Welcome Edward Luce (Financial Times) (Twitter) and Host Jeff Connaughton (JeffConnaughton.com) (Author, The Payoff: Why Wall Street Always Wins) (Twitter)

Time to Start Thinking: America in the Age of Descent

Twitter, and my habit each day of reading primarily about finance-related developments, is ruining me. So I was especially pleased when BevW asked me to moderate this discussion, as it forced me to take my brain on a much longer than usual walk as I read and studied Edward Luce’s exceptional book, Time to Start Thinking: America in the Age of Descent.

Published in April 2012, Mr. Luce’s book has been widely praised as carefully balanced and filled with evocative analysis and reportage. With a cast of dozens of academic, business and governmental thinkers, it wrestles with America’s relative economic decline, how the global economy is increasingly siphoning away America’s ability to innovate and manufacture, and a wide range of U.S. policy failures from education to healthcare to reinventing government. Too often Internet-entranced readers like me look for distillations to digest quickly, rather than dwell on the fascinating interviews, anecdotal treasure chest, and hard-nosed analyses in Mr. Luce’s detailed yet highly entertaining book.

Reading Mr. Luce has helped me realize I’m often a bit too Wall Street-centric in my Twitter feed and contemplation of What’s Wrong With America. Doubtless, Washington’s decades-long obsession with deregulation, the resulting “financialization” of the American economy (in the 4th quarter of 2001, the financial sector represented 45 percent of U.S. corporate profits, and the lure of those big bucks for decades have caused a corresponding American “brain drain”), the credit bubble, widespread Wall Street malfeasance, and finally, the devastating financial crisis (and its destruction of $7 trillion in wealth) all deserve a blue ribbon as one of the primary accelerators of relative American decline. (Our aggressive and excessive overreaction to 9/11 — leading to two lengthy, punishing, and costly wars — would win my second blue ribbon.) Yet Time to Start Thinking deftly encompasses these critiques, as well as the shortcomings of the Dodd-Frank Act and the exponential rise of corporate money and lobbying in Washington, while placing them within a substantially larger frame.

That larger frame is well-captured by “retweeting” (I can’t help myself) one of my favorite quotes in the book:

In 1905, British PM Balfour on where England is being driven by the tides of economic history: “Does theory or experience provide any consolotary answers to this question?” #CautionaryTale

More than a century later, this time as America perhaps takes its turn, that 74-character quote still packs a punch. I suppose because Mr. Luce is British (though he’s lived and worked in America for years) and the U.S. columnist for the Financial Times, I liked his retelling of how Great Britain pondered, as the United States and Germany began to excel economically, what to do? Today, especially when our government is dysfunctional and our politics remain unimaginative and almost wholly dependent on raising vast sums of money, how should we react to the rise of China and other emerging economies? Helping our “hollowed out” middle class is the theme of many political speeches, but the focus of few if any actual policy correctives. Washington argues endlessly about changes on the margins to taxes and spending, but our consensus economic view remains grounded on the hope that adherence to free market and free trade principles will somehow prevail.

In reality, Mr. Luce argues America faces a highly daunting challenge of replacing a failing U.S. economic paradigm with a new one that enhances innovation and competitiveness in a global economy. We need smarter, agile, pragmatic government, but instead we have sclerotic bureaucracy, industry capture, and political extremism which make changing the status quo virtually impossible.

As in so many areas, Barack Obama’s presidency has failed to deliver the pragmatism and government “that works” which he promised. Obama has been a passive POTUS (even on the stimulus and healthcare reform bills, the drafting of which he delegated to Congress), except when it comes to Wall Street reform, where Treasury Secretary Tim Geithner maintained a vise-like grip on the details as the Dodd-Frank bill moved through Congress. Non-partisan, Mr. Luce’s critiques of the gap between President Obama’s “poetry” and his “prose,” as well as the Tea Party’s contribution to gridlock, are particularly unflinching.

Despite the tendency of most politicians to base their optimism on American exceptionalism, Mr. Luce reminds us (in Huck Finn’s words): “Sayin’ it don’t make it so.” After finishing the book, which is filled also with humor and wit, I imagined a dystopian America where the national news leads with “Here is what didn’t happen in Washington today.”

As for Wall Street, I hope one day we’ll enforce the law and break up the too-big-to-fail megabanks. But that would only forestall another financial crisis; long periods of financial stability are a necessary but not sufficient condition of American economic success. How do we ensure rising personal incomes for the middle class as technology and a global work force make American workers less secure? Maybe there aren’t any good answers, in theory or experience. A few months after he had left the Obama White House, even a “humbled” Larry Summers said to Mr. Luce: “There are good things we can do at the margins,” he said, “But on a lot of this, I just don’t know.”

Gaining a better grasp of the variegated problems and several of the alternative potential solutions, in a book filled on every page with enough succinct intelligence and arch wit for even a Twitter-zen to admire, is a superb start. I’m honored to welcome our distinguished guest to this discussion.


[As a courtesy to our guests, please keep comments to the book and be respectful of dissenting opinions.  Please take other conversations to a previous thread. - bev]

91 Responses to “FDL Book Salon Welcomes Edward Luce, Time to Start Thinking: America in the Age of Descent”

BevW April 13th, 2013 at 1:50 pm

Ed, Welcome to the Lake.

Jeff, Welcome back to the Lake, and thank you for Hosting today’s Book Salon.

For our new readers/commenters:

To follow along, you will have to refresh your browser:

PC = F5 key, MAC = Command+R keys

If you want to ask a question
– just type it in the Leave Your Response box & Submit Comment.

If you are responding to a comment – use the Reply button under the number,
then type your response in the box, Submit Comment.

Jeff Connaughton April 13th, 2013 at 1:54 pm

Thanks, Bev. It’s a real honor for me. And Ed I have to say again how much I thoroughly enjoyed your book. It’s funny throughout, from the first anecdote to the end. And I’ve “dined out” on it for a week by stealing anecdotes and lines from it to tell friends. Everyone should buy and read it not just for its serious message but for its grab bag of interesting and funny tidbits.

Edward Luce April 13th, 2013 at 1:59 pm

Hello Bev and Jeff: Thanks so much for inviting me on. It’s a real pleasure to be here.

Jeff Connaughton April 13th, 2013 at 2:00 pm

Now to dive in with a question about whether we should resort to industrial policy to better compete in a global economy.

On the one hand, when it comes to competitiveness and pro-innovation policy, industry CEOs say they’re not getting what they need from Washington. Yet, on the other hand, we know corporate America invests billions of dollars to get a lot of what it wants in Washington, through regulatory capture and industry rent-seeking. One explanation for that seeming contradiction is that special business interests often undermine the common business interest (see e.g. healthcare reform).

Still, given what we both know about money, lobbying and the revolving door in Washington, is there a practical difference between “industrial policy” (designed to help companies and industries build and innovate in the United States) and “crony capitalism” (where those with the best connections get federal subsidies, tax advantages and loans)?

dakine01 April 13th, 2013 at 2:01 pm

Good afternoon Ed and Jeff and welcome back to Firedoglake this afternoon.

Ed, I have not had an opportunity to read your book so forgive me if you address this in there but how do you think the corporations expect to make products and have profits if they destroy the consumer base?

Even the “best legislation that money can buy” won’t help the economy if no one has any money to buy. (America is exceptional these days – just not in the fashion commonly used and understood)

It is difficult not to be a pessimist these days

Edward Luce April 13th, 2013 at 2:02 pm

Jeff; that’s an excellent question – does industrial policy inevitably degenerate into cronyism in Washingon? I guess it depends what you mean by industrial policy. We should dispel the myth that the US does not have any. The oil industry benefits from a whole panoply of subsidies. The taxpayer picks up the costs of the externalities in terms of pollution and Middle East naval patrols etc As the author of Pay Off, which I loved by the way, you know better than anyone the breadth and depth of statutory and regulatory assistance for the financial sector – or at least to its largest and wealthiest players. So there is an industrial policy for Wall Street as well. Both of these have degenerated into cronyism. Look how difficult it is to get the Volcker rule implemented, for example – it’s now 400 pages long and indecipherable to all but a handful of DC lawyers. These are industrial policies by stealth. The last explicitly acknowledged US industrial policy was for semiconductors – and it was the Reagan administration, interestingly, that carried it out in the 1980s. It worked. Japan was busy dumping computer chips on the US market so Reagan set up Sematech, a public-private partnership, with companies like Intel and Motorola, that pooled their research and regained their competitive edge. Reagan also threatened Japan with retaliatory duties to get it to stop dumping and it did. The US semiconductor industry has never looked back. The difference is that it was an openly designed policy aimed at helping an entire sector for strategic reasons rather than particular players within it. It was the product of public debate rather than backroom dealing. There was no revolving door between DC and Silicon Valley. For the most part there still isn’t (although that may be changing).

Jeff Connaughton April 13th, 2013 at 2:03 pm

Well I saw a lot of Silicon Valley in Washington. For example, in 2009, it was obvious that the Obama Administration and Democrats were quite eager to throw federal dollars to subsidize clean energy development, but when I was a Senate staffer and met with Silicon Valley representatives, I always thought they were just “talking their book” because they had already invested millions of dollars in green energy projects that were only marginally profitable. To me, the best “industrial policy” for clean energy is to create a price signal by imposing a carbon tax, but that wasn’t even on the table.

Edward Luce April 13th, 2013 at 2:05 pm
In response to dakine01 @ 5

Dakine01 I agree entirely. Rising inequality is OK as long as the poorest are getting less poor. But the recent growth in US inequality has been accompanied by falling median household incomes, which are now back to the level they were in the early 1990s, almost ten per cent below where they were in 2000. This undermines the consumer-driven growth. Henry Ford once showed Walter Reuther, the UAW, leader, the new robots to help make cars and asked how many of these robots would join the union. How many are going to buy your cars? Reuther replied.

Edward Luce April 13th, 2013 at 2:06 pm

Jeff I couldn’t agree more. A carbon tax would work through the market without any regulatory or intervening bureaucracies – no SECs, no USDAs, no EPAs. That means there would be no overseeing congressional committees, and no parasitic K Street activity. So there would be no iron triangle. Which is why it has zero chance of happening at the moment I’m afraid. People often joke that the better the policy, the less likely Congress will pass it. But it’s often a pretty accurate description. It’s not because lawmakers are stupid. A lot of them are very intelligent. It’s because they need to raise money and have deep and complex webs of relationships and staff revolving doors with companies that can help them (or lobby groups and law firms that represent the companies). As you illustrate so vividly in your book with Dodd-Frank, Washington is addicted to the status quo. That’s why there’s no lobby for entrepreneurs. By definition future business creators can’t organize and can’t pay your election expenses now. Pretty much every big “reform” bill Washington that passes, from Sarbanes-Oxley, to Dodd-Frank, and, yes, I’m sorry to say in some respects the Affordable Care Act, should be called the Full Employment for Accountants and Laywers Act. The system is up to its eyeballs. It’s not an ideal setting for public spiritedness or high quality policy-making.

Jeff Connaughton April 13th, 2013 at 2:07 pm

I loved your story about Truman predicting Eisenhower not being able to handle politics, yet he was an effective president. And he warned us about the military/industrial policy.

You told a great anecdote about a visit to the National Defense Institute to judge a presentation by junior U.S. Army officers about how best to ensure American military supremacy in the coming decades. To your surprise, these officers recommended that America’s military strength is largely dependent on its economic power, and so their strategy was to cut defense spending by a fifth (by closing our bases in Europe and Korea, among other things) and invest in America’s infrastructure and people. It was the first time I found myself supporting the idea of an American military coup. Why do you think both political parties remain so committed to excessive defense spending in the face of our obvious economic challenges?

eCAHNomics April 13th, 2013 at 2:09 pm

My questions involve how soon.

People have been pointing to decline of U.S. since Vietnam. Some would claim FDR started it.

Didn’t Rome decline for centuries before it keeled over?

It took WWI to break the back of the British empire, and lookie-seeie, The Anglo-American empire is the biggest baddest one ever.

Western Europe looked to have been a better model for its citizens, now has lapped the U.S. on the way down.

Why is current crisis worse than earlier ones?

Edward Luce April 13th, 2013 at 2:11 pm

I think I’d refer back to the iron triangle. If you look at Lockheed Martin’s hugely expensive – and delayed – F22 Strike fighter programme, it has generated economic activity in every state and more than 400 districts. This has nothing to do with economic efficiency and everything to do with keeping Congress happy with a grossly inefficient weapons system. And it has hundreds of suppliers, each of which is a lobbyist for the overrun budget.

Jeff Connaughton April 13th, 2013 at 2:11 pm

military/industrial complex, that is.

Jeff Connaughton April 13th, 2013 at 2:12 pm

I like Barney Franks’ lines that Republicans are “weapons Keynesians”: they only think government spending creates jobs when its defense spending.

spocko April 13th, 2013 at 2:12 pm

Welcome. I haven’t been able to read the book yet so forgive me if you address this in the book.

People complain that Washington politicians are “in a bubble” and they don’t really understand the problems of the majority of Americans. This disconnect is important when they turn to “Captains of Industry” who are also out of touch. They will want to solve their problems, not necessarily America’s problems.

In your interviews with GE CEO did you ever get the sense that he knows that what is good for GE isn’t necessarily good for American workers?
I mean putting the head of GE in charge of the jobs programs? That only makes sense if it was about getting jobs for people in countries outside the US.

Pete Peterson might want to cut the deficit and is spending $500 million dollars to get everyone to pay attention to what he believes is the problem.
Did you run into any billionaire spending $500 million dollars to convince journalists and law makers that, “We need to focus on jobs?”

Edward Luce April 13th, 2013 at 2:16 pm
In response to eCAHNomics @ 11

eCAHNomics. Good question. Let’s first define decline. There’s relative decline, which is happening (the US had 33 per cent of world GDP in 2000 and its now down to 23 per cent, probably heading for 17 or 18 per cent by the mid-2020s). This isn’t a bad thing – it means others are getting richer. Economics isn’t a zero sum game. But then there’s other types of decline. I’d argue the decline of the US model – the promise of equality of opportunity and a system based on merit – is steady and deeply rooted. There’s no big bang moment, there’ll be no equivalent of WW1 hopefully. And the US will probably remain the pre-eminent military power for another 25 years at least – again, hopefully. But America’s role as a beacon, or as a model to be copied, is in decline, which has all sorts of impacts on America’s ability to project soft power around the world.

Jeff Connaughton April 13th, 2013 at 2:20 pm

What do you think best explains America’s amnesia about the tremendous economic contributions of public science and research after Sputnik? I suppose the economic recovery bill had a substantial amount in it for science and research projects, but we rarely hear news reports about where that money has gone and what good it has done. Instead we hear about Congress wanting to cut research dollars on things like why bees are dying around the world (and Vint Cerf said to you: Don’t people realize how important bees are to life?)

Edward Luce April 13th, 2013 at 2:20 pm
In response to spocko @ 15

Again – very good question. The other day President Obama dropped by at the California home of Tom Steyer, a billionaire hedge fund donor, to raise money for the Democrats. Steyer is a big voice against Keystone XL, which is fine (he has a good case). Ditto for donors who support gay marriage, school reform, and many other strong issues on which I might well agree with them. But we never hear about billionaires lobbying for steps to raise middle class income. Perhaps if we did, politics would be more constructive about addressing the problem, which I would argue is bigger than pretty much every other challenge facing the US.

Edward Luce April 13th, 2013 at 2:24 pm

I’ve lost count of the number of times investors, or start up entrepreneurs, in Silicon Valley have said to me: “We just need government to keep out of the way.” I’m sure they have a point on many particular issues they may face, but in general this demonstrates remarkable amnesia about the source of so much of the innovation that powers the Valley and America. Congress continues to cut public R&D dollars. And relative to GDP its far lower than in Germany, Japan, Canada and other competitiors. It’s true US companies spend a lot on R&D – but most of it is “D” – development – not pure research. And much of what they spend is on their R&D centers in China, India, Germany etc. GE has nine global R&D centers of which only one is in the US (near Rochester).

Jeff Connaughton April 13th, 2013 at 2:25 pm

Yes, everyone who has a good idea about the common welfare never hires a lobbyist, I can attest to that. The businesses who have lobbyists in DC rank the issues that are most important to their bottom lines, so every DC corporate office stays focused on those issues (tax credits, regulations, etc). That’s why it’s hard to convince the business community that special business interests are undermining the common business interest, just like special interests undermine the common interest.

Tammany Tiger April 13th, 2013 at 2:26 pm

One of my biggest concerns about this country’s future is the influence of money on politics, a problem that has recently gotten much worse thanks to the Supreme Court equating money to speech.

We seem to be going in the direction of the late Roman Republic, where politics was dominated by wealthy, prominent families; was incredibly corrupt; and was practiced with ever-increasing ruthlessness.

Jeff Connaughton April 13th, 2013 at 2:27 pm

So people get frustrated with where democracy has brought Washington and almost envious of the idea that China is being run like a giant corporation by engineers making directed decisions (with some mix of capitalism).

Can you please comment on Austan Goolsbee’s view that in 20 years we may find that directed investment into high-speed rail and other centralized planning decisions in China may not reflect consumer demand and ultimately will prove the U.S. free-market model is best.

Edward Luce April 13th, 2013 at 2:28 pm

I think this is the crux of the Washington syndrome – best described by the late, great Mancur Olson in his Logic of Collective Action. If everyone in society loses 10 cents from a particular tax loophole, and say 100 people gain $10m dollar apiece, who do you think is going to lobby harder? The latter will win most of the time. Today’s DC is far more Olsonian than it was when he wrote the book (around 1970).

Edward Luce April 13th, 2013 at 2:32 pm
In response to tammanytiger @ 21

I don’t have the number at hand, but Lawrence Lessig illustrated your point well in his recent TED talk: A few hundred Americans spent more on the 2012 general election – via super-pacs etc – than the rest of America combined. I’m watching President Obama’s Organizing for Action closely. While I fully understand that he fears he will be outgunned by Sheldon Adelson, or the Koch Brother, or the NRA, on various issues, and needs firepower to hit back (I do get this), it also worries me. If you give over $50,000 dollars to OFA you will get to meet the President at OFA’s quarterly board meetings. To defeat money in politics, Obama has to give money preferential access…

eCAHNomics April 13th, 2013 at 2:34 pm

Heh. Seems like Goolsbee didn’t listen to Krugman’s Nobel acceptance speech. Took him 45 minutes to say it, but the gist was that 19C U.S. developed along RR lines.

Goolsbee’s agenda is to keep China at sea along the string of pearls so that the U.S. can squeeze China at will. China-Russia already have high speed freight rail across the Eurasian land mass and are doing Pipelinestans. Central Asia used to be a bread basket. With transport in place, it could be so again.

Jeff Connaughton April 13th, 2013 at 2:34 pm

Yes, Mancur Olson. One of the signs of a really good book is that it inspires you to read other books. There were several ou talk about and I’m determined to see if my 12 years as a corporate lobbyist are captured well by Mancur Olson’s theories of the decline of nations.

Our stock market is a good examples. Corporate stocks are being traded like grist in a high frequency mill, and asset classes world wide are moving increasingly correlated — up with good news from Europe, down with developments in Cyprus. Yet no corporation lobbies the SEC about whether our markets are best peforming their functions for capital development and long-term investors, only Wall Street and high frequency traders go through the SEC’s doors.

And the SEC has to do evidenced based rule making, but all the evidence is coming from the traders most affected by their rules!

spocko April 13th, 2013 at 2:35 pm
In response to Edward Luce @ 18

Thank you. Now a personal question, feel free to answer in generalities. Economically how are you situated? My friend Suzie Mandrak likes to point out that journalists who identify with the working class are hard to find in the main stream media. Someone who covers the financial industry mean you spend time in their offices and maybe social functions.

Journalists say they want to be non-partisan on politics, but how easy is it to be “non-partisan” on wealth and class issues? Especially if you are comfortable in one.

I know 2 billionaires and several millionaires, but when I talk to them I don’t like to point out my lower standard of living based on employment. And I certainly don’t challenge their world view, after all, for them it worked! They can’t see why I and the other 99 percent aren’t pulling hard enough on our bootstraps. They fail to see the infrastructure help they got which the right is destroying.

Jeff Connaughton April 13th, 2013 at 2:37 pm

The dollars it takes to see a president are increasing every four years. I remember being at the Boston Democratic convention in 2004 and hearing people mutter that they had raised twice as much for Kerry as they had raised for Gore, but they were getting crummy VIP treatment compared to four years before.

Edward Luce April 13th, 2013 at 2:37 pm

I think there’s way too much fear of China at the moment and way too little concern about what the US should be doing at home whether China existed or not. The fact that I think the US is on a declining path does not mean I believe China will supplant the US as the world’s hegemon. We’re more likely to have a long period of multipolarity with all the confusions – and potential dangers – that come with it. I think Goolsbee has a point: there probably is a lot of overuinvestment going on in China. But if you look at what it has been doing in the last two years, it has been fairly steadily trying to shift the economy towards more consumption. I get the sense China does understand what it needs to do, and is still more capable as a system than the US of doing it. There’s no gridlock in Beijing – the levers of power still work.

Edward Luce April 13th, 2013 at 2:41 pm
In response to spocko @ 27

There’s no need to apologise for my question. I’m fairly comfortable – the FT pay a reasonable salary and my wife works at the World Bank and gets paid decently. But we’re certainly not rich. We live in DC, not New York, which means we’re pretty comfortable. I do meet a lot of rich people, but then I also meet a lot of voters and consumers, and teachers, etc I don’t often find that I’m obsessed with the same things as the very wealthy: I like drinking out of biocups – as I remember once doing in Aspen (and then filling it with Fiji water). And it would be nice to catch a ride home on one of their jets. But I”m not a politician and I don’t need to raise money so I don’t spend that much time with billionaires.

Jeff Connaughton April 13th, 2013 at 2:42 pm

If you’re truly convinced China is more capable than the U.S. system, than as you say we do need a new economic paradigm in this country. But free markets and free trade run deep. Can you imagine a Ross Perot like candidacy in the future (this is what Pat Caddell predicted to you – that frustration with our two gridlocked political parties is likely to lead to wealthy candidates, perhaps demagogues, running for president). With the Ross-Perot-like candidate wanting us to return to protectionism or some other theory to take us from the path of decline/status quo?

Lorraine Watkins April 13th, 2013 at 2:45 pm

Lots of good academic and pops description of the failure of unrestrained capitalism out there. Haven’t read your book but it sounds like it is extremely clear and easy to understand while remaining non-political. Do you believe there are any remedies that can be purely non-political?

Jeff Connaughton April 13th, 2013 at 2:45 pm

As for Ed’s financial position, I wish every journalist would spend 9 months traveling the country talking to Americans of different stripes. And he has a very poignant relationship with a family in Minnesota who are struggling through the effects of our difficult economic times.

I know that since I moved to Savannah — and as I stay in touch with friends who live in “fly over” country — I know that Washington is living on a different economic planet than most of the country. It’s essential for journalists to get out of DC often and speak to struggling communities.

Do you find your experiences in researching and writing the book inform almost every one of your weekly columns for FT?

Edward Luce April 13th, 2013 at 2:46 pm

Jeff Immelt said that if globalisation was put to the US electorate in a referendum it would lose. Having said that, I don’t think it ever will be and I very much doubt a third party – whether it was protectionist or not – could break through the US dupoly. The last time we came close to that was in 1912. It’s a very tight duopoly. I don’t think there’s anything wrong with free trade – it should be mutually enriching. I don’t think the answer to America’s problems is to pull up the drawbridge. If the US cut subsidies to farmers/agribusinesses, I think America as a country would be better off. But a handful of agribusinesses would be worse off (back to Olson) which is why it never happens.

Jeff Connaughton April 13th, 2013 at 2:49 pm

Back to our friends at the National Defense Institute who believe we need to slash defense spending to ensure continued American economic success by investing in infrastructure. I got so detested by candidate Romney calling for increased defense spending (and what is probably a reluctant Obama White House to look weak on defense, even as it winds down Iraq and Afghanistan). How does an intellectual consensus develop that we are wasting so much money just to keep defense contractors happy? It’s frustrating and causes real pessimism.

Edward Luce April 13th, 2013 at 2:49 pm
In response to TalkingStick @ 32

I think there are dozens of remedies out there that make sense – a carbon tax, a public-private infrastructure bank, a revived community college system that can reskill the US middle class, a tax system that rewards equity rather than leverage and so on…We’re not lacking for answers. We’re lacking a scenario where the answers are put into practice. So I’m afraid we can’t escape the problem of politics. The good news is that America is federal and gridlock in DC does not mean paralysis everywhere, as it would, say, in a country like the UK (which is arguably in worse shape than the US). The bad news is that state capitols like Austin and Sacramento are just as much in the grip of lobby and revolving door culture as DC.

Jeff Connaughton April 13th, 2013 at 2:52 pm

Yes, you were wise to include in your book so much about how state government works (and often fails) in states like Texas, California and Oregon. I was especially surprised that Oregon was not doing well, from afar they would seem to have the reputation of a good government state in Oregon.

maa8722 April 13th, 2013 at 2:53 pm
In response to Edward Luce @ 16

Thanks for that perspective, but it’s alarming.

A moderate rate of decline paired with a residue of military superiority for perhaps 25 years. . . two toxic, synergistic variables which intersect somewhere? Will there be a “hurry up and use the forces before it’s too late” — or are we there already?

Aren’t there people who will refuse to let go of the past, the bad stuff, refuse to adapt or see opportunity for a better world? Won’t they try to maintain perks and lead us to warfare?

I think that’s likely unless we figure out how not to go that way. Would steering the national focus more toward domestic priorities, away from intervention and meddling overseas, be a key to our future?

Edward Luce April 13th, 2013 at 2:54 pm

I agree, there’s a kind of complacent, engorged, status quo on defence budgets/contracting etc that shows little sign of breaking (although Chuck Hagel gave a speech the other day suggesting he’d like to try). but there is another problem: It’s unpatriotic to call for lower defence budgets. It doesn’t matter if the Pentagon is asking for a lower defence budget, it doesn’t matter if so much of the budget isn’t spent on defence – it’s just too easy for an opponent to paint you as a dove, an apologist for America, a declinist etc if you argue publicly in favour of smaller defence budgets. The US has 12 carrier groups, which is 11 more than China, and more than the rest of the world combined. The US subsidies Britain’s defence and Germany’s and pays for most of South Korea’s. Yet it would cut Social Security first?

Lorraine Watkins April 13th, 2013 at 2:55 pm

Wish I could be as optimistic. I don’t see how much change can occur short of a radical political change. It seems to me that so far our “federal” system has primarily made it possible for the implementation of the fascist and socially oppressive agenda too radical for even the grid-locked Congress. The conservatives got there before we did. State liberal groups and Democratic parties are in shambles.

Jeff Connaughton April 13th, 2013 at 2:56 pm

And I was surprised to catch up on how the Food & Drug Administration has gone from being a model U.S. regulatory agency to what is generally considered to be a bureaucratic mess, though Obama seems to have found a very talented person who is doing her best to grapple with FDA challenges. One of the themes of my book is that there’s really no good reason to take a high-level government job (and all the frustrations of the confirmation process followed by dealing with the bureaucracy) unless you have one eye on it increasing your value later in the private sector. So we increasingly have a plutocracy, government of the rich for the rich. But this FDA leader seemed to be a shining counterexample. Good for her!

spocko April 13th, 2013 at 2:57 pm
In response to Edward Luce @ 30

Thanks. I did a book Salon here in September with Anat- Shenker-Osorio on her book. “Don’t Buy it, The Trouble With Talking Nonsense About the Economy.

One of her major findings is that the metaphors that people use to write and talk about the economy influence what is actually done. And in many cases this is to the advantage of certain economic world views over others.
So, for example some people talk about the economy as a deity that must be appeased (often with sacrifices), a living being with intention or as a force of nature. These three metaphors often support certain kind of action or inactions on the part of governments.

Another metaphor of the economy as a human-made object, in motion, which people can do things to and change. “We need to Step on the gas,” we need to “go down a different path”

In your discussion with CEOs and D.C. Pols, what metaphors do they chose to use when talking about the economy?

Edward Luce April 13th, 2013 at 2:59 pm
In response to maa8722 @ 38

Yes and no. Yes, the US needs to pivot to America, not Asia. The basis of national strength is economic strength. Military weapons and prowess are a consequence, not a cause of national power (and they stay around longer….Britain was the world’s largest military until around 1900 yet it had ceased to be the world’s top economy in 1870). No, because the US should not abdicate its global responsibilities – but it could uphold them just as well on a budget that was a third smaller. There is no contradiction between being a responsible superpower and being a country that invests much more heavily in its own people. I’d argue it was this combination that led to US hegemony in the first place.

Jeff Connaughton April 13th, 2013 at 3:00 pm

I’ll use this as an opportunity to pile on Lanny Breuer (former Asst Attorney General for the Criminal Division) and Mary Schapiro (former SEC Chairman). My former boss Senator Ted Kaufman pushed them both hard to do more and more aggressively about prosecuting Wall Street fraud. I have no idea what is inside their mind and what motivates them. But in the past two weeks Breuer rejoined Covington & Burling, which defends corporations including Wall Street banks, for $4 million a year — and Schapiro joined Promontory Consulting, which is filled with former regulators and represents banks. Whatever that is — revolving door, cashing in, simply an appearance issue — it is eroding trust in government. Yet that is the STANDARD career track in DC today. As someone at HuffPo said, “Public service is big business.”

Edward Luce April 13th, 2013 at 3:03 pm
In response to spocko @ 42

The most frequently heard CEO complaints are not so metaphorical nowadays – they talk about “uncertainty” created by not knowing what is going to come out of Washington. They talk about not “burdening our children and grandchildren with debt” etc and they talk about needing Washington to get its act together. The principal meme, as previous commenters have noted, is about fiscal discipline. I happen to think they have their priorities wrong. The last thing the US economy needs now is austerity.

Jeff Connaughton April 13th, 2013 at 3:06 pm

Pete Peterson has raised and spent billions of dollars through think tanks etc to promote fiscal discipline as America’s number one priority. Yet you note in the book that with interest rates at historic lows, we may look back at this as a seminal missed opportunity to use long-term borrowing to finance a rebuild of our infrastructure and to put people back to work. 30 year bonds are a little over 3 percent!

RevBev April 13th, 2013 at 3:07 pm
In response to Edward Luce @ 45

How do you explain (if you agree) that the President does not seem
to get that austerity lesson? That has been discussed here quite often.

SanderO April 13th, 2013 at 3:07 pm

I don’t see a single thing which works for the vast majority of the people of the United States in the economic model we live within. Further after observing the performance of the United states government for 50 years since I was about 15, I don’t see a will to better the lot of the people.

On the other hands the economy and the government appears to simply serve the elite… the winners… ya know in the competitive race to get to the top… and the people are simply left behind or tossed token scraps.

The political system… elections, lobbying, think tanks is so corrupt it’s laughable and can’t be taken seriously. And the salaries of the elite is nothing short of obscene.

The MIC has gobbled up way way way too much of the resources and left waste destruction and pollution behind. It’s simply criminal.

Let’s get rid of the entire thing and start all over.

PeasantParty April 13th, 2013 at 3:07 pm


Sorry to be coming in so late here, but without having read your book yet I have a couple of questions.

1) I just watched the video of the Central Banker’s seminar held in Hong Kong. My impression from it is that Bernanke has been doing things all wrong in their view, yet nobody knows what the Central Banks can do while still remaining Independent from Governments. DO you feel that is part of our Economic Problems?

2) They mentioned the “Global Economy” so many times I was sick. I can’t understand how the US has made so many Trade Agreements that affect our economy and still don’t have a grasp on the reprecussions. Do you also see that as a problem?

Edward Luce April 13th, 2013 at 3:07 pm

I also like your take in your book on Professional Democrats and The Blob – your names for the interlocking networks of mutual back scratchers in DC (husband is a lobbyist, wife is a congressional staffer, and then they swap). As you say, profiting from your time in government and your connections to people still in it, becomes the principal motive for so many in DC even if it was not what brought them here in the first place. No one apologises for this because it’s so normal.

PeasantParty April 13th, 2013 at 3:10 pm

My thoughts exactly!

With interest rates so low, the borrower of last resort which would be our Government can and should borrow to put this Country back into order and able to compete in that so-called Global Economy. I fear, the competition has been wiped out and replaced with Banking Services.

A fear factor to me in sight of Cyprus.

spocko April 13th, 2013 at 3:11 pm
In response to Edward Luce @ 45

Agreed, but austerity keeps coming. I think part of that is the false comparison of the family budget and a countries budget. “When things are bad you tighten your belt. And we as a country need to do that too.” Bullshit.

Unlike the Country I can’t print out new money on my inkjet.

Have you heard of Brown University economist Mark Blyth talk about his new book Austerity: The History of a Dangerous Idea? He has a great Scottish accent and explains where the idea came from and why it keeps being reinforced. Here is a podcase link to him on the Sam Seder show last week.

Jeff Connaughton April 13th, 2013 at 3:12 pm

I’ve been on both sides of businesses complaining about regulation. Clearly, the repeal of Glass Steagall and leaving derivatives deregulated helped contribute to a world class disaster. Yet even I get depressed when I see how complicated the text of Dodd Frank Act is and then how regulators multiply the complexity of the DFA by spewing out even more complex and lengthy regulations (part of the problem is that Wall Street lobbies for exceptions and lengthy definitions of terms, which makes the regs more complex, and then Wall Street turns around and says we ought to ditch the entire Volcker Rule, for example, in favor of a different approach).

You call for smart, pragmatic government — and CEOs repeatedly ask for same. I feel like it’s spun completely out of control in DC. We need government to restrain business excesses and enforce the law, but we tend to overshoot.

Edward Luce April 13th, 2013 at 3:12 pm
In response to RevBev @ 47

I’m in two minds about whether the President fully gets the problem with fiscal austerity. I think he’s probably torn between listening to good advice that says now is the perfect time to invest, upgrade infrastructure etc because long term Treasury borrowing costs are so low. And between his desire to be seen as the Washington adult in a room full of ideologues, which encourages him to push to the center and split the difference. There’s certainly a tension between good policy and politics. I fear the net result, yet again, will be a 2014 budget that is based on Continuing Resolutions from last year (and the year before and the one before that).

Edward Luce April 13th, 2013 at 3:13 pm
In response to spocko @ 52

thanks for the link – I’ll listen to the Scottish accent afterwards (which is ironic, since Scots often sound so austere).

maa8722 April 13th, 2013 at 3:14 pm
In response to Edward Luce @ 43

Thanks, again.

Then, wouldn’t our global responsibilities in particular have to be significantly redefined? What would we be responsible for which, say, Europe or Asia, is not? Do we demand a hand off for some of this? Sorry for the ham fisted approach. . .

That is, I don’t know how the numbers break down nowadays, but suppose an awful lot of what we spend overseas has some MIC aspect to it. That overseas component would have to be curtailed significantly as military spending decreases overall.

We pull back that way, and how do our particularly American global responsibilities change?

Edward Luce April 13th, 2013 at 3:17 pm

We do need much smarter government in the US – and much of my book is about why it’s become so unresponsive (not just Congress but the federal agencies). But I know you wouldn’t underestimate how difficult it is to reform even the smallest agency in DC without provoking the ire of the oversight committees and their various dependents. I cite an example of Obama wanting to consolidate the 18 agencies that do nanoscience in DC down to one agency but he doesn’t have the power to do it…..Think of the 47 worker training programmes DC has. Fragmented they are useless. But you have to wade through the Congressional molass to make even the most cosmetic changes. After all the sound and fury on Dodd-Frank, how many financial regulatory agencies do we still have? Did it really change anything?

Edward Luce April 13th, 2013 at 3:19 pm
In response to maa8722 @ 56

Clearly there’s going to be less Europe and more Asia. Without the US navy having kept the peace (or largely done so) in the ASia Pacific, that region would not be thriving and a troubled Asia Pacific in which the US did not patrol the sealanes would pose a far bigger headache to America’s power and prosperity than a rising one.

SanderO April 13th, 2013 at 3:19 pm
In response to Edward Luce @ 57

This system cannot be reformed… the corruption is so intrinsic to this system it will not abide reform.

Jeff Connaughton April 13th, 2013 at 3:20 pm

You know, I’m reluctant to defend the Tea Party (your critique is absolutely devastating, and your anecdote about Glenn Beck’s fear of “oligarhs” is absolutely hilarious — British authors leaven with humor, FDL, I’m telling you this book has laugh out loud lines on every other page). But they are a citizen movement (I wish we had one on Wall Street issues) determined to stop the growth of government. And they control one house of Congress. Obama is in a jam, alright, but the Tea Party isn’t stopping the Obama Administration from improving how FDA works or making the OCC a more effective regulator of banks or cutting the national security state we’ve built in an excessive overreaction to 9/11 or asking what in the heck do the people at the Commerce Department do all day (another funny story, Obama had to have lunch with the Commerce Secretary because the White House forget to invite him to a meeting with CEOs). Isn’t the Tea Party basically in line with the view that we need smarter/pragmatic government? That’s not how Glenn Beck talks, but I don’t think Beck or I or the CEOs or many people would disagree on that point.

Jeff Connaughton April 13th, 2013 at 3:22 pm

Okay, I accept that Congress is a restraining force on Obama’s ability to reform government.

But you also note how so much power has been brought into the White House, it denudes the cabinet agency heads of the ability to get much done. We have government by political consultants, and not a lot of hard work and follow through on the issues that people aren’t paying attention to NOW.

Edward Luce April 13th, 2013 at 3:22 pm
In response to SanderO @ 59

And that is precisely Mancur Olson’s point: the longer and more stable a country/democracy, the more difficult it is to reform its governance. There are too many embedded vested interests (it’s called the barnacles theory of democracy). The Greeks and the Cypriots might not know it yet, but they have a great opportunity to start from scratch and clear away all the undergrowth. I would never wish such a calamitous scenario on the US – and I’m not predicting it. Which is why I agree with your point.

PeasantParty April 13th, 2013 at 3:25 pm
In response to Edward Luce @ 58

I understand the Asia Pacific and how our Navy polices the sea lanes. What I DON’T understand is how the Asia Pacific partnership actually helps our Government and our Country. Could you shed some light on that?

Jeff Connaughton April 13th, 2013 at 3:25 pm

Speaking of politics, you finished writing your book in the middle of the 2012 presidential campaign. Did the election results change your assessment of the future of American politics in any particular way? I

was particularly impressed by the fact that gerrymandering did a lot to help the Rs/Tea Party hold so many seats. More people voted D for Congress than R, but Rs still maintained a majority. We may not get changes to the House until every census leads to new redistricting or until Democrats use their demographic advantages to take back more state legislatures.

Edward Luce April 13th, 2013 at 3:26 pm
In response to PeasantParty @ 51

I don’t see much of Cyprus in America’s future. Your debt is not out of control – it should stabilize at about 75 per cent of GDP, which is perfectly sustainable. I’d look more closely at, say, Britain, where the ideology of being a top dog and of being number one meant it was less paranoid than it should have been to the rise of others. We have different terms for it – but Britain had (and to some extent still has) it’s own verrsion of American Exceptionalism. The top dog is always complacent about its enduring primacy while everyone else is busy catching up. The more I hear Obama, and the Republicans, talk about America’s unique and unbeatable attributes, the more I worry.

Jeff Connaughton April 13th, 2013 at 3:30 pm

I noticed your tweet that when you were young you used to protest Margaret Thatcher, but that you were sad at her passing (any patriot and gentleman would be, I would say). She’s being praised as a leader who helped reverse British decline. Are there any lessons of Thatcherism for the U.S. or do you disagree with those who say Thatcher’s policies significantly helped Britain’s economic position?

Edward Luce April 13th, 2013 at 3:30 pm
In response to PeasantParty @ 63

Sure – I’ll try. Asia has about two-thirds of the world’s population. They are buying American products, movies, jeans, software, semiconductor chips, education, media, pharmaceuticals, etc etc. No Asia Pacific country trusts China to uphold the global commons (a secure and open trading system). Without the US there would be a vacuum that China would try to fill and others would contest China’s expansion. This would cause instability and the risks of war would rise sharply. As I said earlier, a rising Asia poses problems for the US (I know where you’re coming from). But if you want a real migraine on your hands imagine a subsiding Asia.

PeasantParty April 13th, 2013 at 3:33 pm

Edward and Jeff,

Do you think that Bernanke should stop with the QE now? I certainly do because I feel that it will wrap itself around to the tax payers again just like everything else. I have a feeling that is why the Austerity measures are now in place.

PeasantParty April 13th, 2013 at 3:35 pm
In response to Edward Luce @ 67

Yes, I got that part. I just don’t see that it is a benefit to this Country and it’s people. It makes DC look good as a peacemaker, and uses our military for corporate interests.

Edward Luce April 13th, 2013 at 3:35 pm

I have mixed feelings about Thatcher. If you look at Britain in the 1970s, it had an IMF program. People were writing books about whether the UK would be the first developed country to slide back into being a developing one (actually Argentina was). Thatcher did put a stop to that but at an enormous social cost. And it’s unclear, particularly today with Britain mired in a partly self-inflicted austerity following the collapse of a financial bubble that originated with the deregulation of the 1980s whether Thatcherism offers any kind of an answer to the problems we’re suffering. In fact, I don’t think it does. Unions are not the cause of today’s ills. Nor is public ownership or out of control public spending. And there’s no inflation anywhere in sight.

Jeff Connaughton April 13th, 2013 at 3:37 pm

As for QE, I certainly wouldn’t own 30 year treasuries because when Bernanke stops buying them, at some point interest rates are going to revert to historic means, and that will mean current bondholders will be crushed.

I worry that Bernanke has created a market distortion that is having negative effects on investment decisions, but he’s the only guy in DC who’s actually doing something to try to get the economy out of the ditch. We have a monetary policy with Bernanke’s foot on the money printing gas, and we don’t have any other types of policies, it seems. So, like an alcoholic, I can’t get off the bottle either and I’m hoping Bernanke — despite the mounting and convincing criticism of his approach — will somehow turn out to be right.

maa8722 April 13th, 2013 at 3:38 pm
In response to Edward Luce @ 58

If I read correctly, then is there more of a reallocation toward Asia than an overall MIC reduction? Maybe it isn’t clear to me.

There seems still a robust policing aspect to this, . . .in Asia? If so, “Global responsibilities” seems code for that, and it has gotten us into conflict before, and competed for resources which might be better spent at home.

Is that a vicious cycle to be broken going forward?

Edward Luce April 13th, 2013 at 3:38 pm
In response to PeasantParty @ 69

Clearly the US has got to have a more balanced trading relationship with China. I agree with you on that. And the US navy and other services could do exactly what they do now on lower budgets. But we can’t return to an era of isolationism or autarky. As the saying goes, when countries stop trading goods, they start trading blows. America has a commercial and trading culture. I think that’s a good thing.

SanderO April 13th, 2013 at 3:39 pm
In response to Edward Luce @ 70

I would call USA not a developed country, but a devolving one. Technology or even industry is not necessarily a sign of social evolution is it?

Edward Luce April 13th, 2013 at 3:40 pm
In response to maa8722 @ 72

So far the “pivot to Asia” means this: The US will split its naval resources 60:40 in favour of Asia Pacific over the Atlantic. Previously it was 50:50. That seems to make sense to me. But it says nothing about the overall ceiling.

Jeff Connaughton April 13th, 2013 at 3:42 pm

Speaking of my optimism about Bernanke (even if not well founded) . . .

Ed, your book includes a great discussion about optimism versus cynicism; for example, how hypocrisy by our political leaders breeds public cynicism, yet optimism is what wills us to action. But in a way I found this aspect of your book to pose a circular logic. When you truly “start thinking” and drill down on America’s various problems, you find there are no obvious answers, and further no reason to believe a dysfunctional Washington will solve them.

So why wouldn’t the average American – even American elites – perhaps cynically conclude that the best course is to live a life of self interest, personal responsibility and local community volunteerism and hope (optimistically if not particularly rationally) that America’s exceptionalism will somehow save the day?

PeasantParty April 13th, 2013 at 3:42 pm

Jeff, thanks.

I am with you on that one. It really has to stop soon, and hopefully he can get somebody in DC to understand that no economic growth for the middle class is going to ruin them all.

Edward Luce April 13th, 2013 at 3:43 pm
In response to SanderO @ 74

Do you mean degenerating? I’m not sure I’d use that metaphor. I think the US is squandering the talents of millions of its people by allowing them to drop out of the labor force and deskilling. The hollowing out of the middle class is also bad for democracy – it’s no accident that median income decline has accompanied the rise of gridlock in DC. And its bad for growth: Either consumers have to increase their debts in order to be part of the game – as they have done before – or else the economy will lose steam. It’s not a good situation. But in terms of technology and innovation, there is still an incredible amount coming out of the US. Not everything is bad. I don’t want to sound too suicidal.

PeasantParty April 13th, 2013 at 3:45 pm

Jeff, I have been investigating the community organization and worker owned business models.

We’ve been handing billions over to the “Job Creators” for over a decade now with no results. Maybe a little real life competition in both government and business will shake the barnacles loose!

Edward Luce April 13th, 2013 at 3:46 pm

Jeff – that’s a very good question and you’ve identified a weakness in my book: It leaves a lot of people feeling demotivated! MF

SanderO April 13th, 2013 at 3:48 pm
In response to Edward Luce @ 78

For sure there exists brilliant innovators in the USA. Unfortunately the trickle down to the people is barely working. Innovation is supposed to improve the society not be the source of wealth for a few… which is what it seems to always become. It’s the reward for innovation = wealth. And wealth that seems to ultimate make others more impoverished.

PeasantParty April 13th, 2013 at 3:49 pm


You ask us to start thinking. Do you and will you support an alternative to all out vulture style capitalism?

Jeff Connaughton April 13th, 2013 at 3:50 pm

It’s a weakness in my life that’s left me feeling demotivated! I want to contribute, but geez it is frustrating. Your book inspired me if simply because it is so intelligently well done.

BevW April 13th, 2013 at 3:52 pm

As we come to the end of this great Book Salon discussion,

Ed, Thank you for stopping by the Lake and spending the afternoon with us discussing your new book and the state of America’s decline.

Jeff, Thank you very much for Hosting this great Book Salon.

Everyone, if you would like more information:

Ed’s website (Financial Times) and book (Time To Start Thinking)

Jeff’s website (JeffConnaughton.com) and book (The Payoff)

Thanks all, Have a great weekend.

Tomorrow: Katrina Hazzard-Donald /Mojo Workin’: The Old African-American Hoodoo System; Hosted by Lisa Derrick

If you would like to contact the FDL Book Salon: FiredoglakeBookSalon@gmail.com

FDL Book Salon has a Facebook page too

Edward Luce April 13th, 2013 at 3:53 pm

There’s nothing wrong with optimism – in fact it’s a good thing if it doesn’t spill over into delusion. People can make a difference by arguing, participating, doing things in their community, voting….Politics has a way of offering opportunities at surprising moments – think of what emerged from the Great Depression – Glass-Steagall, the GI Bill, Social Security etc, or from the Gilded Era in the late 19th century, when inequality and corruption was as bad as it is now. That was followed by the progressive era. So I’m certainly not writing off US politics as a force for positive change. But the clock is ticking. The world moves a lot faster nowadays. There are too many Americans on the economic scrap heap and too many others having to run faster every year in order to stand still. This is a colossal waste of human talent, and potential, which will slow America’s overall growth rate at a time when others, not just in Asia, but also in countries like Germany, are stepping up investments in their workforces, infrastructure, R&D etc. All of this is do-able. But as Jacob Hacker says, the paradox of America’s broken political system is that it can only be fixed through its broken political system.

PeasantParty April 13th, 2013 at 3:54 pm


I find it hard to be demotivated when there is so much that could be done. I think the citizens of this country have to stand up and become THE CITIZENS.

However, the citizens see the militarization of our police forces as a threat to their own lives. That is why I feel that community organizations can breach that wall.

Edward Luce April 13th, 2013 at 3:54 pm

Jeff, Bev thankyou very much indeed. I greatly enjoyed all the questions.

Edward Luce April 13th, 2013 at 3:55 pm
In response to PeasantParty @ 86

I agree with your sentiment entirely. Be active not cycnical. The latter is de-energising.

Jeff Connaughton April 13th, 2013 at 3:55 pm

A paradox indeed, but since I ended my book by calling for more people to get involved, I can’t very well ignore my own advice!

Thanks so much Ed for a wonderful book and a great conversation. I may even pony up and subscribe to the FT just so I can read your columns.

PeasantParty April 13th, 2013 at 3:57 pm

Thank you both for the stimulating conversation.

I look forward to reading your book, Edward.

Edward Luce April 13th, 2013 at 4:03 pm

Thanks so much Jeff: do pony up and subscribe to the FT: I promise we’re worth it! And thanks so much for your excellent moderation.

Sorry but the comments are closed on this post