Patrimonial Capitalism: Peter Hall on Trump, Orbán & Other Pitchfork-Wielding Plutocrats

00:00:31 Andrew Keen: Hello, everybody. One of the great questions of our age is what comes after what my old friend Gary Gerstle, who's been on the show many times, calls neoliberalism. Gary is the author of a very successful book, The Rise and Fall of the Neoliberal Order: America and the World in the Free Market Era. Gary and others suggest that the last hundred years has been made up in historical terms. At first, maybe think of it as the New Deal age, then the neoliberal age, and then something that comes after neoliberalism. In fact, a couple of years ago, Gary was on the show identifying the outlines of our, what we call post-neoliberal age. A man who's given a great deal of thought both to the history of capitalism and democracy and what comes next is my guest today. Peter Hall has been teaching at Harvard University for many years, and he's the author of an intriguing new book, Governing Growth: The Postwar Transformations of Capitalism and Democracy. Peter is joining us from Massachusetts. Peter, congratulations on the new book. Do you agree with Gary's— I know you're very familiar with Gary's work. He may even be a friend of yours. Gary's argument in The Rise and Fall of the Neoliberal Order is first we had, shall we say, the New Deal democracies, then we had the neoliberal age of Margaret Thatcher and, Ronald Reagan, and now we're not quite sure where we are?

00:02:12 Peter Hall: Oh, I think that's right. I mean, when I think about, how the American economy, the American political economy has changed, My terms for that are a little bit different. I think of the first era as an era of modernization, partly because I'm also thinking about European countries, where the issue of how to reconstruct after the war and how to modernize their industry to compete with American firms was, preeminent. And then I think by the 1980s, we do get what I would call an era of liberalization, very much in the terms in which Gary is describing it. And I think a lot of people think we're still in that era, but my own view is that around, the turn of the twenty-first century, we entered a new era, what I call the era of knowledge-based growth, because I think that, the way I think about these things is in terms of what I call growth regimes. Growth regimes are constituted by a kind of combination of firm strategies on the one hand, public policies on the other that are at least to some degree, mutually reinforcing. And I think that we see significant changes in firm strategies and also to some degree in corresponding public policies around the turn of the twenty-first century, around late 1990s, early 2000s. And so I think that takes us beyond, what you might think of as a neoliberal age.

00:03:43 Andrew Keen: So could you give me some more concrete examples of how this manifested itself? Most people, of course, see the Great Recession of 2008 and '09 as a hinge moment. Is this your argument, or did all this happen around 9/11 or what Francis Fukuyama used to describe as the end of history? What exactly happened, and who are some of the participants in this shift, Peter?

00:04:15 Peter Hall: Well, you know, if you think about the neoliberal era and the terms that Gary and others, describe it, you know, we think, of course, of Margaret Thatcher, Ronald Reagan, and, I would say from the point of view of a firm strategies. And I wanna emphasize the—

00:04:31 Andrew Keen: Sorry. I'm jumping in here. I sometimes get into trouble for interrupting. But you say firm strategies. You're talking about corporations.

00:04:39 Peter Hall: I'm talking about corporations. I mean, I think that a lot of people, when they look at, these developments in the political economy, they think, unsurprisingly, largely in terms of public policies, but I think that there are two agents of adjustment in the political economy, responding to economic shocks, secular economic developments. Governments, democratic governments are certainly one of those agents. But, private companies are the other agent. You know, if you think about it, people's employers have as much impact on their lives as the federal government does in most instances. My life is in some ways much more affected by the practices of Harvard University, than it is by, what happens in Washington, although both matter. So I think that when we think about, how these political economies change, yes, we should look at public policies, but we also need to look at how, the strategies of large companies, change as well. And, you know, in the— this era of liberalization in the 1980s and 1990s, we, of course, saw a shift towards an emphasis on shareholder value. In keeping with that, we saw companies focus on their core competencies. This was an era when, Warren Buffett aside, conglomerates largely were wound down as companies sort of focused on their, most profitable enterprises. And this was also an era of outsourcing as many firms took tasks that they performed in house and moved them out to subcontractors who could often hire cheaper labor. And, you know, some of that certainly remains relevant. Shareholder value is still a central maxim in the corporate world. But I think, we see shifts in firm strategies around 2000. You know, who would we associate that with? Well, you know, basically the rise of the Apples of this world, the Steve Jobs of this world, Mark Zuckermans [as spoken: Zuckerberg] of this world.

00:06:53 Andrew Keen: Zuckerberg. Yeah. You mean Facebook—

00:06:55 Peter Hall: But, of course, a very different one.

00:06:56 Andrew Keen: Zuckerberg was still— In 2000, he still may have been an undergraduate at Harvard. I mean, even if he was at Harvard, he may have still been in high school. So—

00:07:07 Peter Hall: Yeah. Yeah. Yeah. But, around 2000, as you know very well from your own work, with the rise of the Internet, which is exponential starting in the late 1990s, and the widespread diffusion of digital technologies. You know, by the early 2000s, if large companies are to succeed, and to some degree small ones as well, they have to be using the new digital technologies. And that's really quite a profound shift, for many companies. And at the same time, and in keeping with that, you know, in the early 2000s, this is an era when firms, shift in general, shift away from, you know, tangible investment in physical assets, a plant, and the like, and put much more emphasis on intangible investments in marketing, in research and development, in corporate organization, and the like. And then I think also, I guess, thirdly, very important in the 2000s, distinguishing it from, the two decades before, we see the exponential growth of global value chains. Right. So we get outsourcing, firms subcontract their labor, to, firms hiring on secondary labor markets in the 1980s and 1990s. But by the 2000s and 2010s, it's— they're really subcontracting, if you like, the production of components and indeed services, outside the country's boundaries. Massive increase in foreign direct investment. So I think there's a big shift in firm strategies that really has to do with the technological revolution associated with digital technologies. And while, you know, some of the practices of the earlier decades, remain in place, I think large firms shift how they're doing business and how they're succeeding. And, government policy moves more slowly.

00:09:15 Andrew Keen: Right. So I take your point. I don't think anyone would argue against what you call this knowledge-based growth in the 2000s with companies like Apple. Google, of course, comes to mind, outsourcing global supply systems and all the rest of it. But how does that impact, Peter, on democracy and the nature of capitalism? Why does it matter that, for example, you have a, I don't know, a company like Apple or Google compared, say, to previous generation companies, maybe like IBM? What's the difference, and how does it play out in terms of, the nature of democracy? The subtitle of your book, Governing Growth, is The Postwar Transformations of Capitalism and Democracy. So how does this shift from neoliberalism to what you call the knowledge-based economy, how does it transform both capitalism and, perhaps more importantly, democracy?

00:10:17 Peter Hall: Well, the shifts in firm strategies I've described, certainly are central to the changes in capitalism. But, you know, I think as we all know very well, when, firms change their strategies, when, the basis for creating value added, shifts, we then get large effects on the workforce. Right? And so the 2000s are a period when we see skill-biased technological change. There's increasing demand for people with higher levels of education, particularly college education. And, people, without that kind of education constitute a large proportion of the Western democracies and the electorate in those democracies. Many of them begin to feel apprehensive about their work situation. Some of them begin to feel left behind. That's one piece of it. The other piece of it, as I think we know very well, is that there's a geographic dimension, to this knowledge economy. A large proportion of economic growth in this country has really been taking place inside 30 large metropolitan areas. I'd say half of the GDP growth in the US over the last twenty-five years has been in 30 large—

00:11:36 Andrew Keen: And, of course, one of those areas is where you are in Boston, another where I am in San Francisco.

00:11:43 Peter Hall: Absolutely. The transformation in Kendall Square where MIT is mind-boggling. When I moved here in the late 1970s, that was a, largely the preserve of auto body repair shops and small machine tool shops. And, now, of course, it's, the center of pharmaceutical engineering.

00:11:59 Andrew Keen: And I have to— I don't always like to include my own personal anecdotes. I couldn't agree more. I lived— we were talking about this before we went live. I lived in Cambridge, in the '9— in the early nineties, and I had a place. It's the first place I actually bought in Cambridge on Central Square. And I don't know anywhere in America, or for that matter, the world, which has changed more than Central Square, which is, of course, the— on Massachusetts Avenue, on the great street that runs between Harvard and MIT. So it's really astonishing, even more than in San Francisco.

00:12:36 Peter Hall: You should have held on to that place. I'm sure that— [unclear]

00:12:39 Andrew Keen: I'm sure. I wouldn't have to be wasting my time with a podcast, Peter. I could be retired and living— I could have bought my own island somewhere.

00:12:45 Peter Hall: Yeah. Probably. Probably. But, you know, the effect of those changes is that many people feel left behind, and we see the emergence of what I would call a new political cleavage. Right? Political cleavages divide some social groups from other social groups on the basis of systematic differences in their political views. And I think that, behind— you know, out of those developments, we see the rise of what I would call a populist cleavage, not just in this country, but in Western Europe as well, maybe Eastern Europe too, particularly separating people, with higher levels of education, a college education typically, from people without one. And, you know, look at our contemporary politics. It's a reflection of the emergence of politics [unclear].

00:13:36 Andrew Keen: You've done so many jobs just listening to a podcast you did called Understanding Populism. I know you also have the six theses about contemporary populism. Of course, Peter, you're not the first or last person to have theses on contemporary populism. But most, I think, are like Gary Gerstle, and they see this rise of populism come directly out of neoliberalism, is what you're saying that's different is this comes out of what you call the knowledge economy? So it's different from the standard— the orthodox view almost that populism is a direct result of neoliberal economics. Is that fair?

00:14:17 Peter Hall: To some degree. I mean, I think that, you know, the long-standing roots lie in rising levels of income inequality in particular, feelings of relative deprivation associated with that we already see in the 1980s and the 1990s. But then that supercharged by this new knowledge economy and the skill-biased technological change that we see. And I think it's being supercharged again by artificial intelligence. My own instinct from, having looked carefully at this issue, although it's hard to show this empirically, is that many people are worried about the extent to which their lives seem to be, subservient to inexorable forces beyond their control, nothing that they can control. They don't even see their governments controlling them. This pervasive sense of uncertainty. You know, the— a majority of people, in the US and in Europe think that, life is gonna be worse for their children than it was for them. And, out of that sense of uncertainty, I think, comes a willingness, more than a willingness to look beyond established parties, established governments, try something new, and especially—

00:15:39 Andrew Keen: And then we, you know, and the rest is politics, or the rest is Donald Trump, which I— we can try and avoid him in this conversation. Peter, I wonder, you brought up AI. And given your narrative, your historical narrative in this book, which suggests that, there are these periods, three post— I'm quoting from the book, three postwar growth regimes, era of modernization from '45 to about '73, an era of liberalization, which is really neoliberalization from 1980 to the late nineties, and then this era of the knowledge base of knowledge-based growth around Internet companies and the digitalization of commerce and corporations. Doesn't AI mark a very sharp shift away from that? Because the whole point of AI is it replaces the knowledge-based economy with something else.

00:16:41 Peter Hall: I think that's entirely possible. I mean, I think, you know, artificial intelligence, as, we all know, is a general purpose technology. Right? Which is to say, a technology that can be applied in many, many economic domains, many, many sectors, you know, like electricity or the combustion engine or steam power originally. And so I think it has the potential to transform the economy. And I think, like earlier digital technologies before it, like electricity, if you like, it's ultimately gonna force firms to change, the way they produce things, the way they market things. And so I think we may well be on the cusp of what I would call a fourth growth regime. And the thin end of that wedge is certainly developments in artificial intelligence if we all survive them according to, current concerns.

00:17:40 Andrew Keen: Yeah. We will see on that one. You begin your book, Governing Growth: The Postwar Transformations of Capitalism and Democracy, talking about an English economist, Andrew Shonfield, who's the author most, I think, of our viewers and listeners won't know of him. He's, the author of one influential book, Modern Capitalism: The Changing Balance of Public and Private Power. Of course, he wrote it in the mid-sixties in the pomp [unclear], shall we say, of the welfare state. How does the place of the welfare state, Peter, play? What is the place of the welfare state economics, and indeed welfare state politics in Governing Growth. It's, of course, in crisis or appears in crisis everywhere from the UK, Western Europe to the United States, to Elon Musk, who earlier in the year tried to destroy the very infrastructure, it seems, of, American government. How intimately bound up in politics is or are the economics of well— of the welfare state?

00:18:53 Peter Hall: You know, I think that, the maybe the most important point to make here would be that there's a way in which the welfare state as we know it, that's a term coined by, a British bishop in the late 1940s, to reflect these more generous social policies that, you know, we get early unemployment insurance in the first half of the twentieth century, but we don't really get what we know as the social policies of today until the 1950s and '60s. And why do we get those policies in that period? Well, I argue that one of the key drivers is the cleavage structure, the structure of political cleavages in, electoral politics during the 1950s and '60s. Electoral politics in the 1950s and '60s in Europe, for instance, was in the Western Europe was dominated by a class cleavage. You know, dividing a blue-collar working class, often a manual working class, with a white-collar middle class. And the effect of that was to push issues of, if you like, working class grievances, up to the top of the political agenda, to change what I call the terms of electoral contestation. And a variety of policies follow from that. I think the interventionist economic policies of the era have a lot to do with that. But there's no question that governments were responding, to this, powerful, class cleavage. And so in some ways, I think, it's central to the genesis of the welfare state. You know, and by the same now in the US, I should say that the same developments happened in the US, but they happened several decades earlier. I see exactly the same, developments and here Gary Gerstle would, I think, agree in the 1930s in the US with Franklin Roosevelt, where, again, this class cleavage was very central, to American politics as a result of the Great Depression. You listen to Franklin Roosevelt's rhetoric, and, you know, he sounds like a raving leftist. He's very critical of big business. They are in turn critical of him. And so I think, we get the Social Security Act of 1935 and a host of other measures that lay the groundwork, for the American welfare state in the 1930s. And then it's only really after the war, that a similar kind of political dynamic, generates, the social policies of the European welfare state after the war.

00:21:25 Andrew Keen: Peter, we do many shows, particularly with progressives, who always strike me or some of them many of them strike me as being nostalgic for not just the politics of the New Deal, but the economics. Is that wishful thinking? Can we go back in history? Is it conceivable to go back to the principles of the New Deal? We did a show, earlier in the week with Adam— last week, with Adam Jentleson, very influential Democratic strategist. He used to be the chief aide for Harry Reid. He has a new book out, Supermajority: How Democrats Can Build Lasting Power. He's a Democratic centrist. There are people, particularly, it seems, on the left of the Democratic Party now who, in my sense at least, think that we can really just lock, stock, and barrel go back to new to the New Deal. Is that just wishful thinking, or is it realistic?

00:22:32 Peter Hall: Well, I think we could use something new, but I think it probably is wishful thinking to think that, the solutions can be found in the New Deal. You know, if it depends what dimensions of a New Deal policy you might think of. Right? If we think about, the core issue is one of government intervention, then I think we are moving back. And I think that's a reflection to some degree, of this populist cleavage I was talking about. You know, a right populist party has been around in Europe, certainly, for, oh, a good forty years. The Republican Party in the US began to turn towards the right in a major way by the 1990s, but it really wasn't until about, the 2010s or so that these parties became serious challengers, for power, against the mainstream parties of center-left and center-right. And, those mainstream parties reacted, by introducing more interventionist measures, which I think were to some degree a repudiation of the neoliberal policies we were talking about earlier on. I think Bidenomics would be a classic example in this country. But if you look at the European Union, it's really after the rise of these parties that the European Union finally issues euro bonds, collective bonds, backed by the whole, European Union, introduces a series of huge infrastructural programs, you know, which are, advertised and to some degree really meant to be, ways to recharge growth, in some ways cope with climate change, just as Bidenomics was. But ultimately, they're also a response to this deep protest from regions and from people who are feeling left behind. You know, it's not coincidental that a lot of the Biden investment projects were located in red states. And indeed, if you look in Germany, the efforts to put in new semiconductor plants, they were located in East Germany, where, the AfD, the right-wing German party, has its strongest support.

00:24:49 Andrew Keen: Pete— Peter, what are your politics? Sometimes we get these big name professors from places like Harvard on the show, and they always strike me as if they're hiding behind their social science, their economics, their political science, their sociology. Do you have a political— I'm gonna say an agenda here, but you've mentioned class cleavages several times. Is that something that we should be celebrating or worrying about? Why should we care about any of this?

00:25:27 Peter Hall: Well, you know, I don't wear my, political heart on my sleeve, deliberately.

00:25:36 Andrew Keen: Do you have a political heart, though? You're allowed to reveal it on my show.

00:25:40 Peter Hall: I don't know. I think I have a political stomach, perhaps. But—

00:25:43 Andrew Keen: well, what's your political stomach?

00:25:45 Peter Hall: Well, you know, I'm a— I don't know. You'll have to try and infer that, I think, because I try not to write out of— I mean, we all have normative concerns. Right? There are things I care about. I mean, I care about, trying to make the world a better place. I care about trying to reduce, the threat of climate change. I care about reducing, social and economic inequality. So if you think that puts me in a particular place on the political spectrum, so be it. But, and those concerns, of course, motivate, you know, the kind of work that I do, the work that many people do. But, in my analyses, I try not to take a strong, political position. You know? Robert Triffin [unclear] talks about the social so-called sciences, and there's something in that. But, you know, I think there is something in social science that means we should let the evidence take us wherever it's gonna take us.

00:26:50 Andrew Keen: So let me revise the question then. You've commented a great deal on populism and the book in some ways is an academic response to the eruption of populism both on the left and particularly in the right and in Western Europe and the US. Is populism a way of forcing change? I mean, I'm no great fan of it, as you are, of Donald Trump. But he is forcing us to address the issues that you've pointed to, the fact that many people in the US and Western Europe have been excluded from growth, increasing inequalities culturally, politically, above all else economically. So is populism a good or a bad thing in terms of calibration or recalibration of politics?

00:27:43 Peter Hall: You know, it— that's a very good question, and I think it's, you know, at some level a good thing, which is perhaps having some bad consequences. Right? I mean, I see the, revolt of the left behind, if you like, the emergence of this populist cleavage as, a wake-up call for, mainstream governments, to think about, what the social consequences, the consequences for ordinary people were of that neoliberal age. And in that sense, I think it's, you know, it's a democratic movement. It's a risk. When I think about, the electoral arena, I think, what's important there is it, determines whose voices are heard most forcefully on government. And, you know, there's no question that, now the voices of a lot of people who feel left behind have been heard. Now what the result is, however, isn't necessarily, what they want, and it's not necessarily, what the country, needs. I mean, the other side of, right populism in particular, of course, is the threat to democracy, paradoxically. I mean, the world is not a simple place. It is full of ironies, and one of the ironies here is a movement, an electoral movement that comes— that really is an expression of popular discontent and therefore the sort of thing that a democratic system should promote, should certainly accommodate, on the one hand. On the other hand, can give rise to parties and governments, which instead of speaking, to the issues effectively, do something else again. You know, my friends, Jacob Hacker and Paul Pierson, like to talk about right populists, including in this country, as, plutocrats with pitchforks. You know, their argument is that, in some ways, like right-wing parties through time immemorial, they're using populist appeals, to secure electoral support, and then they're governing, on behalf of a few large favored, companies, a few large favored sectors.

00:30:04 Andrew Keen: And yet, I mean, another irony, I take the point on plutocracy or the plutocrats with pitchforks. But one feature of the MAGA movement or Trump in particular is using the state sometimes to pursue his own interests, maybe in a weirdly kind of patrimonial way, almost like a mafia leader. So what does this shift towards a kind of rotten statism or what appears to be a rotten statism, particularly in the US and maybe in Western Europe? What does that tell us about the future, not just of democracy, but also capitalism? And does it suggest that maybe the real convergence you've talked about cleavages. The opposite of a cleavage, I guess, is a convergence. The real convergence is between the Chinese model of statist capitalism and this American model of or at least Trump's model of patrimonial capitalism.

00:31:03 Peter Hall: Yeah. Well, I'm afraid— I think you're all too right about that. The question is how durable, is this? I mean, I think patrimonialism is exactly the right phrase to describe, the way in which the current administration is governing, and it's not without precedent. This is more or less the same thing we saw in, Hungary under Orbán, several other East European countries under populist right parties. I mean, those were parties that empowered a certain set of oligarchs. Right? And I worry that we see something similar in America at the moment. The question is, you know, is this a sea change, something that's gonna endure past 2028 or not? And, I don't think I know. I mean, I wouldn't bet on it, certainly.

00:31:53 Andrew Keen: That's hard to bet on anything these days, Peter. The title of your book is Governing Growth. You mentioned earlier that you were an— or you implied earlier you were an environmentalist. Of course, many environmentalists, we do many shows with leading environmentalists, challenged the very idea of growth. There's one way of moving forward on this, especially on the left amongst progressives to rethink growth itself, and that's the only way to make capitalism palatable and safeguard democracy? Is this infinite idea of growth or growth as this almost inevitable consequence of capitalism, is this the problem?

00:32:37 Peter Hall: Well, you know, it's a good, question. And there's no question that, postwar growth, especially in the West, has been built on fossil fuels and, that has accelerated climate change. I don't think anyone would deny that. But my own view is that, the kind of no-growth movement is a political mistake. In other words, to get effective action on climate change, if we possibly can, and occasionally we do, one needs to win, governments need to win political consent. They need to mobilize consent, for policies that, sometimes have costs for ordinary people. And, you're not gonna do that if, you're going to call a halt to significantly reduce, rates of economic growth. I think people care about their standard of living. You know, the, one of the French protesters. Remember the yellow-vest movement in France?

00:33:43 Andrew Keen: Yeah. We did a show, last year on the yellow-vest.

00:33:46 Peter Hall: Yeah. Well, one of them, you know, said to some commentator who was, complaining that, you know, they're standing in the way of fighting climate change. You know, this person said, well, you're worrying about the end of the world, I'm worrying about the end of the week. And I think that is a key fact here. If we think about how to get movement on climate change, well, to some extent, carrots are going to help, you know, subsidies for clean energy and the like, but you're not going to get all the way without some sticks, without some regulations that are gonna cost, people something. And in— people are only gonna be willing to pay those costs if there is also some kind of economic growth and if that economic growth is to some degree at least equitably shared. So, no, I'm— I was gonna say I wish it were that simple. It's certainly not that simple, but I also think that's exactly the wrong way to go. Not that not that I'm in favor of growth at any cost. No. I mean, the threat to the climate is probably, the existential threat that the world faces today.

00:34:58 Andrew Keen: Although not everyone— some people see the existential threat as AI. Let's finish with that. You're a wise man, Pete. You've been teaching at Harvard for forty years. This new book, Governing Growth: The Postwar Transformations of Capitalism and Democracy address what's happened. But as we move forward and people call for regulating AI or using AI as an excuse to rethink the relationship between capitalism and democracy. What would you like to see? What have we learned from the history of the postwar age from 1945 onwards, almost a hundred years now? What have we learned as we begin to figure out how we can use the technology of AI to make a better society, a fairer society, a happier society? But— easy final question, Peter, for you.

00:35:53 Peter Hall: What have we learned? I think that, you know, it may be a bit of a truism, but I think what we've learned is that, technology can bring the world great benefits. It's a central driver behind economic growth and prosperity. But whether it brings us benefits as opposed to costs it depends very much on politics, depends very much on how effective government regulation is. I don't know how to regulate AI. I mean, I worry that no one really knows exactly how to regulate it.

00:36:27 Andrew Keen: Including the people who build AI. Including— They, more than anyone, don't know how to regulate it.

00:36:33 Peter Hall: That's right. But I think that the lesson that, history teaches us going back into the nineteenth century is we need to figure out how to regulate it.

00:36:44 Andrew Keen: Wise words from a wise man who's been teaching at Harvard for many years. Peter A. Hall, his new book, Princeton University Press, Governing Growth: The Postwar Transformations of Capitalism and Democracy. Peter, congratulations on this new book. I think it adds a great dimension, important dimension to the public debates about technology, capitalism, and democracy. Real honor to have you on the show. Thank you so much.

00:37:11 Peter Hall: Oh, it's been a pleasure. Thank you for having me.