The Wolf-Krugman Exchange: your questions answered | FT Podcasts

You still up in uh northern New England? Uh indeed. Uh I would have said western New England, but yeah, it's uh I'm actually on the on the deck of our of our house, as you can see. So, I've decided to be uh go full on summary here. How are you? I'm fine. Um and um I'm about to write a column on uh how Trump is changing the world. I will steal freely. No, I will refer to your columns among others. This is the sixth and final episode in our series, The Wolf Krugman Exchange. I'm Martin Wolf, chief economics commentator at the Financial Times. And I'm Paul Krugman, uh, professor at the City University of New York, author of an independent substack newsletter. Uh today's episode is being recorded on Monday, July 7th at 9 in the morning in Massachusetts, where I've taken advantage of a lovely morning to record out on the porch uh and 2 p.m. on in London. So today we're going to be answering some of the questions you've been kind enough to send us over the last six weeks. We've had several dozen, so we can't get to them all, but we'll try to address some of the themes which seem to crop up most in our inbox. So I'm going to start with the first question which is from VJ from India and he writes given the breakdown of the WTO-led multilateral trading system and increasing use of trade and technology controls by rich and powerful nations to further their security and foreign policy objectives. It is clear that there will have to be a reconfiguration of trading arrangements between nations that also addresses their security and technology needs. New bonds of trust have to be forged before institutional mechanisms can be agreed on. What might such an arrangement look like in the future? Do middle and low-income countries have any leverage to shape the outcomes in this emerging scenario?

I think this is a really superb question and fortunately we really should devote the entire episode to it. Um perhaps we should start off I will just start off by making a few quick uh points on this. The first, it should be said that at least as we are speaking, we don't know what the next stage in Trump's trade war might be. And there's some discussion that with all the countries with which the US has failed to reach an agreement, which as I understand it is everyone but three countries, um all the tariffs could jump back to the liberation day tariffs, which are of course very high. In other words, we can't even step back at all from the immediate crisis. And that's very, very important. On the question raised, I don't see how new bonds of trust with the US, which has been obviously a central player, arguably the central player, can be restored under the current administration or any administration in any way like it or even a different one, given that trade negotiations require long-term commitments and if we have a normal democratic process in the US, a big question in my view that would mean that it be four years or so and then you'd be back with a question, well, who follows this reasonable person who might be president four years from now or eight years from now? So I think with the US, it's going to be very, very difficult. And for the rest of the world, well, the simple truth, there is isn't much trust between Europe and China. It's of course nothing like the US-China relationship, but still there's lots and lots of suspicion. And there's also lots of suspicion, in fact, between India, the most important emerging developing country after China, and China too. And of course, most of the rest of the developing world, though there's exceptions for organizations like ASEAN, Association of Southeast Asian Nations, um, they uh really don't have much weight. So there's a real difficulty in creating trust. And let me just turn to the final question. What would we want to do if we were to rethink the system? Well, I think myself now that the attempt in the to move from the General Agreement on Tariffs and Trade to the World Trade Organization, which was a much more legally demanding institution than the GATT, that didn't really work. It demanded more than people were actually going to stick by. So we'd have to think about how we can give countries some more freedom of maneuver, particularly on things like industrial policy and security, give developing countries the room to do what some of the things they think they need to be able to do, and at the same time police to some degree the point at which a developing country becomes a developed country. So one of the real difficulties, I think, in the system is it didn't really have a way of dealing with the many other problems. The fact that China had become, from a trade point of view, a fully armed developed competitor, and China kept on insisting, well, we're a developing country, so we should have freedom that developing countries have. So there are quite a number of big conceptual issues you would have to deal with if you wanted to create a new trading order. Uh, but first of all, we need the conditions for one, and that's going to be pretty difficult. What do you think, Paul?

Yeah, I would just add that, you know, if we're talking about uh economic powers that seem inclined to use their trade and technology um uh leverage for, you know, national security, basically weaponization of of economic policy. Um, we really are talking about the United States and China. Uh, and the United States is what it is. And China, although, you know, the one one one achievement, you might say, of the Trump administration is to make China look like a relatively reliable uh negotiating partner, but you know, fundamentally it is not. And it it really comes down to uh when you have autocratic systems that aren't uh bound by rule of law, um everything in the end depends upon the whims of the people in charge. So right now it makes a lot of sense for Europe to try and make deals with China because the United States is has has lost its mind. Um, but China is uh is never going to be able unless there's a a color revolution in China or something. China is never going to be um the kind of um global, you know, hegemonic stability power that the United States used to be. So clearly there's going to be a lot of um bilateral, minilateral uh deals. I think we're we're already seeing that, you know, Canada is trying to align itself more closely with Europe. I suspect Japan will be doing the same thing. But we are not getting back that global system that we used to have. I think that's obviously true. Alas, so the question is how we manage the manage the chaos. Uh, alas, so this is a question from Joshua, an economics student from Australia. Um, in light of Donald Trump's sporadic industrial policymaking, to what extent has this accelerated the process of currencies such as the euro and Chinese yuan becoming larger players in financial markets? Uh, and how would the reduction in demand for the US dollar uh affect America's ability to continue running large uh budget deficits?

Um, so I will there's really two parts there. One is is about the role of the dollar. Um, and the clearly uh an erratic, unreliable United States with constantly changing policies. And if you ask what are US trade or even um US financial policies going to be six months from now, um the answer has to be a massive shrug of the shoulders. Um, that has got to damage the role of the dollar. Um, is anybody prepared? Is any other currency in a position to step into its place? Um, I would say still the the renminbi, the the Chinese yuan is not ready for that role, if only because China has capital controls and it it doesn't offer the kind of assured access to your money that um that that the that the dollar has. Uh, the euro, uh, you know, there was a period before the euro crisis when the euro seemed to be playing a growing role in the system and was hyped, I think, uh, but still in some ways, uh, possibly emerging as a dollar alternative, that the all the debt crisis stuff, uh, fragmentation of euro bond markets set that way back. But now, uh, well, you know, you've got a bunch of advanced countries sharing a currency, um, still um governed by rule of law, still honoring their agreements. So, uh, some increased use of the euro, I think, is is a pretty good bet. Um, in terms of the budget deficit, look, advanced countries have enormous ability normally to run both uh uh budget deficits and current account deficits, essentially trade deficits. Um, whether or not they happen to own a reserve currency. You know, the UK has been, uh, has run uh large current account deficits uh most years for several decades. Um, all of it after the virtual disappearance of the international role of the pound. So that's not what's really important, and I don't think that we should think about the the dollar's international role as a key thing. Uh, what worries me is that the the reason advanced countries can get away with this is that they look like reasonable, serious countries. They're run by by politicians who um aren't ideal, but are not crazy. Uh, that are willing in the end to do what needs to be done to stabilize their fiscal situation. And of course, they have enormous um, uh capacity. They're competent, their administrative capacity. Um, does any of that describe the United States anymore? And I think you can make a really good case that none of it does. Not just uh not not just that we have irresponsible deficit increases, but that we have a massive deficit uh exploding, insanely cruel uh budget uh bill that was passed entirely based upon lies. Um, and it's with absolutely crazy uh assertions about how it'll pay for itself and so on. Um, and we are watching in real time uh the diminishing ability of a of a starved and Elon Musk-ed US government to carry out basic tasks like issuing extreme weather warnings. Um, so at some point, I think investors will look and say, well, you know, uh America looks more like an emerging market. It's actually kind of the reverse of what you said, Martin, that in many ways China, although it still wants to be considered a developing country for certain purposes, looks like an advanced, first-world power. In some ways, the United States, although still rich, looks like a looks like a developing country with big governance problems.

The only thing I would add to that, and I I was strengthened in this belief by a column I wrote last week, and it looks fragile, market fragile, and if credibility is broken in any way, trust is broken. What seems to me very likely is we don't have a replacement for the dollar. That the what we cannot assume will last is the integrated global financial markets. They might simply fragment. Uh, the the the extreme integration of financial markets seems to me to a significant degree dependent on the role of the US as a financial power and as a um, and as a superpower in all in all ways. So if what Paul is saying is going to happen, then we've got a pretty big problem. Someone is it's not mowing their lawn. It's I don't know what they're doing. What worries me is it may be somebody sawing a log across the lake. Yeah. Sorry. I was figuring correctly that there wouldn't be many boats out on the lake, but I wasn't counting on that. No, that's not going to stop. All right, I'm going to have to move back inside. All right, give me a minute here. Hi everybody. Um, I've just been forced to abandon my idyllic lakeside uh recording location because um somewhere uh out of sight across the lake somebody appears to have decided to uh make extensive use of a power saw. So back into a more mundane indoor setting. So the next question follows on from our previous discussion and is from a listener named John, who didn't say where he was from. Uh, and asks, what is the optimum mix of tax rates and debt interest costs for an economy? Um, the US has been of course cutting taxes on the well-off and borrowing a lot. You know, when will government debt become more problematic than tax rates? Uh, is there an algorithm to calculate the optimal balance?

Okay, this is actually kind of fun. It's not so much an algorithm. We have a theory of when you should run deficits, when you should run up debt, and when you should try and pay it down, which goes all the way back to uh to David Ricardo, which is that high tax rates do have negatives to them. They they're a disincentive. There can be administrative problems. Um, and uh, but on the other hand, you don't want to deal with emergencies purely by uh, you want to deal with emergencies partly by borrowing, not by raising tax rates all the way. So you run up debt during wars, other emergencies, you should try to bring it back down, at least as a share of GDP, uh, in other periods. Um, the United States is not doing that. Um, we're running large deficits um in the face of an economy that is, you know, there's no war. Uh, there's no pandemic. Um, unemployment is low. We don't need fiscal stimulus at the moment. Um, and uh, it's just irresponsible policy. Um, and it's not a question of optimality. Clearly, you wouldn't be doing anything like this. Um, no no reasonable recommendation about fiscal policy would say that the United States should be running large deficits um and and steadily increasing the ratio of debt to GDP under current conditions. Um, of course, to fix that, something has to give. So you could cut spending, but the the uh big budget uh bill already has savage cuts in social programs for the poor. So you'd have to really go after the middle class, which is politically difficult. Or you'd have to raise taxes. Um, but you know, uh uh one party actually always wants to cut taxes on rich people, and the other, although willing to raise taxes on the rich, is not willing to raise taxes on the middle class. So it's a political conundrum. It's not it's not a question of of hard economics. The economics is actually pretty simple. It's the the politics seems to be insoluble until until a crisis comes.

The only point I would add here, which is obviously important, is that the position of the US in terms of debt ratios now and forecast under these budgets are probably not critical, would put it in uncharted territory. Um, within an appreciable period, the US federal debt ratio and general government debt ratio to GDP would be higher than it had been after the Second World War, and that would be rather a striking place to be in what seems to be a prosperous era of peace. Now let me go on to the next question, which is from Raphael in Britain, and it's really an interesting one. In this series, you've talked about the corrosion of post-war consensus institutions, democratic norms. I share your anxieties, but I worry also that framing the challenge in terms of defense and restoration risks casting liberals in the role of an Arian regime, clinging to outmoded analog systems that many people think have failed. This way, we enact the very caricature that populists would have us play. Should we perhaps be thinking more about what an entirely new 21st-century set of institutions molded to the digital era would look like?

I think that's a fascinating challenge and probably a challenge for political theorists and political scientists more than more than economists. I suppose my response first of all is that unfortunately, I don't know whether we can turn this around. It's a very big part of the problem of those ancient institutions was created by the technologies of the digital era, and I particularly uh think here of social media, the uh the way the algorithms of social media work, the ease with which we can fragment um the whole set of communications and understanding of reality of our societies, exploited so effectively by populist politicians. The ability using these technologies to spread uh lies throughout the uh the population and exploit people's what might think of as rational ignorance. The fact that it's very, very hard work to find out what's really going on. So I see unfortunately digital technology as part of the enemy here. And I also think that those institutions, and I probably perhaps this is partly age, but not just age, I think it's experience, work pretty well. And if we're going to um really discard them for something else, then we really need to be pretty confident they are going to work better. And when I look at what's going on with populist politicians across the western world, and obviously Trump is the leading example, it really doesn't look very good, does it? But I do think that there are some absolutely fundamental political questions to be answered. Uh, how should we strengthen our system against the sorts of challenges it it's now confronting? And part of that is about what non-populist politicians should be doing when they're in office to make people feel safer. Um, to make people feel that their concerns, including for example, we discussed this earlier about immigration, are addressed. I was more optimistic than it turned out I should have been about what the Biden administration was doing, but it seemed quite a bit of what they were doing was was at least in the right direction. But I do think finally that we should be thinking about some new institutions. I'm very interested in the greater use of citizens' assemblies, and I know the arguments against it, but the Swiss really do a very impressive job in sustaining their democracy, and it's a very diverse nation, um, using referenda. Maybe there's a way we could use digital technology to make direct citizen feedback on policy more effective and more uh more relevant, and maybe that's also a way we can bring people together across the world. I think this is the sort of area a lot of people should be thinking about. But I would stress that throwing away institutions that have worked so successfully in the last 60, 70 years, have been in many ways the most successful in human history, um, throw them away because a number of people are disappointed with the outcome and because skillful politicians, demagogues have exploited it. That seems to me very unwise.

Um, let me just add that I think there's a tendency to overstate um the role of kind of technological determinism and particularly of digital in all of this. If we think of the sort of post-war institutions as being uh uh well, social democracy, you know, market economy with with a strong social safety net and limitations, you know, the the whole um uh thing that I think both Martin and I support, uh, the the turn against that, the the hard right turn of part of the political process and the rise in political polarization in both of our countries really comes around 1980 with uh with Ronald Reagan and Margaret Thatcher. Um, and in the United States at least, where I'm I'm more in touch with the ins and outs, the transformation of the Republican Party into a hard-right uh institution that um is kind of contemptuous of democratic norms, that really got started 30 years ago with with Newt Gingrich and the um and the radicalization of Republicans in in Congress. So, uh, all of this really predates uh the digital stuff. I mean, I'm sure that that Facebook and and TikTok make things worse, um, based on just the general principle. I actually never use either of them. But um, I I think we we really need to understand that some, whatever it was that went wrong, it started going wrong a long time before social media became the the monster that they are. So let me just say uh, you may occasionally hear my wife in the background because we uh, it's the modern world. We're both on uh on uh streaming calls and it's uh just given the internal geometry here, we're about as far apart as we can be. Okay. Uh, yeah, that question was addressed to me, but it's something we're both interested in. To what extent do you think crypto assets are already integrated into the traditional banking and financial system? Are we underestimating the potential systemic risks they pose? Um, furthermore, with Trump promoting pro-crypto policies, how do you assess his administration's impact on the legitimization and integration of cryptocurrencies into the traditional system? Uh, or is it more likely to fuel speculation rather than increased institutional adoption?

Okay, I have spent a lot of time on crypto uh over over the years. Um um I I sometimes do go to crypto conferences where uh I'm I'm the um designated enemy uh and uh and uh you know, they're they're they're polite and they do actually pay me a speaker fee in actual money. Um, but the here's the thing about crypto. Um, it's become a huge asset class. So we're talking more than $3 trillion of assets, but there's essentially no use of crypto in legitimate non-crypto economic activity. There are um nobody really takes takes crypto as a means of payment. Nobody uh um uses crypto for collateral or you know, anything like that. It's um um except except in purchases of other crypto assets. Um, this has been true even in places like El Salvador, which have tried really hard to promote the use of crypto, and it turns out that that still goes nowhere. It it basically is crypto doesn't solve any real problem. There's nothing um that crypto does that you know, perfectly legitimate uh non-blockchain-based forms of of digital payment don't do more cheaply and better, except for uh money laundering and extortion. So basically crypto is good for illegal activity, but not for anything else, and that hasn't changed. That said, um, if you've got trillions of dollars in crypto assets, which increasingly take the form of stablecoins, which are, you know, are backed by uh supposedly anyway, backed by by things like Treasury bills, um, you do create something that looks from a financial risk point of view a lot like um banks before banks were regulated, before deposit insurance. In fact, they look a lot like banks in the United States when um when the federal government didn't issue paper currency and and currency was was notes issued by banks that sometimes went under, and uh there's there's quite a lot of systemic financial risk, which is quite a trick for something that is actually not being used for normal business. Nonetheless, it's become a major source of risk. This seems to me to be um clearly uh clearly right. And there's also um the interaction between the um regular financial system uh and the cryptocurrency world worries me a little. There's obviously a lot of deregulation going on. Major banks are engaged in this. I don't know what's going on there. I'm not saying there's a risk, but I wonder whether and how far the regulators in the US, who are not always on fully on top of things because the system is so fragmented, are really aware of the possible um risks here. And the stablecoin role seems to me particularly significant because they are supposed to play some sort of role in the intermediation of cross-border finance, which is always particularly difficult to regulate, and they are supposed to be stable, and there are so many ways to operate these uh which would undermine that stability, and it's not at all obvious, well, to put it mildly, that you could make a profit issuing these if they are really stable. I mean, that's part of the problem. So the I think there are there is a lot of concern here, and I have a lot of concern about the money that is behind the lobbying which is leading uh the US administration, in particular, to liberalize so radically the regulation in this sector.

Let me just add that many regulators are very aware of the risks, but for the most part, those or many former regulators, because by and large they've been fired. So, uh, we're talking about a situation where, um, warning that we may not be safe in going down this route, um, is disqualifying for a position in the current US government. And I would just conclude by saying, I wrote a column about this years ago in which I said it's pretty obvious if you look at it carefully, that if you think about the fundamental core functions of money, um, cryptocurrencies don't meet any of them. Yeah. Let's move on to the next question, which is from Lars, and we're not sure where he's from. Sort of suggests somewhere Scandinavian, but maybe I'm wrong. Um, you suggest that the rest of the world should introduce climate tariffs on the US. What forum will be suitable for such action?

Well, I like that question. Um, well, I think I suggested this, but I can't remember. Um, but uh, the EU has invented something called the Carbon Border Adjustment Mechanism, and the basic idea, I don't want to go through the complexities, some of which I'm sure I'm not aware of, is that um, tariffs would be imposed on countries that do nothing to ameliorate the greenhouse gas emissions in their industrial processes, and particularly in their as embedded in their exports. There will sort of be a form of countervailing duty equivalent to the countervailing duty the system the trading system already allows against subsidies, but in this case, it's on against environmental dumping, which artificially lowers the the market price because it doesn't internalize the social cost. And this, the idea of the EU was, we would impose this mechanism, but it will be reduced or eliminated if the country concerned did take action to lower the emissions associated with the production of its exports. And in this, it's an obviously it's going to be quite an interesting thing how it will deal with China. There are all sorts of interesting questions, but in principle, this is a mechanism that not only should but must be imposed on the United States, um, because the United States is going backward in this area dramatically, so insanely so. I find it impossible to understand all the actions they're taking against energy efficiency and clean energy. Um, and uh, in the trade negotiations which are we we are told coming to a climax right now between the US and EU, I hope the EU will make it clear that they're not going to give up this mechanism. And if the US goes down this road, well, these uh adjustment mechanisms will be imposed. And I think it's the basic way that the rest of the world should follow. The the route it should follow in dealing with what is becoming in this area a rogue superpower.

Can I add? I actually did some years back, but when we were still talking about, we still are a little bit back when we're talking about carbon taxes or cap and trade systems that would have much the same effect as a carbon tax. Yes. Um, in limiting emissions, and the question is, what would you have a border tax adjustment? And the answer to that seemed to be very clear that first of all, you you should, and second, that it would be fully legal under the rules of of the the World Trade Organization, just as um, um, because a carbon tax can be viewed as essentially a tax on your own consumers, that saying that that you have to pay more for something that is generating a lot of greenhouse gases. Um, and just as value-added taxes, there's a border adjustment. Imports have to pay VAT because it's the VAT is basically a sales tax. And and there's actually there's no discriminatory treatment in saying that imported goods pay the same taxes as domestically produced goods. The same thing would be true. Now, if the policies are more like industrial policy, if they're which it looks like where we're actually going, and they take the form of of promoting renewable energy, then the question of what is the appropriate border adjustment becomes a lot harder. But the principle is the same. It doesn't really require a new mechanism. Uh, the EU can simply go ahead and do this, and it can justify it by um, saying what we're doing is actually legal under the principles of the General Agreement on Tariffs and Trade, which it I would say almost certainly is. Uh, so just, you know, go ahead. This is not actually necessarily punishing the United States for its irresponsible policies, that would be going a step beyond, but at least saying that that, in in effect, look, uh, we are spending money to reduce damage to the planet, and good people buying goods produced by countries that are not doing that um should be obliged to pay an extra cost. That seems to me clearly correct, and uh, the question really is courage, because it will just add another element to the trade war. But since we're having a trade war in Europe with the United States anyway, well, why not have it for some very good reasons? Uh, and if the US regards this as offensive, well, they there's a perfectly reasonable mechanism for them to deal with that problem. That is to say, recognize that they are imposing massive costs on everybody across the planet.

Let's go to the two linked questions. Uh, we're going to put them together, and that's because they're critical of us, which is very good, and just as it should be, because we have tended to agree with one another rather in this series. So here we go. The first one comes from Olaf in Germany. It's more a statement than a question, but goes as follows, and perhaps Paul would like to respond when I read through it, because it's very much about America. The FT and the New York Times, well, you're not part of the New York Times anymore, but you were once. The FT and the New York Times are part of the establishment. The rise of Trump can be seen as a reaction to the failures of this establishment. Trump's flawed character invites a mistake. Deal with Trump, but ignore the underlying critique of the status quo. I think you might be making this exact mistake. Many of Trump's actions are based on real concerns. Concerns that have been created by the growing blind spots of a self-satisfied establishment, an establishment that you two are leaders of. Just focusing on Trump does not deal with the underlying issues. And I think we should take them separately, though they're linked, but I'll I'll just give the other one because it's very short. What objective economic metrics would the US economy need to hit for you to admit that the Trump administration is a success? So, Paul, would you like to answer the first one, or even both right now, and then I'll respond?

I think I can do both. Uh, I don't feel like part of the establishment, although I guess uh, you know, that that's always a question, what what does that mean, or do we even have an establishment now? But once in my life, a policy actual policymaker actually took advice from me, um, and I was the prime minister of Japan, so you know, it's it's not like I've actually been uh very much in the middle of things. And um, uh, but anyway, um, I would question the thesis is that the rise of Trumpism, uh, or of populism more generally, is a is a response really to establishment failures. I mean, clearly the establishment is always failing. Um, but um, I look at, and I I know the United States best. I look at the kind of third percent or so of the electorate that is really seriously MAGA. Um, and um, those are, as far as I can tell, there's always been 25, 30% of the electorate that is has quite radical uh um dislike of society as as it is, um, often involving a return to some kind of imagined past. But it's um, and it's it turns out that uh, um, if we ask, you know, how much does economic anxiety, favorite phrase a few years back, contribute? Certainly there are there are real reasons for complaint, but often the, those are not the most radical um voters, and also they vote for policies that actually make them worse off. So there's a real problem. My sense is that there's always been a a discontented uh thing, and maybe going to go a little off where our usual thing, but you know, one of the big factors right now in US politics is the the rise of the the manosphere, people who are uh want to celebrate masculinity, hate feminism, want to restore traditional gender roles, that sort of thing. That doesn't have anything to do with failures of the establishment. That's something that has always been there. What I think really happened, the real story of what happened now is that we used to have uh a much broader sort of centrist elite that that ruled out certain kinds of positions. My sense guess is that if we'd had a Trump-like candidate in uh in in 1970, um, he he could very well have gotten 30, 40% of the vote, but the Republican Party of 1970 would have said no, you know, this we do not go there, and u it's it's more the the the center not holding than it is that that people have been radicalized by establishment failures. Um, and, you know, you look at countries that where everything seems to be uh really uh pretty much okay in terms of material conditions. Just look at Denmark, which has high GDP per capita, high wages, strong social safety net. Um, and there's right-wing populism, nationalism, uh, uh, fair bit of, uh, kind of white supremacist politics even in Denmark, which tells me that this is not something that is really about policy failures.

I I would make one comment on that. I agree with this. The the the pointing at the economic mistakes of the establishment is I think very seriously overdone. Um, and I think the point of cultural changes is important. I would say there's something else here which I think is implicit in some of what Paul has said earlier, but it's very much a theme of my book. There have been some very, very big changes over the last three or four decades in our society. Some of them truly revolutionary and huge social changes um create have political consequences, and it's not a policy failure, as it were, that there were these changes. Actually, there were policy successes. I'll come to that in a moment. But you have to work out a way of dealing with them in a sensible way, and we haven't done a terrific job on the whole establishment in this way. So let me just list a few of them. I mean, my view is over the last 40, 50 years um, the natural process which Paul's also written a lot about of de-industrialization has created some very large changes in the way we organize our economy, the way the the working class operates. This is linked with political changes, the radical weakening of trade unions, and and that has in turn helped the erosion of the safety net in some countries. Then if you look at the rise of the manosphere, which he's absolutely right, well, there has been the biggest revolution in my lifetime socially. I'll leave aside globally, the rise of the developing countries, which is an equally big shock in some ways, has been the transformation in the role of women. When I compare my mother with my daughter, very similar societies, they have completely different views of their role in society, and the women have turned out, surprise surprise, to be at least as bright, if not brighter, than the men, and the men hate it because they're losing they're changing their position in society. So whole r I could go much further. There have been lots of big changes in our society driven by our very dynamic economies and social systems, and we haven't done a terrific job of adapting to them. Politicians are only a small part of this problem. But unfortunately, where I park company completely with you is it seems to me that the people who are exploiting it, the so-called populists, are all the people who are trying to make these social changes go away or pretend they can be reversed with these ridiculous tariffs and turn us back into the mid-50s or even further back, and that's obviously insane. So the the ultra-reactionary response is an indication of the problem. Um, and the problem is profound social changes which societies have to adapt to in a sensible way. What frightens me about this is they will fail and they will ruin almost all that's good about our societies.

Yeah. I mean, I I know I'm terrified by by where it's going, but it's it's not clear again that that uh what would you have done differently? is not an easy question to answer, and what can we do now is certainly not easy. And I would just say that yeah, social change is a much bigger story. And again, I we were talking earlier about digital and um, but I think there are other things. One of my favorite um labor economists and one of the most richly deserved Nobels uh in recent years, uh Claudia Goldin, um, she's done a lot of work on the transformation of women's role, which really got going in the 70s and is still reverberating, and which has a lot to do with, you know, not digital technology, but the birth control pill. And in some ways, where we are now is you could argue that that the introduction of of easy-to-use birth control, you know, lit a very long fuse that is now exploding in political radicalism in the year 2025. Let me just respond briefly to this last question about what objective economic metrics would the US economy need to hit for you to admit that the Trump administration is a success. Well, my short answer to that, and it's linked with the column I wrote this morning, which is you won't know for sure how bad it will fail. I'm quite sure it will fail um, in full, for probably a generation. The point is that really radical changes in a society and economic system have a whole set of complex consequences which ramify. Um, so I was writing a bit about what what's the legacy of Margaret Thatcher to Britain now? It's very different, I think, if you look at now from what we thought it was in the mid-90s. Some of the things we will see quite quickly, if there's high inflation, a collapse of the dollar, um, uh, a run from the dollar in more general ways, a big financial crisis, these things will be relatively early. But it's quite possible he'll survive this. The US has there is a great deal of ruin in a nation, as Adam Smith once said. But the full consequences of what is a revolutionary transformation, in my view, we won't know. And that's where you have to use your imagination, because ultimately our ability to project forward is a big part of how we analyze have to analyze things. What do you think, Paul?

Yeah, I mean, if it's a quick failure, we'll know it. You know, if we have a a recession, if we have runaway inflation. But long-term consequences for technological progress, economic growth, social cohesion, um, that's going to may take a generation before we can really do an evaluation. Yes. I think that's the consequence, and that's where we can go back to history, because we sort of know with this sort of reactionary politics led by authoritarians. One of the things I've just discovered is that Trump has used in this term the the justification for inaction that it is a national emergency more than all previous presidents in the last 40, 50 years. That's an indication of a completely new style of politics, and we know what that leads to in the past. It's it's I'm unfortunately, there's no other word. This is a fascist way of governing. Okay. I think um, we're at the point where we talk about our cultural code. Yes. I wish my cultural code was more upbeat. I have a a song by Carole King, uh, who wrote many of the most widely played songs of my childhood, basically of the 60s and 70s. But a lot of the music that I grew up hearing everywhere, uh, was written by her, and um, uh, she had a great song called "It's Too Late," uh, where the lyric is, "Something has died inside." Um, and um, the um, I I just can't fake it. That beautiful song, and you know, we have to behave as if it's not true, but I do sometimes worry that it really is too late, baby. So my cultural coder this week will be another bit of opera, just to give the contrast with Paul, and it's "Va, pensiero" from Verdi's Nabucco, and it is once again, as quite a few of my other coders have been, about liberation and freedom, and this time national, not individual. The theme remains as alive today as it was in the 19th century when he wrote this, more precisely in 1841. Just think about what's behind the wars in the Middle East and Ukraine today. The opera, and the opening chorus in particular, is about the desire of the exiled Jews for a return to their national homeland. And it was set during the exile in Babylon in the sixth century before Christ. And that was ended famously, and I think with incredible irony, by Cyrus the Great, who was of course founder of the first of several Persian empires, what we now call Iran. Verdi wrote the music, as I said, in 1841, and he was heralding the hope for liberation of Italy, which was to occur two decades later. And on that note, we'd like to thank you very much for joining us for the Wolf Krugman Exchange. We hope these discussions have been useful and informative. We've certainly enjoyed bringing them to you, and I've enormously enjoyed the conversations with Paul. These have been extremely enlightening and fun conversations, and uh, if there's one thing to say about the world right now is there is no lack of things to talk about. And if you are in the Northern Hemisphere, hope you have a lovely summer. And if you're in the Southern Hemisphere, well, summer will come.