How We've Been Tricked: The Death of Economic Freedom | Grace Blakeley Exposes the Truth

0:01I am so glad you could join us. I'm your host, Mo Gaudet This podcast is nothing more than a conversation between two good friends sharing inspiring life stories and perhaps some nuggets of wisdom along the way This is your invitation to slow down with us Welcome to Slow Mo

0:34Welcome back. Today is one more of those last five episodes of the It's Not What They Told You series. It's not just one more episode. It's with someone I hold very, very dear. Someone that I consider a teacher in very interesting ways. She didn't know that. She only knew that when I met her right now because I do spend a lot of time following her work. And I think she's fabulous, honestly, in her outlook on life and the way she analyzes topics. And then I met her in person and I was right. So, you know, it's actually quite rewarding when you, you know, they say don't meet your heroes. No, no, I'm happy with this one.

1:18My guest today is Grace Blakely, who is an avid economist, journalist, and author. She wrote three books on the topics of capitalism and how capitalism is affecting the world. Her latest is Vulture Capitalist, which I have to say, having lived in California for a while, is such an appropriate title for the entire genre of venture capitalist, if you want. And in my attempt to get you to understand our world a little differently than what they tell us our world is like, I think Grace truly was the one guest that I wanted to sort of conclude our conversations around the economy with. So without further ado, I'm going to enjoy my time with my guest today.

2:11Thank you for being here. Thank you so much for that absolutely lovely introduction, Mo. It means a huge amount, especially coming from you. It's quite true. So I, no pressure. I'm hoping I won't disappoint you now. Let's see. I don't think you will. I love the way that you take on the topics that you analyze. And I said several times on this podcast, I am a recovering capitalist in rehab, basically, because for many, many, many years, I believed the promise. I drank the Kool-Aid. You know, I had many startups. I basically embraced the promise of freedom. That if you think to the history of capitalism and the idea that pre-capitalism, there was only royalty and feudalism.

3:01And, you know, there were peasants and lords and, you know, everyone had to pay to work for the lords and the lords worked for the royalty. and capitalism sort of sneaked in, you know, with the British Empire and the trades of spices and so on, where some of the peasants somehow found ways to make money. And you sort of take that story as like, this is true freedom. Everyone now is free. I've then realized actually partially through your work that that's not true at all, that we are the furthest thing. As the subtitle of your latest book says, you know, this is the death of freedom, that the promise is not at all what was delivered.

3:45So that's all I will say today. The rest of the episode is for you. Great. I'll try and take up as much time as I can. No, I mean, it's so interesting hearing you say that because in a lot of ways, I kind of wrote the book for someone like you who was in one way or another taken in by the very seductive narrative that we have around capitalism and freedom. And it's a seductive narrative in a number of ways. I think for those who succeed under capitalism, it's very seductive because the idea that we're all free and that the market sorts us into the best down to the worst and wherever you end up in the hierarchy is a reflection of your natural talents, your natural capabilities.

4:27It's seductive, obviously, for those at the top because it kind of legitimizes your power and authority and wealth. And even for those not at the top, the idea that the way things are is somehow rational and justified and fair, it makes you almost less angry. It kind of makes you just take things the way they are and just accept them because you think, oh, well, you know, I'm not Jeff Bezos or Elon Musk. I'm not as intelligent of those people. So no wonder, you know, I'm earning a tiny amount of money and can barely afford to pay my rent because I'm just worth somehow less as a person. So this narrative that we are all free, we're free to shape the conditions of our own existence.

5:10We're free to work as hard as we like. And if we do work as hard as we like and succeed and apply ourselves, then we will inevitably rise to the top. It's seductive for a lot of people. The only issue is that it's completely and utterly not true and the way i like to talk about this you know we're told this i this kind of story about the way that society works is it almost being like a game so you know you're competing against other people to win the game and the rewards are money and wealth and power and esteem and those who are better at the game get to the top and those who are worse you know fall to the bottom but the issue is that we're all playing this game most of us and then there's a very small category of people who are kind of outside of the game.

5:55And instead of playing the game, they're making the rules. They're the game makers. For everyone else. Exactly. And these are the people who basically plan capitalist economies, the institutions and individuals who have so much power over the way that the world works, that they're able to basically shape the conditions of life for so many people. And that power is generally unearned. It comes from whether that's a position of inherited wealth, often it comes from corruption and influence of that kind that people are able to exert. And it allows a small number of people to undermine that idea of freedom and to enclose the world and shape the world in the way that they would like to see it.

6:44And then we're all forced to play the kind of the game that they've set for us. I use quite a lot of examples to illustrate this point. You know, this idea that we live in a free market capitalist economy doesn't really work in practice because of all this kind of centralized planning that takes place within these free market economies. And the one I'd just like to quickly talk about because it's very relevant at the moment is the example of the company Boeing. Yeah, so you might have seen Boeing in the news quite a lot recently. One of the doors blew out of its planes mid-flight. There's been all sorts of engineering issues with the company.

7:21And actually, if you look back to 2018-19, there were two crashes involving Boeing planes, the 737 MAX disasters, in which nearly... 400 people or something. Yeah, nearly 350 people died, yeah. And initially, Boeing tried to kind of blame the pilots for both of these crashes. But investigations later revealed that it had been a software flaw that was kind of built into the plane that caused the plane's nose to dive down. And the pilot could not really do anything to rectify the issue. And subsequent investigation from both regulators and journalists looking into this showed that a big factor in kind of demonstrating why Boeing had allowed this basically unsafe plane to go to market was that it had shifted towards this corporate culture of basically denigrating engineering expertise, lionising senior management, inserting layers and layers and layers of management, whose role it was to cut costs, crush unions, kind of subjugate workers, ignore whistleblowers, and just deliver cheap planes that could be sold to Boeing's various network of contracts that exists with governments all over the world, not least the American state, and make massive profits.

8:39And they did that. They were able to achieve massive, massive profits, distributed loads of money to shareholders. And it was kind of, you know, a classic tale of corporate greed in which you didn't see any kind of competitive pressure from the alleged free markets, because Boeing was in this position of basically kind of oligopoly power. It is. Exactly. And equally, you know, You have other people who might say, oh, well, if the government was able to kind of step in and make the market fairer or subject this firm to regulation, then this never would have happened. There's only one issue with that, which is that the government was helping Boeing at every step.

9:20So it was one of the biggest recipients of corporate welfare. That means it got money from the government, from the U.S. state in terms of taxes, subsidies. It had huge numbers of contracts with the U.S. state. It was a very integral part of the military industrial complex. In terms of regulation, at the time of these disasters, the airlines, so the aerospace manufacturers were being regulated in the same way as the banks in the run up to the 2008 financial crisis. This is self-regulation. And Boeing was being regulated by a unit of the Federal Aviation Authority that sat inside Boeing and whose workers were being paid by Boeing.

9:55Yes. Congress had just passed another round of deregulation for the airline industry, saying that no manufacturer would ever release a plane that was unsafe because it would damage its position in the market. Capitalism would never allow such a thing to happen because we have free market competition. And then even after all of this had come to light and Boeing was charged because of all of these failings, it still got a massive backdoor bailout during the COVID-19 pandemic. So you have this kind of cabal of senior executives, wealthy shareholders, politicians, individuals within a powerful state who are brought together in something like the military industrial complex and who are entirely insulated from free market competition and also actually quite well insulated from democracy as well.

10:48so they exist in their own little bubble at the very top able to make these massive decisions that have huge effects for everyone else and yet we're told that we live in this free market system boeing's workers were subject to this ruthless market yes but the executives of course you know boeing has a a very important position let's say for the u.s economy because the competitor is Airbus, which is not American, which basically means that if Boeing fails, the U.S. economy fails or the U.S. position in aerospace fails and according or commercial aerospace fails. And accordingly, the American government would never let them fail if you want.

11:29Right. It's very, very similar to the analogy of 2008 and the big banks. Right. Too big to fail if you want. Now, of course, the interesting side of this is that basically it means that we are asking the regulators, we want the government, if you want to say capitalism is freedom, because everyone can do what they can to succeed without government regulation, the Reagan economics, if you want, what Thatcher allowed to try to do here in the UK, or pretended to do here in the UK, is basically saying, hold on, no regulation from the government, it's freedom for the market economy. And at the same time, now when we ask the government to regulate, by definition, there is really none of that because the benefits are, there is a conflict of interest around the benefits.

12:21So that's a very, very, there is really no freedom if you want. when you think about how we end up in places like this so we constantly hear the words around you know those big influencers somewhere who own all the money or own all the wealth who are making all the decisions in a way that basically affects every single one of us how does that actually play in reality? I mean, is there really like a backdoor meeting where people worth less than 100 million dollars are not allowed in that meeting and the others come together and say, okay, from now on, we're going to start another pandemic and, you know, that's going to, right?

13:04Is that how it happens? No, generally not. Although there are moments of generally crisis when you do see powerful people come together, often in a room and make really big decisions about what happens next. So the example I always think about is the financial crisis when the central banks got together with the heads of the major banks and basically made a plan for the world economy. And there was a study that was done after that that showed that those banking institutions that had the closest links with the American state ended up doing better from the bailouts than those that didn't. So, you know, occasionally, And I think this is where the kind of conspiracy theory stuff comes from.

13:48You do see powerful people coming together and actively making those decisions in a collective way. But the vast majority of the time, the cooperation is not that explicit and it's not that open. It is the subject of a kind of networked organization that allows people with similar interests to come together to lobby and to influence politicians and political power. Now there's nothing inherently wrong with that. This is how democracy works. You know, you have different groups of individuals who organize within civil society to make their interests known and try to apply pressure on politicians or whoever else they're trying to pressure.

14:30The issue is, is that we live in a world in which only one set of people have the ability to do that. And the vast majority of people are actively denied the capacity to organize in order to demand things of politicians and are basically repressed and crushed and beaten down when they try to demand things. So we talked about neoliberalism, right? about the Thatcher and Reagan and they're coming to power saying we want to deliver free markets right what's very interesting is that the first things that neoliberal leaders do when they come to power is basically go to war with any organizations that manifest collective power particularly the unions so in the UK the first thing that Margaret Thatcher does when she comes to power is go to war with the country's unions and she wins she crushes the miners who are trying to fight for their jobs hold on one second so let's define new neoliberalism for everyone oh sorry neoliberalism in my in my understanding is government will not regulate this is free market economics every everything happens with the freedom and justice of free market government is a burden, let's leave everything to nature, if you want, the nature of economic free markets.

15:53Exactly. So of course, Reagan in the US, Thatcher here, were basically the leaders of that idea. Let's go back to the unions bit, which I think is fascinating when you really think about it. No, that was immensely well explained, because that's exactly how they presented their ideology. Exactly. That's how they sold the ideology. Exactly. And it was really powerful, I think, because people bought into that idea of freedom. More freedom. Yes, exactly. Yeah. But what's interesting is the contrast between that promise of freedom, which is we will come to power and we will promote individual freedom.

16:27We will give you control over your life. Your pensions. Exactly. Yes. And then the actual actions of these governments when they come to power. And the first thing they do, as I've said, is, yeah, literally use the power of the state to beat back and divide people who are organizing to try and defend their interests. First on the list are the unions. So Reagan famously goes to war with PACO in the US. Thatcher goes to war with the miners in the UK. And then all of this anti-union legislation is introduced to make it much harder for workers to organize to defend their interests. And so you see union membership decline quite substantially over the course of the next several decades.

17:10They also dissolve other forms of collective power that existed in the economy at the time. So Thatcher, for example, shut down the GLC, the Greater London Corporation. And she had been in this kind of battle with the GLC because there were lots of kind of left wing politicians that were organizing in this London metropolitan authority to try and do things like. thatcher wanted to build the london docklands right where we now have canary wharf and all of these big financial institutions the people living there at the time said we don't want this they actually put together a document called the people's plan for the london docklands with the support of the glc and they said our children deserve to be more than lavatory attendants for passing businessmen we want a different vision for this space which is where we live and partly because of its involvement with community organizing like that that just shut down the glc so you know any form of community power that it had been helping to support was then crushed as well so you see these these politicians come to power and their first aim is to crush any resistance any resistance that comes from the vast mass of ordinary people right at the same time They deliver unparalleled freedom for those at the top.

18:31So suddenly you can literally move your money anywhere in the world because you have the removal of capital controls and exchange controls. Tax, especially the taxes that have been levied on those at the very top of society, were slashed. You saw a transformation in regulation. And again, this is often cast as deregulation, which implies that the state is shrinking and stepping back. But that isn't what it was really like. It was actually a proliferation of regulation, but regulation that benefited those at the top, particularly the big banks. Banks need lots of regulation because, you know, they need an environment of certainty.

19:09Banks always need to know that ultimately if anything's going to go wrong, then the state is there to bail them out. Exactly. So that's why regulation is important to the banking system. And you've got, in many ways, lots of new regulation. But instead of regulation to protect workers or protect the environment, it was regulation to protect the banks. so what all this shows i think is that neoliberalism was never really about freedom it was about freedom for some those at the very top and in order to protect the freedom i.e the wealth and power of those at the top they saw it as necessary to constrain the freedom of everyone else and particularly their freedom to organize and you see this today with demonstrators being put in prison for years for peaceful protest.

19:55This is a continuation of the same logic, which is we're putting people in jail to protect freedom. Whose freedom? The freedom of those at the top. Which is quite fascinating when you really think about it because that becomes today really the underlying current of everything that you see online, everything that you see. I mean, in a very interesting way, since the Reagan-Thatcher years, individualism, we spoke about this briefly before we started, becomes truly the dream of every now consumer, not human. Okay. The idea is that as a human now in this fair world where dog eats dog, but dog can become very big and I can be Jeff Bezos if I really worked hard enough.

20:51Suddenly you start to believe that you're competing with everyone else rather than cooperating with everyone else, which I have to admit in my blurry years, I used to, because I'm raised in the East and, you know, educated in the West, I used to think that this is something wrong with the West, that individual freedom is highly prioritized above societal and community benefit. Okay. But now I can get it. I can get that this is an agenda that basically says, hey, if all of you guys fight, okay, and argue and be rude to each other, which now is explosive on social media, then you're never going to organize and annoy the rest of us up here in the penthouse trying to just make a little more money here.

21:41Exactly. I literally couldn't have put it better myself. Thank you. My teacher said I was good. So where does that put the politicians then? Because interestingly, you'd look back at the Thatcher years and say, oh my God, it's the best thing that happened to the UK. You know, she was the politician that came and saved all of us, right? And you could actually back that up with years of prosperity in the city of London, if you want, where so much money was being made for so many people and so many Bentleys started to show up on the streets. So there are signs that things are improving. Was Margaret Thatcher or Ronald Reagan actually working for the people?

22:24Were they governments of the people or governments of the elite? And Thatcher and Reagan, and Thatcher in particular, actually, had this ingenious strategy. And Thatcher said, the method is economics, the object is to change the soul. She wanted to transform the way that people related to each other in exactly the way that you said. in the 60s and 70s, it was in some ways the peak of organizing. You know, you had a strong labor movement, you'd had, you know, in the US, the peace movement, the protests against Vietnam, the anti-apartheid movement that was spreading around the world and spreading through the student movement.

23:06You had the environmental movement, you had all of these people coming together to make their power known. And it was starting to disrupt the operation of capitalism because these people were gaining political power. They were able to really present a threat to vested interests. And neoliberalism was what undid that. And it did so through a two-pronged approach. The first one was to create an ultimately unsustainable financial boom, the benefits of which would be used to incentivise people to behave in a certain way. And that's the second prong, which is this project of societal, sociological and fundamentally psychological transformation that underpins this transition, which is, as you said, about how do we stop people from organizing together in these movements that are threatening us and get them to start competing against one another and i i'm kind of writing a book proposal at the moment that looks at this exact thing i'll publish it great but the the three trends that i think were most pronounced were the shift from workers to entrepreneurs the shift from citizens to consumers of public services and the shift from communities to households so rather than seeing yourself as a worker as you might have done in the the post-war years thatcher's aim was to encourage you to see yourself as an entrepreneur an investor entrepreneur and the reason that that is particularly beneficial is because workers organize.

24:54They all have the same interests often. If they're not paid well, they'll talk to their peer. Exactly. And say, hey, are you unable to put food on the table too? Yes. Yeah, exactly. And that was a problem because these workers were coming together and they were organizing and they were saying, we're not getting paid enough, so let's go on strike. But if you're an entrepreneur and you know this better than anyone, you're competing against all the other entrepreneurs. it's your job to use your savvy as an investor to invest in your human capital so this comes out with education education is now something that you pay for and you take out a loan to invest in it because it's investment in capital in your human capital wow you you take out a loan to make sure that you're able to purchase your own home and that again can provide a source of wealth that insulates you from life's risks.

25:45You, again, get your own private pension and you have to invest that in the stock market. And when the stock market does well, which means wealth is increasing at the top, you then think, oh, well, wealth is being created at the top, but I'm getting a little bit of it as well. So why would I resist? Even if your salary stayed the same, if you have assets, then you're much more likely to identify with the interests of those at the top because of the value of your house, the value of your pension is going up then that means your interests are aligned with with those kinds of people so that shift is is really important and then on the flip side it's the the kind of proliferation of asset ownership is accompanied by this dramatic expansion of debt now debt is the key here because the unleashing of the financial power of the banks is what brings us this boom that creates all of this prosperity this alleged prosperity that we get from the 1980s onwards it's largely driven by the removal of exchange controls and the removal of capital controls so money is now free to flow all over the world and banks can now create much more money through lending than they had been able to do in the past a lot of that lending goes into mortgages it means that you can now take out a massive mortgage and use that to buy a home what happens when you have more money chasing the same amount of stuff you have more liquidity chasing the same number of houses house prices go up it creates a massive financial boom we know what happened from the 90s onwards that boom ends up taking over the whole global economy creating massive economic growth and prosperity for lots of different people but ultimately that was unsustainable and in the process you have this beast of debt that is released and debt is a really powerful disciplining tool for people because you know on the one hand you might have some assets but on the other hand you now have to manage your liabilities as well so if you're relatively wealthy then you always make sure that you know you try and have more equity say in your home than than your liabilities you kind of manage your debt and your assets you're a good kind of mini capitalist who makes very healthy financial decisions.

27:58But if you're not paid very well, you might find that suddenly the value of your liabilities is higher than the value of your assets. And instead of saying, oh, well, you're not being paid a high enough wage to be able to afford the things that you need to survive, people will instead say, you've been irresponsible, you've made bad financial decisions, and that's how you've got yourself into debt, even though they've taken out the debt just to be able to pay for things they needed to survive. so it's you internalize that you think i'm a failure because i'm in debt you don't think i need to organize with people to try and have a higher wage and actually today you know financial issues are driving a lot of people particularly young men to self-harm and suicide because they internalize that blame they think it's my fault because they they look at the the lifestyle of the top guy who is you know who seems to be so clever and in a very very interesting way for men that means he's very masculine right he he managed to succeed and become the best hunter in the tribe right and and i'm not able to do this so it's not just that i'm not able financially it's basically an identity issue that would lead to that it's quite interesting as well when you it doesn't matter as a matter of fact if you're gaining capital you know in your assets that you bought in debt, I think the sentence that you said there, which is so interesting, is that is a very powerful disciplinary instrument.

29:28So, you know, where I grew up in, you know, a developing economy, you keep the people busy with football and putting bread on the table, right? In more advanced economies like here, I think the idea is if you had given people enough, which was really what was happening post-World War II with the, you know, baby boomers creating so much GDP. It seems that in my mind, that basically meant they had so much time to start pondering stuff that could actually harm the government, interestingly, or the top players, right? Or the, you know, the ones that the government works for, really. And in an interesting way, to keep people busy, then student loans, other loans, mortgages, car loans and everything becomes the shackles that basically keep us restrained.

30:20I have to say, I've never really discussed this in public. Maybe we should have it over coffee, but I'll ask you anyway. One of my experiences, which most people have never had, is I was witness because of my position at Google and at the time and because of my history of being a very prominent businessman and in the Middle East for a long time. So I was very much entangled into what was happening with the Arab Spring. Not that I had any views on it because I had not lived in my home country, Egypt, for maybe 20 years at the time. But, you know, I'd been in a position of, I know the internet really well.

31:00So almost everyone was constantly reaching out to me, the previous government, the transition government, the, you know, the opposition. Everyone was just talking to me all the time, saying what's happening. Right. And I have to admit, in my mind, I think the Arab Spring seems to have been a glitch in the system where somehow because Arabs at the time were so offline, if you want, you gave them a tiny bit of online community and suddenly they go like, this is shit. right and and they they organize and they explode okay and i have to say i i feel that leading after the arab spring into 2019 2020 that you could see quite a bit of organized opposition around the world hong kong here in the uk and so on and so forth and it i don't think that this is the reason for covet i you know i'm not into that conspiracy at all okay and i know you wrote about you know the covid economy if you want but it seems to me that somehow governments found a massive opportunity to say okay everyone stay home right let's not organize in the streets anymore no more arab spring and you could actually recognize very quickly that post covid everyone's silent everyone's like yeah what was that right and do you know let's talk about that era a little bit no conspiracy theory here but but two things happened with COVID one is actually society at large was disciplined everyone was ordered to sit home nobody had freedom to add to do anything but at the same time massive amounts of money were funneled into the system through printing money basically more debt right and I think that completely shifted I think this was a you know one big nail in the coffin of freedom, if you think about it.

33:02What do you think of that? I think, yeah, that is a very interesting and well thought through analysis because you're right, it's not conspiratorial to say that governments in particular, but also big multinational corporations, took advantage of a crisis to strengthen their position. And you see this happening over and over and over again. You know, Naomi Klein talks about the shock doctrine and disaster capitalism, the way in which the powerful are able to take advantage of moments of crisis and uncertainty to embed and strengthen their control. One example that she uses, which I find really fascinating, is the example of the tsunami and the crisis and devastation that took place in the Maldives and the way in which that was used to remove people who had been living on the islands in the Maldives for a very, very long time, settle them all in a very, very small area of the capital and ultimately sell those islands off to big hotels so that they would become centers for, you know, no luxury tourism, basically.

34:15Now, no one's saying the government caused that natural disaster, but they took advantage of it to basically kind of redistribute power and wealth within that economy. And I think that you can say the same about the pandemic and that that takes place both within individual societies and at the level of the world economy. Now, you mentioned that having been born in the Middle East and been a businessman in the Middle East for a while, and that that idea of debt as a disciplining tool resonates with you. Now, you can see that at the level of kind of individual consumers, but you can also see that at the level of whole states.

34:55Nations at large, of course. So the name for my book, Vulture Capitalism, comes from this vulture fund, basically, which was just after the 2008 financial crisis. Zambia, which is a relatively small African nation, big copper producer, had nothing to do with the financial crisis, But because of the collapse in world GDP after 2008, copper prices fell, its export revenues kind of dried up and its debts started to look unsustainable. So there was an Irish fund that bought Zambia's debt, knowing that Zambia was going to default on that debt so that it could sue the government of Zambia for failing to pay its debts and take vast amounts of money out of the pockets of ordinary Zambians and suck it back into the rich world.

35:42Now, this is the kind of what you might call kind of lawfare. It's like warfare using international legal systems that you see all the time in the world economy. And debt is a very powerful tool for basically crushing entire nations and particularly nations where you're beginning to see some resistance to the dynamics of global capitalism. And I think you're quite right that we did start to see that in a really big way before the pandemic. I think part of the reason for that was that we were moving from a unipolar world into a multipolar world. Now, you know, you can say whatever you want about the dynamics that underpin that.