The Trouble with Trillionaires: Mordecai Kurz on Capitalism, Democracy, and the Second Gilded Age

00:00:31 Andrew Keen: Hello, everybody. A day doesn't go by without some piece about billionaires and their billions. According to the New York Times, today, billionaires' billions are increasing faster than ever. Fifteen years ago, the world's billionaires had $4,500,000,000,000. By 2024, their wealth had tripled to 14,200,000,000,000. Now they're at 20,000,000,000,000. And, of course, it's being manifested in all sorts of political ways like, Elon Musk, the world's, biggest trillionaire or the world, perhaps, the man who will become the fur the world's first trillionaire, wrecking, at least in some minds, the American state with his DOGE initiative, his failed DOGE initiative. Meanwhile, tech companies still claim that they are benefiting society with their innovation. OpenAI is gonna go public later this year. They just came out with a white paper, which they published, authored by Sam Altman and Jakub Pachocki about how AI is built to benefit everyone. Everyone, apparently, is gonna get AI, although, of course, in previous tech innovations, not everyone benefits as much as the billionaires. One man who's been watching this with a great deal of concern is my guest today, a longtime, economist at Stanford University, one of America's most distinguished economists, in fact, Mordecai Kurz, has a new book out. It's called Private Power and Democracy's Decline, How to Make Capitalism Support Democracy. And Mordecai is joining us from Stanford. Mordecai, you've been teaching there since 1960. Is that right?

00:02:19 Mordecai Kurz: 1961.

00:02:21 Andrew Keen: It's much changed in the last sixty years on Stanford campus. When you began in '61, the Internet barely existed.

00:02:30 Mordecai Kurz: That's right. That's right. We used to have typewriters.

00:02:35 Andrew Keen: Yeah. Those were the old days, Mordecai. So why is this different? I know you write extensively about the Gilded Age. Every technological innovation seems to create enormous wealth, great political turbulence, but we resolve it. Is our current age, what some people are describing as the second Gilded Age, in many ways similar to what happened at the end of the nineteenth century?

00:02:58 Mordecai Kurz: Yes. I'm I'm the one of the one who keeps repeat repeating the title second Gilded Age. And, in fact, my first book published in 2023 on the subject, is, says suggests that it explains the second gilded age. The second gilded age is similar to the first gilded age in a sense that we see great deal of inequality and rising of economic monopolists who turn themselves and who become centers of political power and resulting in decline of democracy and great deal of strife. The same thing that happened, it I mean, the first gilded age that goes from the civil war to the first World War, 18 from 1864 to 1914, is ended up with a big reform. And I think this that second gilded age of which is where today, I believe, ultimately, will lead to a reform as well.

00:04:17 Andrew Keen: What kind of reform do you outline? Is it a political reform? Is it, is it economic reform? The subtitle of the book is intriguing. How to make capitalism support democracy.

00:04:29 Mordecai Kurz: Obviously, the reform that I'm proposing, comes at the tail end of the explanation. The after all, there's a lot of arguments that leads to the reform and explains why the reform it is what it is. But it has three principles, the reform that I'm advocating mostly in chapter seven, eight, nine. Number one, to reduce to diminish the market power of many private firms in America, power which is based on technological superiority. Now this is a long winded state statement. But the argument of the book is that technology is used as a method in a free market capitalism. Under free market capitalism, technology is being used as a weapon of gaining market power, and market power leads to political power. And the first component of my reform is to reduce that power by various means, like changing, reforming patent law, reform antitrust law, reform, the law that deals with acquisitions and variety of other issues. The second component of the reform that I'm advocating is a increased fairness in the distribution of the gains from technological productivity. Right now, the gains goes mostly to the top, and the bottom receives very little. In fact, between 1980 and 2010, workers with without college education gained almost nothing in terms of income. Their income in 1980 and income in 2010 were basically the same. And a large number of them lost their jobs due to variety of forces that are discussed in the book. And what I'm proposing is substantial change in the distribution of income, raising the marginal tax rate on income top income to 65 with a compulsory minimum 15% tax on income above 400,000 and increase corporate income tax to 45%. And the third component of the reform that I'm advocating is what I call creating the legal condition of ensuring the livelihood of workers. That is to say, one of the great, evils of American society in the in this second gilded age has been to abandon the millions of workers, their families in regions of the country that were declining, that suffered from technological, obsolescence and from import competition and variety of other forces that we could talk about if you want to. And as a result of that, they lost their jobs, and they lost their livelihood. And I believe that one of the consequences of that massive loss of livelihood is Trumpism. Trumpism fed upon the despair of those people. And what I'm suggesting is that we should develop a policy that says the government will guarantee the livelihood of those people, any worker, anybody, any worker who loses job due to a policy which is supported by policy. In other words, due to act which is supported by policy, should be given the opportunity for retraining, for reskilling, receiving education and retraining, and while being retrained, supported financially given the wage and livelihood of the family, tuition for children, medical care, and other necessities, and ultimately, helping replace the place the person back to work, and if necessary, to move to a location where jobs are available. So there are three components to the policy. Number one, reduction of market power. Number two, more fair distribution, more egalitarian distribution of the gain from technology and guaranteed livelihood of every American worker.

00:09:51 Andrew Keen: Mordecai, a lot of people are gonna be very intrigued by your argument. It's pretty radical, but it's very much in keeping with fellow economists like, Piketty, Dani Rodrik, Gabriel Zucman, who all are very distinguished economists. Zucman's been on the show, who all, I think, are in your camp. But when it comes to AI, I mean, I take your point about this radical dislocation and it's self evident that Trumpism is a benefit of all this economic chaos. Since most people in the AI business, inside and outside, have no idea of the kind of jobs or economy that will emerge in our AI age, how can you retrain workers? What would you do for the, I don't know, the for example, if AI does indeed make many hundreds of thousands of teachers redundant or journalists or cab drivers because of self driving cars, how do you know how to teach them? And who's gonna organize this? Who's gonna determine what they learn? And, of course, most importantly, where's the money gonna come from?

00:11:01 Mordecai Kurz: Well okay. So let's start with the end. As you yourself, at your opening, you described the trillions of dollars the top billionaires have had. My calculation shows that the billionaires and the people who gained between 1980 and 2000 my last computation was 2019. So I computed that they gained, 25,000,000,000,000 between nineteen fifth 1980 and two in 2019. And by today, it's probably $35,000,000,000,000. And the question is who will pay for it? You go where the money is. As I said, I'm going to I'm proposing an increase in the, in the marginal income tax of 65% on the top rate and corporate tax rate rise it to 45%. That will bring in a lot of income. So income is available. The money is available. To tell me there's no money is saying I don't want to pay.

00:12:09 Andrew Keen: Yeah. I take your point. But So as you know, Mordecai, this week, Californians seem to have voted against the billionaire attacks, and many, in fact, Stanford educated billionaires have chosen to leave the state. If indeed you did what you wanted to do in The United States, wouldn't the Elon Musks and the Larry Pages, and the Sam Altmans of the world simply leave The United States?

00:12:42 Mordecai Kurz: I don't think so. I think The United States for them is such advantage. The United States offers a market of a market it offers opportunities, technological, infrastructure, techno and human in infrastructure, education, universities. It has all that they need for their billionaires. The billions didn't come with their own. It's their billions is not a consequence of what they do only. It depends upon what the where they are, the environment in which they are. The entire system called America is what makes it possible for them to become billionaires. So if they want, number one, I would like to do the taxation across the world in all western countries, advanced countries, not only The United States. But if they want to leave, that's fine. Others will come instead of them.

00:13:38 Andrew Keen: What do you make of the arguments of people like I know you cover in the book arguments of people like Marc Andreessen who argue that this will destroy innovation.

00:13:49 Mordecai Kurz: It will not. The and the proof of that is very easy, extremely easy. In 1942, president Roosevelt proposed to the congress that no person in America will have income more than $25,000, which is equivalent to about $450,000 today. It proposed an income tax of 100% above for income above $25,000. Congress didn't give it to him. It gave him a 92% tax for income above $200,000. So for half a century, The United States had a an income tax rate that ranged between ninety two percent and seventy eight. And the innovations were as big as they ever. America progressed to become the world's powerful most powerful country in the world. Technology and wealth rose dramatically. In fact, the half a century between '19 the 1935 and say 1985, viewed by most people as the golden age of American economy. The economy will there's no there's nothing in the world that says that these entrepreneurs should receive the amount of money they do they receive now. They could be equally shared with this profit. The profits could be reasonably more reasonably shared, and they will continue to innovate because innovations will still be a source of great wealth. And the question is, instead of 1,000,000,000, they will make only 200,000,000. But 200,000,000 is a lot of money.

00:15:41 Andrew Keen: Certainly is. So this is a political question. How do you interpret the emergence of, democrats like, Mamdani, Bernie Sanders, who in many ways are echoing your argument as an economist?

00:15:58 Mordecai Kurz: They're not really argue they're not really echoing my argument because I'm a pure capitalist myself. I'm a great supporter of capitalism. The book was written because I just want to make capitalism more humane. I want capitalism to be more compatible with democracy. I want capitalism to be not contradictory to the democratic principles. I want the capitalism to support democracy rather than undermine it. And when you create inequality and you create vast, tensions within society, you break democracy. Democracy needs community spirit. It needs some degree of communal responsibility and sharing. And what I'm saying is that we The United States demonstrated it's possible to have it. For half a century, we had it. And we lost it because in 1980, mister the president Reagan decided that we should have a pre market capitalism, which will be a different society. He created a society which says greed is good, individual good, and even in the individual freedom is the essence of society, and people should be fully responsible for that what they what happens to them. Well, it in the extreme form, it becomes alienation. It causes disruption of society. It causes increased, inequality, intention, and, ultimately, is where the mess that we are today. What we have today is the consequence of the policy that we adopted in 1980.

00:17:50 Andrew Keen: And now you've been, teaching at Stanford since '61. You came over to do your PhD at Yale in '57 from Israel. The Reagan revolution you talked about was pioneered by neoliberal economists, Friedman, Hayek. Why did economists like yourself lose the argument in the sixties and seventies?

00:18:18 Mordecai Kurz: Because we did not know how to solve the problem of inflation, and we didn't have adequate tools and understanding of what happened in The United States in nineteen seventies when due to the oil shocks and slowdown of innovations, we found ourselves in a mixture of inflation together with unemployment. And Keynesian methodology and Keynesian analysis could not respond to that. And Reagan looked for different ways and then turned to Friedman. It was a mistake. It mean the fact that we had difficulties solving the problem doesn't mean that we had have to adopt a point of view which turned out to be disastrous.

00:19:13 Andrew Keen: What's the alternative scenario? Had Keynesianism defeated neoliberalism in the sixties, where would we be now? Would we have the Internet? Would we have all the innovation? Would America be as wealthy as it currently is?

00:19:27 Mordecai Kurz: Yes. Yes. Absolutely no question in my mind, except that we will have a more e egalitarian society, and we'll have less tension, and we will be more at ease with each other, and we'll not be hating each other.

00:19:42 Andrew Keen: Let's go back to the Gilded Age. You mentioned FDR, of course, but, that was after the second World War. Who are your political heroes from the Gilded Age? I know that Grant was a president that you begin, you discuss. Are we talking about Teddy Roosevelt? Who what American or global politicians understood this profound dilemma and the challenges to democracy of such radical economic inequality?

00:20:09 Mordecai Kurz: It began with Teddy Roosevelt. Teddy Roosevelt, nineteen o one, began the reform. He aligned himself with the reform movement. There were many small names that are not known today, and I don't I don't want to start stay throwing around names. But there was a large reform movement in America that was formed around 1888 1880. Usually, at the beginning, it was about farm reform farm and in protest to the railroads of the exploiting farmers. But, gradually, it also, was also a urban component that was advocating, taxing of land only. But it all combined together into the antitrust legislation and the trust busting of Teddy Roosevelt in nineteen o one. And then from then on, we had the sequence of events, nineteen o five, '26, nineteen o seven, and we've got the Food and Drug Administration to fix food and drugs in America. Federal Reserve was came in 1913. The 1913 came the reform of the income tax. 1917 came the Federal Trade Commission. And on all the way to 1934 when you've got the, Securities Exchange Commission, 1935, Social Security. And finally, 1937, you've got the introduction of minimum wage, which is, in which the federal the, Supreme Court relented and stopped fighting with, with a reform movement. But it was the two I think that the three names that should be the central to this process are Teddy Roosevelt, then president Wilson, who was very, very, very active in the reform as well, and then finally, president Roosevelt Franklin Roosevelt.

00:22:31 Andrew Keen: What about the cultural elements? It's very striking that Americans are increasingly pessimistic about the future and the role of technology. In fact, in many ways, I think they reflect you. Whereas people in China, in contrast, are much more optimistic. Could it be argued, Mordecai, that this is a cultural cycle, that America was great, is no longer great, to borrow some language from Trump, and will never be great, that its moment has passed?

00:23:01 Mordecai Kurz: It's possible. It's possible that America, will not maintain its glory of the years before the Chinese rose to compete. It may be. I don't know. I can't judge that. But I don't think that there is any necessary it's not to be a reformed country, to reform our democracy, and to live more reasonable life with less hatred and less division doesn't require to be the top of the world, doesn't require to be the leaders of the world. It is on its at its it could be an objective on its own. Regardless of what position The United States has vis a vis China, America can still regain its democratic footing and regain its ability to main to have a society which is thriving and, optimistic. And I think that such a reform will come. It has done it in the past, and it'll do it again. And it'll Trumpism will end It will, it will not end in a whimper. I believe that we are heading towards some kind of a calamity. But at the end of that event, democracy will be renewed.

00:24:30 Andrew Keen: The Economist ran a piece recently arguing that American capitalism has taken a what it calls an apocalyptic turn and argues that the real danger is that 2026 will turn into 1789, and there'll be a political revolution, the storming of the Bastille, maybe some equivalent of the guillotine. Do you fear 1789 or 1917 or even 1848 Mordecai in The United States?

00:24:59 Mordecai Kurz: Well, I don't know. I cannot predict. I'm I'm I'm I'm I'm a scientist, and I'm not able to make a prediction of that nature. I do feel I do feel deep down that a crisis is coming. What crisis it will be, I'm not sure, but it will be a significant one. And that crisis will enable democracy to be reestablished. Are we there?

00:25:39 Andrew Keen: Sorry. Yes. Mordecai, you have a colleague at Stanford who actually is in the classics department who wrote a book. He was on the show a few years ago arguing that the kind of inequality that exists now historically doesn't get resolved by tax reform or political change, but actually either by some kind of catastrophe, civil war, overseas war, or some catastrophe like COVID. Do you fear that too? I mean, how confident are you that American democracy is sufficiently supple to actually, reform the current system?

00:26:25 Mordecai Kurz: That's a good question. It's true that last reform ended in the Great Depression, And the Great Depression became a powerful tool that destroyed a lot of capital and enabled restoration of democracy. Whether there will be a destruction of capital or an expropriation of capital, I don't know. I'm I'm I am I feel comfortable believe I shouldn't say that. This is a silly way to put it. But I am in agreement with the idea that some kind of crisis is coming, and that crisis is going to be a cut of a promoter. Democracy doesn't change very easily. Democracy changes very slowly. And therefore, democratic process requires a force to cause change. And there will be such an event after Trumpism is out, and the transition out of transit out of this populist period will not be easy. That much I can say. I've said it before, and I won't say anymore.

00:28:07 Andrew Keen: You mentioned that you're not in the Bernie Sanders, Mamdani camp, that you're a full fledged capitalist. Do you see any evidence of figures within the Democratic or indeed the Republican Party who share your concern, your concern about radically reforming the system? People who are, like you, unabashedly pro capitalist?

00:28:32 Mordecai Kurz: Most mostly most people who that I talk to that I that seriously listen to what I have to say find themselves in agreement with me. Because what I'm saying is three principles. Number one, you can't have democracy with so much private power around. You have to suppress that power. Number two, you have to have more fairness in the distribution of income. And number three, we must be we must maintain the principle that livelihood of human beings is important. We cannot just let ten, twenty million people lose their jobs, find ways of maintaining their health, they're maintaining their employment. And that by the way, you asked me how do they do that? One of the thing that I did I'm strongly in favor of is directing the channel, the direction, influence the direction of innovations. This is very important. It's a very important concept. Let me take a moment to explain that. I a good my favorite example is the doctor and the nurse. So AI can create a robot, and the robot sits there in the table in the room, and the patient comes to speak to the robot, tells the robot what the illness that the person has. And the robot makes a diagnosis, and after making diagnosis, spews out a prescription and off he goes to this pharmacy to get the medication. And the doctor is out of job. But you can have another doc another kind of robot, the robot that is designed to help the nurse. The nurse is the robot, and she now uses the robot to help her make more rapid diagnosis and more accurate diagnosis on some things that before she was unable to do. So she is upskilled. She can now see more patients, and the doctors have more time. So the doctor now can spend more time with the difficult cases and more care see more patients as well. So now in the first model, the doctor is out of job. In the second model, the robots made the nurse more productive, made the doctor more productive. They all they see more patients. Medical care is cheaper. Everybody is better off. The second model is the robot makes helps humans. In the first model, the model the robot replaces humans. So what I'm saying is if we make more of the second type of robots and we use politics to direct the choice of technology, we can all be better off. We can be better employed, more productively employed, and fewer people losing their jobs. So we need to use democratic mechanism to control the direction of innovations. The direction of innovation should not be completely subject to the freedom of Silicon Valley. Silicon Valley should not be the ultimate arbiter, what technology we should be using. And that's very important.

00:32:31 Andrew Keen: You know, should we trust the tech companies? As I said, OpenAI, which is gonna go public later this year, claims that it's technology, that it's building its technology to benefit everyone. They have a plan to share AI. It's a rather vague plan. Are these people just lying to us?

00:32:50 Mordecai Kurz: No. I would like to see legislation, strong legislation that says that if you build a machine of the first time that replaces humans, you get a tax of 100%. But if you or at least 50%. And if you develop a machine that helps people, promote people rather than replace them, then you get a subsidy of 25%. That's what I want. I want a law. I want a law to dictate that. I don't trust them.

00:33:22 Andrew Keen: What's gone wrong? You've been teaching at Stanford for more than sixty years. I'm not blaming you, Mordecai, for what's gone wrong, but many of these tech barons went through Stanford. Many of them dropped out. Sam Altman dropped out. Many of the others graduated. Larry Page and Sergey Brin, of course, were graduate students at Stanford. Not you personally, but is there a problem with a place like Stanford? Theo Baker recently has a new book out, How to rule the world and education in power at Stanford University, which is very critical of the lack of, a moral education at Stanford.

00:34:02 Mordecai Kurz: I think that Theo Baker's viewpoint is extremely narrow, and it applies to a very small segment of Stanford, which is the, the computer science group. I think that Stanford has failed. And like many of the big universities in cutting back, general education, I think Stanford failed to direct the students to take more courses and offer more and have more should we should have had more, requirement of studies of how to think, how to be a good citizen, to be a western civilization. I think that there has been a tendency to abandon those in favor of the more specialized, topics. But it was caused the cause of it I mean, it's complicated question that I can only, the only explanation I have for what is happening is that education has become so expensive. The cost is so expensive that people who come and spend all that money are looking for some kind of financial reward, and therefore, they seek ways of using education as a way to develop a career rather than how to think, how to be a human being. And it is a it's a failure of ours, but it's also a failure of our society of not supporting, of not offering students adequate support. It's a complicated question, but I agree with you that we have much to blame.

00:35:56 Andrew Keen: You live on the Stanford campus. So you've had a front row, Mordecai, on this new gilded age. What does it look like to you from your vantage point on the campus of Stanford?

00:36:10 Mordecai Kurz: From my vantage point, it looks like a society which is breaking into pieces, those who live up the hills in mansions, could that begin in their price at the $1,010,000,000 dollars and the rest of the people who can't who cannot drive, who can't come to they can't live here. They have to drive and commute for many, many hours. And the fact that everything is so expensive. And, and you can look at the shops and you see the wealth on one side, and then you look at the people who cannot, who work here, but can't but can't live here. And the continuous complain of people who leave because they it's too expensive, and it's the result of the money being splashed around, homes being sometimes bought by somebody flying with a, helicopter. And by looking a house, say, I want to buy that at any price. This is very noticeable.

00:37:20 Andrew Keen: Mordecai, what would you make of some people who argue, particularly Singapore or China, that democracy just doesn't work anymore? And that the only way to make, a fairer society is through the Chinese or Singapore model of top down reform.

00:37:37 Mordecai Kurz: I think that I think the answer to that is yet to be seen. Number one, we haven't seen what is the limit to the I believe that there will be the Chinese model has a brick wall. They're going to reach a brick wall. They're not going to pass beyond that. That's number one. Number two, I think that political freedom is very important. And I think that, democracy has proved itself last hundred years as being capable of, providing fairness and justice and the, America in 1960 and 1950, showed it can have egalitarian principles satisfactory. And I think that democracy is a superior form of existence.

00:38:35 Andrew Keen: What do you make, Mordecai, of the abundance argument? The one maybe a moderate reformist abundance argument of people like Ezra Klein and Derek Thompson. I think so. The more radical abundance argument, which seems to be borrowed from Marx that, you know, Keynes wrote about this at the beginning of the twentieth century, that all this technology would actually free us from labor. Is there any truth to that?

00:38:59 Mordecai Kurz: Well, there is some truth to that. And truth the truth to it is the excessive amount of regulations that we have built into, construction system. The there's it's very difficult to do anything in America because it is there are so many hurdles that must be passed, and then we have to find ways of making easier. We must find it easier for people to build something, and we must find it easier for people to accomplish, to, to produce big deals. America has found it very difficult to make big projects, and we need some ways to recover the ability to make big projects and find ways of cutting down some of the regulations that give enormous power to individuals, individual communities, in control over space and territory. I think there's something to that argument, and the argument is reasonable.

00:40:13 Andrew Keen: What about the Keynesian argument of, ultimately, technology will free us from labor? I mean, Keynes made it. Marx made it. Elon Musk claims that in the long run, money will disappear. I mean, that seems particularly utopian and rich coming, so to speak, from a guy, a trillionaire like himself.

00:40:32 Mordecai Kurz: My answer to them is in the long run, we all did. And the long run could be a long, long

00:40:38 Andrew Keen: And that was, of course, Keynesian wisdom, wasn't it?

00:40:41 Mordecai Kurz: I'm not I'm not there yet.

00:40:44 Andrew Keen: You're certainly not there yet. You speak, I think we do a number of shows, as you can imagine, on this. I can't remember anyone speaking with such fluency and anger and erudition, on this. You're over 90 years old, Mordecai. We have a show coming up, with a Yale historian concerned about what he calls American gerontocracy. I'm not suggesting you're part of that gerontocratic elite. But what's your defense of the wisdom that you've acquired over your ninety years? Is, is this something that, we need to somehow recognize? Of course, Silicon Valley people think we can live forever.

00:41:32 Mordecai Kurz: I think what I'm saying is common sense. I think it's common sense in it is compatible with American tradition. I think my views are compatible and supported by the tradition that would by the experience that we've had in the last century. And what I'm saying is if you take a careful look at where we came from, you could see a major mistake made in 1980, which we now are paying the consequence of that. And in 1980, we took a turn that took us in directions of becoming selfish, isolated, divided, and ultimately destroying the foundations of democracy itself. And we've we under I think that my knowledge and my experience simply shows that we can do better. And the American experience shows we have reformed the fall, and we will reform again.

00:42:54 Andrew Keen: Well, there you have it according to Mordecai Kurz, author of Private Power and Democracy's Decline, one of America's leading economists, over 90 years old, the professor of economics, emeritus professor at Stanford, author of a major new work, Private Power and Democracy's Decline, How to Make Capitalism Support Democracy. As I said, Mordecai, we've rarely had guests on the show who, articulate your position with such clarity and passion. So I wanna congratulate you on that, on the new book, and I hope you'll continue to remind people of this enormously important argument. Thank you so much.

00:43:34 Mordecai Kurz: Thank you. Thank you for having me.