Capitalisn’t: A Defense of the Neoliberal Order

Glenn Hubbard: So, we have both sides sort of pulling to the fringe, but to me, that leaves the middle lane open, and I’m naive to think that economics has a lot to say about it.

Bethany: I’m Bethany McLean.

Phil Donahue: Did you ever have a moment of doubt about capitalism and whether greed’s a good idea?

Luigi: And I’m Luigi Zingales.

Bernie Sanders: We have socialism for the very rich, rugged individualism for the poor.

Bethany: And this is Capitalisn’t, a podcast about what is working in capitalism.

Milton Friedman: First of all, tell me, is there some society you know that doesn’t run on greed?

Luigi: And, most importantly, what isn’t.

Warren Buffett: We ought to do better by the people that get left behind. I don’t think we should kill the capitalist system in the process.

Bethany: Just as Luigi and I, in previous podcasts, have explored the idea of meritocracy and the idea of liberalism, we’re also interested in the concept of neoliberalism, which has come to be a sort of shorthand for the economic order that prevailed through the early part of this century, if not earlier.

And so, he wanted to talk to Glenn Hubbard, the former dean of the Columbia University Graduate School of Business. He’s written a new book called The Wall and the Bridge: Fear and Opportunity in Disruption’s Wake, which essentially is a defense of that old neoliberal order.

And his concept is that, instead of building walls to protect pieces of our economy from disruption, we should be building bridges to help people maintain access to their livelihoods in the face of that kind of disruption. A very clear example would be, instead of building a wall to protect us from China, we should be building bridges to help retrain people who have lost their livelihoods due to the offshoring of their industry. And Luigi and I wanted to find out if there were fresh ideas for how to reimagine that old neoliberal world order.

Why don’t we start just with a very basic question: Why this book now?

Glenn Hubbard: Well, I think this is the time for a book about walls and bridges, because we live in a world of populist anxiety about capitalism and the market system. The truth of the matter is, openness is still very much worth the candle for technology and globalization, but the political process served up only one answer to it—to the anxiety—which was walls. Economists going back to Smith have always talked about bridges to prepare people for the future. That’s why I think the book is particularly important now.

Bethany: How do the words translate into action, though? And what I mean by that is that in the book, you lay out some of the underlying forces that have caused disruption in communities. And we can talk all we want about bridges and about ways of blunting this impact. But you make a compelling case at the same time for the strength of these underlying forces. Is it mere words to talk about job training and community college and ways of blunting this impact? Does that actually accomplish anything? Could that have changed things over the last bunch of decades?

Glenn Hubbard: I think it could be a game changer if we go beyond words to both framing and action. Let’s first start with framing. I think of growth and disruption as a coin with two sides. As economists, we don’t believe growth happens in some linear, nice progress that leaves everybody incrementally better off. That’s just not how it happens in the real world. So, you can’t, as a politician, say, “I love growth, but I hate disruption.” That just isn’t tenable, and we’ve got to frame it as such.

The problem is, the easiest thing to do when people don’t like disruption is to talk about walls, because it’s very simple. You don’t like trade? I’ll make it go away. You don’t like the technological advance that caused you to lose your job? I’ll make that go away. I can build physical walls in the country. I can build metaphorical walls. I can get business and government too close together. I can do all those things. It’s simple to articulate.

Bridges are much more powerful. Specifically, in the modern world, I think we need two kinds of things. One is to radically prepare people for the future. In the past, we used to do this really well. I spent a lot of time on the development of the land-grant colleges, which came about, of course, as the nation was in the middle of a civil war. So, whenever people tell me it’s too difficult to do things, Lincoln managed to do it in the middle of the Civil War. The GI Bill is another example. Austan Goolsbee and I had suggested a block-grant approach to community colleges linked to outcomes, which would, like Lincoln, focus on the supply side. Rather than free tuition, why not actually give these institutions of real training more resources?

Another important action is to reform what economists call social insurance. Most of our treatment of workers comes from programs that were developed in the 1930s for an economy where I might lose my job temporarily in a business-cycle downturn, and then get it right back. That, of course, isn’t what’s causing people’s anxieties. And so, it may mean much larger support for work, tangibly in the US, programs like the Earned Income Tax Credit, or radical decentralization of retraining, something in the book I call “personal re-employment accounts.”

We need a rethinking of these ideas on a grand scale if we’re to match the land-grant colleges or the GI Bill, both of which came at periods of change like the one we’re having now.

Luigi: Now, you’re not only a prominent economist and for a long time the dean of Columbia Business School, but you’ve also been in policy, and you’ve been head of the Council of Economic Advisors in 2001, at a crucial moment in US history. If you were to go back with what you know now, what would you have done differently then?

Glenn Hubbard: Well, it’s a great question, Luigi. One of the stories I tell in the book, The Wall and the Bridge, is about steel tariffs, which to our eyes as economists is kind of a no-brainer question. Of course, we shouldn’t have steel tariffs. And I remember the day I was to go in and argue the case to President Bush, I knew I was the only one who was going to take that side.

My wife reminded me that the world has two groups of people: economists and real people. And she said, “You are an economist from central casting. President Bush is a real person from central casting. Be careful what you say.” I didn’t just go in with Econ 101. I actually went in with a plot of shares of workers falling. And he said, “That’s what I’m trying to stop, is the loss of steel and manufacturing jobs.” And I said, “But Mr. President, I just showed you agriculture 1900 to 1940. Would you like to put those people back on a farm?”

And I could tell by the look on his face, I was making progress. Then I showed him a chart of job losses across the country. And he said, “Wait, I thought I was saving jobs.” I said, “No, sir, you’re actually losing more jobs.” And I showed him county by county, given upstream and downstream from steel, where the job losses were.

Fast forward, he of course didn’t go my way, but he was at pains to call me back in and tell me why. And he said, “You know, I agreed with everything you said, but Vice President Cheney and I had made a promise in Wheeling, West Virginia, during the campaign to help steelworkers. I didn’t hear you say anything about either those workers or communities or what you would do. You were talking about how things would work on average. And I agree with you, but you didn’t talk to me about that.” I think I might have learned more that afternoon from George Bush than he learned from me.

Luigi: You said, and I think it’s important, that you should have learned more compassion from Dick Cheney, which is quite something. But besides that, I think that’s a—

Glenn Hubbard: From George Bush, not from Dick Cheney.

Luigi: But my question is what you would have done differently as an economist. So, you were there, and I know this is an unfair question, so I’m not blaming you. I’m just saying, with what you know now, would you have, for example, tried to slow down the massive increase in imports of manufacturing from China? Because you were basically at the beginning of the great influx. If you could go back, would you say, maybe we should have slowed it down, maybe we should have done something else? What are you thinking?

Glenn Hubbard: Well, it’s a really interesting question, Luigi. I think, in general, on trade—and of course, as you know, technological change is probably the bigger deal in disruption in labor markets, but let’s take both of them together for the moment.

I think economists could have done more to talk about how labor-market interventions could have prepared people more for change. The bigger political error economists made is not coming up with more in terms of tangible programs to help workers and communities: place-based aid, worker aid, and so on.

Luigi: But, like what? Sorry if I insist, like what? With the benefit of hindsight, what would you have proposed to fix the problem?

Glenn Hubbard: Well, I think two things. Let’s start with place-based aid. Like most economists, I’ve generally been suspicious of place-based aid. I generally had the view, why not just move people to where jobs are? The economy does have abundant opportunity. As you know, mobility data, geographic-mobility data, belie that in the US. People really aren’t moving. I’ve taken waves of students to Youngstown, Ohio, a city that did depopulate after steel closures but still has a lot of people. And you ask yourselves, why aren’t they in Nashville or Orlando or somewhere else?

Well, there are a lot of good reasons people aren’t moving. Moves are actually riskier than economists often think. So, I think there are ways to target aid to communities for business services.

The other is to, again, prepare people with community colleges and training and massively support low-wage work. You could either do it through the Earned Income Tax Credit, which is the US model, or do like my colleague Ned Phelps suggests, which are labor demand subsidies, as he’s recommended in the European context for low-wage work.

I think there are many specific things we could be doing. Unfortunately, politicians find it easier to talk about protectionism, whether it’s about trade or technology, because it’s more of a sound bite.

Bethany: Why haven’t those things that we’ve done worked when we’ve done them? And I’m thinking most prominently about Janesville, Michigan, in the book . . . Or is it Wisconsin? Wisconsin. And the book, a book that Luigi and I both like, about the attempts to retrain workers there and the attempts to deliver place-based aid. If that’s a solution, why hasn’t it worked in the places that have tried it?

Glenn Hubbard: Well, in fact, Janesville, Wisconsin, that is my favorite book in this genre, because it chronicles a town that did try. First of all, it was Paul Ryan’s constituency, so it was actually connected in Washington. It had a direct link. Yet I think, if memory serves me right, it was Parker Pen and General Motors that closed facilities in Janesville, and there was wrenching change.

I think these are complicated problems. Another one of my favorite books in this area is Why the Garden Club Couldn’t Save Youngstown. The notion that building new museums and beautifying the community is the root to prosperity is probably misplaced.

There are successes. Pittsburgh. Pittsburgh had the same steel issues as Youngstown. It’s, in fact, a nearby airport between Cleveland and Pittsburgh lies Youngstown. Yet Pittsburgh had city leaders, university presidents, and foundations come together to work on very specific training for businesses that actually had jobs, as opposed to just general training programs that didn’t lead to anywhere.

The state of Massachusetts. When the mills closed in Massachusetts, business leaders thought about going to Washington for protection and then thought, no, they would rather come together for a new industry.

So, there are local successes, but they require commitment of both business and government, and they require training people for jobs that actually exist in that area rather than just general human capital. So, it’s not all a failure.

Luigi: But, Glenn, there is a big difference between the plot you showed to President Bush of the movement from agriculture to industry and what’s happening now in manufacturing. The big difference is the absolute level. So, if you take manufacturing, for example, the absolute number of manufacturing jobs had never dropped in the United States until very recently. When you’re talking about a big reallocation of work, you’re saying new people go into different sectors, which is easy.

When you’re saying a reduction in the absolute number, you mean you have to train people who are in their forties and fifties and have spent all their lives being factory workers to become webmasters or nurses. And that is much, much more difficult. So, I think that’s the fundamental tension, because I think we are all in favor of innovation. We all understand innovation comes with disruption, but there is a social dimension that we economists, I think you’re right, have ignored too long.

But then I struggle to see what we are proposing differently. Because I think the problem is, the guy who’s 45 and has been a factory worker all his life ain’t ready to become a webmaster. There is no training program that will do it. If you destroy his or her job—most of the time it’s his job—destroy his job, you’re not only destroying his job, you’re destroying his family. You’re destroying the community. What do we do?

Glenn Hubbard: Well, great question. But let me begin by saying even if we had no trade, the very job destruction you mentioned would happen from technology, which is the dominant force of this. So, it can’t be an argument for just trade protectionism. That isn’t even the big determinant of the job destruction. That wasn’t even what killed Youngstown. It was actually changes in the technology for producing steel.

Manufacturing has become extremely productive. It was going to lose jobs. We don’t have an output of manufacturing problem in the United States. It’s the decline in manufacturing jobs.

Now, you raised the great question of what to do about it. I’m not one of those people that thinks that manufacturing jobs are the “good jobs,” and so, we should just make them come back, whatever the cost. But I would think of preparation as not one size fits all, but very much for different groups.

For younger people, I think there’s abundant reason to believe that shifts in training, in particular for jobs that fit particular communities and businesses, are important. Now, you’re right. For older workers, that’s going to be a challenge. I mean, let alone the skill gap. So, that’s why I suggest in the book, we’re going to have to think about much larger-scale supports for work or possibly even term-limited wage insurance for older workers as a kind of social safety net for change.

I don’t think we have a choice. The only choice is to try to protect these jobs. There are people running around advising politicians, saying we need to do everything we can to protect manufacturing jobs. I always remind people, look, the jobs my students want and probably your students want, Luigi, didn’t even exist 30 or 40 years ago. So, how is somebody in Washington going to define what a good job is?

Bethany: How does your concept of term-based employment insurance differ from universal basic income?

Glenn Hubbard: Big difference because it’s about work. Going back to what the classical economists were looking for, they were looking for participation in an economy. You can think of it as an economics of flourishing or dignity. People get a lot of their dignity and attachment to the economy from work. Imagine a world where somebody said to you, “I don’t think you really have much to offer the economy, so I’m simply going to meet your material needs with a check.” It’s hard for me to believe that’s a world of dignity.

That may be partly because I’m a Presbyterian and a Calvinist, but it is also true that I think the classical economists very much believed that. So, I think supporting work is different from universal basic income in that very significant degree . . . UBI, at least as it’s talked about, universal basic income in the US. Also, is it means-tested? So, it’s just a radically expensive idea, whereas support for low-wage work is much more targeted.

Luigi: Now, you massively use the term neoliberal in the book. I’m always confused a bit by who is and who is not a neoliberal. So, are you considering yourself a neoliberal? And if so, what is distinctive of neoliberals, or what distinguishes you from neoliberals, depending on the way you answer the first question?

Glenn Hubbard: Well, it’s a great question, Luigi. I do consider myself, at least, a recovering neoliberal, if not still one. My mission in the book is to put “liberal” back into “neoliberalism.”

And I think what neoliberalism did was basically remove the guardrails, if you will, and some of the moral foundations of liberalism that economists like Smith had. I think that a lot of people who say they’re embracing Adam Smith mean a piece of Smith. So, just like many neoliberal economists will talk about The Wealth of Nations and the idea that productivity and the ability to consume is the source of a wealth of nations—that’s a radical and wonderful idea.

But, again, Smith also wrote The Theory of Moral Sentiments, which brings in another group of people to celebrate Smith. The sense in which I’m different is that I think both are equally important, and they’re a coin with two sides. Smith thought of an economy as a moral system. After all, he wasn’t really an economist the way you and I are, Luigi. He was a moral philosopher writing at the beginning of time for our profession. So, you can’t understand Smith’s view about openness and the importance of what a wealth of a nation is without also understanding that he meant for everyone to be in the economy.

My colleague Ned Phelps does a good job, I think, when he refers to it as mass flourishing. That’s what the Smithian economy was about, and not everybody’s a Smithian. I don’t think Donald Trump has read a lot of Adam Smith, and I doubt Bernie Sanders has, either.

And I think neoliberals so celebrated the market they walked away from some of those guardrails. So, neoliberal openness is still an extremely good idea, but putting back some of the guardrails and the moral foundations are also good ideas.

Bethany: Is part of the problem also that the way economics has developed, its focus on numbers, that it’s lost sight of the moral foundation? Does the field itself need to reinsert some level of a moral foundation back into it?

Glenn Hubbard: Well, I think economics has really two challenges in this environment. One is the one that you mentioned, which is to go back to more of a grounding economics in society. One of my teachers, Ben Friedman, wrote a fantastic book called The Moral Consequences of Economic Growth, where he argued that economic growth isn’t just improvements in material living standards, it’s the openness of an economy to new ideas, the tolerance of different religions and races and alternative points of view. We all have a dog in that fight.

But this is a more basic problem with the economics profession. And it was identified by the queen of England when she spoke right after the financial crisis at the London School of Economics. And she said, “Why did nobody see it coming?” And the answer to the queen’s question is complicated on the one hand, but it’s simple on the other. We weren’t looking.

My late teacher, Marty Feldstein, used to say when problems were difficult, “Get up and walk around. Go actually talk to real people.”

So, in the answer to the queen’s question is, why weren’t economists talking more to financial-market participants? Today, if we’re trying to understand anxieties about technological advances and globalization, why aren’t we going out to the heartland more?

Bethany: That question about the state leads to a bigger question. If neoliberalism in a basic sense was let the market rule, your new definition—neo-neoliberalism—is there a framework for how involved and where the state should be involved? Do you have a framework? Is there a broad framework out there?

Glenn Hubbard: Well, I think there is. Let’s start with where Smith was on the role of the state. Smith was not laissez-faire, despite the characterization casually of him as such. Smith definitely had a role for the state in what today we would call public goods, infrastructure, education. Smith, of course, wrote at a time before the modern capitalist economy. He writes The Wealth of Nations in 1776. So, I think probably today, Smith would have emphasized not just competition, which is one of the core elements of the wealth of nations, but also the ability to compete and training. Social insurance might well be involved.

I think all those give us a foundation for what a modern market economy would be, but there’s something missing. And Luigi’s colleague Raghu Rajan has talked about this very eloquently, and that is communities or other connective tissue in the economy. I mentioned Karl Polanyi before. In The Great Transformation, his view was, by focusing solely on markets, economists are reducing everything to transactions and incentives, but there is more to the connective tissue of an economy if we go that way. So, I think a contemporary liberalism, a neo-neoliberalism, whatever you want to call it, has to be cognizant of that.

Luigi: You mention competition as a crucial element that sort of keeps the system working, and you emphasize in your book that Smith was very skeptical about the employers getting together and conspiring to increase wages, and so on and so forth. So, I would like to bring you to the issue of antitrust, because as you know, there is a renewed debate about to what extent we have fallen behind in the enforcement of antitrust, and to what extent the consumer-welfare standard is the right criterion to determine whether you should let, for example, two firms merge.

So, I would like to know, number one, do you think we have a problem of excessive concentration in market power in America? And, two, if so, what should we do, and should we still use the consumer-welfare standard or not?

Glenn Hubbard: Let me start with the consumer-welfare standard. I do think that is the right standard. If there is a role for the state, it would be to make sure that individual consumers are not made worse off by the actions of firms. That’s essentially what Smith was talking about in the example that you mentioned.

Luigi: But, sorry, when you say consumers, you also mean workers?

Glenn Hubbard: Sure, sure, absolutely. But what I wouldn’t have as much sympathy for is competitors, the European view that, basically, public policy should be focused on competitors as opposed to competition. And I think for the US—

Luigi: But, sorry, if you care about consumers in the long term, you care about innovation. If you care about innovation, you care about competition. If you care about competition, it’s very difficult to ignore that if there is a market with one, there is no competition. So, at some point, you need to care about competitors as well.

Glenn Hubbard: Well, but I guess that’s where maybe I’m less worried. So, we’re not probably going to talk together about IBM, and yet that was the thrust of a major antitrust era, or AT&T, or even Microsoft.

I would argue that companies today, like Alphabet, Meta, I see nothing that tells me they won’t have the same fate. In other words, I can imagine dynamic competition in which firms are able to garner rents for some period of time, but not forever.

The legitimate antitrust concern, if there is one, is about forestalling future competition. So, we should be suspicious of mergers-and-acquisition activity that really is just a catch-and-kill type model of firm acquisition. That’s an issue, but in general, this attraction in Washington to what I think of as a very Brandeisian view that if you’re big, you’re bad, I just don’t think that has much of a foundation in economics.

Luigi: And do you see now that we have a problem or not?

Glenn Hubbard: I do think there’s suspicion of a problem in dynamic competition, but I’m scratching my head as to what the remedy is. The loose term that gets used is, “Let’s break these firms up.” What exactly does that mean? If you were to take a firm like Google or like Facebook, I don’t think breakup, If you mean the old AT&T-style line of business breakup, I don’t think that’s it.

It strikes me a lot of this has to do more with looking at the sources of competitive advantage. And so, as an incumbent firm, if I have big advantages because I own all of your data, and even if you come along with a better idea, you can’t displace me, well, I can change the private-property rights on the data. I can simply say the data belonged to the individuals. Amazon has to buy it. Facebook has to buy it. Or Zingales Co. as an entrant has to buy it. I think we need to think more subtly about remedies.

Bethany: So, you wouldn’t make the argument that some have made that there’s a fundamental change in the way business is conducted now, such that you have these moats that are developed around businesses, this winner-take-all model? In the case of Google, for instance, that the constant reinforcement of their business model means no one actually can compete with them in search?

Glenn Hubbard: Nothing in the history of business says that that’s likely to be true, because each time . . . If Smith was right, businesspeople naturally look to do that. I always remind young faculty that our students here in the business school, perfect competition’s not their goal. This isn’t the econ department. Their goal is to be a monopolist. That’s fine. That’s what businesspeople want to do, but I don’t think they’re going to generally be successful, because I do think the process of competition is quite vigorous. So, nothing tells me that Google’s got some sort of lifetime monopoly in search, if we get data-ownership rights correct, just as if you look at the graveyard of past monopolies, they’re, I think, instructive.

Luigi: But today, for example, if you are trying to . . . If Google tries to enter in separate businesses, they can do it fairly easily by self-preferencing the search. If you control the search, you control allocation of rents in a lot of businesses and you have a disproportionate amount of power. So, are you in favor, for example, of separating and having the idea that you can’t be a player and a referee at the same time?

Glenn Hubbard: I think that’s definitely something to look at. The antitrust examples, historically, would be in the oldest antitrust cases: railroads. Where railroads, likewise, could advantage different adjacent businesses by both whether they would permit traffic and at what cost on the railroad. So, I do think that is worth looking at. It’s very different than breakup arguments, but it’s definitely something to consider.

Luigi: You do a very interesting summary of economic thought, starting from Adam Smith, and then you move to Ned Phelps and the recent theory of economic growth. But if we take the recent theory of economic growth, basically, on innovation, there are gigantic externalities in innovations. Ideas can circulate freely and potentially benefit everybody. And so, there’s been a lot of demands and push for a more state-intervention direction of research in that dimension. You can very easily see why, because if there are very positive spillovers, you want the state to do it. Now, what is your view on that? And what are your suggestions on this topic?

Glenn Hubbard: Well, I think there are two mechanisms by which the state could get involved in research. One is financial, in funding. The other is direction. Let me take those in turn. I think we need to increase support for basic research in the country. That’s where many of the ultimate spillovers come. And I don’t think the state should be involved at all, particularly in the direction of that money. The way the National Institutes for Health, the National Science Foundation, other programs allocate money— peer review, highest-quality research and scholarship—that’s the way it should be.

There is, however, another dimension of research where the state also could be supportive in funding, and that’s in applied research centers. So, unlike basic research, where I might imagine that there’s a handful of top universities that are always going to get the bulk of that federal support, applied research could be spread throughout the country, building again on the intuition of the land-grant colleges, which completely changed, both through their manufacturing extension services and agricultural extension services, local business. That’s another area where federal block-grant support could be useful.

But again, having the state direct it, pick the areas? I think it’s just going to be subject to rent seeking and politics.

Bethany: We had Oren Cass on our show previously. He’d written a piece that was in American Affairs that was critical of your book. But more broadly, I’m wondering if the emergence of this, let’s call it protectionist wing within the Republican Party, if that surprises you or troubles you. Or if, having read your book, some of the trends that you’ve laid out have existed for decades, is this just more of the same, in your view?

Glenn Hubbard: I think it is more of the same. It doesn’t surprise me. It does trouble me. Oren Cass is an earnest person. I’ve known him for years. He’s just 100 percent wrong in very, very harmful ways for the political process. His essential thesis is that every economist since Adam Smith has gotten it wrong. And so, Smith’s radical insight that the true wealth of a nation was the consumption potential of average people, so productivity, all those things, were the central Smithian insight, that’s all wrong, in Cass’s view. It’s really about the protection of jobs and particular jobs.

Now, it’s possible that every economist since Smith is wrong, or it’s also possible . . . that Oren Cass is just completely off base. And it’s really the latter. Now, I’d be tempted to dismiss it as just intellectually disingenuous, but it’s worse than that, because it is actually going back to something I said before: Walls are so easy to say, and they’re so tempting to politicians.

And you can see how you get there. If you wanted more individuals in the country to have a middle-class job, and historically middle-class jobs were manufacturing, you could see the political leap. “Aha! We’ll just protect manufacturing jobs and restore the middle class.” But of course, that syllogism is just fraught with problems, none of which are acknowledged or perhaps even known by Oren Cass. So, Oren Cass and people like him are a big problem in the Republican Party. But the forces he’s talked about have been there for decades, and shame on mainstream economists for not stepping in and calling it out.

Luigi: Speaking of the Republican Party, what is left of the Republican Party? Because it seems that you were, in the past, at the center of the ideology of the Republican Party. Now, I feel you are really marginalized, and the Republican Party belongs to, not even Oren Cass, but JD Vance and Trump. So, how do you see the future of people who don’t want to embrace the spending policies of the Democrats?

Glenn Hubbard: I think you have to put aside the labels and talk about ideas that win people over. I think that President Trump advanced his agenda by appearing to have an answer, that “I can make it like the past. I can bring things back that you liked by building walls.” If your answer to that is just neoliberalism of just, “Trust me, it all works out on average,” it’s not surprising “mainstream” Republicans weren’t winning the day.

If we’re to win the day, it would have to be on a different set of ideas, because I agree, the argument from the left that what we need is simply a bigger state and greater redistribution, that’s not going to solve the problem, either. So, we have both sides pulling to the fringe, but to me, that leaves a middle lane open. And I’m naive to think that economics has a lot to say about it.

Luigi: With this optimistic note, thank you very much, Glenn, for the opportunity.

Glenn Hubbard: OK. Thanks. Thank you, Bethany and Luigi.

Luigi: Bethany, because I’ve known Glenn for many years, I want to know, what is your impression?

Bethany: I think he speaks very well, and the words all sound really, really good. I think it is the actual actions that are underneath that are, I think, more challenging than the superficial words may imply. What do you think?

Luigi: First of all, I have a lot of emotion and reaction. The first one is that nobody feels that they want to be called neoliberal these days. If you think about who is the example of a neoliberal, Hubbard will come to mind. And even he is trying to create distance and say that he’s different. And then he’s going back to Adam Smith, he’s trying to . . .

But, basically, the story is that he’s distancing himself from the policy that has dominated the United States in the last 40 years. So, that is, to me, quite revealing.

The second is, how important is democracy to make even economists change their minds? I think that had Trump not been elected, there wouldn’t be this rethinking of the world. I think that because Trump coalesced the consensus or the dissatisfaction of a big chunk of America, now everybody is paying attention to it. But if it wasn’t for that election, if Hillary Clinton had won, would we have the same discussion today or not?

Bethany: You raise a really interesting point. I’ve always been squishy as to what it is that “neoliberal” actually means. And so, every time somebody says it, I have to think to myself, what do they mean? And I’m not really sure that people knew what they meant when it was a good thing. And now that neoliberal has become a dirty word, I’m not really sure that people know what they mean when they invoke it as a dirty word, either. But it is really interesting that it has become something you don’t want to be. It’s no longer a compliment. It is an insult.

And the interesting thing, what you say about Trump, I think, is true, but what’s interesting is that it is, to me, the financial crisis that should have caused a giant rethink of neoliberalism, defined however you define it. It didn’t, and it wouldn’t have, because it allowed the status quo to continue very much as it was.

And even though that perhaps should have been the rethink—and was, I think, in some sectors of the world—that was the beginning of the populist rebellion. Maybe not the beginning, but it certainly intensified the populist rebellion. But it wasn’t until Trump was elected that everybody woke up and said, “Wait a minute.”

Luigi: Yeah, I don’t want to sound like, “I told you so.” But I think that, for me, the financial crisis was exactly what you described. And the book I wrote in 2012 was very much a reflection of how my world has changed as a result of the financial crisis, and how I expected and anticipated a populous revolt. One of the things I’m most proud of is that I said populism is inevitable. The question is, what forms will it take?

And what is ironic is the book came out in 2012, exactly 10 years ago, at the time of the Mitt Romney campaign. And Glenn and Oren Cass were on the Mitt Romney team, and they completely dismissed this narrative. And I remember some people saying, “Oh, America is different. There will never be a revolt in America,” whatever. And it took the Trump election for them and for most people to confront the fact, but you are absolutely right. The roots are much earlier. They are in the financial crisis, but also, they are really in the entry of China into the WTO and the massive reallocation that created.

I was a bit disappointed that he did not have a bigger solution. I asked him what he would have done with the knowledge now. Which is not blaming what he has not done, because we were all there and nobody saw that in the proper way. But I think with the benefit of hindsight, I would have expected a bit more position in one way or another.

This issue that, “Oh, it’s all technology, and technology is inevitable,” I think forgets two things. First of all, I think that the China shock was much faster than what technology would have created, and it was completely controllable, because it was a shock driven by a political choice that could have been moderated the way we wanted. So, I think that’s number one.

And, number two, even technology, I think, can be shaped to some extent. It’s not manna coming from heaven, but he’s unwilling to shape technology in any form or shape. So, we know that, for example, Kennedy shaped technology with the race to the moon. Now, was it the right way to aim stuff? I’m not so sure, but I think there is a purpose, if you want, that can be useful. But he’s not willing to go there at all.

Bethany: What I’m struck by is that it sounds really good to talk about adding a moral dimension back into the free-market worldview and to talk about how economists need to care about people’s jobs and livelihood as part of their framework. But I’m still troubled by what concrete actions that caring takes if it isn’t a form of protectionism. Because the solution of job retraining, sure, it’s worked in some places, but it hasn’t worked more than it has worked.

And so, if it’s not a more activist intervention in the market, for example, by prohibiting certain forms of outsourcing to China in the name of creating increased resilience . . . because I think the short-term, profit-driven nature of our market means if one company can make more money by making its supply chain more fragile and outsourcing everything to China, then everybody’s going to have to do that. And I don’t see how you fundamentally reshape that dynamic without thinking as a country about what we want to do and intervening in markets more than I think Hubbard is comfortable doing.

Luigi: Yeah. I think that’s a fundamental question. Given what we know now, are we willing to put some restrictions on markets? And I think the answer that comes from him is loud and clear: no. It’s a difficult decision, because I’m very sympathetic, of course, to the idea that any kind of constraint can be captured by vested interests. But the issue is, the absence of it could be captured by vested interests also, in the sense that it does represent the Business Roundtable view of the world. And he sounded very much like the Business Roundtable, including, of course, the purpose of business and we should look at stakeholders. Very beautiful statements, but what is the action behind those statements?

Bethany: This is too harsh a criticism of him, but it did seem to me that he was trying to have it the same way as he’s always had it, just adding some nice language on top of it, about caring about workers and retraining and making sure people are taken care of, but not fundamentally rethinking anything about his previous worldview.

I was surprised by how vitriolic he was about Oren Cass, so I think that the vitriol must be because this point of view espoused by Cass and others really is a threat. But I was struck by what he said, and it did make me nod in agreement, that it is too easy, also, to talk about keeping jobs here via protectionism. That doesn’t get at the fundamental issues underlying some of what’s happened, either. And so that the easy solution isn’t as easy as it looks, either. So, I agreed with him on that.

Luigi: First of all, as you well know, the toughest fights are among people who are the closest, because they need to distinguish themselves. So, within the left, they hate each other in a way that they prefer somebody from the right rather than the closest neighbor from the left, but slightly different. And here it is the same.

And, second, to be fair to him, Oren Cass used some vitriolic language in reviewing the book. I don’t know whether you saw the review of the book. It was really fun, really well written, but really, really negative. So, I think that he’s returning the favor.

But also, you’re right that it is a threat. But also, in my view, they have a solution that is not ideal by any stretch of the imagination, but they have a solution. And it seems that he doesn’t, really. My disappointment in looking around is there is not a coherent new way of thinking.

People are patching things here and there, but to me, the biggest problem is that nobody has come up— neither the left nor the right—with a solution to the problem of the disenfranchised Middle America workers. And I think that this problem is looming enormously.

Ironically, last week I had on my Twitter feed next to each other the announcement that Harvard will give $100 million to study the problem of racism and the legacy of racism, et cetera, et cetera. And the next tweet was that the outgoing class of Harvard is 36 percent legacy. I saw kind of the irony of this juxtaposition and said, “Wait a minute, what about if you are a nonlegacy White guy?”

Bethany: Well, yeah, but that also does . . . There’s hypocrisy embedded in that. The wanting to have things the same way and wanting 36 percent of the class still to be legacies, while talking a big game about fixing racism. And it’s analogous to Hubbard in some ways, although Hubbard’s is far more honest, in my view, but it’s analogous to him in some ways of talking a big game about caring about people and injecting a moral framework back into markets and capitalism and economics, while fundamentally not wanting to really change anything under the surface.

For our capital-is, capitalisn’t today, we wanted to talk about this new bill in Congress called the American Innovation and Choice Online Act.

Speaker 8: The Justice Department and the administration have reportedly endorsed the antitrust legislation that’s before Congress and that Congress has debated that would prevent large-cap tech from sort of marketing its own products, for example, to users.

Bethany: Don’t you just love how bills are given these names that make them sound absolutely wonderful, no matter what they actually are? I think it’s one of the best examples I can think of of the dissembling involved in language.

Luigi: But at least they don’t have any fancy acronym like the JOBS Act that stands for something completely different.

Bethany: Well, we could be calling this the AICO, American Innovation and Choice Online. I think that would a pretty horrifying name.

Anyway, to be honest, I’m looking forward to talking through this. I’m not quite sure what I think. Believe me, I understand the issues and what Amazon does and what Google does to bundle their services. And I get this idea that we don’t want companies to use their dominance in one field to give their other products an unfair advantage.

What I don’t understand is, is what the big tech companies do any different than what big business has always done with its products? And then, is the kind of dominance that the tech companies have achieved somehow more—the word that’s coming to mind is impenetrable—unstoppable than the kind of dominance that other big companies have achieved? Which has never been that. Big companies have come and gone.

And so, if the answer to both those questions are yes—this is really different than it’s been in the past, and, yes, these companies, the moat which they’re able to build around them means that they are immune from the creative destruction of the kind that has always ended these issues in the past—then I think I’m more in favor of the bill. But I don’t know how to answer those two questions.

Luigi: I think you framed the problem perfectly, Bethany. There is no doubt that supermarkets have been doing self-preferencing all their lives. If you go to any store, they’re going to put their private-label stuff in front of you in the best position. So, self-preferencing is not new.

However, the magnitude of the problem, i.e., the dominance that, for example, Amazon has online and even more so of Google . . . Remember that Google is basically 98 percent of the searches. You know the famous line that the most searched word in Bing is “Google” because people cannot go fast enough away from Bing.

There is an extraordinary amount of dominance that allows these companies to leverage that market power into a contiguous business and expand, potentially at a very high rate. So, if I am Google and I put my travel agent first, I become a travel agency. If I put my product first, I can sell other products, and so on and so forth. And I think that’s the source of the problem.

Bethany: That’s interesting. The very word “platform” does suggest something that’s different than it’s ever been in the past, right? Because platform does have this connotation that you can do all sorts of other things off your platform, and that having built a powerful platform does give you a kind of power that didn’t exist in the nonplatform-based world.

And, for sure, I see the arguments. I mean, you think about how expensive search is. Because Google is winning at search, Google is going to keep winning at search. That’s just, these things are virtuous circles. It is theirs to screw up, rather than . . . And I think maybe that’s the most dangerous part of this new world, that so much of this dominance does become self-reinforcing.

Whereas in the past, the business . . . Like with IBM, some small startup could come along with a better product, and that would be that. And this world doesn’t work that way. It’s much harder for Google or Amazon to lose their dominance. They would have to really, really, really massively screw up, and all the things that could happen between now and the point where they massively screw up and creative destruction happens are really quite frightening. I don’t like the idea of living in a world where Amazon dictates everything.

Luigi: But also, I think that most people forget the reason why IBM became not so dominant, AT&T became not so dominant, or Microsoft became not so dominant. It’s not only because of creative destruction; it’s because of the intervention of antitrust. It’s clear that, for example, IBM did not perfectly integrate the PC into its business and outsourced the operating system, precisely because it had been under antitrust scrutiny for ages. It is clear that during the Microsoft trial, Microsoft was so much under scrutiny that it felt challenged to actually use some of the more aggressive practices that probably would have led Microsoft to dominate the search world and, in a sense, the internet world.

Bethany: Yeah, there’s no question the trial caused Microsoft to lose its mojo. It’s not even the actual outcome of the trial, it’s that the trial itself and being under that degree of scrutiny caused Microsoft to lose its mojo. And so, there’s an argument that just the intense amount of scrutiny on these companies may be reining in some of the worst of their practices. I don’t know if that’s true, either, but there’s at least an argument that as this bill moves, wends its way through Congress, even if it doesn’t pass, that the knowledge by these companies that they are one step away from a bill like this passing might, in and of itself, do some good.

Luigi: Yeah. I think that it is better if the bill passes than if it doesn’t pass. But I agree with you that being under scrutiny is better than not being under scrutiny.

Bethany: Yes. So, I guess I’m going to vote . . . I’m still not sure. I hate being unclear, because I also don’t understand the details of the bill and exactly what it’s going to do and how it would be executed. And I don’t really think anybody does. So, I don’t think I know if I vote this particular bill a capital-is or a capitalisn’t, but I think, based on our discussion, I do vote the idea of regulating businesses whose dominance is starting to threaten the American ideals of competition. That’s definitely a do. It always has been.

Luigi: Yeah, for me it is a clear capital-is. Capitalism without competition doesn’t work, and we need some regulation to enforce the competition. And maybe this bill is not perfect. No bill is perfect, but I think it’s much better than no bill.

Bethany: Before we let this go, can I just whine about one thing that always irks me to no end? The Wall Street Journal editorial board, predictably enough, wrote a piece saying that passing this bill is going to wreck the entire world and destroy American competition. And they ended on a note that aggravates me so much. The last lines of their piece were: “The US economy is suffering from inflation. Interest rates are rising and a recession is possible. The last thing America needs is a new regulatory shock from Congress.”

I find that such slippery logic. Whenever that’s what’s invoked in order to prevent some kind of new regulation or some kind of something, that, “Oh, we can’t do it right now because America is struggling.” Anyway, that rhetorical device, I find just the height of sophistry.

Luigi: Yeah. I think we should do a study of how many times the Wall Street Journal called it the end of capitalism if a law was passed and how many times they used the argument. Because if it is an expansion, you don’t want to break the expansion. If it is a recession, you don’t want to make the recession worse. So, basically, there is no time to ever have any regulation whatsoever.

Bethany: That’s really well said. And that’s exactly it. It’s such a useful rhetorical device, because it can be used in basically any economic scenario.

And one thing has nothing to do with the other. Either this thing is a good idea and needs to happen in order to increase competitiveness, or it doesn’t, but that should have nothing to do with the time in which it’s taking place.

Luigi: Actually, on this note, I read on the internet this line. It was great. Google and Meta talking about Social Security as a priority for not passing the bill, it’s like somebody from Five Guys talking about your weight and your diet.

Bethany: That’s pretty awesome as well.