Political Economy

Ep.17: Political Economy, Technocracy, and the New Gilded Age with Robert Johnson

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Episode Summary for Political Economy, Technocracy, and the New Gilded Age

In this episode of Hidden Forces, host Demetri Kofinas speaks with Robert Johnson, about the political economy, inequality, and the failings of our technocratic institutions. Dr. Johnson serves as President of the Institute for New Economic Thinking and is a Senior Fellow and Director of the Global Finance Project for the Franklin and Eleanor Roosevelt Institute in New York. Robert Johnson is an international investor and consultant to investment funds on issues of portfolio strategy. He recently served on the United Nations Commission of Experts on International Monetary Reform under the Chairmanship of Joseph Stiglitz. Dr. Johnson served for many years as a Managing Director for George Soros at Soros Fund Management. Robert Johnson was part of the famous team of speculators that broke the bank of England in 1992, forcing the pound out of ERM. He served as Chief Economist of the US Senate Banking Committee under the leadership of Chairman William Proxmire, and before this, as Senior Economist of the US Senate Budget Committee under the leadership of Chairman Pete Domenici. Robert was also an Executive Producer of the Oscar winning documentary, Taxi to the Dark Side and is the former President of the National Scholastic Chess Foundation. Dr. Johnson received a Ph.D. and M.A. in Economics from Princeton University and a B.S. in both Electrical Engineering and Economics from the Massachusetts Institute of Technology.

In this episode, we will explore the history of finance. We will look to understand political economy and how money drives politics. We begin our journey at MIT, under the tutelage of Charles Kindleberger, perhaps the greatest financial historian of our time. We learn about the professor of political economy Thomas Ferguson and his Investment Theory of Party Competition. How do power and money make policy and drive politics? We take a ride through the Reagan Revolution. We contemplate financial deregulation and question some of the assumptions of Laissez Faire economics in an age of globalization, multi-national corporations and zero marginal costs. We contemplate the ways in which markets and the economy have changed in the years after the fall of communism and the rise of the Washington Consensus. We hear tales of the early days of high-finance, where Robert Johnson, George Soros, and Stanley Druckenmiller shorted the Pound Sterling, broke the Bank of England, and walked away with a 2-billion-dollar payday.

Black Wednesday was almost 25 years ago to the day. How has global finance, international trade, foreign exchange, and financial deregulation changed the landscape of speculation in the years since? How has a decline in productivity, a collapse in marginal costs, a rise in total debt, along with an aging demographic laid the groundwork for a rise in populism? What is the role of experts, and how has faith in technocrats and academics declined in recent years? How do we defend our liberal, democratic institutions absent convincing academics, trustworthy politicians, and inspirational leaders? How do we get the money out of politics when politics is so beholden to money? How do we reform a corrupted government that is in bed with wall street? A government that is beholden to multi-national corporations and co-mingled with industrial military companies whose very profitability is dependent on multi-billion dollar federal contracts? It’s time for us to become educated on how our political economy works, because if we don’t have the knowledge to call out “the experts,” then we are powerless to effect the very changes that we seek to induce.

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Reading List for Political Economy, Technocracy, and the New Gilded Age

Fault Lines: How Hidden Fractures Still Threaten the World Economy by Raghuram G. Rajan
The Escape from Balance Sheet Recession and the QE Trap: A Hazardous Road for the World Economy by Richard C. Koo
Too Big to Fail: The Inside Story of How Wall Street and Washington Fought to Save the Financial System—and Themselves by Andrew Ross Sorkin
Complexity and the Economy by W. Brian Arthur
Why Information Grows: The Evolution of Order, from Atoms to Economies by Cesar Hidalgo
Manias, Panics, and Crashes: A History of Financial Crises by Charles P. Kindleberger
The World in Depression, 1929-1939 by Charles Kindleberger
Golden Fetters: The Gold Standard and the Great Depression, 1919-1939 by Barry Eichengreen
Golden Rule: The Investment Theory of Party Competition and the Logic of Money-Driven Political Systems by Thomas Ferguson
Why Nations Fail: The Origins of Power, Prosperity, and Poverty by Daron Acemoglu
The End of Economic Man: The Origins of Totalitarianism by Peter F. Drucker
The Origins of Totalitarianism by Hannah Arendt
Theory of Economic Development by Joseph A. Schumpeter
Debunking Economics: The Naked Emperor Dethroned? by Steve Keen
The Crash Course: The Unsustainable Future Of Our Economy, Energy, And Environment by Chris Martenson
The Rise and Fall of American Growth: The U.S. Standard of Living since the Civil War by Robert J. Gordon
Capital in the Twenty First Century by Thomas Piketty
The Moral Economy: Why Good Incentives Are No Substitute for Good Citizens by Sam Bowles
Secrets of the Temple: How the Federal Reserve Runs the Country by William Greider
This Time Is Different: Eight Centuries of Financial Folly by Carmen M. Reinhart and Kenneth S. Rogoff
Devil Take the Hindmost: A History of Financial Speculation by Edward Chancellor
The Alchemy of Finance by George Soros
The Crisis Of Global Capitalism: Open Society Endangered by George Soros
Reminiscences of a Stock Operator by Edwin Lefèvre and Roger Lowenstein