Shownotes Transcript
From CAFE and the Vox Media Podcast Network, welcome to Stay Tuned. I'm Preet Bharara. I think that Trump's understanding of cultural anthropology leads him realizing that actually what is feeding the American voters right now is the equivalent of the Roman Empire's bread and circuses.
That's Jillian Tett, a columnist and editorial board member for the Financial Times. Her weekly column covers politics, the economy, and social issues, and offers unique insights pulled from her background in cultural anthropology.
As we approach the 2024 presidential election, economic issues have taken center stage. Ted joins me this week to discuss trade tariffs, inflation, and how each candidate's proposed economic policies could shape the United States and the world. And don't forget to sign up for our upcoming Stay Tuned virtual live show on October 15th. I'll be joined by Ben Wickler, chair of the Wisconsin Democrats, to talk about key battleground states in the 2024 election.
Head to cafe.com slash live to RSVP. I'll see you there. Stay tuned. And we're back with Canva Presents Secret Sounds, Work Edition. Caller, guess this sound. House click. So close. That's actually publishing a website with Canva Docs. Next caller.
Definitely a mouse click. Nice try. It was sorting 100 sticky notes with a Canva whiteboard. We also would have accepted resizing a Canva video into 10 different sizes. What? No way. Yes way. One click can go a long way. Love your work at Canva.com. They're not writers, but they help their clients shape their business's financial stories.
We'll be right back.
Before I get to your questions, I have some exciting news. Stay Tuned is nominated for a Signal Award for Best Podcast in the News and Politics category, and we need your help to win. To vote for us, head to cafe.com slash signal or click the link in the show notes of this episode. Thanks, as always, for your continued support of our work. Now let's get to your questions.
This question comes in an email from Patricia. She writes, I'm reading about the widespread damage caused by Hurricane Helene. What is the provision for a natural disaster disrupting voting on a scheduled national election day? Congratulations on your seven-year anniversary. I've been listening from the start and gotten answers to so many questions about the law that I never even thought to ask, Patricia. That's a great question, Patricia. And thank you for those kind words. Let me just say at the outset,
that our hearts go out to the people in the hurricane's path, both Helene and also the new hurricane bearing down on Florida, Hurricane Milton.
Listen to officials and the instructions that they give you, take care, and be sure to evacuate if you're told to do so. Above all, be safe. But of course, in the midst of hurricane season and nearing election day, your question has become a very important one. So to start off, I'll say there is no constitutional provision addressing election delays resulting from natural disasters. All we have really is a
is a federal law mandating that federal elections be held on the first Tuesday after the first Monday of November. And that law has been on the books for quite a long time. And as far as I know, a presidential election has never been delayed for natural disasters or any other reason. That being said, election officials in the various states do have ways of minimizing disruptions that could arise from extreme weather events or other kinds of emergencies.
They can extend deadlines for early voting, allow ballots to be forwarded to temporary addresses, they can facilitate casting an absentee ballot, or even add new voting places. The specific measures, as I suggested, vary from state to state. Like every other aspect of voting, it depends on your local rules. Just last week, for example, Florida Governor Ron DeSantis signed an executive order allowing election officials more flexibility on early and absentee voting. The order also allows election workers to move polling places
and designate new ballot collection locations. And by the way, this doesn't just apply to hurricanes or other natural disasters. You will remember that in 2020, at the start of the COVID pandemic, steps were taken to prevent the spread of COVID while still preserving people's right to vote. So to answer your important question, there is not a federal statute or provision that addresses how natural disasters might disrupt elections,
But the local election officials, who are the ones who administer national elections at the state level, are able to put, because they have flexibility, certain measures in place, like moving voting places and allowing for more flexible early voting, etc. Hopefully, everything goes smoothly. This question comes in an email from Abby, who writes, Hi Preet, I'm a 1L and I've been a fan of the show for years. It was a huge help in confirming my interest in law.
I've been interested in big law, but I'm getting more interested in litigation and prosecutorial work specifically. I know it would be a departure from your typical broader topics, but I wondered if you could talk about your interests in law school, your path...
and major decisions you had to weigh, or any recommendations you might have for law students exploring various fields. Love your podcast and hugely appreciate the work you do. Thanks, Abby. Well, Abby, thanks for writing. These are difficult and complicated questions, maybe not as difficult as you might think, given where you are in your education. For laypeople, if you don't know by now, 1L is shorthand for someone who's a first-year law student.
So I hope you're doing well and you're handling the first year, which is the most difficult year of law school. Once you get past year one, it's not a breeze, but it's a little bit easier. It's a little bit lighter. I'm one of the lucky ones, I guess, in the sense that I knew fairly young, as I write about in my book, that I wanted to be a lawyer.
I remember reading Inherit the Wind and thinking, if you could have as your career and your job to go to court and argue for causes, better if you believe in the causes than otherwise, that would be a great way to make a living and also to make a difference. Then my interest in what kind of lawyer I wanted to become got narrowed as I went to law school and thought about what I wanted to do in public service. I had a trial practice class my third year of law school at Columbia with a sitting judge on the Southern District of New York and a sitting assistant U.S. attorney, and it
In that class, I discovered that I was most at home thinking about prosecution cases, doing arguments to mock juries, giving openings, giving closings, marshalling the evidence, and presenting my case. So when it comes to me, I knew that I really wanted to be a federal prosecutor and hopefully could become one in the Southern District of New York. And not everyone has such a focus on what they want to be. Not everyone knows right away what they want to be when they graduate from law school. I happen to know.
I actually spent six years in private practice, all with an eye towards honing my skills and building my resume so that I could be accepted to the SDNY. And fortunately, I was. What's my advice to other people who are not sure? It's basically this. Do what you think interests you and what you might enjoy, what you might be good at. And what I tell graduating classes when I give commencement addresses at law school is don't worry too much about having made the wrong decision.
The one benefit, and there are many benefits of having a law degree, is I think that our profession, whatever people think of it, is one of the most mobile professions you can have. You can become a litigator, change your mind, and become a corporate attorney. You can work at a law firm, change your mind, and go in-house at a company. You can be a private sector lawyer, change your mind, and go to public service and vice versa. You can actually leave the profession altogether, as my brother has, and as a lot of other people I know have.
We've had some great guests who are famously lapsed lawyers, including Min Jin Lee, who is an award-winning novelist, began her career in, as you put it, big law. In fact, our cafe team, which I think is the best podcast producing team in the business, we boast three lawyers, or people who are trained as lawyers, and now work in journalism. So I hope you have a good three years. I hope you find a great starting job. And at some point, consider working for us.
This question comes in an email from Donna, who writes, Hello Preet, just wondering if there is an update from the young Bharara on the current odds for the November presidential election. I am hoping it is improved from the Biden post-debate assessment. So Donna, you are obviously a regular listener. And what Donna is referring to is on the podcast immediately after the first debate, the Biden-Trump debate, I was sharing with the audience the assessment of my younger son, which is reflected in my family group chat.
About 9.24 p.m., my younger son messages the group, this debate is so painful. My older son replies, my oh my. My wife writes, oh no. Then the younger Barrera, as you mentioned, writes, I'd give Biden a 0.01% chance of winning the election. My wife responded, oh God. And I see that I wrote then, I have increased my vodka ratio.
I don't know if any of you had an evening like that, but that's how it went in the Barrara household. I'm happy to report to you, Donna, that I checked in with young Barrara last week. And although he's not a political scientist, he's not studying political science like his older brother and sister. He's rather a science kid, which makes him smarter than all of us. He now believes that the Democrats, as represented by Kamala Harris,
has a 60% versus 40% for Trump chance of winning the election. Let's see how it goes. Stay tuned. I'll be right back with my conversation with Jillian Tett. Support for Stay Tuned comes from Washington Wise, an original podcast from Charles Schwab.
Decisions made in Washington can affect your portfolio every day. But what policy changes should investors be watching? How might the 2024 election affect your trading and investments? Washington Wise is an original podcast from Charles Schwab that unpacks the stories making news in Washington and how they may impact your finances and portfolio. Host Mike Townsend, Charles Schwab's Managing Director for Legislative and Regulatory Affairs,
Take a look at the stories that matter most to investors, including regular updates on the 2024 election and its potential implications for the market, policy initiatives for retirement savings, taxes and trading, the Federal Reserve and how regulatory developments can affect companies, sectors and even the entire market. You can download the latest episode and follow at Schwab.com slash Washington Wise or wherever you listen.
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That's CozyEarth.com slash Preet. If you get a post-purchase survey, say you heard about Cozy Earth from Stay Tuned. Polls show that many Americans rank the economy as the most important issue shaping the presidential election. Financial Times columnist Jillian Tett joins me to discuss each candidate's proposed policies and their potential impact on the election. ♪
Jillian Tett, welcome to the show. Delighted to be with you. It is so good to have you. Even though you were across the pond, the miracle of modern technology makes this conversation possible. So I appreciate it. So we have a lot to talk about in connection with economics in the U.S. and around the world. And I want to get to a number of issues, including this debate and fight that's happening politically in the U.S. with respect to tariffs, also taxation policy, and a whole bunch of other things.
But I want to start by quoting back to you something that was very famous from the 1992 presidential campaign, where the Clinton campaign said that they were focused on one thing. And they said, it's the economy, stupid. I guess my question to you is, isn't it always the economy? And how much is it the economy this time as compared to 1992? Well, it depends what you mean by the economy, whether you mean the economy in general or people's personal experience of the economy.
Because what we've seen in the last year is a really big gap open up between the two.
If you look at the macroeconomic numbers that America is doing remarkably well right now, particularly compared to the rest of the big industrialized countries, many people, including myself, did not think that it could produce a so-called soft landing, meaning steady growth with low inflation and pretty high employment. In fact, it has done that. And the macroeconomic numbers as a whole means that everyone in America today should be very, very happy.
Of course, we know that they're not because people's experience of the economy depends on where they sit in terms of the economic hierarchy, how much money they're earning or not. And it does seem that there's quite a lot of disparity between some of the winners and losers. But it also depends on how you feel about the future, how you feel about your community, how you feel about where you stand relative to others.
And on that measure, there's a lot of anger and unhappiness in America today. There's a very clear partisan bias if you look at how people describe where the economy is going, in that Democrats are much more upbeat than Republicans, even when they're in the same income bracket and should be experiencing similar kinds of economic realities.
But there's also a big gap between how people see their own finances and how they see where the economy as a whole is going. And the key point to understand is that polls suggest that consumers are more upbeat about their own experiences than about the country as a whole. And that might reflect a climate of general media negativity, political mudslinging and things like that.
So to go back to, is it the economy, stupid? The answer is yes, but it depends on which bit of the economy you're talking about. It's very interesting that distinction between the economy generally and how the economy is affecting a particular person who's being asked the question. I would think it would always be the latter because if 80% of the people in the country are doing well, but you're in the 20% that's not, it seems obvious to me that you would care about the second thing, not the first thing.
It would also seem obvious to me that whosever policies are being credited by the 80% would be in the politically advantageous spot. But then you bring in these other issues, including not necessarily an objective view about how someone is faring in the current economy, but whether or not that's good enough in comparison to others. I mean, look, most people in the United States, if they compare themselves to the rest of the world, should be feeling absolutely buoyant about the economy, but they're not because things are relative.
Is that the right way for people to be thinking about the economy? In other words, are there some people who are being unreasonably negative, even though they're doing particularly well? And what comes to mind is a joke that I heard someone make about some folks who complain about inflation and the price of food, and nevertheless, in this comedian's words, hire a chauffeur for their burrito, which is basically what Uber Eats does. Well, that's a great example. I mean, there's two or three things to be aware of. Firstly,
that people don't compare themselves to how someone's living on the other side of the world or even necessarily to how their grandparents lived. If they did, then everyone in America would be very happy right now. What they tend to compare themselves to is what their neighbors are doing. And that has changed significantly in the last few years because people,
People's vision of their neighbours used to be based on their analogue experience, i.e. the people they lived around and could physically see. Now, of course, social media and digital technologies means that we can all compare ourselves to everything all the time that's happening online, and that's very different. And almost everyone looks worse than the lives that influencers or others are leading. But the second key point is that as the work of behavioural economists has shown, people's
People tend to grab on to simple means, if you like, to use the modern social media phrasing rather than the economist phrasing. And so, for example, right now, economists would say that inflation has been coming down in America really quite dramatically. And so people should feel happier about
But the lived experience of most consumers is that the price they see most regularly is the price of gas on the forecourt in gas stations. That's a simple number that they can understand and which they can compare historically to where things were a few years ago. And so if gas prices go up, that has an outsized impact on consumer psychology and will make people feel that actually they're very gloomy looking forward, even if the macro data is fine.
And we've seen this over and over again in the last few months in that what the voters appear to be saying repeatedly is they're angry about the so-called cost of living crisis, how prices have jumped up on a three, four, five year horizon. They're not particularly interested in explanations about why that reflects supply side problems or demand side problems, even though that's what economists care about. And they're often looking for someone to blame and someone to fix it.
That is tough to get your head around if you're an economist, but it's certainly shaping the political debate right now, big time. Gas prices are particularly thorny and difficult political football. I mean, I worked in the Senate for four and a half years for the current majority leader before he was majority leader. And the Democrats held press conferences about the high price of gasoline from time to time under the Bush administration. Republicans do it to Democrats, even though as I understand it, and I wonder what your view is,
that there's not much specifically that a presidential administration can do about the cost of gasoline, and it fluctuates so dramatically from time to time. I wonder why it is. Maybe it's because of the reason you said it's very effective, but it seems a little bit hypocritical because both sides will say, depending on the circumstance, well, it's not really the fault of our administration. And when the price of gas goes higher, it's
The other political party will say it is in fact absolutely the consequence of your policies and the fault of that administration. How do you explain the politics of gas prices in that reality?
Well, the policies of gas prices in one level are very simple. People care about it because they use gas a lot. It impacts the household expenditure of anybody who has to drive significantly, particularly at the lower end of the income scale. But secondly, because gas is such a clear-cut, simple price that everybody can see and it hits you in the eye when you're driving along, it's very easy to track.
And so people care a lot about that because it's one of their clearest barometers to what they think is happening overall. As you've just said, it's actually a terribly bad guide to what's happening to prices overall because the oil market is affected by so many different things that don't necessarily reflect demand or what's happening to other consumer prices. And in reality, there's not a lot that presidents can do about it except say,
maybe use the Strategic Petroleum Reserve to try and flood the market and bring down prices, which, of course, the American government has done quite considerably in the last few years during COVID, to a point where many industry and energy analysts are getting worried about the rundown in the reserve.
But at the end of the day, the best thing that presidents can do is either just pray that there's not going to be any kind of conflict or any kind of move by the big producers that's going to lead the oil price going higher, or to basically bolster homegrown energy security through green technologies, or what the Biden administration has done in the last few years, give out a lot more oil and gas licenses and encourage the sector to keep pumping out oil and gas.
I want to ask you more about the political rhetoric surrounding inflation. As I see it, the problem is that at some point in time, a product that you have to buy, whether it's gas or milk or eggs or something else, was $5. And then you had this period of inflation, and people can argue about what the causes of that might have been. But then that product goes from $5 to $6, and that's a burden, or $5 to $7, let's say. And everyone's upset. And then inflation, or the rate of inflation, eases.
and goes back down very considerably. And this is now obviously the Democrats' burden to bear. And whether it's Biden or Kamala Harris, they say, well, inflation is not so bad. Look, it's down to almost historic lows, but the eggs or the products still cost seven bucks because inflation easing doesn't cause negative inflation. It's not the price going down. And in that reality, as a political and rhetorical matter,
How should the administration in power be talking about inflation? Is it a useless exercise to try to explain to people that they should be happier that their eggs are not or their product is not going up to $8 or $9 when they are still recently accustomed to it being $5?
Well, it's a very tough question, the question around how politicians talk about inflation. Because first of all, economists tend to live in a world of real price increases, real inflation movements. People who are not economists live in a world of nominal prices, and
And they look at things like sticker shock. And, you know, just take a crude example, petrol, gas might have gone from $5 to $6 a barrel. But if they're getting paid in a way that's also had a significant 20% wage increase, then at the end of the day, they should be flat. However, the reality is that people don't adjust their vision of price increases for how their own pay is moving or not moving.
So that's one big problem. The other big problem is level, in that economists tend to obsess about the annual price increase or decrease, i.e. inflation or deflation, and that's the number they look at. Consumers simply see whether it's $6 or $7, and trying to square that circle is incredibly hard.
And we don't live in a world where prices collapse dramatically to offset previous price increases. So my best advice to politicians would be to acknowledge people's pain, acknowledge the challenges they face in dealing with these price increases. Talk about potential support if you want to. But otherwise, don't spend all your time promising to, quote, fix inflation, because that's supposed to be the Federal Reserve's job anyway. Right.
Well, you said something interesting that suggests a question in the minds of some listeners, and that is that a lot of economists view things and look at the economy from a different perspective than consumers. Isn't there a problem if that's so?
Well there's definitely a problem in the gap of how economists might look at the economy with models and create quite abstract visions for the future and the lived experience of real consumers who are neither as rational as economists like to presume nor are they as all-seeing and all-knowing and in possession of the kind of information that they would need to make truly rational decisions.
Because the level of transparency often isn't there. Now, I was trained, I did my PhD in a subject called cultural anthropology, which takes a radically different approach to looking at our lived economic experience. For one thing, it says that economics is not just about money. We live in a world where a lot of exchanges today are not mediated by money at all. And they don't get counted in the official statistics.
Another problem is that consumers tend to have a very different vision of time from economists. It's very subjective. It's not as overarching as an economic model. And economists tend to ignore the fact that cultural patterns can really influence how consumers behave and how they perceive value or no value.
On issues that are very consumer-driven, that affect the economy, like the issues you just talked about, it comes to mind, for example, that rate of spending, rate of saving, is a psychological aspect of the economy. Do economists understand what motivates saving as well as they might?
I would argue that if you start talking about saving and spending, then you're going straight into the realm of economic anthropology and behavioral economics. Right. So we need more people trained like you. Well, I guess I'm a job creation screen for anthropologists. Well, I don't understand how you can develop models or talk about rate of spending and saving on the part of individuals like
who are separate psychological entities without understanding anthropology or psychology. How do you do that? Well, I would agree it's very hard. And in fact, one way to imagine anthropology is that psychology tends to look at how individual human brains operate and all the neuroscience that goes into that. Cultural anthropology looks at the cultural patterns which shapes how groups of people behave together. So society's collective brain, if you like.
And the reality is that we're all creatures of our own environment. We're all affected by cultural patterns that we absorb without even realizing this and often don't notice. And that really impacts how we look at the future and behave.
So to cite another small example, in the last few months, a really big gap has opened up between the Europeans who have been saving, these European consumers, saving a considerable portion of their income. In fact, they're saving more than they were before COVID hit, seemingly because of concern about general economic insecurity.
and Americans who are not saving very much. And as a result, there's been something of a consumer boom in America, which has not been matched in Europe.
Now, in theory, if you're being rational as an economist, you'd say that, well, that is completely nuts because, yes, the American economy is doing better than Europe, partly because of that consumer spending. But America generally has much worse safety nets for consumers if they lose their jobs. And the Europeans have a much bigger safety net, so they shouldn't need to save as much.
But the reality is that there's really ingrained cultural patterns going on on both sides of the Atlantic here. And so at the end of the day, the only way to really explain these differences is to look at that thing that economists hate to talk about, which is culture. Look, I'm with you. I think it's incredibly important. And we'll get to some of these issues and the other topics we pursue. So I want to talk about one economic issue that has been debated a lot in this election season. And it has some people scratching their heads.
And it's the debate between Donald Trump and Kamala Harris now before with Joe Biden on the appropriateness and the wisdom of tariffs. Before we get into that political debate and how people have changed their minds or parties have seemingly changed positions on this over the last number of decades, my first question to you is just so we go back to the beginning and to basics, explain what a tariff actually is. Well, in its most crude form, a tariff is a supplemental fee that
or a supplemental payment that you slap on somebody who wants to sell something to America or to another country. So if you're buying steel rods, for example, maybe someone sitting in China or Korea will say, I want to sell you these steel rods for $100.00.
If you want to slap on a tariff, you would say the government, actually, you can sell them at $100 to these consumers in America, but I'm going to slap on a 20% tariff so the people in America will be buying them at $120 effectively.
So let's unpack that. So the $20 actually in concrete real life is paid, am I correct, not by the seller in China, but on the importer who is in America? Or do I have that wrong? Well, effectively it's paid by the importer. And the idea is that that's going to deter, although the actual mechanics can change,
from time to time, situation to situation. But the theory is that that does two things. Firstly, it makes it much more costly to buy things from overseas if you're sitting in America. And so the hope is that that will then force people or encourage them to basically buy American-made goods instead.
And then secondly, of course, it raises money for government. And so one can also say this is basically an enormous import tax. Right. But the particular party that you're incentivizing in the process is the importer who may not believe that he or she can pass along the higher-priced product from importing, thereby arguably, presumably protecting some competitive product of your own in the United States. Is that correct? Absolutely.
Do you believe in Donald Trump's head that he believes if he imposes a tariff on China that Mexico pays for it?
Well, like many things in Donald Trump's head, it's going to be a very tough thing to unpack because actually within that joke, you actually start raising a lot of other questions like where exactly do you impose a tariff and how do you determine it? Because, you know, if you go back to the days of, say, the Boston Tea Party, to take one example from history that's, you know, rather pertinent to me given my accent, you
You know, in those days, you could literally just slap on a tariff onto tea as it came into the country or onto whiskey or anything else and say, right, I'm effectively going to tax that. It's going to be put in massive import tax, import duties, and that's going to be paid once at point of entry, end of story.
Now, if you're dealing with a car today, it's not like a bale of tea. It's going through multiple stages, multiple factories. The question of where it's assembled is not always clear cut because part of it might be assembled in Asia, part of it in Mexico, part of it in America. So in the modern supply chains, it's become a lot more complex to work out where exactly and how you're going to impose the tariffs if you want to.
Explain the difference in two scenarios where a tariff might be imposed. Scenario one is one where there's a lot of competition, right? Let's say there are a lot of steel rods that are made in China. There are a lot of steel rods that can be made in the United States that are of different quality, strength, etc. But there's competition in the market. You impose a tariff in that situation, what's the consequence? What's the wisdom of it? As compared to a different, the other example I would give you
is an industry in which American ability to produce products in that category is limited or embryonic, but China or some other countries much farther advanced in the production of that product. Wiser in one circumstance than the other?
Well, if you impose tariffs in a situation of lots of competing sources of products, including those without tariffs, then if you believe in the magic of free market forces, then consumers should all flock to the products without tariffs. And essentially, you'll end up keeping out non-American products from American markets just by simple economic rationality. Right. And you don't hurt consumers because they get the product.
Well, you don't hurt consumers, they get the product. And generally speaking, if there's lots of competition, the fact that the price of some imported goods has gone up wouldn't drag up the price of all the other goods. And so you wouldn't get inflationary pressures. But you might get, just pause on that example for a moment, you might get retaliation. And so the rods that your country, that America is producing, that company might face some more difficult times because they might have tariffs imposed on them when they're selling those products in other countries.
Yes. I mean, if you end up basically in a situation of retaliation, then you start to get cascading tariffs and essentially it does become a wash. And so a bit like the example we were talking about earlier with the sticker price of gas on the forecourt, what people will tend to look at is the tariff that might be imposed against, say, a Chinese company
import and think, oh yeah, obviously it's bad. We should keep this, or rather it's good. We should keep those bad Chinese products out of our markets. And if they come in, our government's going to slap, say, 20%, 60%, whatever it is. And that's like a quasi-tax. So that sounds good.
But as you say, the problem is that when you look at the real tariff effect, i.e. netting off what you're imposing on imports against what other people are imposing on your own exports, then it can start to look very different. And you may end up in a situation where essentially you're collecting tax or money through imposing tariffs, but you're seeing your own producers being squeezed out of other markets as hurting your overall economy because someone else is imposing tariffs on them.
What was the golden age of tariffs, if I can use that phrase, in the U.S.? Because there was a time when tariffs were quite popular and also endorsed by various economists. Am I correct?
Yes, I mean tariffs have gone in and out of fashion over time. And of course the American Revolution was sparked in some ways by protests against the type of tariff and tax first time round. So you've had bouts of history when tariffs have been pretty high. Of course the time that everyone points to as a really dark time
was back in the 1930s when protectionism exploded around the world and tariffs were slapped on just about everything. And in many ways that's seen as the warning and the reason why you want globalization and freer markets because when you do slap tariffs on everything, what tends to happen is that obviously global trade grinds to a halt but many economies grind to a halt as well because they are so dependent on
on cross-border trading. And so what happened to the popularity of tariffs? Is part of it the maturing of the American economy? I guess one question I have is, separate and apart from benefits or consequences, positive and negative, that the United States would have to consider in imposing broad tariffs, targeted tariffs, whatever the case may be, does America, as the most powerful economic force in the world,
have to think about those things differently because they have an interest in maintaining some kind of world order or not? Well, for me, one of the most insightful commentators I've heard on this issue was actually John Manny Keynes, the 20th century economist. And I spend much of my time in Cambridge, England each year at King's College, which I oversee, which is where John Manny Keynes was.
And he wrote some haunting and devastating and very prescient letters and essays back in 1919 and after that, which pointed out that before 1914,
the Western elite, the American and the British elites, just kind of took globalization for granted because there was a period for about three or four decades before 1914 when there was an explosive rise in the amount of trade and the movement of money and the movement of people.
And for the most part, there weren't a lot of tariffs and people didn't even have passports when they wanted to move. It was a tremendously free, open, easy-flowing global economy. And that then collapsed in World War I. And John Miller Keynes was terribly worried in 1919 that the Western elites, business leaders and politicians, were so complacent about the benefits of globalization and it being good for them,
that they kind of hadn't even probably noticed how much they'd benefited and didn't get out and start fighting to protect it. And so the world slid into this period of horrible populism, punitive policies to each other, protectionism, and it had a dreadful impact on the global economy.
And the reality is that we're in real danger of repeating that all over again. After World War II, when there's been shown so clearly the horrors of what could happen with fragmentation and populism and protectionism and what might be called patriotism or nationalism, there was a concerted effort by global leaders to say, actually, we want to create a much more free-flowing financial and trading system,
So we're going to start creating institutions like the International Monetary Fund and World Bank and then the World Trade Organization to try and make sure that we don't have retaliatory Paris all over the place. But although that episode of the last few decades was wildly successful in boosting global growth,
Once again, people have become very complacent about the good things in that. And so people are rallying around the idea of tariffs as being a quick and easy fix. When, of course, John Medicaid, back in the 1920s and 30s, would have argued very strongly that it's anything but. I'll be right back with Gillian Tett after this.
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Noelle, the election is nigh! It sure is. Can you name all the swing states? Oh, um, Michigan, Wisconsin, Nevada, Arizona, Pennsylvania, Georgia, and... Is it Virginia? It is not. It's North Carolina, but you got the others.
I mean, I think it's arguable. Let's just say I'm kind of right. Let's give me partial credit. Partial credit it is. And we are doing episodes about all seven of the real swing states. Oh, it sounds like I should listen. What are we doing, like history lessons? No, the big issues, abortion, the economy, election security, all of it.
OK, so you're saying if you listen to Today Explains seven episodes on the seven swing states between now and the election, you are going to be ready for whatever comes on November 5th. There you go. Today Explained, wherever you listen. We drop in the afternoons, Monday to Friday. So let's talk about the particular candidates now that we've laid some foundation about tariffs and how they work. What's your understanding of what Trump's tariff plan is, both when it comes to China and then more broadly?
Well, what Trump has said in recent weeks is that he plans to put 10% tariffs on all inputs and 60% on those coming from China and maybe up to 100% on some other goods coming from China. Now, I was recently in Canada with a group of Canadians with some of Trump's senior potential team. And when they came out and said this to Canadians, you know, the normally mild-mannered, polite Canadians said,
exploded and said, well, hang on a sec, we have this thing called the USMCA, which is meant to be the successor deal to NAFTA, the North American Free Trade Agreement. So we have a deal in place between Mexico, Canada and America, which means that we're not supposed to put tariffs on things. How on earth can Trump come in and just slap on 10% tariffs on everyone? Surely you don't mean us Canadians are going to be subject to this too.
To which the would-be Trump team said, well, absolutely, yes, you will be. Nothing is written in stone forever. Deals can always be renegotiated and we fully intend to do this. Now, there are a number of questions about this in my mind. One question is, are they just doing this as a negotiating position and trying to terrify the Canadians and Mexicans and everyone else to be much more conciliatory? It's possible they are.
Are they simply taking this very tough stance because they think it's going to win votes and get them elected? And that once they're in office, they'll drop it because a whole bunch of business leaders will go to them and yell at them and tell them not to even threaten to do this. Again, it's possible that that happens. Can we pause on that? So explain, though, if the purpose of the tariffs is to help American business ostensibly, even if it's wrongheaded businesses.
Why would American businesses be upset about the tariffs? Well, the answer is that some businesses would not be upset about tariffs. So if you are making steel...
You probably think tariffs are a great idea because it means that you'll end up with your products being much more competitive for American consumers. Of course, the risk is that your products will then get tariffs if you want to export them. But there's lots of sectors in the economy where businesses actually just want to sell to America and be protected from foreign competition rather than try and export.
However, the reality is that if you look at, say, the car sector or the chip sector or the vast majority of big business sectors that drive the American economy, they all involve multiple stages of global supply chains. And what that means is that if you're making cars and the cost of your steel suddenly goes through the roof because of tariffs, because the steel you want to buy from elsewhere, then
then you're not going to be happy at all. And you might say, well, actually, we think tariffs net-net are a really bad idea before you even begin to think about the cost of trying to sell your own products in other markets that might slap on tariffs too. Right. So if you're an American car company, and part of the reason the tariffs are bad for you is that you have plants in other countries, and the steel that you bring to your plants in the other countries is more expensive, then
Isn't the counter argument? Well, yeah, good. We're glad it's causing you pain because you shouldn't be making cars in other countries to begin with. Bring that manufacturing home. What's wrong with that argument? Well, that argument is certainly one of the versions of the campaign rhetoric that the Trump team are using. So they would argue that everything should be brought back to America.
And there's at least two problems with that. Firstly, that some things just cannot be made in America as effectively or cheaply at all. So there are all kinds of things like, say, lithium processing, which is an absolutely vital part of the modern supply chain around making cars or iPhones or almost anything else.
Lithium processing is a really horrible, mucky business that requires a lot of water, a lot of cheap labor, things like that to actually be economic. And it's unlikely that many people in America would actually want to have that on a massive scale right now. So the fact it happens mostly in China is, as far as many American consumers concerned, probably no bad thing.
So that's one problem with it. Another problem with simply slapping on tariffs and somehow assuming magically that everything is going to be sorted out is the question of where you actually draw the line about who is or who is not your friend.
The Biden administration has talked a lot about friendshoring, the idea that we don't want to put factories in potentially hostile countries like China, and we want to put them instead to our friendlier countries. And up until now, it's been assumed that those friendly countries would include Mexico and Europe and Japan and South Korea, because they're all part of a broad, loose military alliance.
Well, some of the really shocking things that have happened in the last two or three years, if you're a business leader, is that on the one hand, you've had Nippon Steel being barred from buying an American steel company, supposedly because that's too threatening for national security. So suddenly Japan doesn't seem like such a good friend after all, at least in the eyes of Congress.
You had European producers in green industrial products being kept out of the IRA, Inflation Reduction Act subsidies, because again, Europe wasn't counted suddenly as being a good enough friend to be included there.
You've got Trump muttering about Mexico and threatening to punish companies who have their operations there. And people like Bud Lighthizer have been very articulate about how they don't see Mexico as being an extension of America when it comes to production. So trying to work out who your friend is today looks about as difficult as trying to work out who truly is a friend in a high school canteen. Giving Trump and his advisors the benefit of the doubt, as far as you can,
Is there any universe in which you think that an across-the-board—put China aside for a moment—but that an across-the-board 10% tariff on all goods imported from outside the United States helps consumers in the near or medium term?
Well, it might potentially help consumers in some very limited sectors if they happen to live next to a factory or next to a place which can actually produce the same goods at a similar price or even cheaper and potentially create more American jobs on the back of it.
But that is such a limited, small set of examples. The reality is that if Trump slaps 10% good tariffs on everything, you're likely to see all kinds of retaliatory measures. And so if you are, say, a company trying to sell into Canada, then there's going to be much harder for you to actually sell your goods. And if you are looking at, say, China and slapping 60% tariffs on China, then
The reality is that what that means is that every component that goes into your cell phones, for example, will suddenly become dramatically more expensive. And that means that you'll have to pay a lot more for your iPhone or the toys that you give your kids at Christmas or in other holidays will again become a lot more expensive almost overnight.
And there's a more subtle challenge, which is the mere fact that someone threatening to create tariffs left, right and center will add an element of uncertainty for businesses that makes it very hard for them to plan their supply chains or have the confidence to invest going forward because they don't know how the rules will change again in the future. Are there people who can reasonably predict what the inflationary impact would be?
in the near term to a 60% tariff on Chinese products and 10% across the board for all others? Well, there's all kinds of people who are trying to guess what the impact would be. And I'm not going to come out with those figures. All we know is that they are big. There would be a big hike in inflation potentially as a result of all this.
And on top of that, of course, you've also got the inflationary impact of migration curbs. Because if Trump can be taken at his word in terms of his threats to deport millions of people and create migrant camps and things like that, that's going to suddenly take a large chunk of people out of the workforce in America who are picking fruit, doing construction jobs, doing cleaning, things like that.
And that means businesses will have to either pay out more for local workers, which of course many consumers say would be good, but that would be inflationary too.
or they're going to have to try to use more robots and automation. And that's going to create further strain again. So the combined impact of the two policies that Trump is talking about, i.e. tariffs and dramatic ways of expulsion of migrants, means that you could actually see quite a significant pressure upward on prices. Okay, so here's my question because I'm very confused.
What is it that Trump does or does not understand? I'm going to use your phrase. What does he or does he not understand about cultural anthropology? Such that on the one hand, a central theme of his campaign is that the Democrats brought you inflation, and I know how to fight inflation. And yet a central economic policy of his is one that objectively and rationally and based on, you know, basically across the board,
expertise of economists and others say would be incredibly inflationary. How does that work?
Well, I think on one level, Trump absolutely understands cultural anthropology because he knows that consumers are not economists and they don't think rationally. And that's what he's tapping into. He's feeding people these constant memes, if you like. And I think of this current election as being an election of dueling memes, not so much dueling policies. On the one hand, you have the Kamala Harris campaign, which is all about hope and joy and opportunity and very positive memes.
And then you have the Donald Trump campaign, which is about fear and anger and, you know, otherization and really quite dark memes. So Trump understands that people don't think
in terms of models and algorithms, they look at the sticker price on the forecourt and go, yikes, and that's what he's tapping into. And he knows that people don't understand how tariffs work and the inflationary impact of that. He also knows that people don't sit there mostly and look at the fiscal implications of what he's talking about. You know, very roughly speaking, you know, his
pledged policy moves would add something between four and seven trillion dollars worth to the budget deficit potentially potentially is a key word there about twice as much as the Kamala Harris plans and that again is being ignored by most voters because they just don't understand exactly what that means.
So the Kamala Harris plan you mentioned, what is it and how does it compare? Well, Kamala Harris is in a rather interesting position around tariffs because when Biden came in, he had previously been criticizing Trump's election campaign and economic campaign. But the dirty secret is that they actually didn't remove many of the tariffs. He kept them. So how do you explain that?
Well, a few of them he moved very quietly, but he left most of them in place. Because A, the one thing that almost everyone in Congress agrees on right now is that they are anti-China. That's the one pointed by partisan consensus. And B, he clearly felt that the American economy could weather that
And because his overarching rhetoric was much more positive and globalist, he wasn't sparking the same threatened retaliation from other countries as the Trump team had been.
So one of the dirty secrets, one of the ironies of the Trump to Biden handover was actually the tariff policy as it was brought in by Trump didn't change very much during that period. The big question now, though, of course, is whether Trump will do what he says and double down and treble down and dramatically increase the tariffs or whether it will simply stay as it currently is, which is what Biden or rather what Harris is presumed to be doing.
Does that allow, does that murkiness allow, I'm going to ask you to be a political scientist for a moment, does that allow Trump to get away with what he gets away with? In other words, he says that he wants to impose tariffs across the board, which potentially is cataclysmic. And when people criticize him, he says, well, the other side wants tariffs too, even if it's the case that Kamala Harris is proposing tariffs.
targeted tariffs in certain sectors in ways that are not cataclysmic, in the same way that he says, you know, or his supporters say, well, yeah, you say Trump lies, but the other folks lie too, even though it's to an infinitesimal degree comparatively. Is that another great understanding of cultural anthropology? I think that Trump's understanding of cultural anthropology leads him realizing that actually what is feeding the American voters right now is the equivalent of the Roman Empire's bread and circuses.
On the one hand, he's promising all kinds of distraction, entertainment and humor and drama, which you get on your social media feed. So things like his assassination attempt that he survived,
Things like, you know, all the rallies he has, his outrageous comments. Those are all, if you like, in the category of circuses, of entertainment meant to distract people. And boy, does it work really well. And then he's also tossing out bits of bread, i.e. things he can use to bribe the voters with in terms of his promises. Like no taxes on tips. Exactly. No taxes on tips. Exactly.
The tariffs, you know, basically going to keep your jobs, you know, buy America and things like that.
And so that combination is really the way he's approaching the election. And it's a meme election. It's not a clear-cut policy election. The only really detailed policy plank we've had or platform from the Republicans has been Project 2025, which we've just had Howard Lutnick, the big Wall Street broker who's now being
charged with being in charge of the transition group and selecting people, he came out and told the Financial Times yesterday that that was in no way part of the Trump agenda. So we don't really know exactly what Trump will do. And we don't know how much of this is just bluster to increase his negotiating leverage in any future trade discussions.
Has one side or the other given a little bit more economic policy detail? Kamala Harris put out an 82-page book or booklet. What do you make of that?
Well, I think both sides are pretty weak on economic policy, to be honest. Weak on their policy or on giving details of their policy? I would say they're weak on giving details of their policy. I think with Harris, it's easier to imagine what you're going to get because you're basically going to get more of the same. And in many ways, they are the continuity candidate. I suspect with a bit more in the way of social policies on top of it because most of Biden's initiatives around that
element of his platform was shot down by Congress. And presidents, when they've lost a primed, prized policy measure in Congress, don't usually want to come back and try it over and over again. So Harris coming in fresh, if she does come in, will probably have more maneuver to pick up other parts of the original Inflation Reduction Act and other bills that Biden wanted to push through, but which got shot down.
So, you know, that gives us some clue of what Harris would do. In terms of what Trump would do, I mean, on one level, that's kind of anyone's guess. He has said a lot of things. He's given indications about policies. You know, what we think he would do is, one, seek to weaken the dollar, because that's what Bob Lighthizer has said repeatedly. Secondly, to increase spending significantly and cut taxes, if
in a way that could create a $7 trillion additional debt burden, raise tariffs and curb immigration in a way that would be very inflationary, and potentially undermine the Federal Reserve's independence as well. He's also talked about that.
So if you put those four elements together and remember that the U.S. is going to have to sell $9 trillion of debt in the next 12 months just to roll over its existing debt, and in fact the size of auctions is going to increase by about 30%, so it needs to sell a lot of debt to a lot of foreign investors. Put all that together and you have the makings of potentially quite explosive policies. I mean, it could even unleash, you know, if not a financial crisis and a lot of market problems.
gyrations. But once again, we just don't know how much Trump will bow to economic and financial reality once he gets an office. And the one other thing I'll say is that, you know, what all that means is that the question who Trump picks as the next Treasury Secretary is unbelievably important. Steve Mnuchin was quiet under the first Trump presidency, quite deliberately so,
but was a sort of predictable, steady pair of hands as far as many business leaders were concerned. And he ring-fenced quite a lot of the policymaking and really kept it away from Trump. This time round, Trump might put one of his fiery ideologues into the Treasury role, and that would produce a very different outcome. Can we take through a couple more of Kamala Harris's policies? Absolutely. This proposal of $25,000 to first-time homebuyers...
Does that make a dent? Is that a good policy? What do you think of it? Well, I personally think that a policy like that is going to be so problematic to execute and implement.
but it's probably not terribly helpful as a policy. And again, it could be inflationary. I can absolutely see why the Harris team want to do something like that, because the reality is that there's large chunks of the population who effectively are being priced out of home ownership because of how high prices have jumped up and because the bank's becoming a lot more cautious about lending to first-time buyers.
But there are other ways to address some of this. And the primary issue right now is the supply of housing and finding ways to make it much easier and cheaper for people to build a lot more houses. And if you did that, that would make housing much more accessible to a broader sweep of people without having to offer them sweeteners or once again a form of bread and circuses, i.e. electoral bribes.
What do you make of the fact that Kamala Harris gave a speech recently about her economic policies and had a sentence in it in which she said, I am a capitalist? Well, Harris's team know that they're facing a world where Trump keeps describing her as Kamala communist, comrade Kamala, all of that. And that meme is very powerful and influential and it has certainly bounced around social media a lot.
So they're very keen to distance her from that. So coming out and saying she's a capitalist is a way to try and distance herself from that. It's worth also pointing out that on one level, she's also trying to keep the progressives within her own party in check, because there are people in the younger generation who are saying now they prefer the concept of socialism to capitalism, that they haven't got a clue what that means in practice.
But I think the other reason why Kamala Harris is coming out and saying that is because she actually believes that. You know, she believes that business and markets have a role in sparking American prosperity and growth and that competition is a good thing and that actually the government shouldn't try and direct policies and resources all the time. So I happen to believe that she actually believes that as well. But the fact she needs to state it is perhaps the most interesting thing of all.
Putting on your cultural anthropology hat, was it a wise thing to have said?
I think that saying that she's a capitalist was absolutely a wise thing if you're seeking the middle centrist ground, because capitalism is so entwined with America's self-identity and the vision of how the country is supposed to work. And so in some ways, what she was also saying is, I believe in America's vision of itself as being a business-friendly, market-friendly country with democracy.
Do you think there's been more so in recent times, or maybe this has always been true going back to the McCarthy era, a degradation in the meaning of terms, including socialism, communism, fascism, and the rest?
I think what's happening right now is that politics has turned into the equivalent of a soccer match in that you basically have... Low scoring? And slow? Exactly. Well, sadly not. But anyway, there's lots and lots of tribal behavior and lots of symbols and rituals and memes that are really more about trying to divide the teams and define the teams rather than actually having a lot of meaning inside of them.
And that's being amplified by social media. But it really is about a lot of tribal behavior and, you know, name calling rather than anything more serious. And again, in some ways, Trump understands this better. I mean, one of the most insightful comments I had or bits of advice during the 2016 Trump campaign came from somebody who said to me, you must go and see an American wrestling match to understand Trump.
Because although the elites tend to assume that Trump became famous from his television series like The Apprentice, the reality is that actually for much of America he became famous through his participation in wrestling. And when you go to a wrestling match, you realize that wrestling is all about manufactured drama and stage-managed violence.
and silly name-calling and, you know, rhetoric that whips up the crowd and creates a frenzy, even as everyone knows that all of the aggressive, dramatic name-calling rhetoric is kind of fake in some ways. And Trump, consciously or unconsciously,
essentially extrapolated all of those cultural dynamics into the way he stages his campaign rallies. And idiots like me, elite journalists, other people like that, and I say I come from a global background with a PhD, which makes me, puts a target on my back for many of the Trump supporters. But, you know, people like me tend to look at what Trump says in his rallies and take it very literally and try to pass it as a kind of policy statement.
And it's not when you realize he's actually talking like somebody in a wrestling match. It makes a lot more sense. And that's the way that many of his supporters hear it is a set of memes and tribal symbols rather than anything else. Right. Well, you can see that in the differing, violently differing reactions to some things that Trump says, including when he said his supporters would say jokingly.
Ernest liberals would say, threateningly, that I'd like to be a dictator for a day on the first day. Right? They're very, very different reactions from people on the one hand taking him seriously and the other hand not taking him seriously or literally. Final question for you. Who is in more trouble, the US or the UK? If you're looking at the countries economically right now, it's definitely the UK.
The US economy has been motoring, primarily because its big companies have been doing so well, particularly in the tech sector. If you look at it in terms of politically, the UK has managed to achieve the remarkable outcome of electing into power a set of politicians that seem really boring.
which, you know, one might think is a bad thing until you realise actually the politicians who seem more exciting in recent years in the UK, like Boris Johnson, like Liz Trust, did an enormous amount of damage to the country.
So actually, centrist, boring politicians are probably what certainly the UK needs right now if they can actually implement their policies effectively. And probably what a lot of the Western world needs right now. Less drama, less posturing, less polarization and name-calling, and more practical dedication to getting on and doing the job of governing.
On that note, Jillian Tett, thank you so much for joining us. Please come again soon. Well, thank you so much for having me on the show.
My conversation with Gillian Tett continues for members of the Cafe Insider community. In the bonus for insiders, we discuss how Donald Trump, if re-elected, may seek to assert control over the traditionally independent Federal Reserve. If Trump does go down the route of trying to essentially have the chairman of the Federal Reserve do whatever he wants, people are going to assume that
the future framework that's kept the dollar strong and stable is under threat. To try out the membership for just $1 for a month, head to cafe.com slash insider. Again, that's cafe.com slash insider. Well, that's it for this episode of Stay Tuned. Thanks again to my guest, Gillian Tett.
Or you can send an email to letters at cafe.com.
Stay Tuned is presented by Cafe and the Vox Media Podcast Network. The executive producer is Tamara Sepper. The technical director is David Tadishore. The deputy editor is Celine Rohr. The editorial producers are Noah Azoulay and Jake Kaplan. The associate producer is Claudia Hernandez. And the Cafe team is Matthew Billy, Nat Wiener, and Leanna Greenway. Our music is by Andrew Dost.
I'm your host, Preet Bharara. As always, stay tuned.
They're not writers, but they help their clients shape their businesses' financial stories. They're not an airline, but their network connects global businesses in nearly 180 local markets. They're not detectives, but they work across businesses to uncover new financial opportunities for their clients. They're not just any bank. They are Citi. Learn more at citi.com slash weareciti. That's C-I-T-I dot com slash weareciti.