Ian Shapiro is the Sterling Professor of Political Science at Yale University. His latest book is After the Fall: From the End of History to the Crisis of Democracy, How Politicians Broke Our World.
The Democracy Paradox is made in partnership with the Kellogg Institute of the Keough School of Global Affairs at the University of Notre Dame.
If we want people to support democratic capitalism, it has to be a kind of democratic capitalism that delivers for most people, and we haven’t had that.
Ian Shapiro
Key Highlights
- Introduction – 0:20
- The Left’s Preemptive Capitulation – 2:21
- A Dollar Short, a Day Late – 14:52
- Right on Politics, Wrong on Math – 25:19
- The Next Turning Point – 39:38
Introduction
Today’s guest is Ian Shapiro. He is the Sterling Professor of Political Science at Yale University. But that undersells his importance. Ian Shapiro is one of the more influential political scientists alive today. He studied under Robert Dahl and was a coauthor of The Democracy Sourcebook.
Ian’s latest book is called After the Fall: From the End of History to the Crisis of Democracy, How Politicians Broke Our World. The book is a harsh critique of politics in the West after the Cold War. He argues the West adopted neoliberal economics too easily and abandoned Keynesian economics too quickly. He also believes the West made critical foreign policy mistakes that have created a more dangerous global environment today.
I agree with parts of Ian’s critique and disagree with others. But what I find appealing is the idea that historical turning points offer opportunities that are easily missed. I believe we are in one of those turning points now and the opportunities we miss today will become the challenges of tomorrow.
So this conversation is more than a complaint about what went wrong in the past. It uses those examples to consider how we might go forward as we deal with multiple challenges today such as demographic change, artificial intelligence, and populism.
My challenge for you is to consider what future generations will view as our missed opportunities. If you listen to Spotify, you can leave them as a comment on the episode. You can also send me your ideas to jkempf@democracyparadox.com. There is a link to the complete transcript in the show notes.
The Democracy Paradox is made in partnership with the Kellogg Institute of the Keough School of Global Affairs at the University of Notre Dame. But for now… here is my conversation with Ian Shapiro…
Podcast Transcript
jmk: Ian Shapiro, welcome to The Democracy Paradox.
Ian Shapiro: Thanks so much for having me on.
jmk: Well, Ian, I was very impressed with your recent book, After the Fall: From the End of History to the Crisis of Democracy, How Politicians Broke Our World. For me, the book reads very much as a critique of the direction that we took after the collapse of the Soviet Union, a sense that we missed critical opportunities.
However, it feels like the critique is not so much that the United States or even the broader West missed these critical opportunities, but it reads as if the left in particular missed important opportunities. And so I’d like to start out by asking how you think in terms of the book, do you feel that this is a critique of broader politics within the West, or do you feel like this is more an indictment or a critique of the direction that the left took after the fall of the Soviet Union and kind of that period from 1991 to the present?
Ian Shapiro: So I think that question is well put. Generally speaking, my critique is of all the mainstream political parties, but the direction taken by center-right parties in some ways is less surprising than the direction taken by center-left parties. That the broad argument is that the mainstream parties converged on courses of action that have, in geopolitics, committed the US and the West to an unsustainable form of unilateralism, which was going to eventually come crashing down in the ways that it has.
And that in domestic politics, the convergence of center-left and center-right parties on an economic model that leaves millions and millions of voters behind was also going to eventually come home to roost. It’s more of a critique of the center-left parties in the sense that it’s not really surprising that center-right parties were pushing for neoliberal models, for example.
The center right have been doing that for decades before Reagan and Thatcher came along. In fact, the term neoliberalism was coined in the Mont Pelerin Society and other right-wing think tanks, long before there was any possibility of them entering the corridors of power, as they did with Reagan and Thatcher in the first instance.
But the critique of the left is that they engage in a kind of preemptive capitulation that actually starts before the end of the Cold War. It’s accepting the proposition that Keynesian policies were largely responsible for the failures to deal with the stagflation of the 1970s. And so they were back on their heels.
They largely accepted that critique. So with Keynesianism off the table, and then after 1991, communism off the table, they largely buy into Margaret Thatcher’s infamous line that there is no alternative to neoliberal economics. And so whether it is Mitterrand’s about turn in 1983 or the new Democrats really starting with Jimmy Carter, but coming to their own with Bill Clinton and then Obama, or whether it’s Blair and Brown in the UK, or whether it is the coalition of the Greens and the SPD that implemented the Hartz reforms in Germany in the first decade of this century, or we could go down the list of what happened in Spain, what happened in France, and tell a very similar story.
So that the neoliberals in that sense found themselves pushing against an open door, and this was a short-term tactical success for the center-left parties. After all, Clinton gets reelected, Blair wins three elections, the SPD survive in office even it is as junior partners in a CDU-led government. The Spanish parties that implemented it also managed to remain in power.
So it was a short-term tactical success. But the argument in the book is it all comes unstuck after the financial crisis for two reasons. One is that their claim to fame was that whether center-left or center-right, they were competing essentially to show that they were the most successful technocrats.
That they could manage the world economy and particularly the global financial system. They could fine-tune it, they could get everything right, and everyone else just had to get with the program. And because they were so completely blindsided by the financial crisis and reacted in such a panicked way, their reputation for competence was shattered.
But I think more important than that, they immediately reached for Keynesian instruments in a hypocritical way. Namely, they bailed out the banks and the elites, and recapitalized the systems and prevented a depression and all of that. But they did virtually nothing. They continued imposing austerity on everybody else.
And as the results of that disjunction played out, that’s when the populist entrepreneurs saw the opportunity to say, as Alternative for Deutschland in the very name of the party, say, “Well, you know, you say there’s no alternative. We say there is an alternative, and it’s us. And it’s going to be anti-globalist and it’s going to be anti-immigration, and it’s going to have a very different agenda than what the neoliberal consensus had converged upon.”
jmk: So there’s a lot in your answer right there. There’s a couple things to note. Number one is the sense that the left, for electoral strategic reasons, became something that they had previously not been, that they had shifted their identity starting in the ’80s, but really coming into its own within the ’90s after the fall and collapse of the Soviet Union.
The second thing I noticed that you mention is the idea of the left becoming more technocratic and defining themselves in terms of being better stewards of the economy and better stewards of government itself. I mean, those are two different directions, so let me peel those off one at a time. Regarding the left becoming something different for electoral purposes, was there a better avenue to go?
‘Cause the sense that I’m getting from you is that they shouldn’t have changed, that there was no reason to evolve at all. But I don’t know that that’s really what you mean. I mean, it feels like they had to do something different because they were losing elections. Particularly in the United States and Britain, they had lost so many elections.
It seems that the left had to reinvent itself in some way. Are you saying that they shouldn’t have done anything at all, or are you saying that they should have redefined themselves differently?
Ian Shapiro: I think they should have redefined themselves differently. I think that the late 1970s, mid to late 1970s were brutal for incumbents all over the world because everybody was flailing at stagflation.
After all, center-right parties had also been Keynesians from Eisenhower to Nixon in the US. So it’s not like there wasn’t a problem for all of the incumbent parties. It’s a bit like 2024. Whatever you were, you didn’t want to be an incumbent. You know, what we had had until the end of the ’70s was a largely bipartisan consensus on Keynesian demand management, and in particular on managing welfare states so that those harmed by the creative destruction of capitalism had a cushion.
You know, there’s a lot of political science literature which shows that if you look in the early era of globalization, the countries that were the most trade open also had the most public spending. So essentially, they were going for free trade with compensation for losers, if you like, and they were broadly informed by Keynesian macroeconomics.
The end of the ’70s, both the center right and the center left changed because the center right abandoned that consensus that had prevailed from Eisenhower to Nixon in the US, and we could have said the same thing when, you know, Churchill comes back in the ’50s and then they don’t undo the British welfare state.
So they buy into the neoliberal turn, and the left is floundering, and they don’t know what to do because they’re having a crisis of confidence about Keynesianism, and then the collapse of communism is coming along. The problem with the neoliberal model is not that it doesn’t generate economic growth.
It does. It’ll be at its slower rates than what we had seen in the mostly post-Cold War, but that was probably inevitable regardless. The real problem with it is that trickle-down doesn’t work. So what you have is the beginning of decades and decades of huge gains from productivity, huge economic advances, but almost all of the benefits are accruing to the top 10, five, and one, and even 0.1%.
And you have decades and decades of wage stagnation for the bottom 90%, really at least until the turn of the century. And the answer is, “Well, suck it up. Get with the program. There’s no alternative. This is the deal.” And the left have no answer to that. They say, “Okay, we’ll climb aboard and show we can do this, too.”
And we don’t really have to worry about being outflanked on the left because those voters have no place to go anymore. There’s no Keynesian, there’s no communism, and so on. But if you look at the collapse in support for center-left parties, even during those periods when they’re starting to at least win some elections, it’s falling precipitously.
If you look at the SPD, if you look at the French socialists, if you look at the Labor Party in Britain. And after the financial crisis, the problem is that their traditional supporters are their most alienated ones because they’re the ones whose wages have been stagnating for decades. And so my own view is, obviously they could and refused to change, and the New Deal and Great Society and the welfare states of the post-Cold War era were not going to just remain unchanged into the future.
They confronted new challenges. But just as there was no blueprint for the New Deal, FDR made a lot of it up as he went along. A lot of it didn’t work, and they abandoned things that didn’t work. But the need for a new economic model that was going to produce growth whose benefits were widely distributed was palpable, and they made no effort at that.
The sorts of things that, in a dollar-short, day-late, ham-fisted way, the Biden people were trying to do — they were looking for a new kind of industrial policy. If you look at Biden’s commerce secretary, Gina Raimondo, she needs an industrial policy for the transformation of labor markets for the AI era.
So it’s going to be very different. Even Larry Summers and people like that are now calling for industrial policy. That was a dirty word in the ’80s and ’90s. It was, you know, hearkening back to what was thought to have failed. So I think there’s got to be new kinds of innovation from government. There’s got to be policies to protect the most vulnerable from the changes that are coming.
You know, we’re now in a world in which people are going to have to change jobs multiple times. That means massive resources for retraining people. It’s a different set of policies, but the objective has to be the same, which is, if we want people to support democratic capitalism, it has to be a kind of democratic capitalism that delivers for most people, and we haven’t had that.
jmk: So I’ve read the shift to industrial policy less about being a successful economic model than being about a decision based on two things. One is foreign policy in terms of being able to mitigate some of the weaknesses that we have with China taking on so much industrial capacity, for one. But a second component of industrial policy being about distributing gains more evenly to be able to create support among the working class that Democrats have lost.
And it seems like that did not work during the Biden administration. I mean, it was not electorally successful. A lot of programs were targeted at red states, and voters didn’t respond at all. Not only did they reject Biden, but they seemed to reject Democratic congressmen, Democratic Senate candidates. I mean, it didn’t trickle down in terms of political support.
Do you think that that would have worked out differently if it was attempted earlier and on a longer term basis? Or do you think that it might have had the same consequences that voters just didn’t see the benefits or didn’t link those benefits to the left if it was attempted in that kind of direction?
Ian Shapiro: So the failures of the Biden administration were kind of overdetermined. There were many reasons for them. I think that aspirationally, they were the first Democratic administration since Lyndon Johnson to break with the neoliberal policies and try and rebuild the Great Society coalition, and I think that is what the center left does have to do.
I think there’s several answers to your question. One is, yes, they were a dollar short and a day late. They were drinking out of a fire hydrant when they came into office because of COVID and all of that. And so they didn’t actually enact these policies until the second half of the administration. And so one of the difficulties with this kind of investment is that it doesn’t pay off right away.
And if you look at the New Deal, FDR was very careful to combine things that would produce immediate benefits with investments that would produce medium term benefits. He was very shrewd at that. So that was one problem. The second was, I think they had the right idea, but it was much too small bore. You know, what came to be called the Inflation Reduction Act was a massively scaled down version of what had been envisaged as a three point five trillion dollar build back better that Joe Manchin and Sinema just balked at.
And so what was eventually adopted created, I don’t know, sixty-five thousand, seventy thousand jobs. But in a labor market this size, it’s a drop in the bucket. So it came too late. It was too little. Partly it was just American politics. Partly it was the inflation that people were blaming on Biden, even though it was worldwide and it was really about COVID and the war in Ukraine.
Biden was a terrible retail politician. He was a terrible spokesman for what he was doing. He was too old, he was too sick. So there are many reasons the Biden administration failed. But I think that, you know, if you look at the Chips Act, even though it was ten percent of what it should have been, it did in fact garner bipartisan support.
And what Raimondo was trying to do in it is exactly the kind of thing that the US needs to be doing. I mean, you look at Germany, you know, Merz has been a deficit hawk his whole career, and when he ran in twenty twenty-five, said he would not get rid of their debt brake and all of this. As soon as he came into office, not only did he get rid of the debt brake to build weapons, he’s committed half a trillion euros over ten years for infrastructure, again, based on debt.
Here’s a center-right politician becoming a garden variety Keynesian. That’s like a $2.3 trillion investment in the US economy. It’s a big number. It’s half a trillion euros in an economy the size of Germany’s. So where we are now is that the neoliberal model has run its course because it’s now been shown to be politically vulnerable, and the center-right parties are now on the defense, and they’re trying to figure out how to stop the far-right populace. And so they too are now converging on some new version of industrial policy, of Keynesian-type thinking.
But obviously they’re not going to be going back to what we had in the 1960s. It’s going to have to be something very different.
jmk: Germany’s an interesting case because they really did need to increase spending. I mean, even publications like The Economist that have adopted pretty much a pretty strict neoliberal line in terms of what they’re advocating for, were even telling Germany to get rid of the debt brake and to start spending more.
So I mean, there was a lot of discussion about the need for Germany to be able to increase its spending, particularly in terms of investments. I would definitely think that that’s something that was talked about from a lot of different directions in terms of that. The thing that strikes me about Germany is that it’s an economy that has maintained its manufacturing identity.
It’s a country that continues to have a trade surplus. It has strong manufacturing within its country, and yet right now, in particular, in over the past few decades, Germany, compared to the United States, has stagnated economically. You know, Europe has been much more stagnant than the United States has. I mean, the United States has the same nominal GDP share of the economy that it did back in 1991.
In fact, I think it’s, like, a fraction of a percent higher today than it was in ’91. Europe has lost ground during the rise of China and some of the other middle income countries as they’ve continued to grow. Europe’s fallen further behind. If the United States would’ve adopted a strategy to try to preserve more manufacturing, could the United States have fallen into that same position that Europe’s in right now, that it seems to be kind of stagnant economically, whereas the United States still seems like it’s a dynamic economy for all of its faults?
Ian Shapiro: Well, I think that’s a very astute observation. You know, I’ve always thought fighting the offshoring of manufacturing is a fool’s errand. First of all, it won’t work. Trump one didn’t bring any jobs back from China, and Trump two hasn’t brought any back either. But in any case, increasingly, it’s fighting the last war because the problem now is jobs are going to technology and AI.
The offshoring is like yesterday’s problem, so all this dreaming about that and, you know, having trade wars and so forth, I think it’s just beside the point. I would say certain different things about Germany and then the rest of Europe. In Germany, what you say is spot on. You know, the great book about this is Wolfgang Münchau’s book, Kaput.
It’s compulsory reading if you want to understand the German malaise. You know, you come out of that and you think Germany in the last decade is like Japan in the nineteen nineties. They’re desperately holding on to an increasingly obsolete model of industrial production, and they’re just completely bypassed by China.
And, you know, they have very little debt, so they have the capacity to spend. So I think the Germans, instead of recognizing that an industrial policy has to be forward-looking and, you know, look at what are the industries of the future going to be and how we’re going to prepare people for those, they just essentially were clinging to a model, a disappearing model.
So I think that’s the Germany story. And the countries like Hungary, where they basically pegged their economic future to outsourcing German auto industry that, you know, was also a model that was disappearing. Now they’re trying to get China to build electric cars in Hungary, which is what they need to be doing.
I think the rest of Europe is in a different spot from Germany because in the early teens, Merkel and Trichet basically took the German debt brake euro-wide by forcing them all to sign up to the fiscal compact, and they are much more heavily leveraged than Germany is. But even there, I think they’re obviously in huge need of massive investment in infrastructure, in labor force transformation for the future.
And even Macron, who’s almost always wrong about everything, who’s been the worst kind of triangulating running after the neoliberal model, even when he was given a second chance in twenty seventeen, he repeated all the policies that had destroyed the Hollande government that he had largely designed. So it’s kind of a flat learning curve most of the time.
But even he, perhaps now because he wants to be president of the European Commission next, is saying the ECB should be issuing infrastructure bonds for European development, for which there’s now actually precedent since COVID. So I guess I should be a little worried in the sense that people say when your barber tells you it’s time to buy stocks is when you should be selling.
So if even Macron is coming around to this, maybe there’s something suspect in it. But I do tend to think you’re going to have to have the state take an innovative role in fostering investment. It’s almost certainly in all of these countries going to have to be public-private partnerships. It’s going to have to be a lot of it incentivizing the private sector with tax breaks.
In the US, there’s the EITC, a whole variety of things. So it’s not going to be the WPA for the twenty-first century. It’s going to have to be very different. But they need to find ways to induce capital to invest in things that are going to generate benefits that accrue to broad sectors of the population. If they don’t, the kind of politics we’ve got now is going to continue.
jmk: Something else that you mentioned earlier in the conversation was that the left define themselves as technocrats in terms of the neoliberal model. The idea that we can manage this economy better than those on the right. That strikes me as peculiar when we think about the history of the left, because for a long time, the left was viewed as the ideological side that was least capable of managing the economy.
So as we get to more recent times, we almost take for granted that the left is the party that portrays itself as the competent stewards, and the right seems to be the more populist, excited, working class, non-professional group that’s running on emotions, and the left is the thinking group that’s actually trying to think through things and do things the right way.
It feels to me when I look at history, that the leaders of the left were oftentimes trying to portray themselves as really competent. In the United States, beginning with JFK and moving beyond that, we get to Barack Obama, and he seems to be the epitome of the professional politician, the person who always knows the right answers.
Everybody on his team is a straight-A student. And it feels like somewhere along the way, voters and the rest of the public, instead of thinking that these leaders were against type, they started to identify the left as being the straight-A student, the competent person in the room, and started to think of the right as being the opposite, the working class person, the non-professional person.
I mean, is there something to that? The fact that it’s almost as if the identity flip-flopped because the parties were trying to portray themselves against type and eventually became that type.
Ian Shapiro: I think that’s largely correct. I completely agree with it. You know, the gradual transformation of the voting base of the Democratic Party, you know, took several decades, but it’s now the party of the professional classes and the intellectuals and the entertainment industry, and the Republican Party is being transformed into a working class nationalist party.
The same is true of the British Tories and Labor, and you could go down the line in Europe as well. I think that there’s several reasons for it. First of all, I think that the Republicans are just so much better at politics than the Democrats, so they’re much better at messaging. 20 years ago, I wrote a book with Michael Graetz on the repeal of the estate tax, where we did 150 interviews to try and understand how this had gone from being something that was thought to be unthinkably fringe politics to being enacted in 2001 with bipartisan support.
And we did 150 interviews for that book. Congressmen, senators, staffers, you name it, the interest groups and so on. In those interviews, at least five or six times, people said to me when I was asking a version of your question, they said, “The Democrats want to be right and the Republicans want to win,” which is a bumper sticker way of saying what you just said.
They think, “How do we move the ball down the field to where we want to get to?” And as you say, the Democrats tend to think that they want to get an A in the seminar or something. So there is that, and they’re much better at messaging. I mean, just for example, even when the Democrats are right, they lose the messaging war.
Just look at deficits and debts over the last 30 years. The Democrats have the image of running up debts and deficits and wasting money, and it’s 100% at variance with the facts. You know, Reagan ran up the deficits and debt, and Clinton paid them off, and Bush ran them all up again, Bush II, with his wars and his Medicare Part D and all the rest of it, you know.
And then as soon as the financial crisis was gone, Obama was paying it down like a good responsible technocrat. And, you know, Trump comes in and even before COVID is just piling trillions and trillions of debt, and then he’s just added another 4.3 trillion. You know, even when the Democrats are actually right, they just seem to lose the messaging war.
Most Americans still think, you know, Republicans are more frugal and so forth if you look at the polling. So I think that’s it. And I also think the Democrats and center-left parties all over Europe have kind of shot themselves in the foot by leaping aboard identity politics starting in the late 1980s.
In this country it embraced the thinking that multiculturalism is the answer, that the coalition of the future’s going to be a patchwork of ethnic groups and we’re going to get more and more Hispanics and so forth.
And so as in much other politics. The right is much better at identity politics than the left as well. They’re both good at sticking the Democrats with positions that they can’t defend to your kind of middle of the road, middle American working class voter, and they’re good at playing their own identity politics cards, ethnic white nationalism.
In Europe, it’s the same story, kind of blood and soil nationalism that the far right play. They’re just very good at it. They know how to mobilize people with that stuff, and the left being seen as soft on Muslims or who’s going to be on the girls’ soccer team and all the rest of it. They get themselves trapped into all of these absolute political dead ends while the Republicans move the ball down the field, and they also get lulled into a false sense of security.
The biggest danger now is the Democrats are reveling in the schadenfreude of Trump being so unpopular over the economy and even immigration, but they don’t have any agenda. And, you know, if you look at their own levels of support, they’re as low as when Gingrich took over Congress for the first time in forty years in the early nineties.
And if they stumble back into office like this, six months later, they’ll look like the Starmer government. Yeah, they came in as this enormous majority, biggest majority a labor government’s had in living memory. Yet six months later, people are just trying to run them out of there. So I do think it’s really important that they grapple with these questions.
jmk: Yeah, I think the United States is a little bit of an outlier because of the two-party system. So Trump did break with the neoliberal model on trade, and he did talk a lot about maintaining redistributive programs such as Social Security and others protecting those at a time when some Republicans were talking about trying to privatize them and do things like that, try to go even further into a neoliberal small government direction.
Trump kind of shifted away from that. But on the whole, I mean, he’s pushing a lot of traditional Republican policies like tax cuts, deregulation, things like that. When we look overseas to Europe and we look at what are called the far-right parties, that can feel a little bit misleading because they’re far right on cultural issues.
But when we talk about economic issues, oftentimes they’re to the left of some of the center parties. Marine Le Pen, for example, is oftentimes criticizing Macron for being too conservative on spending and economic issues. She’s actually campaigning to the left of him on economics and campaigning to the very far right on cultural issues.
The AfD does the same thing. You mentioned the left in the United States and really throughout the West shifting on cultural issues. It seems like these far-right parties now are meeting the working class where they’re at, not just on the cultural issues, but also on the economic issues in a way that the left really wasn’t capable of doing during the ’90s and 2000s.
Ian Shapiro: So I have a little different take on that. I don’t think the far-right parties in Europe is different from what Trump is doing, as you say, because if you look at their economic policies, yes, they’re very strongly in favor of their welfare states, even expanding them in various ways. They’re just chauvinistic about it.
They say no immigrants, and this is where they’re similar to Trump. They try to combine that with being for tax cuts because they want business interests on their side, and Le Pen is a good example of that. They’re talking about reducing retirement ages. They’re talking about more subsidies for families and so on and so forth, but lower taxes.
The AFD’s doing the same thing. Farage in Britain, same thing. It’s similar to Trump saying, “We won’t touch Social Security. We won’t do any of these things, but we’re cutting taxes.” And I think this is the principal reason that the policies of the populist far right are unsustainable because if they want to have low taxes, no immigration, and robust welfare states when they have growing dependent populations and shrinking working age populations, that is a recipe for massive social conflict because there’s no way for that arithmetic to add up.
So now Trump squares that circle by just borrowing. Sure, just add another four point three trillion. And if you look at how they extended the tax cuts that were going to expire before they even got to the four point three trillion, they actually threw in another three trillion. It’s really seven point three trillion that the Republicans have essentially added to the debt.
So they’re not confronting the contradiction. You cannot have a shrinking labor market, shrinking tax receipts, and an ever-expanding dependent population. You know, if you look at the demographic projections, even if they’re like fifty percent wrong, the numbers are just staggering. And so the way in which these far-right parties are thinking about their economics is just basically nuts.
And whatever we’re going to have in these countries, it’s not going to be that. You know, what is it going to be? Who knows? Either intergenerational distributive conflict or class distributive conflict or wars, but this is not a remotely credible way of running any of these advanced capitalist democracies. And even here, can they go on just borrowing it forever?
You know, I’m Keynesian to the core of my being, but at some point… You know, this is not counter-cyclical. It’s just massive structural debt piling on piling and piling.
jmk: If the demographic projections don’t reverse themselves and we continue to see not just birth rates decline throughout the West, and to be honest with you, it’s not just the West, I mean, it’s throughout the world.
Even Africa is seeing declining birth rates even though they’re continuing to grow because the birth rates are still so high. So if we’re continuing to see declining birth rates throughout the West, throughout the world, does that mean Keynesianism wouldn’t make sense anymore? Because Keynesianism kind of assumes that there’s going to be a larger population, increased tax revenue in the future.
But if there’s fewer people to pay taxes, unless productivity vastly outpaces population declines, you could have better living conditions and reduced tax revenues at the same time, which is not a great recipe for borrowing money or carrying large sums of debt within the government.
Ian Shapiro: Well, I think we could get there at some point, but we’re nowhere near there.
I mean, in the next decade, six hundred million people are going to enter the labor market worldwide. Most of sub-Saharan Africa is somewhere between stage two and stage three of the demographic transition. They’re all labor surplus economies. If immigration was not politically explosive in countries like ours or in Western Europe, you know, any economic demographer who was innocent of politics would just look at the economies and demographies of the capitalist democracies and say, “Well, all of these countries obviously need masses of immigration, and there are millions of people who want to go to them, you know, and they need them to run the service economies.”
You know, it’s not like they need them to write software. They need them to run the service economies and take care of all the old people and do all of the things that immigrants do in the US and Spain. But then you bring in the politics, and you’ve got these parties that are getting power by mobilizing hostility to that.
You know, when people have a zero-sum view of the world, they think if an immigrant comes into our country, it means one of us doesn’t get a job. That is not true. It’s just, that’s not the case. And if you look at the two countries that have had the most immigrants, Spain and Poland, they’re two of the best performing economies in Europe.
And you know, you don’t have to read left-wing economists or read The Economist magazine about why Spain is doing well. It’s because they have a lot of immigrants. It’s a segmented economy. Immigrants work in the sectors that Spaniards don’t want to work in, just as in Britain and the US. It’s not like they’re taking jobs.
In the US, we have no unemployment to speak of. The notion that we’ve got to keep shrinking our labor market when we have such low fertility rates, it’s just nuts from an economic point of view. So it’s all about the politics and the identity threat and why do people feel so threatened and so forth. And that, I think, is because of their economic insecurity, so that becomes self-reinforcing.
jmk: But this sounds like we’re on the threshold of a new turning point where we have entirely new missed opportunities. Because if we think of the 1990s as a period of missed opportunities where we could have redefined our economic policies in a different way, we could have redefined our foreign policy in a different way, definitely avoided wars in Iraq, and definitely avoided nation-building within Afghanistan.
Today, it sounds like the missed opportunities are trying to right-size our deficits and debt for a shrinking labor force and supplementing our labor force with immigrants so that we make up for declining birth rates, so that hopefully we don’t even have to make those decisions for a long time. Right now, we’re going the opposite direction.
We’re shrinking our labor force by reducing immigration, which is then compounding the problems that we have from declining birth rates and are going to make it even harder to be able to generate the tax revenues into the future that are going to be able to help us sustain the levels of debt that we’re continuing to increase rather than try to decrease.
Is that the turning point that we’re at right now as we’re kind of entering into the middle of the 21st century, that these are the missed opportunities that we’re facing that future generations are going to criticize us for?
Ian Shapiro: I think it’s everything you say, but it’s worse. I mean, take a country like the US.
There’s not one labor market, there are lots of labor markets. But if you think about the labor market of Middle America that is most vulnerable right now to AI and all of that, the jobs that are going away, you know, not so much blue collar jobs now, you know, white collar jobs, middle class jobs going away.
There is no real agenda to think about what’s going to happen to those people. And the worst thing economically is that they find nowhere to go on Social Security Disability because then they’re not productive, they never come off it, and they stop being counted in the employment statistics, and they’re angry, alienated people that can be mobilized for all kinds of brutal politics.
And that population has been increasing and is going to increase more. We all know that. And if we don’t respond to that population before it’s a crisis, we’ll have to respond after, and it’ll be a lot harder. So if you look at GDP per capita spent on retraining displaced workers, we spend one-twentieth of what the Danes are spending, and it’s hugely important.
And then if you think about the labor markets, displaced steel and coal workers and school teachers are not going to be mowing people’s lawns and picking fruit in Southern California. They’re just not going to be doing that. And you know, they’re not going to be doing construction. We’re kicking the people who do all of that out of the country.
I agree with everything you said, but I would add that we really have to invest in labor market transformation and systems of retooling people in their thirties who basically have got obsolete skills. And they’re not stupid people. They are educable, but they’re going to have to learn new activities. And we don’t even know what they are going to be, but there’s got to be a lot of investment and giving corporate America incentives to invest in those people, because, you know, at the end of the day, we want to have a workforce that American business is going to want to hire.
But that’s the real answer to offshoring, is to produce workers who people are going to hire. And you know, if you look at the economists’ predictions about the effects of AI on quality of employment, it’s all over the place. The answer is nobody knows. And so there are going to have to be a lot of investments that won’t pay off.
But there are optimistic scenarios. For example, I’ve seen interesting papers about how AI is going to make it much easier to start small businesses. You may well get an explosion of small business activity, where the overhead costs of starting a small business just plummet because of AI. And so there are all kinds of things we can’t imagine any more than, you know, Karl Marx could imagine a laptop computer.
But we have to be investing, and a lot of it won’t work. Nine out of 10 startups fail, but, you know, we have the best venture capital in the world still. And I think that’s the biggest challenge. If the government does one thing that fails, it gets hung around their neck forever. You know, think of Solyndra or whatever with Obama.
So I think selling a more experimental and forward-looking approach to investing in the labor force of the present and future is a big part of it, as well as trying to beat back this self-defeating hostility to immigration.
jmk: So we’ve been talking a lot about politics within democracies, but I know that you’ve spent a lot of your career thinking about democracy itself, both studying under and working with people like Robert Dahl.
Let me ask you in terms of the study of this, what has this taught you in terms of reflecting on this period that really kind of spans your career? What has the politics of that really taught you about the meaning and purpose of democracy itself?
Ian Shapiro: Well, I think it reaffirmed for me Churchill’s one-liner that it’s the worst system except for the others.
It’s just not the case that there’s any authoritarian model that works over time. If they’re benign dictatorships, eventually they become malevolent. If they’re good at the early stages of economic planning, they become bad at it once economies become complex. Everyone often gets excited about the next Asian tiger or whatever it is.
But in the long run or even in the medium run, authoritarian systems do worse. Democracy is a very fragile achievement. All the kind of teleological euphoria about the whole world’s becoming democratic and so forth, and democracy will never collapse. I don’t share that. Any regime can collapse, and democracies are a vulnerable achievement, but they are an achievement.
But they have to deliver for most people. You know, Albert Hirschman made this point fifty years ago. Unless they deliver for most people, most people won’t support them. It’s not rocket science. And there is a kind of muddling through, fumbling quality to democratic politics. But, you know, I think we can easily become too pessimistic.
You know, if you look at all this hand-wringing about democratic backsliding, I mean, most of these countries are not in danger of backsliding. Look, you know, Hungary, you know, Orbán lost and he gave up power. I mean, the US might be more in danger of backsliding than most European countries. And yeah, the other thing I would say, if one’s tempted to be too pessimistic, imagine it’s nineteen forty-six.
You were born in nineteen hundred, so you’re forty-six years old and you’re living in any Western democracy. And somebody says to you, “What does the future hold?” You’d look back on your life and what would you see? Two world wars, the Great Depression, the rise of fascism, communism. You’d just come out of a war that’s killed sixty million people.
You would have said, “We’re just heading for Armageddon. It’s coming soon.” And you would have been completely wrong about what the next four decades were going to be. So, you know, life does have more imagination than us. It takes luck. You know, there’s lots of contingency in politics. But, you know, I think it’s reasonable to be hopeful and, um, you know, there are many bad scenarios that can play out, but there are also good ones, and most of them are things that people like us can only dimly imagine.
jmk: Ian Shapiro, thank you so much for joining us. To mention your book one more time, it’s called After the Fall: From the End of History to the Crisis of Democracy, How Politicians Broke Our World. Thank you so much for discussing it with us. Thank you so much for writing the book.
Ian Shapiro: Thanks for having me on.
Links
Learn more about Ian Shapiro.
Learn more about his book After the Fall: From the End of History to the Crisis of Democracy, How Politicians Broke Our World (Basic Books).
Learn more about the Kellogg Institute.
Apes of the State created all Music
Email comments or questions to jkempf@democracyparadox.com
Leave a Reply