read an essay called Dark Age Ahead by Jane Jacobs, the famous Canadian woman who wrote a lot about cities. And her featured chapter in the essay was called education versus credentialization. And she talked about, this was written in about 2004, that we were approaching a time whereas the divide in the distribution of income was becoming more severe, that people would be fearful and desperate and would pay anything to get the credentials of an elite education in order to belong on which you might call the affluent team. And that’s just like medical or other inelastic demand out of fear. And I’m looking at now movements to cancel student debt. I’m hearing lots of people say, I’m not going to college. It costs too much. They’re defying that. But how do you see the difference between education and credentializing system?
Thomas Ferguson:
Well all right. Couple of things, first of all, the simple economics of this had gotten so desperate that one needs to and then I will pick up on education versus credentialization. It’s just a fact that the percentage of people who actually graduated from college has not really risen that much in a long time in the United States, since about the late 70s or 80s. Crept up a little, but not much than other countries, it’s often actually gone up larger, but not all that many, but yes. And when you look behind that, you see almost a complete starvation, which took time to kick in from the late 70s forward in public education, public higher ed, generally at all levels. Some of the local where the schools and affluent districts are funded basically locally with some state aid, they get around that, and public higher education has really withered.
Thomas Ferguson:
Private institutions have it, except for the top 150 or so that have some fairly large endowments, not endowments. They’re pretty well pressed. And everybody has an effect then in, it’s like Europe, right? I mean, you’ve had 30, 20 or 30 years of austerity, same with American higher education and often lower levels of education. You just keep cutting folks, and things like that. That’s the first thing. And so that makes the administrators desperate. It makes everybody desperate I had a couple of years as a battlefield promotion to and in fact it’d be the deputy provost of an institution. I remember having to go through a budget crisis with, I think, total discretionary fund for about seven months about $50,000, which in an institution that rans some millions of dollars, that’s nuts, hard to deal with.
Thomas Ferguson:
I mean, just even one shock and you’re in serious trouble. All right. So there’s that. And then there’s the problem of in truth, most teens and most officials will sell anything for cash. They’re so desperate. And that’s a problem because you get these cases of people chopping entire disciplines departments out of the whole university in a one afternoon. Saying well, you just got to fund yourself. Well, you’re not going to be able to fund everything that you want to fund any university off of immediate cash returns, because somebody thinks your thing is useful, it’s fine if you have a high-paying STEM science technology and engineering and mathematics thing.
Thomas Ferguson:
And I don’t doubt that you can make economies in places nor that over a hundred years, you could do some major reforms not just in the humanities or the social sciences. But I dare say, even in the organizational physical science, I have a few thoughts on that as the COVID epidemic has hit, or I’ve had to interact with a lot of people. We’re not going to talk about that one tonight.
Rob Johnson:
True.
Thomas Ferguson:
It just is the case that if you’re trying to get students to learn the impact of individual instructors really matters. I mean, it just does. So Roger Benjamin and I have written some stuff on this and we’re thinking about how do you deal with a situation where you’re now looking at this is really worth pondering right now, because it’s clear that all, but say the top 150 American higher education institutions are under enormous pressure. But most people go not to those. And so, you’re looking at the beginnings of a large scale desert in higher ed, and you have this happening while everybody is saying, “We want to do something about income and wealth inequality.”
Thomas Ferguson:
Well, those are round squares. I don’t know what is going to happen. I am sure it’s not going to be good. Look right now, you can’t even get trying to do something simple, like a hand public transit money to do their ventilation system. So the people can travel on them without spreading COVID is so fantastically controversial in the US Congress, it hasn’t happened much. I mean, I think there were some little aid but nothing fundamental. And this is crazy, something’s going to have to give here. You can’t go on and we are not going on. I saw the sad case of, pardon me, it was a college in Massachusetts that was effectively trying to turn itself inside out.
Thomas Ferguson:
It was a perfectly sensible, small liberal arts college. And then they said, “Well, we’re not making enough money, we’re going to try to do corporate education.” Well, guess what? Corporate guys don’t pay very much for their education. They like low per unit costs. And they’re dealing with typically fairly advanced students who know rather what they’re doing and often bring a lot of knowledge in a particular subject that you’re getting educated and not everybody, but it’s a common model. And that place was just been catching up to the realize there’s not enough money and there’re a lot of folks going bust they could use some reforms. I’m not saying higher ed cannot deal with some, I mean, I will not get started on this. That’s a separate podcast by Hogan. But the notion that you’re going to improve things by wiping out hundreds of colleges and universities, including many of the historically black and Hispanic institutions.
Rob Johnson:
Good. Well, you’re a friend and my former teacher, and your co-author, Peter Temin wrote a lot about this in his book, The Vanishing Middle Class how to use the analogy to W. Arthur Lewis famous paper, the migration from the farm to the city. He talked about the dual economy. Peter talked about the migration from low margin services to high margin services where the migration was through the education system and how things like racial animosity, poisoned the climate for which you might call appropriate wrongs in the letter. But even if the moment is highly unequal, if the wrongs are in the letter, so there’s a promise of credible opportunity, the pressures on society can be alleviated, but we’re going in the wrong direction. According to the thing you’re saying.
Thomas Ferguson:
Yeah, there’s no wrongs right now or rather, the wrongs are breaking even as people try to step on them. And the other problem is which you can see in the way globalization has hit the job structure, a lot of folks emerge there, more folks emerging from college than they can employ in jobs that you’d think would be normally appropriate to that. So you get all the time, you see folks with large scale work with all kinds of degrees and they’re hanging in there at some mid entry level work thing. And everybody’s desperate for work. That’s that too. And now with the crisis in the US auto industry itself worthy of a separate thing. You’re going to lose a lot of jobs and they’re going to disappear, I think, quite rapidly-
Rob Johnson:
Because electronic vehicles are not as labor intensive in the construction and maintenance.
Thomas Ferguson:
A lot different labor requirements. Yeah. This is a crisis that is hitting everywhere in the world now, but it’s going to hit the American well, wherever their car last parked a couple on the West Coast. Yeah, this is a big deal. I asked somebody a celebrated trait there is with a lot of connections in Washington, I said, “What are you guys doing about this?” He said, “We haven’t the slightest idea.”
Rob Johnson:
Good. Well, I’ve been talking with people like Michael Spence, Danny Roderick, and Joseph Stiglitz about the prospects for underdeveloped countries now where technology platforms with automation, machine learning what you might call, make the Asian development model of infant industry protection manufacturing, and learning by doing obsolete. And they’re saying to me, it’s actually more daunting than that. That as you go to renewable resources like wind and solar power for energy, the value of oil or coal in the ground will go down at the same time is the value of labor being replaced by machines goes down. So the question is, how will these emerging economies converge with the advanced economies particularly with the, what they call increasing returns. Meaning where the monopolies are located. They achieve a scale and nobody can compete with them whether with cheap labor or by replicating the technology, but operating at a much lower level of volume.
Thomas Ferguson:
Yeah. Look you could as well, I mean, there’s no reason to privilege some piece of the emerging market you could be describing some Midwestern parts.
Rob Johnson:
I was going to say it’s city of Detroit.
Thomas Ferguson:
Yeah. Right.
Rob Johnson:
Yeah. So Tom coming back around, we’ve covered a lot of different bases emerging from your analysis of money and electoral politics. But I think that’s really a foundation stone because what I call the commodification of social design implementation and enforcement is what leads to the withering. And you get an amplifying feedback loop which is, once things become unequal, the access of that plutocratic minority exacerbates and makes things more unequal. What used to be tax evasion is now legal tax avoidance. And then you say, we can’t afford it because we don’t have the government funds to rebuild or repair the infrastructure education or health system. But it seems to me like the route, which am I might call the foundation stone is actually where you started this conversation. If we can’t get our representatives to create balance in society, it’s just going to wither and wither until it explodes in crisis.
Thomas Ferguson:
You can’t expect me to disagree with that. I’m just shocked to hear that there were gambling, going on in the capital. But yeah, no, I think-
Rob Johnson:
Oh, I’m grinning because I’m your former student. So I guess I’m feeling like I have learned some of my lessons.
Thomas Ferguson:
Yeah. Well, politics today is you got to face this, it’s above all these other things that people normally, it’s also a racket. The people in it are to a very considerable extent. I’m sorry to say racketeers. And they constantly thinking about how can we hear of being small, how do we all stay or get richer off this stuff? I was quite struck because I did a session the other week on Jeffrey Myers book on the gilded age on Boss Tweed in New York. And he’s really gone into detail. He just goes the old generations studies of machine politics used to drive me crazy because they weren’t very interested in the business structures of these folks. He really takes you inside it. And it made me feel right at home. And I said, “Yeah, this is the Congress that I know.” That where you’ve got folks getting incredibly rich regardless of their stock portfolio arguments about a particular time-lapse just watch how people come and leave far richer in so many cases. And you know, what this process is just ridiculous.
Rob Johnson:
And it’s one of the reasons that in 2016, when the former reality show host, Donald Trump walked around and said, “The system is rigged.” People saw that as fresh air as somebody outing the system and he beat 15 Republicans before Hillary Clinton. Even how would I say, well-educated people consents now. That even if they’re on the pathway to success, the system doesn’t cohere. And I think that this is an extremely dangerous time. Obviously things like the pandemic and climate change illuminate the extent in the extremes of dysfunction and the notion of what you might call the common good is just in tatters.
Thomas Ferguson:
Yeah, yeah.
Rob Johnson:
But to repair it we’ve got to move away from despair because despair may feed acquiescence to authoritarian response.
Thomas Ferguson:
Yeah. It’s a pretty interesting situation because I think the Biden administration, we all know its margin of victory was narrow. Democrats margins in the house and the Senate have both, I mean in the Senate, it’s just basically 50/50. Vice-President and in the house they lost seats. So these folks need to perform otherwise, if they fail as they failed with Clinton and with Obama in the first terms where people in a, I mean, Clinton walked away from his promises for Medicare for all it, they didn’t use the term at that point, but that’s what it mounted to. And the failure to do a big recovery bill in the first two years the Obama administration in both cases, Clinton and Obama got emulsified in there two years later in the off year election-
Rob Johnson:
That’s right.
Thomas Ferguson:
That happens again and it’s not obvious that all those folks let’s put it this way, the nicest way I can put is it’s not obvious that all these people are going to sit there, if they came in again and allow themselves to be voted out, we’ve just run that experiment. And it was a pretty narrow call escape.
Rob Johnson:
Yeah. Well, any final thoughts? I think you’ve covered an awful lot here in-
Thomas Ferguson:
I assume we can edit, do you want to restart this? Because I cut into you mentioning my colleagues when we first start, you might want a little new opening.
Rob Johnson:
Okay. I’ll go quiet for about three seconds and we’ll do it again. This is Rob Johnson, President of the Institute for New Economic Thinking. I’m here today with Tom Ferguson to discuss his new paper that’s on the INET website with two colleagues GiChen and Paul Jorgensen on the role of money in politics, particularly as it pertains to the Senate and house races of November, 2020, Tom. Thanks for joining me.
Thomas Ferguson:
Well, I’m glad to be here Rob for what we’ll have to say, since this is after all of the internal conversation and I met, I completely fair inquirer.
Rob Johnson:
Good. Okay. Let me=
Thomas Ferguson:
Thanks.
