Transcription
PHP. Soch. Well, thanks for this opportunity, and I'm very much looking forward to, uh, pick your brain and and and get some really interesting discussion going.
So, I'll dive in like some of the introductory questions. When questions about democracy, political leadership, and global order feel increasingly urgent, why Japan and why now?
You know, I didn't choose Japan. Japan chose me. I think that people in Japan, uh, Kazumarono, um, you know, who arranged to set up this interview and and co-op publish the book. I think that there's a lot of resonance now that we sort of go back to 1945 and we see it as a human event rather than a divine event, in a way. And when we saw it as a sort of divine apocalyptic event, and we saw Fukuyama talks about the end of history, but people thought the end of history was then because it felt like the history was ending. It felt like the whole world was ending. It turned out that the whole world was not ending, and like that utopia had not been found. You're sort of waking up from this world, and it's like in kind of the age of nations, these sort of these states established by America, if I may be so blunt, to rule the world, are sort of waking up and finding that they're teenagers, and that their parents are not gods. And what exactly are we doing here? And maybe might makes right, maybe might doesn't make right, but like, what are we even doing here? And so the sense in a lot of countries, certainly including the US, of like, what are we even doing here, has been, you has long has really overtaken this sense of like self-confidence. We have this system that assumes this enormous amounts of self-confidence, and from that becomes comes this enormous stability of the post-war bureaucracies, which created institutions that were really de facto not accountable in any way, and it was sort of expected that they would be perfect, and that they would need no watchdog above them, because how could there be anything above them? And then they start to just go awry in all of these strange ways. So, yeah, we're, we're the questions are no longer answered. History is not over.
That's the timing that we are facing today, and that's pertinent for the Japanese audience and Japanese setting as well, too. And why do you think people in Japan, on the other side of the world, should care about Cardi Saran right now?
Far too much power flows from Washington as the center of the world. And so when I sort of look at Japan's situation, you know, the sort of the myth that Japan since 1945 has been independent or what not independent, but let's choose a stronger word, sovereign.
Like, obviously, this is a country with a constricted sovereignty. It is still one that has maintained a great deal of national identity. It is the most non-American country in the world, despite being enormously Americanized compared to Japan 100 years ago. To hear from what I find is that people, especially in countries like Germany and Japan, find it interesting to see the same questions reconsidered from the other side, because the task of treating what you call Pacific War, a sort of normal historical event and not as a religious event, is I think actually of great importance today, because that is the period that established the rules of the international order. I think you, you talk about that in the in the book as well, too, like in historiographical questions and how, how we should understand that the World War II and, uh, v Japan v Germany. You're trying to scream to we shouldn't imitate too much of America, because America might not be functioning properly. And it's more like you have to relate as an adult. Like I have teenagers now, I have older children. Should they imitate me? Should they rebel against me? Should they, they, in a way, have to make that choice for themselves, and like, I'm not the one who's going to be in charge of that choice. I think there is no longer an advantage in the US as to sort of disguising the nature of the international order.
To simplify your ideas for a Japanese audience, would it be fair to say that you envision a political system in which the state is run more like a company? So the first question is essentially, why is the state like a company? And my answer is that they're being run for the same purpose.
Mhm. Because what is the purpose of a company? Most people will say a purpose of a company is to make things. Absolutely not. Maximize the profit. You're like, "Oh, we have to make a profit." No, that's even actually also wrong. What you're really trying to do is maximize the value in the longest possible term of the company's assets. And if it's a public company, the public's estimation of that value is in a number, which is your stock price, and you succeed if you make, as we say here, number go up.
So if we model a company as a country, we say, all right, well, what are the assets of this company? And our natural answer is the land, the buildings, and the people, right? And, you know, if the country is thriving, we should see the land and the people and the buildings thrive. We should be able to fly our drone over it and see that it is thriving. And let me give you an example of how to think about that stage and approach used by both Japan and China.
If a company is a country, the profit and loss of that c that company is a country is the global trade deficit or surplus. If you're running a trade surplus, you're making money. If you're running a trade deficit, you're you're losing money. All American economists being against this idea, somehow Donald Trump understands it intuitively. They'll say, we're losing $800 billion a year to China. Actually, somehow Americans don't seem to quite grasp how bad that is, or how that correlates with the country falling into ruins. It's China Inc. or Japan Inc. Obviously, you see what the assets are. It's human beings that help produce things. Here's one classical European expression of the purpose of government, which is solace populate supreme elects. The health of the people should be the supreme law. And if you put that together with like, keep the trade surplus up and keep the the people flourishing in a broad sense, you're doing well. For example, in Japan, you will see there are basically no giant supermarkets. Instead, there are small family stores. And Americans go to Japan and they say, "Wow, that is this is very efficient. Don't you people know how to make money?" And Japanese look at it and they and they're just like, "You're wrong." And we know you're wrong. Because what you're doing is you're actually doing you're solving the pre-modern purpose of government, which is to make sure that labor demand matches labor supply, and that everyone is needed, the dignity of working, and all that, right? You know, and that becomes, of course, increasingly more of an issue with AI. You're looking for a model that gives everyone an incentive to do the right thing, and you're hoping that that incentive works. And you basically see that if you give the right incentive to a monarch who is a CEO, and that problem is properly modeled as the same problem facing any company, then that works.
When you look at corporate governance, it's shaped like an hourglass. There's a pyramid-shaped structure going downward, which is the same as an army, or a baseball team, or a movie, or a restaurant. Any organization of a large number of people getting things done, always has an org chart that is shaped like this, and that leads you up to a single figure at the top. And the problem with the single figure at the top is that there's no redundancy. Having that single point of failure is very, very difficult. And that's why we have this amazing, I think, originally Dutch and then English forum of the joint stock company, that says we're going to put one person in charge, but they're not going to be quite an absolute monarch. They're going to be an accountable monarch, and we're going to have a board of directors, and then above that, a shareholder structure that holds the CEO accountable, so that we can basically fire the CEO if he's doing a good job.
I think that's u wonderful for the company, right? Like you have a joint stock company, you can freely exit, uh, land, right? Like you're located within the land, you have a family, you have the people connected to you, and and all of a sudden, if you're in a fire, or you get fired by the by the nation, how do you, where do you go? This model still works even if there's no migration at all. Your people are liabilities as well, right? You have to provide, uh, you know, like any Roman common farmer with a slave. You have to provide for the old age of your, like you have there are a large number of people who are basically useless mouths in your state in this situation, and they still should flourish because we're human beings and not evil robots. If you can see, oh, the crude economic incentive is we just deport all the useless people, that doesn't really work either, because you're not simply basing on a GDP or anything like that. It's, it's more like a solace of the people, which which will be very difficult to quantify in some sense, right? And there are many, many things in management that are difficult to quantify, but you can see in the long term, right? And and that's, that's sort of the whole art of management is to turn the unquantifiable into the quantifiable.
First assumption is that your CEO of the nation is sort of like the CEO of any Fortune 500 company. Maybe he's not Steve Jobs, but he's not Hitler either, right? First of of all, this is a generally like sanity and peace producing structure, but you still want the CEO to be accountable in some sense, right? Why does the CEO need to listen to the board? Why can't the CEO just arrest the board?
In the CEO obeys the board in the 21st century. First of all, you have a closely related question, what leaves the CEO in control of the country? So how do you enforce that if it's not built built on like sort of public opinion being behind whatever? Well, we have in the US military this technology called a a permissive action link, or a PAL. It's what's in the nuclear football of the guy that stands next to the president. And the way our nuclear weapons work is that only someone with the codes can activate them, and only the president, and this person presumably loyal to him, has these codes. That was 1960s technology. Today, you can put that on every single weapon held by a government. You know, the state's military can only fight with proper authorization, otherwise their guns will not work. That also allows you to to solve the board problem. The board literally on the blockchain has the power to fire the CEO, because we invented this thing that is actually above sovereignty. The board can fire the CEO. The new CEO's guns work, and the old ones don't. Then you're like, "All right, what if the CEO arrests the board?" And I'm like, "That's very simple. The board is anonymous."
I guess you didn't you didn't talk really much about the the board board system in this book, because that that was the question that I had for a long time, like how, how do you make the accountability? How do you, you know, restrain the certain, you know, desire to dominate, right?
In choosing that individual, in choosing that focus of power, you just have to choose right. History is dangerous. Don't screw it up. And you choose someone like say, a Kemal Atatürk, or even a Deng Xiaoping, someone who is really a Lee Kuan Yew, someone who's really seriously devoted to the future of the country. Uh, that's a solvable problem, because that person is just like, all right, here are 17 people that I really respect to carry on my legacy, all younger than.
In that sense, how do you assess the current, the second Trump administration, and how, how he's faring, because he seemed to be doing a lot of things that that you pushing the CEO to do, the the holding of the executive power. And.
Two things about the second Trump administration. There's no denying that it's like 10 to 20 times as powerful as the first Trump administration in terms of the influence of the White House on the government. It is still probably 100 times, 10 to 100 times less powerful than Franklin Roosevelt's impact on the federal government of his time. The first Trump administration realized that it had to go to war against the administrative state, against the deep state, the civil service. Um, and they're like, "Oh, darn. We should have been prepared for that war." The second Trump administration was prepared for that war, right? They did not, however, realize that they would have to go to war against Congress. I would say largely because again, these ideas, these kind of different perspectives, really, you know, seep into, they seem very bottom-up through the like younger people in the administration. And so, for example, if you look at Doge, at the top levels of Doge, it's really the mentality is, let's, let's save money for the government. And at the bottom levels of Doge, it's like, basically like, you know, this is war. Let's go, go to war against the deep state. Let's sort of kill the pillars of the deep state, like USAID.
Do you envision that that sort of actual change taking place within this administration before 2028, or is this something that you have to wait till the the next administration to really implement?
Are sort of everyone's projections are that the Democrats would win again in 2028, and then the question of whether it's sort of possible to win the election in 2032 comes into place. You would probably be ready to see somewhat more radical takes on the system, because here's, you know, the fundamental nature of the system is very like the USSR in 1988. And the USSR in by the mid to late 80s, there was a widespread loss of belief in the system, not just among the masses that it ruled, but even within the nomenclature. Right. And so when you have a system in which the passion is dead, it's just very easy for anyone with the initiative or authority to say to that system, it's over. And that's what happened in East Germany. Like that's what happens in Czechoslovakia. That's what happens mostly in the USSR, although there's a little bit of, you know, conflict energy there, but almost none. It's like surreal. And the miracle of the thing that Trump sort of learned experientially and then ignored is like, he could have after he took down USAID, he could have just kept moving. He could have gotten rid of the State Department. He could have done an American Gorbachev doctrine, decommissioned the whole American empire, closed bases, closed embassies, and that would have had the same effect on America that the Gorbachev doctrine had on Russia, because that would have said to America's allies, such as Japan, hey, you actually are an independent country now. And you're never going to go back to that. And like actually, you've done something irreversible. And like when you're actually seeking to change political arrangements, the currency of that is irreversible acts. And once that that takes place, like the the all of a sudden US hegemony in in some sense just ends. Right? That would be one policy that a new regime could take, and I think that that's a very effective policy for the same reason it was very critical in bringing down communism in the USSR.
Are say you go to Paris and you see that Paris in many places is quite beautiful, and in other places it's a decaying, dangerous slum, and there don't even seem to be any French people. All right, why is this? Most Americans think the cause of this is French. It's all America. And so basically, when you say to France, you say to Germany, hey, we actually don't care how you govern your countries, their first response is to be, wow, we really don't need to keep all these Africans and Middle Easterners around all over Europe. Europe, you know, suddenly realizes that it can re-Europeanize itself. It very rapidly will.
Does it take a CEO type leader to change that, or that the current bureaucratic system can shift that, that the move? But I mean, like Japan's like has a certain immigration, uh, policy which was implemented by the the bureaucratic government, right? We can consider it objectively as political science. For the problem with these bureaucratic governments is that there's a conflict of interest. The bureaucracy does not have the interests of solace populist supreme elects in mind. It has a self-empowering interest in many ways, and it's clear that empowering the bureaucracy is weakening any competition to the bureaucracy or anything that might challenge it. That means weakening populism, weakening any kind of literal democracy, and that means an incentive, a political incentive to import foreigners.
Once you see this pattern of the incentives of bureaucracy becoming perverse, and this conflict of interest developing, you kind of see it everywhere. So, for example, expanding NATO to the east. This is a policy that George Kennan warns against. This is a policy that William Burns, head of the CIA, warns against. Everybody, all the elder statesman people who don't have to climb in the hierarchy are like, "No, this is a bad policy. This is going to start a war for no reason." Can't stop the policy. The war starts. And so you see all of these cases in which basically the elegant, you know, thing of the sort of what I call the neo-cameralist, the design of the state, state, it's a joint stock company, is that there are no conflicts of interest.
When you look at this kind of model of the state as as the kind of sovereign firm, and when you see basically, okay, the sovereign firm should be prosperous, it should be profiting, it should have a high trade surplus. One of the most pivotal events in Japanese economic history is the Plaza Accord, where the US uses its diplomatic and even military power to say to Japan, hey, you have to revalue your currency upward. But I think Japan was was hit the hardest in some ways in that. China, of course, would, you know, would laugh at being named a currency manipulator. In in the case of a nation is firm, what you're doing when you basically keep your currency down is you're keeping your prices low. And of your national products, and you're also paying your employees less. So essentially, the Chinese state is like, all right, we pay our employees less, we have lower labor costs, that's fine, because actually luxury does not improve people, it mostly degrades them. So we'll we'll work them hard, because that's good for their moral character, and we care about their moral character because we own them. And that's very consistent. And and in doing that, we'll build up this giant manufacturing powerhouse. And that is completely under my theory of government, that is completely completely responsible, correct? That is the proper thing for the Chinese government to do. Um, this is all really set out in my, uh, my favorite economist, Friedrich List, uh, um, 1840s economist. I think these policies have been hugely successful for China and Japan. Uh, Japan would be even more successful.
What sort of division that you have once that American primacy weakens? France to Germany, local, national, and nihilist suddenly have no boundaries at all, no barriers to their action. Uh, we're no longer imposing limits on your military. If Japan wants to pick a fight with China over its old colony, Taiwan, how Japan wants to deal with North Korea, that is no business of the US.
What do you think the biggest mistake Japan could make in the next 20 years? You know, China is like has a doctrine of like peaceful rise. I don't think China is thinking in particularly militarily aggressive terms. Oh, we're going to basically replace the role of American foreign policy and be like, we are the defenders of Taiwan. We will go to war in the Taiwan. That's for me.