Economics

Professor Simon Hix

Professor Simon Hix is the pro-Director for research at the London School of Economics and is the chair of Vote Watch Europe. 

Professor Hix is a globally renowned expert on EU politics, democratic institutions, parliamentary voting behaviour, political parties and elections – and to prove it he is the author of over 100 books and papers on these topics. 

We had a fascinating discussion about Brexit, where to for Britain as the deadline for a deal approaches, what drove the Leave vote itself as well as the worrying rise of right wing nationalism in Europe.

 

EPISODE TRANSCRIPT

Misha Zelinsky:                  So, Simon Hix, welcome to Diplomates, thank you for joining me.

Simon Hix:                              You’re welcome.

Misha Zelinsky:                  And I should say, for the recording, that we’re in your rather salubrious offices here in the London School of Economics. So thank you for having me along.

But given that we are in London and this is a political podcast, what better place to start than Brexit. So, as an Australian to a Brit, what the hell is going on? Because back home it looks kind of crazy. Is it as crazy as it seems?

Simon Hix:                              It is crazy. You know, I was away for a period over Christmas and came back and it’s the same old, same old, in the sense that we still don’t know where we’re heading. So, we’ve got a vote next week in the House of Commons on Tuesday.

Misha Zelinsky:                  And that vote is for … ?

Simon Hix:                              This vote is for Theresa May’s deal. So she’s done a deal with the EU which is called a withdrawal agreement. It’s an agreement that sets the terms of the UK leaving the EU and the terms are, essentially, how much money do we still owe as part of the divorce deal? What are the rights of the citizens in the UK and UK citizens on the continent? What happens to the Irish border, between Northern Ireland and the Republic? Republic, of course, is going to stay in the EU, Northern Ireland in the UK, of course is going to leave the EU. And then a transition arrangement for two years while we negotiate the long term deal.

So she signed the deal which is more or less the deal that we knew was going to be signed. It has to be ratified by the House of Commons for us to be able to leave on the 29th of March. So the 29th of March is the deadline bias.

So if they don’t pass it through the House of Commons, we leave on the 29th of March without a deal.

Misha Zelinsky:                  A hard Brexit, so to speak. Yeah.

Simon Hix:                              A hardest of hard Brexit. So, leaving without a deal has potentially enormous consequences. We’ve got one wing of the conservative party saying, No, leaving without a deal is fine. We’ll be fine. A lot of them are very Libertarian. They have a view that this is about creative destruction. Bring it on. And we’ve gotten to the point where you’ve got this left wing of the Labour party saying, Actually a no deal would be a good thing because it would be a crisis of capitalism and then they’ll be a collapse of the government. And then Labour will get elected and we’ll be able to implement socialism. And then we’ve got the right wing and the Tory party saying, No deal will be a good thing because there will be a crisis of socialism and then we’ll be able to slash and burn the British state and they’ll be this new Singapore-on-Thames Nirvana that we’ve wanted.

Misha Zelinsky:                  It’s almost horseshoe politics with the extreme left and the extreme right, both agreeing on the outcome.

Simon Hix:                              They can’t both be right, obviously, right?

But either way, they think there’s potential disaster. Most people accept that without a deal, it will be end of Just-In-Time production supply chains which could be the collapse of manufacturing. Tariffs and quotas on agriculture, most of our agriculture produce is exported to the European market.

So I think the planes will not be able to take off and land. You know, they’ll be a tail backs at Dover. They estimate a 10 minute delay on every truck going through Dover within an hour, leaves to a 30 mile tail back. So you can imagine what that cumulatively…

That super market shelves will start to empty out. The NHS is worrying about running out of drugs because their main supplier is in Holland. A no deal scenario is a disaster. Most people accept that. Most economists, most people who work in the supply chains will tell you that. All the business interests will tell you that.

What does it mean for the citizens rights? Nobody really knows.

So, it’s potentially disastrous if we leave without any kind of deal. But the right wing or the Tory party are using this as a threat because they don’t like the deal that she’s done. They feel the EU has got a better arrangements out of this. So we still don’t know where we’re headed. If they kick out the deal next Tuesday, which they probably will, all bets are off. We have no idea what’s going to happen after that. And the EU is willing to say, Bring it on. If there’s a no deal, you guys are going to suffer more than us.

Misha Zelinsky:                  That’s interesting because this sort of concept that Europe would get a better deal, why would they? I mean, there’s no incentive for Europe to encourage other countries to leave, I should think, right? So if you’re the European Union, you want to make it as hard as possible I would have thought.

Simon Hix:                              Yeah. So there’s kind of two sides of it. So one side, I don’t think it’s the EU wants to be seen to be punishing Britain, although there are definitely voices that say that. Particularly you hear that on the left in France or the left in Germany, where they blame the Anglo-Saxon bankers for the financial crisis. And so they say, It’s about time the Brits got their comeuppance. Sort of thing.

But the general view on the continent is they don’t want Britain to leave. We’re a major economy. We’re important for exports and imports.

Misha Zelinsky:                  Defense.

Simon Hix:                              Defense. For the whole credibility of the European project globally. The EU project in general is weakened if Britain leaves. So there’s a general sense of it’s a shame that the UK is leaving. So they don’t want to punish Britain, but equally, they’re saying, why should we give Britain a particularly good deal? You chose to leave. We have to protect our interests and our interests are the continuity of the single market that we’ve worked our butt off to create a continental scale single market with free movers and good services and capital within it. Why would we undermine that? Just because you guys want to cherry pick the good bits of this and not be responsible for some of the obligations that come with being part of this single market? Why should we give that to you? We don’t give that to anybody else?

So it’s not about punishing Britain, it’s about maintaining the credibility of the EU and holding the EU together. And of course, for the economic relationship between Britain and the EU 27 is pretty asymmetric. In London, these politicians here are very arrogant about Britain. We’re the fifth largest economy in the world. We’re this great global trading power. English language is the lingua-Franco globally. London is the world capital of the world services sector. Yada, yada, yada.

50% of our trade is with the EU 27. 15% of their trade is with us. That British trade with the EU 27 is worth about 20% of our GDP. Their trade with us is worth about 2% of their GDP.

Misha Zelinsky:                  Right. That’s interesting.

Simon Hix:                              And if you talk to trade economists here at LSC, they’ll tell you that those kind of asymmetries ultimately will predict what kind of bargain you get in a trade deal. The EU’s got far less to lose from failing to agree to a deal than the UK has.

Misha Zelinsky:                  That’s interesting.

Simon Hix:                              So the UK, the deal that gets done is bound to favor the EU. So, I remember a former student of mine is in South Korea, she’s in the Korean diplomatic academy and she’s one of their experts on Europe. And I said to her, hey, Wun, how’s Brexit look from east asia? She says, well, Simon -”

Misha Zelinsky:                  About as good as it looks from Australia, I’d assume.

Simon Hix:                              Right. Exactly. So it’s kind of interesting for an Australian audience to hear her say, she said, look, it doesn’t matter if you’re the fifth largest economy or the 10th largest economy, like Korea, or the 15th or the 20th, if you’re not the US, the EU or China, you’re a regulation taker. Those three markets make up 50% of the global GDP. 50% of global trade and goods and services. And they’re bargaining deal with any… It’s a reason why none of the three of them have got deals with each other in trade. They’ve all got bilateral deals with everyone else in the world. Because they say, ‘You want access to our market? Here’s the set of rules. Take it or leave it. You don’t want to accept these rules? You don’t have access.

And so that’s the way the US negotiates trade deals. That’s the way the EU negotiates trade deals. Why would it be any different if you’re the fifth?

So, Japan is the largest economy that’s accepted that kind of an arrangement. Canada, South Korea, those three countries. So Canada and South Korea both have trade deals with the EU and with the US. And the deals they have are essentially agreeing to apply European or American rules.

So for example, Canadian beef farmers have two fields. One field with cows destined for the US market and one field with cows destined to the European market.

Misha Zelinsky:                  Interesting.

Simon Hix:                              And the cows destined to the American market are pumped full of hormones, so you get these big fat cows destined to the American market. And the kind of skinny, vegan cows destined for the European market. You know, have to follow European Phytosanitary standards. So they’re regulation takers.

Misha Zelinsky:                  Yeah. So, the Brexiteers are probably going to get mugged by reality then in the end.

Simon Hix:                              Of course they are.

Misha Zelinsky:                  But so, leaving aside whether or not you get a better deal, there’s a deal on the table. They’re talking through the politics of it with it going to a vote, it’s interesting to me a lot of the discussion is around May versus the Brexiteers within her own party. And the Parliament is bigger than one party or bigger than one faction.

Simon Hix:                              Well yeah. And she doesn’t have a majority.

Misha Zelinsky:                  No.

Simon Hix:                              Because [crosstalk 00:08:48]have majority.

Misha Zelinsky:                  But there’s not a lot of discussion about Labour in all of this and Corbyn. So I’m curious to get your take in all of that.

Simon Hix:                              Yeah so Labour, like the conservatives, Labour is also split on this. It’s split into three groups. One group are the very pro-European group that would like to cause as much problems with this ratification as possible. With the hope that there’s a second referendum and they overturn and stop Brexit altogether.

Misha Zelinsky:                  And these are the sort of Blair-ite types.

Simon Hix:                              They’re the kind of Blair-right wing of the party.

Then there’s another group, which is a more radical left group. They call them the Lexiteers. The left wing Brexiteers.

Misha Zelinsky:                  Right.

Simon Hix:                              Who have never liked the EU. They saw it as a kind of capitalist project. They want us to get out of the EU so they can have a sort of socialism in one country. Pull up the drawbridge. British jobs for British workers. Subsidized British industry. You know, they’re living in some kind of…

Misha Zelinsky:                  The old socialized, left, yeah.

Simon Hix:                              So, in a sense, I like to describe the two radical versions of Brexit are the Tory radical version of the Brexit as the Singapore-Thames. And the Labour radical version of Brexit is Venezuela on trend.

Misha Zelinsky:                  That’s good.

Simon Hix:                              That kind of epitomizes where they think they’d like to take us. Most sensible people don’t want either of those outcomes.

Misha Zelinsky:                  Yeah.

Simon Hix:                              And Corbyn comes intellectually from that wing of the party. He’s never liked the EU. He thinks that we want to leave. To give these guys a bit of credit, though, a lot of people who did vote for Brexit in the North of England, you know, a lot of these cities in industrial decline are former Labour voters. So a lot of Labour seats have big let it, leave majorities in them. And the Brexit voting coalition in the referendum were two groups. It was kind of wealthy rural southerners who were just centerphobes who never liked Europe because they want Britain to go back to Empire.

Misha Zelinsky:                  Yeah.

Simon Hix:                              Empire 2.0 is what they want. And cities in industrial decline. Post industrial cities, very angry voters who are really angry at the ruling elites in the south, in the establishment. And they’ve never liked… In a sense, voting’s really the EU’s symbolic vote against what has happened in those communities.

So I’ll give you an example. So in Sutherland in the Northeast of England, the major employer in Sutherland is the Nissan car factory. Employs about 300,000 people. It’s the largest car employer in the UK. 70 something percent of their production goes to the EU single market. Just-In-Time supply chains, meaning that any delay in their supply chains will massively increase costs. So Brexit will increase those costs because they’ll be customs checks and stuff. Sutherland voted to leave the EU and the majority of those car workers in Sutherland voted to leave the EU.

So Lisa Nandy is a Labour politician and she tells a story about being asked during the Brexit campaign, being asked by the management of the car factory to come and talk to the shop floor workers because the management was saying, we’re totally opposed to Brexit because of the risks to the factory. Can you come and explain to them that if they vote for Brexit, they could all lose their jobs.

So she stands up and she tells the story to a packed room full of production line workers, saying, you do realize that Just-In-Time production will end. They’ll be tariffs and quotas on your cars. So, Nissan, which is a global company, will probably decide to end production here and move the factory to France or Slovakia or somewhere else. And you guys could all be out a job. And she says, one guy put up his hand and he said, we’re not stupid. I’ve been working here for 20 years. Don’t you think I know how Just-In-Time production lines work? Don’t you think I know where our cars are going? He said, you know, with new technology coming along we’re not expecting to have this factory here in 20 years anyway. It’ll be robots doing this stuff. We’re not voting for Brexit for our jobs. We’re voting for Brexit for our kids and our grandkids. And to send you guys a signal that you’re not listening to what has been happening around here in the Northeast of England.

Misha Zelinsky:                  That’s interesting.

Simon Hix:                              And that’s a real challenge for the center left. And so there’s an element wing of the Labour party which is very sensitive to the fact that although the kind of cosmopolitan youth, younger voters, the Londoners, are opposed to Brexit, a lot of their core voters are saying, you’ve got to deliver this.

Misha Zelinsky:                  Yeah. So we’ll get to the vote itself because I want to pick up on some of the things you’re talking about but just to stay with the Labour party, just very quickly, so Corbyn, one of the things that I find interesting is that there’s a real enthusiasm for Corbyn amongst young people. The so called Corbynistas.

Simon Hix:                              Yeah.

Misha Zelinsky:                  They would be remain people.

Simon Hix:                              They’re all remainers. In fact-

Misha Zelinsky:                  How is he getting away with being probably a Brexiteer in disguise whilst-

Simon Hix:                              It’s really difficult. And I think he can get away with it because they’re in opposition.

Misha Zelinsky:                  Yeah.

Simon Hix:                              And so he’s able to oppose anything the government proposes. So in a sense, what he’s asking for, if you actually look at what he’s asked for from Brexit, what he wants is the UK to carry on applying EU social regulation standards, EU environment standards, frictionless trade, to try employment first Brexit, he calls it. So you want to keep as much manufacturing as you can in the country. But that’s exactly what May’s deal is. You can’t put a piece of paper between the deal that she’s negotiated and what actually Labour are asking for.

So they’re really only voting against this symbolically, to try and create a crisis. To try and bring down the government in the hope that there could be a general election.

Misha Zelinsky:                  Right. But is there any way, I mean, if you’re May, just to put on your sort of… Is there a way for her to turn the focus onto Labour in the vote and I mean, far be it from me to give advice to the Tory party, but it just seems interesting to me that rather taking all these seating internally, if there’s a way to force the opposition-

Simon Hix:                              But with the government’s opposition dynamics of British politics…

Misha Zelinsky:                  Government always owns the result, right?

Simon Hix:                              Yeah. And the opposition, nobody’s going to blame the opposition if this fails. They will blame the government, blame Theresa May. So they can get away with playing these kind of games. And if we end up with a no deal Brexit and that is a disaster for Britain, and it could be absolutely disastrous. There’s kind of a typical British sense of, oh, it will be alright on the night. People will figure it out. People come to their senses. There’ll be a managed no deal. People will just figure it out. The French aren’t going to be crazy enough to stop lories going through the tunnel. And the Dutch are still going to be sending us medicines for the NHS. Come on, people will still allow British airlines to land in Paris and Berlin or whatever. It’ll be all right on the night. That’s the sort of general attitude of the British public.

Misha Zelinsky:                  Big gamble.

Simon Hix:                              I think it’s a very big gamble.

Misha Zelinsky:                  While I speak of gambling, let’s talk about the vote. And correct me if I’m wrong, you were given the rather difficult task of being an advocate for the remain voters. You went around the country. There were a bunch of experts who went around as the go would say, so called experts. Maybe you’re one of the so called experts people speak of.

Simon Hix:                              I was, yeah.

Misha Zelinsky:                  Tell us about that.

Simon Hix:                              So no, I was part of a group of about 14 academics, political scientists, economists, lawyers, historians, who were funded by the British Economic and Social Research Counsel, so the main funding of the social science body in the UK, to be experts. We were meant to be neutral. We weren’t advocates on one side or the other. We were meant to be able to, you know, media could call on us and we’d go on TV or the radio or go on public platforms in local communities to referee debates or to be someone there who could correct facts, this kind of stuff.

And it was modeled on what had happened during the Scottish referendum campaign. They had this program for the Scottish referendum campaign and the perception was that it worked really well. They’d had a bunch of academics who could come on and sort of neutralize the craziness of some of the claims people were making.

Misha Zelinsky:                  And the remain sort of came from behind in that situation to remind of that.

Simon Hix:                              Yeah, exactly. So, we’d go to different parts of the country and it was a real eye opener going to places. I remember going to Spalding in Lincolnshire. Lincolnshire, east coast of England, very agricultural community. Lots of new Polish and Lithuanian fruit pickers and agricultural labor going into that town.

We were called by the local newspaper, can we come for a town hall meeting on Brexit. Can they send some experts? So three or four of us went out there. Difficult place to get to in the middle of nowhere on the east coast of England. We went London to Peterborough, a bus and a train and anyway. It was hours together. Just a sense of how isolated this place is. You know Britain’s a small country, it’s a really isolated place out there.

And the local town is sort of boarded up and the only places open are these Polish shops and very flat agricultural land. And, you know, about 150 people show up at this town hall meeting and it’s about 80% pro-Brexit. And we’re standing on the platform and whatever we say, they ask questions, and whatever we say goes down like a lead balloon.

So, you know, one guy said, well why do you guys think Brexit will be bad for the British economy? And my economist friend says, well, you know, 50% of trades for the year, about 20% of our GDP, 20% of the whole size of our economy. If there’s a reduction in trade that’s a reduction in the size of our economy. And no matter how different people mold it in different ways, the estimate is it will be between 2 and 8% of our GDP. A reduction of between 2 and 8% of the size of our economy. And the guy said, that’s your fucking GDP not mine. What should I care?

My initial thought was well that’s a stupid thing to say but then I thought actually, no, that’s actually a really clever-

Misha Zelinsky:                  Wouldn’t change the economy of that town for brief-

Simon Hix:                              Really! And what he’s saying is, it’s been shit here for a long time, you guys are gonna take the hit for this.

And someone else said, I’m a farm laborer and since all these polls have been coming over, my wages have gone down every year for the past three years and I bet you lot have had rise haven’t you? And it went round like that.

And then someone else said, I’ve been waiting for a counsel house and it used to be a four month waiting list and now it’s a two year waiting list.

Misha Zelinsky:                  Because the immigrants.

Simon Hix:                              Yeah. And someone else said, you know, my daughter’s at one primary school and my younger son was gonna go to the same primary school but now there’s no places left in the school so I’ve got to drop my daughter off in this school drive ten minutes to drop my son off at this other school and then I’m late for work and that’s cause all this, and all the places are full of the bloody Lithuanian Polish kids!

And we’re on the platform going, this isn’t EU’s fault. This isn’t, you know, these are choices the British government has made about not investing in public services in areas where there’s been large immigrant populations and they’d say yeah but no one’s gonna listen to us. Doesn’t matter whether we vote Labour or whether we vote conservative, you guys are not gonna listen to us, but you’re bloody gonna listen to us if we vote for Brexit.

Misha Zelinsky:                  Interesting. So out of this experience did you think the Leave vote would succeed? We’re asking ourselves after the fact now obvious, but on the night did you, after that experience did you think it was gonna go that way?

Simon Hix:                              Yeah I did. So the opinion polls are really tight actually and most people weren’t trusting the polls. The opinion polls have been so wrong in the 2015 general election-

Misha Zelinsky:                  Yeah that’s right.

Simon Hix:                              Nobody-

Misha Zelinsky:                  They predicted Labour was gonna win.

Simon Hix:                              Yeah, exactly and so nobody was trusting them in 2016 and so everyone was saying the opinion polls are obviously wrong and so then they were making up their own version of what they thought was gonna happen. So most people thought the remain was gonna win easily, the betting markets, the currency markets, the prediction models, everyone-

Misha Zelinsky:                  For the record I also said it wouldn’t happen so…

Simon Hix:                              Yeah so I was doing some consulting in various different places and I was showing opinion poll data to say this is too close to call. It really could go either way. And my experience of going ’round to different parts of the country suggested that was the case. So it didn’t surprise me on the night.

Misha Zelinsky:                  Yeah, okay. That vote itself had kind of, Brexit kind of reset the map for politics and we’ve seen a lot of things happen since like Trump. What does it tell us more generally, you’re a political scientist, what does it tell us more generally about politics?

Simon Hix:                              Yeah, I think we are seeing a lot of advanced democracies, a realignment with politics. A realignment away from… for a long time politics in the post-war period was pretty simple straightforward. Lower income people voted for the left. Left wing parties wanted redistribution of wealth, higher taxes, creation of public services. Higher income people voted for people on the right. Right wing parties wanted to cut taxes, cut public spending, liberalize markets, and so on. And that was the sort of standard politics for most of democracies for much of the post second world war period.

We’re now facing the situation where it’s largely an education divide and an urban rural divide. It’s much more geography driving it than anything else. So you’ve got cities that are globalizing cities. They’re creating growth in financial services and creative industries, film, fashion, art, design, media, tourism, higher education, and so on.

The returns you get on education are massive so the economic divide is really driven by whether or not you’ve got a degree or not so getting university education massively increases your economic opportunities. And the economic opportunities gap between those who have university certification verse those who’ve not has grown massively and the economic opportunity gap has grown between cities that are growing, that is fast growing cities, and other cities in industrial decline and then aging rural populations.

So you’re getting a kind of anti-establishment feeling which is a coalition of these aging rural populations feeling like what is happening to my country? It’s not the country I remember or the country I grew up in.

Misha Zelinsky:                  Yeah. Sort of pathos nostalgia.

Simon Hix:                              Yeah, exactly, and often that’s around race and ethnicity and immigration and a backlash against gender equality. For example, interestingly, after the Gilets Jaunes demonstrations in France-

Misha Zelinsky:                  We’ll get to those.

Simon Hix:                              They set up a bunch of citizens assemblists out of the Gilets Jaunes and you know what the very first demand that came from those citizens assemblies was? Abolish gay marriage.

Misha Zelinsky:                  So that was them… interesting.

Simon Hix:                              Which is more kind of symbolic politics about the kind of rolling back, nostalgia, world’s moving too fast and so there’s that aging rural population.

And then you’ve got cities in industrial decline and there’s very angry, and sometimes this is young people, sometimes it’s older people, particularly men who used to be in industry, collapse in industry, decline in industry, and that coaliltion, that antiestablishment coaliltion is a new force that’s very much drawing support for populous parties and as far as they’re concerned mainstream centre parties are basically the same. They represent different postcodes of the capital city. So the Tory party, pre Theresa May, represented Notting Hill and Notting Hill set and the Labour party represent isn’t. And if in France the French socialists represent the Left bank and the French conservatives represent the Right bank of Paris. That’s what it felt like to the rest of the country.

Misha Zelinsky:                  And it’s just consensus around free trade, open markets, free movement of capital.

Simon Hix:                              Yeah, open liberal immigration policies-

Misha Zelinsky:                  And there’s some differences on the margin around how you sort of dice up the pie and that type of stuff?

Simon Hix:                              Yeah, exactly and whereas mainstream center right leans a bit more towards financial service interest and big business interest and the mainstream center left leans a bit more towards creatives industries and the new economy and higher education interest and this kind of stuff but neither of them really care about rural populations. Neither of them really care about cities in industrial decline.

Misha Zelinsky:                  It’s interesting that this sort of rural urban divide and the question of people being told what’s in their best interest and I think that’s interesting about the way that economists and people that are in the political game for the last 30 years are probably looked at the macro stories and look how good it is, right? But the thing about trade is it destroys and distributes unevenly.

Simon Hix:                              Trade and immigration. Both have distributional consequences. So in aggregate we know that trade is good for the economy in terms of increasing GDP, increasing opportunities, and so on. But you don’t look at what the local consequences of that are. So there’s loads of research now that looks at the China shock where you can locally, what has been the effect of globalization.

Misha Zelinsky:                  China between the WO in 2001.

Simon Hix:                              Yeah, exactly. David Autor is an american economist and a bunch of European political scientists, what they’ve done is for every region, for every local region, they’ve worked out what is the employment in each sector, what percentage employment is there in each sector in that region, and what is the exposure to global trade of that sector. And so you can work out what has been the globalization effect regionally. And what we know is that the bigger the globalization, the bigger the negative globalization effect regionally, the bigger the vote for populous parties.

Misha Zelinsky:                  Interesting, isn’t it.

Simon Hix:                              And the bigger the vote for Trump. The bigger the vote for Brexit in the UK and the bigger the vote for Le Pen in France, for the populous in Italy and so on and so on.

So that’s one. The other one is this distributional consequences of immigration. Again we know that immigration is great for the economy. It makes… new skills, new ideas, new resources, cheaper public goods, cheaper public services. On average immigrants our net contributors to the economy, they’re not recipients of money. The usual story.

Misha Zelinsky:                  All the facts.

Simon Hix:                              All the aggregate level facts. But increasingly what we know is that there’s local distributional consequences in two senses. One is an economic one, one’s a cultural.

The economic one is in certain sectors of the economy, wages have fallen dramatically as a result of immigration. In the UK for example, it’s agricultural labor and the building trades. Why? Because they’re cash.

Misha Zelinsky:                  Yep, hard to regulate.

Simon Hix:                              They’re cash-based economies. All the sectors where there’s a minimum wage and the minimum wage is enforced, immigration has had no effect on wages. But it’s had a huge effect on agricultural labor in the building trade.

Misha Zelinsky:                  Interesting.

Simon Hix:                              Everyone’s got a Polish plumber and everyone’s got a Lithuanian fruit picker.

Misha Zelinsky:                  And they’re rural areas as well.

Simon Hix:                              And they’re rural areas. That’s where there’s been real wage competition.

And the other one, then, is competition for public services and that’s usually disproportionate. Cities of where there’s immigration being sucked into cities, public services are being cranked out and a lot of these rural areas nobody’s thinking about increasing school capacity. Nobody’s thinking about building another classroom in a primary school or you’ve got to provide more surgery spaces in the local doctor surgery. Nobody’s thinking like that. So the local population feels the squeeze in public services.

And then, of course, there’s the cultural aspect. A lot of these places have never seen immigrants before and that takes time. That’s a legacy. We forget too quickly… So my grandmother grew up in Northwest London and where she grew up in Northwest London it was very white at that time and then it became very big Indian population immigration in the 1950s and 60s.

Misha Zelinsky:                  How quickly did it happen?

Simon Hix:                              It happened in the space of about a decade.

Misha Zelinsky:                  They say the speeds often effective, right?

Simon Hix:                              Yeah, the speed. But at that time there was really vehement… I remember my grandmother being very racist, you know. Ugh they’re all moving into, why are they moving into my neighborhood type thing. And now of course we’re in London and nobody thinks twice about it, right? So we forget very quickly our own recent experience of what it was like with being whites with new immigrants.

Misha Zelinsky:                  Oh it’s a similar story in Australia as well. So before we get off Brexit because I want to step into Europe but there’s a lot of talk about second vote. I’m quite nervous about the consequence of second vote because after everything that we’ve just covered about the anger and telling people what’s what, there’s a sense to me that you didn’t quite get it right and we’re gonna give you another shot at it and I would be very concerned, and I’m curious to get your take of it, seems to be very concerning to suddenly flip and be 52/48 remain. It’s almost like it’s been stolen from people.

Simon Hix:                              I absolutely agree with you. I mean I agree with you for two main reasons. One, the call for second referendum ignores, actually, the history of Britain’s relationship with the EU which is that we’ve always had a semi-detached relationship. We’ve always been reluctant members. We weren’t members of the single currency, we weren’t members of the Schengen border-free zone, we were always semi-detached.

Misha Zelinsky:                  We had a deal.

Simon Hix:                              You know, and sooner or later we were gonna have to make a choice as the process of European integration is moving forward. Sooner or later we’re going to have to make a choice. Are we inside it or are we outside. So it made sense to have a referendum on this and the referendum was going to make the decision so you can’t pretend that history is now fundamentally changed so now we really want to stay and we want to sign up to the whole thing. Of course we don’t. So that’s the first thing we’ve noticed.

The second thing is, you’re right, it’s incredibly condescending so I get annoyed with someone of my arch remainer friends who seem to think that going around and telling people you’re stupid and you’re a racist and you’ve made the wrong decision and you’re a xenophobe and you were bought by Russians. You think that’s gonna persuade people to change their mind?

Misha Zelinsky:                  Hasn’t really worked in human history so far.

Simon Hix:                              The third thing is it would get really, really nasty and I do really worry about what the consequence is. I’m genuinely worried about violence, political assassination even. I mean we had a murder in British politics, Jo Cox was murdered in the 2015 general election campaign by a radical right extremist. The Labour MP in the north of England. I wouldn’t be surprised if we have that kind of thing again. It’s not to say that we should be scared about, it’s more the, there’s a legitimate angle which is that this was an antiestablishment anti-elite vote. It’s very dangerous in democracies to fuel an antiestablishment anti-elite movement. That’s when you really can get very dangerous types of things happening and I don’t want to fuel that and I do think there was legitimate reasons for people to vote for this.

I think my experience of traveling around the country, people were not thinking about this lightly, people were massively mobilized. They thought about this very carefully. And a lot of people say, well they weren’t considering the economic interest. Well whenever people have elections and make choices in elections, there’s lots of things that go into their mind when they walk into the ballot box. For some people it’s symbolic, for some people it’s careful economical interest of their family or their personally, for some people it’s national identity. There’s lots of things that go into what influences why people put the x where they do on a ballot paper and so that’s no different in a referendum. Why would we think it should be any different in a referendum? And it’s completely legitimate.

Misha Zelinsky:                  Now, talking about that nationalism, and you’ve got another hat, you’re the chair, I believe, of Vote Watch. It’s a European project so you’re very, obviously, across European politics. Kind of want to get your take about how loudly are you about what we’re seeing other countries across, you know, Poland, Hungary, Turkey, not in Europe but peripheral to Europe, obviously, and now Italy. More and more, sort of right wing-

Simon Hix:                              France.

Misha Zelinsky:                  Well, yeah. Like you said, more of these National upsurge but not only in opposition. They’ve taken control of governments and dismantling democracies.

Simon Hix:                              That’s right. What we’re seeing it-

Misha Zelinsky:                  Is this 1929 to 39 all over again or is a bit more complex?

Simon Hix:                              Too early to tell in that sense. So it’s true that what we’ve seen is part of this realignment of politics, it’s the rise in support for these populous parties and the populous coalition is the same coalition we’ve been talking about behind Brexit.

And almost every country in Europe now has a populous movement of some kind. Some of them a bit more radical than others but no matter what country you talk about there’s a party where it’s… I don’t throw around populism lightly so what I mean by populism is a party that says that we represent the voice of the people against the establishment. And it’s very antiestablishment type view, very simplistic policy responses. A classic mainstream party moderate their promises because they know that there’s certain things that it’s difficult to deliver on and you can’t promise this and promise that. Where as populous have no constraints so the populous will say we’ll shut down immigration. Populous will say we’ll stop globalization.

Misha Zelinsky:                  Simple responses to complex problems.

Simon Hix:                              In Italy, the populous parties say we’re gonna have a flat tax and introduce universal basic income.

Misha Zelinsky:                  Yeah, increasing spending and lower taxes.

Simon Hix:                              Right.

Misha Zelinsky:                  Great plan if you can pull it off.

Simon Hix:                              It’s that kind of pub politics, I think of it, and it’s very attractive at the moment, particularly post economic crisis and we’re growing in equality, people saying, well what the hell. Let’s just try this. Let’s just go for these guys. And it’s a wakeup call for the establishment.

Misha Zelinsky:                  But once they get control of the-

Simon Hix:                              So here’s the real test. The real test is in ten years time when we look back, there’s two possible outcomes. One outcome is you get, you know, democracy is a safety valve. If there are deep divisions in society surely Democratic institutions and elections are vehicles through which these things get thrown up and then we as mainstream establishment, we have to address this stuff.

One version is mainstream parties respond, we come up with new policy responses, there’s big infrastructure investment, we try to address some of these regional and individual inequalities that’s developed, we try and think about how to create new sectors of the economy, try to think about what do we do to address these inequalities that have come out of globalization. How do we address issues of social integration of immigration. If those things get addressed then they’ll be a restabalization of politics.

Another alternative world is these populous come to power and instead of just addressing these things they start to dismantle democratic institutions.

Misha Zelinsky:                  And you’re seeing that in Poland.

Simon Hix:                              And they say we represent the will of the people and you get a narrative which is popular in Hungary which is I’m not a liberal democrat I’m a iliberal democrat because I represent the will of the people. The will of the people is the majority, why should you guys constrain what the people want? Why should you judges and you media and you other political parties, why should you constrain the will of the people?

Once you gauge that narrative that starts to get dangerously close to the types of politics we saw in the 1930s and so we don’t know yet how robust our institutions are to that because you’ve not seen it. These post-war institutions we’ve built, they’re pretty robust so far and they’re relatively new in centuries in Europe in Parliament in Hungary and that’s why I think the judiciary and the media are quite easy to be attacked. Italy is the test case. You’ve got the populists now in Italy. How robust are the Italian institutions to what will be? And Le Pen could win in France or Le Pen’s niece, she is the rising star.

Misha Zelinsky:                  Let’s talk about the French because I think, maybe it’s an arrogance of major Western countries that some of the Eastern European countries have been on the periphery and maybe they’ll never really develop democracies anyway and maybe they’re experiments, France is a serious economy, it’s a serious country, it’s a serious democratic history.

Simon Hix:                              Nuclear power, the rest of it.

Misha Zelinsky:                  Right. How worried are you about France? If France were to become a notably autocratic nationalist sort of nation, I mean that’s the European project almost over, right?

Simon Hix:                              It is over. Yeah. They were saying you can’t have France without Europe, you can’t have Europe without France.

Misha Zelinsky:                  Right.

Simon Hix:                              So Le Pen almost won. The Nationalists in France have been growing in support.

Misha Zelinsky:                  But doesn’t feel like they’re losing momentum.

Simon Hix:                              They’re not losing momentum, they’re gaining momentum. France is the epitome of the rotation of this politics. Macron represents the global elite, Le Pen represents the will of the people against the global elite. That’s the narrative.

Misha Zelinsky:                  And the concern I had when he came to power was that, didn’t strike me as the man for the times because the inequality story, the cultural disconnect story, he’s just want to double down on all the things that people are pissed off about.

Simon Hix:                              To be fair to him, France is a bit particular because France…

Misha Zelinsky:                  They always have this history of-

Simon Hix:                              Yeah, but not just that. The structure of the labor market in France is quite particular because they’ve got highly regulated markets and you have a whole insider outsider problem meaning that a lot of young people are priced out of jobs because highly regulated labor markets make it very difficult for companies to take on new people knowing they may not be able to keep them in place in 6 months or 12 months or 18 months. So you get very, very high youth unemployment in France and so that’s very different to… So a lot of young people actually were supporting Le Pen in this election.

So Macron in that sense was saying I want to liberalize the French economy in return for big infrastructure spending. In return for big spending on new technologies like digital environment, trying to shift the economy away to new technology so in a sense it wasn’t your classic doubling down of globalization it was more of a, we’re not gonna stop the world, we’re not gonna stop globalization, we’re not gonna save manufacturing in Europe. We need to think about a new economy. How are we gonna build this new economy. So in a sense, I saw his agenda of coming to power, his policy agenda and some of the people around him were really thinking creatively about how to think about what is going to be a new economy or a new society in a globalized world in an advanced democracy. That’s a step ahead and that’s exactly what I want mainstream politics to be thinking about doing.

Misha Zelinsky:                  Yeah, absolutely. He had a lot of hope-

Simon Hix:                              The problem then is he only managed to get the liberalization stuff passed without the other stuff so then it just looks like he becomes a baby Thatcher. It looks like he’s doing what Thatcher did in Britain in the 1980s. And it looks like, well, we’re going even more down that path and so then you get the Gilets Jaunes movement, you know, the yellow vest-

Misha Zelinsky:                  The yellow vest.

Simon Hix:                              And so these guys, again it’s an odd coaliltion, the bulk of the movement are rural small town suburban and rural areas, older voters, and small towns in decline, farmers, farm related producers, social conservatives, quite Catholic, and then a small wing are kind of angry, urban, militant, radical, left anarchists. They’re the guys smashing up the Arc de Triomphe and the shops in Paris but the bulk of the movement is this quite conservative movement so it’s a kind of…

Misha Zelinsky:                  People often get hijacked with movements.

Simon Hix:                              They do. And so the radical left has hijacked the movement but the movement itself is quite a socially conservative movement.

Misha Zelinsky:                  Interesting. And one thing we haven’t talked about, we’ve touched around it, but Russia. Every nationalist movement you look at is Putin’s not too far away from it. What’s his game here?

Simon Hix:                              Yeah so Putin is trying to metal. I don’t buy the Putin is driving this but I do buy that Putin is benefiting from all this and so if there’s anything that he can do that makes life difficult for the mainstream establishments so for example Brexit. The allegation is that there’s Russian money that got into the leave campaign and there’s Russian data hackers that were used to try and identify who to target with the leave campaign and so on and so on and so on. With Brexit-

Misha Zelinsky:                  When these votes are so tight though, it’s interesting.

Simon Hix:                              It could make a difference but lots of things could make a different.

Why does he want Brexit? So there’s this sort of macro level thing, anything that destabilizes western Europe is good for Russia-

Simon Hix:                              Yeah. But there’s a micro level thing which is that Britain was the one country at the table in EU that was really pushing to maintain sanctions against Russia, right? With Britain off the table he reckons he’s got much more chance of getting the EU to back down on some of its sanctions. So there’s some really very concrete short term interests related to this. And so he’s playing both of those games. There’s often very concrete interests related to gas, relating to sanctions… The sanctions are hurting and with Europe staying together and the European Establishment have really held together with sanctions and those sanctions really are hurting Russia. So he really wants to try and loosen that so this is the game he’s playing which is not just the big geo-political one. It’s really concretial to economic interests.

Misha Zelinsky:                  Yeah, because he’s got the foot on the throat with these sanctions.

Simon Hix:                              Absolutely.

Misha Zelinsky:                  Interesting. One thing I want to get your take on, and we’re coming to the end now and you’ve been very generous with your time but right wing populous. I mean there’s this anger and very sort febrile political environment but why is it that the right wing populous are winning and you’re not seeing… in the 30s you had the communists popping up, the socialists, and all these social democrats, FDR, they’re nowhere and this ethnonationalism, this right wing populism is winning everywhere.

Simon Hix:                              And it’s interesting-

Misha Zelinsky:                  And inequalities there, I mean it’s there in the data.

Simon Hix:                              Similar circumstances in Latin America with the left wing populous so great, big impact of globalization, big economic inequalities between globalizing cities and rural populations. I think it’s largely to do with the fact that these are often middle-aged or older voters that are losing from these changes and so it’s not necessarily younger voters. So apart from what I’ve just said about France, younger voters tend to be the ones to be educated, younger voters and they seem to be the ones to support more radical left ideas. Whereas older, these are more socially conservative voters. They already got their protected interest. They’ve already got, you know, state pensions. Often they’ve got houses and they’ve paid off these debts and so this is largely driven by social values that they don’t share and so national identity.

In fact, 1930s when there was a major economic downturn and we saw votes shifting mainly to the radical right rather than to the radical left. In fact, throughout history of democracies, there’s a nice paper by simple economists looking back over from 1918 to the present looking at major economic downturns. Major economic downturns tend to lead to swing votes to the radical right or to the left and that’s what we’ve seen over the last ten years in Europe.

Misha Zelinsky:                  Interesting.

Alright well one last question I ask of all my guests and this might not wash so well with a Brit but with Australian audience-

Misha Zelinsky:                  After the last series, I’m not sure we’ve even won a game. We’ll need some sandpaper. Australian gets asked who they’d love to invite as internationals to their barbecue. So for international audience I’d say, which three Australians would you invite to a barbecue. Alive or dead, I’ll give you that.

Simon Hix:                              Oh boy, that’s a good question. Well Misha, he’d have to be one of them.

Misha Zelinsky:                  No, no, you can’t count me. Even thought the show’s called Diplomates and I know you as a mate now, obviously, so I couldn’t tap into the cult of Simon Hix online but…

Simon Hix:                              That’s a good- I’ve never thought about that.

Pauline Hanson.

Misha Zelinsky:                  As a political scientist, no doubt on that one.

Simon Hix:                              As a political scientist.

Misha Zelinsky:                  Well, okay, she can make the fish and chips.

Simon Hix:                              Yeah, I think it’d be interesting to know what makes her tick.

Misha Zelinsky:                  Yeah.

Simon Hix:                              Rudd, I think.

Misha Zelinsky:                  Kevin Rudd.

Simon Hix:                              This is getting interesting.

Misha Zelinsky:                  And the third one would probably… the swimmer with the huge feet. What was his name?

Simon Hix:                              Ian Thorpe.

Misha Zelinsky:                  Thorpe.

Simon Hix:                              So Simon Hix, Ian Thorpe, Kevin Rudd, and Pauline Hanson. Wow. I mean, people like trying to get Kevin to stop speaking but… that would be an interesting barbecue to say the very, very least.

Simon Hix, thank you so much for joining the podcast and it’s been fantastic and I look forward to chatting in the future.

Misha Zelinsky:                  Have a safe trip home, cheers. Bye.

 

 

Steve Glickman

Steve Glickman, the CEO and founder of Develop Advisors, is the world’s foremost expert on Economic Opportunity Zones. Steve joined Misha to give his predictions on the mid-term and 2020 elections, discuss solutions to geographic inequality, dissect the problems with a UBI and explain what’s gone wrong with global trade. Steve also gives tips on how to overcome partisanship in the legislative process.  It’s a BIG chat.  

A young gun in US politics, Steve was an advisor in the Obama Whitehouse and started his career as Special Assistant US Attorney. 

While at the Economic Innovation Group  – which he co-founded with Sean Parker – Steve developed the radical ‘Economic Opportunity Zones’ that are tasked with kickstarting capital investment and job creation in areas of the US suffering from high inequality and low capital investment. He is now bringing EOZ’s to life via his new investment firm, Develop Advisors. 

It’s a great and really fun chat. For policy nerds, there’s a really fascinating critique of the Universal Basic Income.

We need this guy to run for President some day (no pressure, Steve).

 

 

EPISODE 2 FULL TRANSCRIPT: 

Misha Zelinsky:                  Steve Glickman, how are you? Welcome.

Steve Glickman:                 Thanks for having me.

Misha Zelinsky:                  I should say that it’s in the evening in DC right now. Is that right?

Steve Glickman:                 Yeah. It’s 5:40. So all the government bureaucrats have already gone home

Misha Zelinsky:                  Very good. So I should say we’re obviously recording this across time zone. So it’s early in the morning here in Australia. But yeah, the wonders of technology bringing people together. So Steve, I was actually just going through your CV before. You and I first met through the American-Australian leadership dialogue where youth delegates. I’m a little bit surprised at the depth of your CV. Are you sure that you actually youth delegate or are you fudging things a little?

Steve Glickman:                 Well, you know, I make up most of the stuff that I do or talk about on the spot so you can pretty much assume it’s all one big running lie.

Misha Zelinsky:                  Well, just on that. So your main role, and we’ll talk a little bit about your broad career as we go along. But your main role is that to you are the co founder and CEO of the Economic Innovation Group. I was hoping that you might be able to tell us a little bit about what the EIG is and how and why it was set up.

Steve Glickman:                 Yeah. I think a good way to think about us is we’re social entrepreneurs. So we are trying to find a new pathway at addressing big economic challenges in a very crowded marketplace of think tanks and political organizations, and other groups that are trying to make their mark in DC. We were founded in early 2013. It was really, much of this was the brainchild of Sean Parker, who as you know is the co-founder of Napster and the first president of Facebook. And when he and I got connected at the end of 2012, early 2013, he was really focused on how you leverage the private sector to solve big economic challenges. Particularly, how you drive more private sector investors to a bigger part of country.

Steve Glickman:                 And that was really our DNA from the beginning was could we get a group of Democrats and Republicans, conservative and liberal thinkers, private sector, public sector actors to really come together around the notion that we could create a new incentive system to change the flow of capital markets in the US?

Steve Glickman:                 And as we started unpacking that problem and that approach, we found ourselves doing a lot of research around what drives inequality on a community level around America, and what the depths are of that inequality and what the impact is. And the more and more we unraveled that onion, the more questions we had and the more we realized that we think we had stumbled upon maybe the most important economic policy challenge that wasn’t really being addressed by either political party and that gave us a pretty strong feeling that we were onto something meaningful. So we’re really intensely focused just around that problem, and bringing in a whole new set of actors from the private sector to solve it.

Misha Zelinsky:                  Yeah, that’s really interesting. So we’ll talk a little bit about the bipartisan part of the EIG. But I’m just curious. I mean, I think a lot of people talking about inequality. I think what’s interesting about what the EIG does is that you are very focused on can I say, in an American sort of way, is that it’s focused on capital investment and enterprise. I was wondering if you could maybe just unpack that a little around how you see the role of enterprise in lifting people up out of inequality and rather than it being perhaps a government led solution.

Steve Glickman:                 I think our approach to it is that it involves both, but that the government at all levels. Whether it’s the federal government or local governments in the US, which is unique to the US structure that we’ve got that federalist system. That a lot of the programs initiated by government having worked very well, but even more importantly, it’s both politically, financially, they’re broke. There’s just no capital based on the changes in our tax system and the changes in the political acceptability of big government programs to do a lot more out of the public sector. And some of that’s just a factor of the economy and our debt, and the fact that between social security and Medicare, and defense spending, and payments of the debt, there’s just not a lot of additional capital to go around unless you hike up taxes.

Steve Glickman:                 And certainly in America, the political trends are in the opposite direction where you’ve been lowering taxes, or have had pretty low taxes for 30 or 40 years. So if you, go ahead.

Misha Zelinsky:                  Sorry, keep going.

Steve Glickman:                 So if you’re gonna solve the problem of how you create more economic growth, it costs money from somewhere. And the private sector is to contrast to all those trends in the public sector has never been wealthier, more profitable. The stock market’s never been higher than ever before. So clearly there’s a lot of capital that’s resting there. From our standpoint, the capital markets aren’t broke, they’re just broken. And they’re not working in the way that they could or should work. And if you’re not driving more capital places, you’re not ultimately creating more businesses places. And if you’re not creating more businesses places, there’s no other way to get jobs. So we subscribe to the notion that to change economies, it starts with the ground up. You have to create local, homegrown businesses and you can’t do that without capital.

Misha Zelinsky:                  Now, that’s really interesting. And I think you talked a lot about tax cuts there. And tax cuts at the moment, corporate tax cuts are on the agenda in Australia in a very contentious. There’s a lot of argument from both sides of politics. I think what was interesting, obviously those are major tax cut I’m brought in by the Trump administration and the republican congress. But what was within that was a small piece of a very innovative policy that the EIG championed. I was wondering if you could maybe tell us a little bit about the role that the tax cuts have played in helping the EIG actually get some rubber on the road in terms of things you just talked about.

Steve Glickman:                 Well, so the program you’re talking about is called opportunity zones. And let me separate it out a little bit from the overall tax reform package. It was a vehicle to make a certain set of tax changes, but I think it’s a little bit different in the tenure of what you see from many other parts of that tax reform package. It’s designed to do something that the US tax code has done for a long time, which is if you want to incentivize certain types of behavior, and in our case it was incentivizing moving private capital to low income parts of the country. The tax code is the most important and most powerful, most systemic way to do that. And of course we do that in the US to stimulate a charitable contributions. We do it to stimulate people buy houses, we do it to stimulate companies to make investments in research and development. We do it to stimulate the clean energy economy.

Steve Glickman:                 So it makes total sense and if you think, and we do think that community level inequality using most important problem to solve and there’s lots of capital in the private sector. Let’s utilize the tax code to systemically change the flows of that capital. And that’s basically what the opportunity zone program does. It’s essentially a deal between the federal government and private investors that we as the federal government will give you some level of tax forgiveness if you’re willing to make longterm and economically productive private investments in communities that are cut off from capital markets.

Steve Glickman:                 The program is obviously more complicated than that and we can get into whatever level of details you want, but at the end of the day, that’s what it’s about. It’s about getting capital off the sidelines. By our calculation there’s about 6 trillion with a T, $6 trillion in unrealized passive capital gains sitting in the economy. that’s in the stock market, in the real estate market that has been booming for at least a decade now. And if that money can be funneled to distressed communities around the US, there’s a pretty powerful tax incentive attached to it and we think it will move markets, it’ll change the way the market works.

Misha Zelinsky:                  That’s really interesting. So yeah, obviously taxes. It controls the flow of money. You’ve talked a lot about the role of capital in these distressed communities. I know the EIG talks a lot about the geographic role of inequality. I’m just wondering about the role. How do you see the role of responsible business in addressing inequality? And obviously we want to see capital investment in distressed communities creating jobs, but what do you think, what’s the role of the business community in addressing wage inequality and lifting up people and making sure that we don’t have a situation where you have people working one job or multiple jobs, and being unable to sustain themselves?

Steve Glickman:                 There’s no doubt that how stagnant wages have been an America is a big source of inequality on a number of different levels. And this was one of the stories of the recession and the recovery was that we gained back all of our high wage jobs. We gained back way more than we lost in terms of low wage jobs, and we didn’t gain back those middle wage jobs. And a big reason for that is the industries that really never came back were a lot of those middle wage industries like manufacturing. Now a lot of thinkers and policymakers in both parties understand that. But then your solution set gets all over the place and a lot of it has been focused for years on well, if we want to bring back those type of jobs, we have to bring back those sectors, and that’s not our perspective.

Steve Glickman:                 It’s manufacturing has fundamentally changed. But those communities that were manufacturing communities need similar quality jobs to replace it. And jobs that fundamentally don’t require a college education. On the democratic side, you hear a lot of talk about how everyone should go to college and that’s just not really a practical solution at least in the US. So you’ve really got to create new business activity in order to change that. And listen, I don’t think you’re going to be able to get there by forcing the corporations to do that, at least not in traditional ways. There is a big competitiveness problem in the US economy. It is much harder for new businesses to start and grow. We’re on this huge 40 year decline in our ability to create. So there’s this myth that the US is this entrepreneurial economy, and of course in some ways we’re more entrepreneurial than many other places around the country. But that edge that the US has is rapidly declining, and in part that’s because we’re creating businesses in such a smaller number of places around the US.

Steve Glickman:                 So again, we think it’s a homegrown problem, and that there are entrepreneurs everywhere. And the way to get at solving that problem is by getting more and more of those entrepreneurs capital. Let me give you one quick stat. If you look at the venture capital industry which is the source of much of the high growth entrepreneurship in the US, nearly 80 percent of that capital is invested in only three states. So three out of the 50 states, Massachusetts, New York, and California get nearly 80 percent of the capital. And that’s true across many other parts of our capital markets. Including how banks lend and where banks are located around the US. So this is a big problem to unravel and we think it starts with how capital flows.

Misha Zelinsky:                  That’s really interesting, and I think it gives us an opportunity to talk a little bit about this geographic inequality, these distressed communities. It’s been discussed a lot and I’m curious to hear your take on it as someone who’s a Democrat and perhaps has a slightly a nuanced view of the election. The geographic role that inequality pied in the US selection, you of course grew up in Michigan. That’s a state that’s blue state gone red, so to speak. But I think that what’s interesting is you talked about there was the loss of jobs, Trump zeroed in on very acutely around this loss of jobs and the promise to bring back steel jobs mining jobs in those distressed communities. And whether it was true or not, it certainly resonated. So I’m curious just a little bit about the geographic role that inequality played in the US election.

Steve Glickman:                 So I think there’s a couple answers to that. One is let’s take a look at how people evaluate the economy. So in a time when the national economy was booming, our unemployment rate was close to four percent and the stock market had been growing for this long bull market. That national level economy was just not resonating to people because frankly, it’s just not how people evaluate the economy. They evaluate the comedy based on what they see happening in their community. And people are really good at evaluating how well their local economies are doing. And as it turns out, a lot of national policy makers and the media don’t fully understand what the country looks like outside of big markets like New York, LA, San Francisco, and DC because that’s where they spend most of their time.

Steve Glickman:                 It looks much different than the rest of America. We for instance looked at swing districts, at places that voted for Barack Obama twice and then voted for Donald trump. And those are places it’d be hard to say that the difference in the election was based on race because they elected for an African American president twice. And much more likely, the driving force there was the economy. And if you look at those counties, and there were 200 plus of them that voted for Barack Obama twice and then voted for Donald trump. The big tying factor for all of them is that three quarters of them lost businesses during the recovery years and lost jobs on net during the recovery years. So while our national unemployment rate is going lower, in those places unemployment rate is not being affected at all. In fact, they’re losing jobs.

Steve Glickman:                 And one of the stories about the economy that people don’t fully understand even now is when we talk about the recovery, we’re talking about a recovery that really disproportionately benefited the top 10 or 20 percent of the country, that the rest of country kind of stayed even. And that the bottom 20 percent of American communities lost jobs and even a greater trajectory than they did before the recession. And in a lot of those places, it was totally rational to say the status quo establishment economic thinking from both parties isn’t working for us. It’s not changing our trajectory. So we’re going to vote for something different. And, one of the things they’re voting for is how to maintain their quality of life, maintain a community where their kids can stay and achieve the American dream.

Steve Glickman:                 And we know the reality is changing in those communities. The tragic thing is I don’t think either party is really giving folks a viable solution for how they change their trajectory. Because a lot of these jobs aren’t coming back. And a lot of the problems for their current economic situation isn’t as simple as trade, or immigration, or any number of issues that have become the threshold issues in our debate. It’s really a much more complicated, long term structural change of communities that haven’t kept up with the how fast the economy’s been changing and having diversified the industries and the opportunities they’ve given to people who have lived in a lot of these cities.

Misha Zelinsky:                  That’s the challenge, isn’t it for progressives I think is that the difficulties of the problem cannot be explained in neat, make America great again, type sloganeering. So that is always the challenge. But what’s interesting as well as you talked a lot about there about the main economies LA, New York, San Francisco. But what’s interesting as well is this so called red state blue state thing where people look at them on a headline map. But what’s actually interesting, if you dig into a blue state, you’ll see that it’s actually perhaps a blue dot or a blue island on a red ocean. And maybe just talk a little bit about the differences between outcomes and metropolitan people versus outcomes in those sorts of non metro rural areas. And the tensions that are building there.

Steve Glickman:                 And I think the problem is even a little more complicated than that. So listen, the geographies that do really well in our economy typically are the suburbs. And the suburbs can be republican or democrat. Some studies going to do really well and some cities tend not to do well. And a lot of those cities, you have large population groups, particularly minority population groups that are doing much worse than whites even in rural areas. But ultimately, I think this comes down to a trajectory. If you’re living in an African American or Hispanic community, even one that’s on absolute terms not doing as well as a lot of white communities, you’re probably doing better than your parents or your grandparents did. And that’s not just an economic issue. That’s also a social justice, civil rights status that have improved for many, many millions of Americans despite a whole set of current challenges.

Steve Glickman:                 If you’re in the white working class community and a lot of those are small town and rural America, your trajectory has gone the opposite direction. You’ve lost. Particularly if you’re in a manufacturing community, you’ve lost those industries. You’ve lost those quality of jobs. You’ve lost your main street. It’s been replaced by a minimum wage jobs. Whether it’s working for really big companies or for distributors or call centers, or whatever is left. And the quality is just different. There are rural communities and small towns in America that are doing great, but disproportionately the parts of the country that are doing the best are cities that are connected to global markets, connected to immigrant communities, and connected to the digital economy. And those are places like you mentioned, like New York and DC and San Francisco and LA, and also other towns that are, cities that are taking advantage of it. In the middle of the country, like Denver and Austin. And Minneapolis and other communities.

Steve Glickman:                 But those are the exceptions. And so the reality is this is not a rural versus urban issue. There’s just huge amounts of distress in both communities, and it’s not even a black versus white issue. But a lot of this has to do with trajectory. And, if you see yourself going the wrong direction, if you see your kids have less opportunities than you do, it makes people angry. And rightfully so. And I think at a starting point, and this goes back to our conversation around Trump, people want to be seen. They want to know that you understand their problem, and how their problem is unique and different because of where they live. And I think to Trump’s credit, he understood it and was able to articulate it. And whether or not you have a good solution for it or not, more politicians on both sides have to articulate that as the biggest problem we need to solve with this country.

Misha Zelinsky:                  I think that’s interesting. And you’ve talked a bit about Trump, but I think what’s interesting and puzzling to a lot of Australians is that you had people that voted for Obama. We had eight years of Obama, and then suddenly those very same people turned around and voted for Trump someone that not only was the antithesis of Obama, but was the leader of the birther movement. So it is quite puzzling from an Australian point of view. But I’d be curious to get your views as someone who worked in the Obama administration in an economic portfolio. Could the Obama administration done more for people, in terms of making sure that those communities weren’t so left behind in the recovery? Because I think Obama rightly put a lot of focus on saving Detroit with the auto bailout and focused very heavily on making sure that those working class jobs were not lost. But should the Obama administration done more and should the Democratic Party have detected this problem that was out there?

Steve Glickman:                 So the short answer is yes. I mean clearly, the Obama administration should have done more. I would separate a little bit the first term from the second term and not just because I served in the first term and not the second.

Steve Glickman:                 But I really think in the first term, the big focus was on the economic infrastructure of both America and the world. Which as you probably remember was teetering. And even right coming out of the recession, people were extremely nervous. Not just about the US, but Europe was going to collapse. That Italy and Spain and Greece, were going to default. And that meant the end of the EU and a new global recession and we would have all been screwed. And so that sucked up a lot of the bandwidth in the first term all the way through. And the bailout and TARP and the stimulus package, and the auto rescue in Detroit. And I’m pretty proud of the role I think the president played in, not just in America but globally in stabilizing the economy.

Steve Glickman:                 In the second term, I think we could’ve done a lot more. In part, we didn’t have as much political capital as we had in the first term for sure. And we didn’t have congress anymore. And that makes it difficult to do real big meaningful things including things that require for instance, changes to the tax code, which you need an act of Congress. Congress controls really all the spending in the US political structure and they were openly at war with the president and vice versa. So, the White House was really limited to what it could do through executive order, which is a much smaller set of authorities then you can do through law. So I think a lot of bridges had been burned by then, and all that political capital had really been used on creating health reform and creating universal access to healthcare, which I think is part of the problem you’re talking about.

Steve Glickman:                 But this is a problem that we could have focused more in on in the second, could have done more about. It’s also a really longterm problem. So the recession was not a turning point for most of these communities except in degree of distress. Most of these places where it had been distressed for at least 10 years before the recession and probably decades beforehand. Detroit hit its peak in the 1950s where it was one of the wealthiest economies in the country and had been in a downward slide as the US lost manufacturing shares to other world economies. And that’s just the way the economy works. So I do think the White House has some blame and the administration has some blame. But at the end of the day, this is as much an issue about local leadership as it is about federal leadership. And there are certain places now that are just well much better prepared to take advantage of this economy than others.

Steve Glickman:                 And once they got lazy and passive, and decided they were gonna hope and pray for another company or another manufacturing plant to take the place of the last one they lost instead of how do we take advantage of this new tech enabled economy and use our infrastructure of universities, I mean don’t forget, places like Michigan and Ohio and Pennsylvania have had world famous engineering research universities. University of Michigan, Carnegie Mellon, Ohio State, and so you have the raw firepower to take advantage of the new economy. But it requires a local leadership and local vision to get there. And I think too few places had that until the last couple years or so.

Misha Zelinsky:                  That’s really interesting. And I think you’ve touched a little bit on trade and touched a little bit on the effects of job replacement in communities where you’ve seen perhaps a steelworks shut and not be replaced with anything. One of the things I’m very fond of, and we certainly see similar things in Australia. I certainly see that in my role in the Australian Worker’s Union. One of the things I always say is that trade is good, but fundamentally trade destroys and distributes unevenly. And I think we’ve certainly seen it in the US, but I’m curious at Trump has been putting forward a very muscular focus on trade. He sees trade in a binary sense where a trade balance if it’s negative, the US is losing. And if it’s positive, the US is winning, he sees it in a zero sum manner. Just curious how do progressives grapple with this question of trade which can hurt people, and how do you make sure communities aren’t left behind in the process?

Steve Glickman:                 So there’s no doubt that trade, as a lot of people will say, the benefits of trade are dispersed pretty widely and the impact of trade and the challenges with trade tend to be very concentrated. And that’s certainly the case in the US economy. The economies that were most dominant by manufacturing, not necessarily most dominated by trade because the trade rich, trade dependent economies, some of them are booming. And a lot of the places we mentioned like Seattle and Los Angeles and New York, which are big hubs of trade are doing really well. But if you’re a dominant sector and is manufacturing and you don’t have a diversified economy, than the impact of trade can be huge. And one, as the Democratic Party or either party. I think we need to start by doing a better job giving communities the tools that they need to adapt.

Steve Glickman:                 Some of that is capital and how they access capital so they can build new industries. Some of it is how they retrain workers. We have a terrible and a terribly outdated worker retraining system in the US. It requires you to lose your job. It retrains you into sectors that aren’t producing jobs. It’s both inefficient and ineffective for people. And this is really a place where the private sector can and should play a huge role. If you’re not creating a workforce training system where the private sector is at the table to talk about where their hiring needs are and how government can offload some of that training with the guarantee or the commitment that private sector interview and hire people coming out of these programs, until that works better it’s really hard to solve this problem. But this conversation has been one that progressives have been good or even better at talking about for a long time.

Steve Glickman:                 So if you look at the height of progressivism, you’re really talking about the thirties, forties, fifties, sixties, even going into the seventies. So from like FDR through Lyndon Johnson where we had massive policies around retraining, around settling the west. And I think just as importantly and something that the Democratic Party is starting to talk about more around competition and corporate consolidation. So we really have the most consolidated and economy in the US we’ve had since the depression, since the 1920s and thirties where a smaller number of big companies control a bigger part of our economy. And that leads to a lot of this inequality and wage suppression and lack of investment, which we’re all seeing. Because workers and communities are less able to compete. And if you look at where airline hubs have gone from when you’ve gone from having 10 airlines to having four airlines. Or where banks are located. Bank of America shut down 10,000 of their branches over the last 10 years. And community banks are growing at a slower rate than ever, which means small business lending in this country is basically plateaued at a 20 year low.

Steve Glickman:                 So it matters what the private sector is made up of, not just what they do. And if they’re made up of lots more of, many more companies that are growing and more dispersed as opposed to a few really big companies, it makes a big difference in the economy. And so this question around how you create a more competitive economy in the US is really important. And Democrats used to talk about this all the time, and we really stopped talking about it in the last 20 or 30 years.

Misha Zelinsky:                  It’s interesting. It’s interesting, the concept of competition. It’s a bit of an anathema sometimes to those on the progressive side of politics, but competition is inherently good for the economy. It’s also good for consumers, which fundamentally the people that we seek to stand up for which are families, people buying things. And you want to see competition in wages, making sure that wages are going up and competing for labor, but also that you want to see competition in the cost of goods and reducing the cost of living for people. So it is interesting the level of concentration, but also what you’re seeing increasingly is a global phenomenon. We certainly see it here in Australia with many US firms where it’s winner takes all markets. And, one of the things I’m curious actually if your take on this and I think perhaps I could already know your answer. But one of the solutions being advocated is universal basic income. If there’s no jobs and jobs that are being inherently more and more consolidated into mega firms and you’re seeing market’s up ended and people unable to work, that we should have a universal basic income, which is basic principle.

Misha Zelinsky:                  Everyone gets, no matter if you’re a billionaire or dirt poor, everyone gets a certain income and then off you go to try to do best from there. But I think that there are certainly some problems with that idea, but I’m curious about your take on that because I think fundamentally, the better outcome is you want to see a good job. If you lose a good job in a steelworks, a unionized job, it’s well paid that it’s replaced with another good job and it’s not that you’re on your own driving Uber and trying to make ends meet.

Steve Glickman:                 So I dislike almost everything about UBI. One I think it’s an American. We already really have a UBI through our social security system, and it’s just for people who can’t contribute to the economy. People who are disabled or a retired, or for reasons that are no fault of their own no longer working. And then it makes sense to have a massive safety net, one that’s growing with the way the economy’s changing, for people who are no longer contributing. But otherwise our system is premised on people working. And I believe people want to work and want quality jobs where they’re contributing to their economy and being, their wages reflect their contribution.

Misha Zelinsky:                  Well there’s a dignity in work as well, right?

Steve Glickman:                 Of course. But in UBI is like giving up. It’s a form of charity and saying we can’t solve this problem of how we create new businesses and new industries and train people with new skills. So we’re going to pay people, but we’re going to pay them a poverty level wage. And I believe even if we could afford it, which we couldn’t because you gotta think in the US, if you’re paying for 350 million people, but let’s assume half of those are workers, so 150 million workers and you’re paying them $15,000 a year, you’re talking about a program in the trillions of dollars a year. And the US doesn’t have that type of capital. It can’t afford that program. And even if it could afford that program, it would suck away from every other single domestic spending program we had. We’ have a UBI program, and a Pentagon, and social security and Medicare. And that’s all the economy could withstand. The US budget $4 billion dollars a year. You’re talking about this would be something like 40 or 50 percent of our budget.

Steve Glickman:                 So I don’t think it’s either politically or economically viable, which is why I don’t spend too much time thinking about it. But I think conceptually it’s also a broken. And we shouldn’t be giving up. On the Republican Party, I think as they see the economy particularly in the lens of this new republicanism, it’s very focused on how we separate ourselves from immigrants and our trading partners. And I think that’s a big mistake, and it’s particularly a big mistake in the context of immigration.

Steve Glickman:                 Immigrants, there are very few economic thinkers who would tell you that immigration is not a large net positive to any economy. These are people that want to be here, that want at work, that are disproportionately business owners and the creator of high growth businesses. Something like half of our venture backed businesses in the US, 50 percent are backed by immigrants or immigrant co-founders. So they’re a huge part of our economy. But on the democratic side, there’s this theory around the future of work that robots and artificial intelligence are taking over and there’s nothing we can do about it. So let’s just pay everyone, five or 10 or $15,000 a year. And to me that’s just as big of a cop out.

Misha Zelinsky:                  It’s technological determinism, so that we have no control over the technology that we can’t shape it to our way either, right?

Steve Glickman:                 Well first, yes. And there is no evidence of that. Our economic evidence shows a low productive, low wage, low unemployment economy. And if there were tons of robots and artificial intelligence, productivity will be super high. Wages would be higher and there’d be a lot less jobs because robots would be doing it. So that’s not the case right. Now that even if you thought that was the case 10 or 20 or 30 years from now, which I don’t subscribe to, the fatalistic way to your point that we look at this is sad. Because there are lots of things we should try. If we thought robots were going to take over the economy in 30 years, then the solution is let’s not give everyone charity so they’re making a poverty wage. The solution is how do we prepare more American communities and more American workers to take advantage of that technology enabled economy? We need more thinking about that, not more thinking about how we’re going to spend more money to spend our way out of this problem. At least in my view.

Misha Zelinsky:                  I subscribe to that view too. I don’t think the UBI, whilst it’s interesting, I think it’s under the assumption that there’s no work, and I don’t believe there will be no work. So I think it’s actually making sure that the work we have is well paid and people are skilled for it accordingly. But so I’m just curious. You touched on immigration there and the role that immigrants play. And I think any policy person would agree with you, but that’s certainly not the mood in the community globally. You’re seeing it in Europe, you’re seeing it in Australia, you’re seeing it in the United States, suddenly with Trump with his wall. How can progressives articulate a positive view of immigration and not purely on an identity basis, but on an economic basis?

Steve Glickman:                 Well listen. Fear and economic scarcity or the perception of economic scarcity drive bad policy decisions, and they drive anti-immigrant thinking for hundreds and hundreds of years.

Misha Zelinsky:                  This is not new. That’s important.

Steve Glickman:                 No. And I think for a lot of these issues, the question like for instance, the answer to trade is not making a better argument for trade. And the answer for immigration is not making a better argument for immigration. It’s ultimately solving that perception people have of economic scarcity and that they’re in decline. And so these are all first order questions. It starts with if you want to get those issues right, and we may get them wrong for the next four or five or six or seven or eight years. And it’s not because people are in my view, hateful or mean or irrational. It’s because they don’t see any other option. So I think we have to give people other options. We have to convince them that there’s a way they’re going to get skills and there’s gonna be new programs, new cooperation between the public and private sector around how we upscale people.

Steve Glickman:                 I think they have to see that investors are rebuilding a bigger part of this country because they buy the fact that there’s a future in more places than just a handful of cities around the country, and they have to see new businesses start in their backyard so the trend lines aren’t just Kmart and Target, and then came Walmart, and then came Amazon, and out went all the local businesses that thrive and grow in these economies.

Steve Glickman:                 And by the way, the notion that San Francisco and LA, and New York, and DC are better places because everyone’s crammed into them looking for opportunity and they have to pay outrageous amounts to buy condos. It costs over a million dollars to buy a one bedroom condo in San Francisco now, and they’re losing more people than they’re taking in because nobody wants to live there anymore, because it’s unlivable. The fact that that’s a better outcome even for those economies is crazy.

Steve Glickman:                 So this requires dramatic action. The market’s not going to work it out. People are not mobile. We have lower rates of mobility in the US than we’ve ever had before because people don’t have the connections, the skills, the capital they need to be able to move to places that have these industries. The only solution is to create more industries and more businesses in a bigger chunk of the country. And I think there’s plenty of interesting entrepreneurs and you, I think at this point earlier. We know there’s plenty of work because there’s plenty of problems to solve. Work is just a function of solving problems for other people. Whether it’s the problem of how you create stuff in mass or how you grow stuff in mass, or how you provide certain services to people. And most of those jobs you can trade away.

Steve Glickman:                 Our economy like the Australian economy is mostly a services economy. And those services are locally provided. They’re your restaurants and dry cleaners, and they’re your bars and your doctors, much of this stuff you get locally. So a lot of the economy is not going to change dramatically. We’re really talking about the parts of the economy that are globally connected, and if you just focus in on that part of the problem, there are solutions there. At least in the US, we have a huge infrastructure around our capital markets and our labor markets and it’s just working really efficiently, and we as a society and the government can fix that if we wanted to.

Misha Zelinsky:                  That’s a really interesting point. So earlier on, you touched on this concept of unamerican. I think as an Australian, I certainly understand what you mean by that and I think many people in the world would. What’s a lot of people asking at the moment is what is it that America stands for? And I know that’s a broad question, but we talked a little bit about immigration and Trump’s take on that. And, we talked a little bit about trade. The US, for many, many decades now since certainly since World War II is been the guarantor and the prorector and advocate of an open global system. Be it of immigration, be it of trade and has also added support that with its institutions. Now in recent times, the US is turning in on itself. So I’m curious about how does the US with these challenges that it has around inequality, around the negatives around trade and around the negatives around immigration and the political impacts of that is happening, and the political part is detecting that? But at the same time, the rest of the world, countries like Australia, other western liberal democracies are looking to the us to say how is it that the US can help underpin the challenges we’re seeing from China, from Russia, from other models. From non-US models. And how can the US juggle both its challenges at home but also help us friends abroad?

Steve Glickman:                 Well, listen. There’s no doubt we’re at an unprecedented point in our politics where leadership that our friends around the world who are used to seeing from the US is lacking, at least in terms of our role in the global economic stage. With that being said, nothing in my view so far has fundamentally changed. We’re still a part of an active participant in the WTO, the World Trade Organization. We still have, with some very small exceptions given the size of our economy, a very open market both for investment and portrayed. We still have a immigrant rich country, that takes in large numbers of people every year and it brings a large number of tourists here, and large number of people are educated around the world in US universities. So I think the tone and the rhetoric is certainly off in terms of where the US is traditionally lead.

Steve Glickman:                 I’m not sure anything has fundamentally changed yet in terms of how the American economy and the American immigration system fundamentally works. Now of course, some of it is starting to change. I think it’s an open question of whether Congress pushes back against that. Our system is, the president’s got a lot of authority, particularly around foreign policy issues, but very little unilateral authority around core economic issues. And that includes trade, taxes, and even immigration where the president’s powers are limited. So congress ultimately has to come along, and I think what you’re not seeing is an acceptance from either party, including the Republican Party that their norms have fundamentally changed around trade or even that our national consensus has changed around immigration yet. I wish we were letting in far more immigrants than we are now, and I wish we had not pulled out of the transpacific partnership, which I think would have put us on a much stronger footing to be closer allied to Australia and Japan, and Korea, and other countries in the region in dealing with China. That was a big I think self inflicted wound.

Misha Zelinsky:                  Let’s talk about TPP. Let’s just talk about TPP.

Steve Glickman:                 But I’m not sure how much has fundamentally changed in the US beyond that.

Misha Zelinsky:                  Yeah, because I think TPP is interesting because you talked about trade. And you said the US president has limited powers. But the TPP, I think there are a lot of problems with that deal. But nevertheless, the TPP was seen as the US as part of Obama’s pivot into Asia is about setting the rules of the game, setting the rules of the road. And the US 2016 election pulled, both parties away. I mean the Republicans got pulled away first through trump’s challenge internally, but then Hillary Clinton was also pulled to the left by a firstly Bernie sanders and then Trump himself who she was effectively crucified over NAFTA and the impact that NAFTA had rightly or wrongly at least in a perception sense on the communities we talked about earlier. So that’s I think one real world example, and China are filling I suppose the vacuum around TPP with their one belt, one road initiative, certainly in the Asian region. So I think there’s certainly already observable impacts from new us retreat from an open liberal system.

Steve Glickman:                 Yes. I mean you’re totally right. I wouldn’t buy too heavily into any of the campaign rhetoric, at least from Hillary Clinton’s camp around TPP. She was one of the architects of TPP when she was the secretary of state in the Obama administration. And if you look back at the history of trade agreements, it’s typically been democratic presidents who have done the heavy lifting on trade despite the stereotypes of the party. Bill Clinton got NAFTA done. I’m, Barack Obama did most of the heavy lifting around the TPP. Kennedy was really the initiator of the first big trade expansion in US history, and Roosevelt and Truman were big supporters of how you use economic diplomacy to solve big means here. I think what we got wrong in the TPP debate was that it’s fundamentally an economic agreement. It’s fundamentally a political agreement. I think the biggest, most important part about TPP was securing our place and our alliance within Asia and dealing with any number of issues that balanced powers in East Asia that would give us better footing from everything from North Korea to the South China Sea, to engaging with Russia and elsewhere.

Steve Glickman:                 And that should’ve been the debate we were really having because that’s where it has the biggest impact. It would have honestly marginal economic impact even though these are really big markets because we had agreements with most of these countries. The only one that we didn’t have a meaningful agreement with was Japan. And that’s where a lot of the tussling was at the end and it was around really small issues. Most of the tussling and these agreements, for instance, TPP happening around Ag. And the AG sector in the US is .5 percent of our GDP. 99.5 percent is something else. Manufacturing, services, natural resources. This is a really small part of the US economy and that’s not really what the agreement was about. It was about a new political order or at least preserving a political balance in Asia. And unfortunately we’re losing some of that.

Steve Glickman:                 What’s interesting is that the president’s in Singapore right now trying to create a new political packed with the Koreas, and we’ll see if that works and we’ll see whether his shoot from the hip model is effective. I’m not ruling it out. It’s not the only way to get there. But I do think when we take away the tools from our tool box, which trade is a big one of those tools, we hurt our standing around the world and thus hurt US security and foreign policy interests.

Misha Zelinsky:                  So you talked about China and the South China Sea. One of the things that Australia focuses a lot on is the role of China and trying to grapple with the economic underpinning relationship that we have with the Chinese, and also the challenge that China brings to the liberal world order, but also the challenges that it brings to our launches with the United States and other like minded countries, and they’ve been very city in the South China Sea.

Misha Zelinsky:                  So there is a lot of nervousness around the US’s continued role as a strategic guarantor of freedom of navigation in South China Sea. But also, do you see that the US is focused enough on the challenge that China has brought? The US tends to be at its best when it’s challenged. Much like in the Cold War, but also with the rise of Japan. And do you see that it might actually bring the best out of the US in terms of raising its own standards, but also reaching out to friends around the world?

Steve Glickman:                 Well, China is the most complicated national security foreign policy issue the US has to deal with. And we have a really complex, multifaceted conversation with China that’s ongoing and has been ongoing for years. However, I think 2018 is not the 1940s and 50s. I think that across the world, countries that have long relied on the US as a guarantor have to start taking care of their own backyard. And that’s both Europe and Asia. I think the Europeans have to step up and play a bigger role in world affairs. They’ve got the resources, they have the military technology and the military powers to do it. I think it’s the same thing in Asia. I think that Japan’s, the current construct that Japan is going to be taken care of by the US is one that’s been outdated over the course of 70 years, and that everyone needs to play a role in keeping up their own backyard.

Steve Glickman:                 The US is not the sole world power. It’s undoubtedly still be richest and most powerful country in the world, but that margin has decreased across a number of different factors. And that means other countries have to step up. And the US, listen. I have no doubt that over even the medium term, the US will know its allies from its friends and be there for its allies when push comes to shove. But it’s a lot easier if our allies have leverage in their own regions. I think frankly, not to preach to the choir here, but Australia has done a really good job of this. Australia’s emerged as a powerful force in Asia. It’s a tiny country, because it has stepped up, and stepped up in a lot places have where it’s had the US back where it didn’t really need to, in I think asserting its roll and influence. I’d like to see Japan step up in a similar way and I’d like to see Germany step up in a similar way in Europe. These are the two richest country in the world aside from the US and China, and they need to step up.

Misha Zelinsky:                  Yeah, I think that’s an interesting point. And I know the Japanese certainly are looking at amending their constitution. But I do think even from a leveraging resources standpoint, it’s important that every country unifies. Because people often look at it as though it’s a United States versus China, but when you actually look at it, if you add the liberal democracies. You add Europe, you add the US, you add the UK, now Australia and other countries. You put those together, the GDP between those countries is extraordinarily huge. And you can certainly leverage that in a number of strategic ways, further the projection of a broader liberal order.

Misha Zelinsky:                  But I just want to take it back to domestic politics. You are, as I said earlier, a senior figure in the Democratic Party. And you’re also based in Chicago, which is endlessly fascinating. From a political standpoint, it’s obviously the political home of Barack Obama. I’m curious, you didn’t grow up there, but you’re now in there. So maybe you could give us some insights as to how you ended up in Chicago from a political standpoint, and we’ll talk a little bit about the midterms as well.

Steve Glickman:                 So two small corrections. One, very few people would describe me as a senior figure in the Democratic Party.

Misha Zelinsky:                  I’m being generous mate.

Steve Glickman:                 And two, I don’t live in Chicago. I live in Washington DC.

Misha Zelinsky:                  Oh yes you do. But you are Chicago Bears, Cubs fan?

Steve Glickman:                 I do. My dad and my grand father grew up in Chicago, so spent a lot of time there growing up and a big Chicago cubs fans.

Misha Zelinsky:                  Someone needs to do better research for me.

Steve Glickman:                 No, I chalk it up to the time zone change. That’s probably what’s contributing to this.

Misha Zelinsky:                  That’s right. So your family is from Chicago. That’s right, isn’t it? And that is a very democratic political city.

Steve Glickman:                 Yeah, although every city is a Democratic city these days for the most part. But yeah, there are these very storied democratic roots in the, in the city of Chicago.

Steve Glickman:                 Listen, I think that there’s this, what’s I think interesting to me now is there’s been this incredible comeback story of the role of cities as almost replacements from actors on the federal level. There’s lots of ways you’re seeing this in ways that are kind of surprising, if you look at climate change and the pact Eric Garcetti, the mayor of Los Angeles has pulled together by getting a large contingency of mayors to subscribe to certain climate change goals. Even with us pulling out of the Paris Accords. Or whether it’s the role cities are playing in creating new economic future for their citizens without relying on the federal government to step up and do anything dramatic. The most interesting I think politics right now are city level politics. And some of these cities, their economies are so large, whether it’s LA, New York, Chicago, and elsewhere. That they rival many countries around the world, so they’re starting to pursue their own trade missions, and starting to pursue their own commercial diplomacy around the world.

Steve Glickman:                 And so I think those are really fascinating trends of the rise of cities around the world, and I wonder whether they’ll start to displace the role of federal governments everywhere when there’s more interesting things happening in the city level than on a national level.

Misha Zelinsky:                  And so just coming up to the midterms and a lot of attention on the elections. A lot going on. It will be very important, at least to Trump’s presidency, whether or not the Democrats can secure either of the houses. How do you see that probably playing out?

Steve Glickman:                 So I think as is typical in lots of midterm elections, the opposition party does really well. And I expect Democrats in 2018 certainly in the house. There’s a much more challenging playing field in the Senate in 2018 because Democrats are defending so many seats in the Senate. But I expect us to do very well in the house. I think Democrats will take over leadership of the house, and I think there’s a lot of signals you’re getting from existing members of Congress, including in the Republican Party where you see a number of senior retirements among Republicans in the house. Which is a pretty good signal that they don’t have a strong feeling they’re going to hold onto power next year. Now with that being said, being in control of one house of Congress only gives you so much when the presidency is the other party and the Senate is the other party, which I think is like most likely to be the case. Although the Democrats have a fighting shot to take over the Senate. We’re only down two seats. 49 seats are held by Democrats in the Senate and 51 are held by Republicans.

Steve Glickman:                 But it will make a difference in at least slowing down the agenda that President Trump has in the White House because he’ll be forced to work with Democrats. I think it might be a very interesting paradigm though, because I think President Trump has shown that he’s willing to work with Democrats and Republicans when the circumstances are right. And so I wonder if he’s going to have some issues he can work on with a democratic house.

Steve Glickman:                 I think the other big looming question is whether a democratic house moves forward to impeach the president, which they can do with-

Misha Zelinsky:                  I’m curious to ask you about that because you’re a former trial attorney at the Department of Justice, so it’d be remiss of me not to ask you on the Trump Russia investigation, how you see that playing out.

Steve Glickman:                 Yeah. And there’s also an investigator for congress. I investigated the wars in Iraq and Afghanistan. And so a sense for how that process works. So all democrats would need is a majority vote in the house to impeach the president. And they should I think have the numbers to do that if everyone voted that way, I’m not sure everyone would. I think right now, I think the grounds on which to impeach the president are pretty late. I think that there would be some unintended consequences of this creating some sympathy for the White House and a distraction for an agenda the Democrats may want to start to lay out going into the 2020 presidential election. And I don’t think it’s likely to result in the president being removed from office because Democrats would need two thirds of the Senate, which is likely to be controlled by Republican to be pretty close to 50/50.

Steve Glickman:                 And so they would need a number of Republican votes. Unless there’s a smoking gun that comes out of the Bob Mueller investigation of the Trump campaign, and their connections with Russia which at least I’ve not seen or heard yet. I don’t think that’s very likely to be successful. And I’m not even sure whether that vote will be taken in the house because it comes with a lot of political risk. So I think the president is likely to serve out his term and I think there’s likely to be a Democrat who’s speaker of the house. And that brings us to 2020, which I image you’re curious about as well.

Misha Zelinsky:                  Yeah you’re well ahead of me mate. You’re just naturally guiding yourself to the questions. But so 2020, you’ve talked a lot about I think a bit of a different democratic agenda for certainly in respect to the campaign that the Democrats ran in 2016. So I’d be curious to see what you think are some of the lead candidates are to take on Trump in 2020 in the assumption that he’s there, and then who you might favor?

Steve Glickman:                 So I’ll answer both those questions maybe a little differently than how you asked them. One, let me just talk about the context now. So if you ask voters, and I’ve heard this pretty recently from very experienced public opinion researchers who have looked at how voters view the Democratic Party and the Republican Party, and the president. I think you get some surprising results. One, the president’s a lot more popular than people give him credit for. And in part, I think it’s a factor of the fact that the economy is still really strong, and the president’s viewed as very strong on the economy. And he’s viewed as someone who a while his unfavorability rates are still very high and they had been all the way through the campaign, even when he won. People view him as pretty strong, as someone willing to stand up to what he thinks is right. And someone who’s good at business and good at the economy.

Steve Glickman:                 And that still holds true. And if you ask voters what Republicans stand for, it’s pretty clear to them they stand for less government spending, lower taxes, and for big business. Now as a Democrat, I think that’s a very vulnerable set of associations to have with voters, because people like a lot of the things government provide. And they’re I think skeptical of large businesses, but you have to give them an alternative vision. And when you ask voters what they think about Democrats and their economic vision, there’s a series of like 10 question marks in that answer. No one has any idea.

Steve Glickman:                 I was close with Hillary Clinton’s economic team when she was running her campaign for president. And I could not tell you what her priorities were, and I can easily tell you what Trump’s priorities were. In fact, he stayed pretty focused on them. I may disagree with a number of them, but you know what they are. And so Democrats first and foremost, they need a positive vision for the economy, which is the only game in town. People don’t vote in foreign policy issues, and they don’t vote on social issues, at least on a federal level. They really vote on the academy, first and foremost. It’s issues like one through five for when you ask people what’s most important to them, it relates to the economy. It’s healthcare, it’s housing, it’s a good job. It’s my community, etc. Wages. So we need to give them a reason to vote for democrats. We really need a new economic world view and vision and philosophy. And ultimately that boils down to a new generational thinking of this.

Steve Glickman:                 There’s this very outdated notion in I think both democratic and republican circles that we’re still having a debate that’s left versus right or left versus center. When really we’re having the most important debate is one that’s new versus old. It’s a new generation where you’d see a lot of agreement around certain issues among new republicans in new democrats. A new generation of them, let’s say under 45. And the old views of what the parties stands for, and that I think is the most important debate in the country. Now, democrats are going to run 20 candidates for president. And lots of them are impressive and maybe might be very good presidents. I’d give you some who I think are going to be front runners.

Steve Glickman:                 I think you’ll see Cory Booker, the senator from New Jersey do well. I think you’ll see Terry McAuliffe, the former governor from Virginia do really well. I think you’ll see Jason Kander, a young rising star from Missouri who ran for senate and has now become a national figure. I think you’ll see him do very well. But I think all of them are going to have a really tough time beating the president. It’s very hard to beat incumbent presidents. It’s very hard to beat incumbent presidents in a really good economy. It’s really hard to be incumbent presidents in a good economy who’s maintained a pretty high level of popularity in his own party. And he’s extremely popular in republican circles. The notion that he’s vulnerable is a total farce. His approval rating in the republican party is 80 percent or higher. This is like George W. Bush numbers after 9/11. He doesn’t have to win by much to win. So I think you need a democrat that’s got a real affirmative vision that people want. It’s got to be more than being anti-Trump. And frankly, I have not heard much of that breakthrough in the party so far and it makes me very nervous the democrats are not prepared Well for 2020.

Misha Zelinsky:                  Well that’s a very sobering analysis and we’ll leave it on that note on the serious. All our guests are asked, so I know you’ve been to Australia and this is about making, the show’s called Diplomates. So it’s about making some mateship across the ocean. So just curious about having visited Australia, who are the three Australians that you would invite to a barbecue, and obviously you’d invite me. So I’d be there anyway. So I’d be looking for you to think of three others mate.

Steve Glickman:                 Yeah. Well I need someone to drink all the beer. So that’d be you. So I’m going to stick in the political and economics lens around three Australians I’d like to have dinner with. So let’s start with politics. We’re bipartisan, so I’ll take a bipartisan approach to this. So on the left, definitely Julian Assange, I’d want to have him at the table. When I think about Australia-

Misha Zelinsky:                  You might have to get him in by Skype mate. I don’t know whether or not he’s going to be allowed out of the embassy, but …

Steve Glickman:                 You didn’t say it had to be practical. You just said who I want. If I’m thinking about someone who to me represents Australia, it’s Julian Assange on the left. On the right, the most famous Australian, most consequential Australia I can think of is Rupert Murdoch. So he’d be the Australia and I’d have from the right. I’m sure you’re loving these choices. You’ll like choice number three.

Steve Glickman:                 So choice number three would be an economics focused choice. And the person I have in mind gave probably the most compelling analysis of what happened in the economic crisis of anyone I’ve seen, American or Australia. And do you know who that would be? She’s from a very famous movie you may know.

Misha Zelinsky:                  I ask the questions on this thing mate, so I have absolutely no idea. But you’ve got me on tender hooks right now with Julian Assange and that Rupert Murdoch.

Steve Glickman:                 So number three in this trio would be Margot Robbie, because there’s no one I’d rather listen to on the economy then than Margot Robbie. I think she, Julian, and Rupert all in one room would be a tremendous Instagram photo at least.

Misha Zelinsky:                  Well, Steve Glickman, Margot Robbie, Rupert Murdoch, and Julian Assange would make quite a group. I don’t know whether or not either Rupert or Julian would want me there, but I’d certainly be happy to get along and at least drink couple of those beers you talked about. Steve, thanks so much for your time. I think it’s been a fantastic chat, a lot of great insights and good luck with everything. Hopefully if we don’t see on the ticket in 2020, hopefully see 2024, 2028 Glickman. I’ll be there handing out for you mate.

Steve Glickman:                 Well, I appreciaTe that. That will never happen, but I do appreciate you having me on the show anyhow and love talking with you. Good on your Misha.

Misha Zelinsky:                  Never say never mate. Thanks a lot.

Steve Glickman:                 Talk to you, bye.