145. Gary Stevenson: Masculinity, Money, and the Myth of Meritocracy (Part 2)

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2:01Welcome to The Restless Politics, leading with me, Rory Stewart. And me, Alistair Campbell. So here we are, part two, Gary Stevenson. And last episode, very much about his kind of early life and his time as a trader. And I guess we're going to dig a bit deeper now into his economic worldview. And also, given this is The Restless Politics, a lot of politics too. Listen, I'm an economist, OK? Three years at LSE, maths and economics. Two years at Oxford, economics. Five, six years in the city predicting on the future of the economy. I've made millions of pounds betting on the collapse of the economy.

2:33I made an enormous amount of money betting on the collapse of the economy after COVID. I can tell you now with absolute certainty, and I would like you to remember this, because I know I do things like this. People go home and they say, oh, that guy, young guy, he's passionate. He's a bit naive. Remember this because I will be correct. In five years time, the economy, in terms of living standards for ordinary people, will be massively worse than it is now. I guarantee you that. I guarantee you that. And you're defining that in terms of median incomes or GDP? Living standards. Because you can't look at just median income when what's going to happen, its prices are going to go off.

3:01So if you say tax wealth, not work, let's say that happens. Let's say that the current Labour government, you know, down the track a bit, think, okay, we're just going to have to swallow very, very hard. We're not going to be able to build the sort of public service we want on the back of the current economy. Therefore, we're going to have to go down this wealth tax route. Yeah. how big a difference can that actually make so when you talk about you know that that's your line tax wealth not work but maybe we need to be even more radical than that and think about total reshaping the economy and how does that even begin yeah i mean listen this is going to get much much worse very very quickly you know you and i are sitting on the titanic and the iceberg is over there and you've just asked me you know maybe we need to think about whether boats are the best way to cross the Atlantic?

3:54And that's a good question. You know, there are probably big things we could change. If you don't change this very, very, very quickly, living standards are going to fall very, very quickly. And the trade is going to get richer? Yeah, yeah, definitely. And Farage will win the next election. He will also fail on the economy. And, you know, Labour will get back in. They'll fail on the economy. And what will follow Farage will be something further right. And can you take listeners back who aren't following you all the time to why that's the case? What are the three or four main reasons why that's going to happen?

4:20The clearest way to explain this is, imagine you are a billionaire. You have a wealth of one billion pounds. What people often don't realise is the passive income that generates. So if you have a wealth of one billion pounds, you will have a passive income of something like 50 million pounds a year. That's from your wealth, income from your wealth. So doing nothing. Yeah, that's not from your work. Four million pounds a month, so a million pounds a week. You have a passive income of a million pounds a week. Imagine you are that person. And bear in mind, there are people who are much, much richer than that.

4:43You have a passive income of one million pounds a week. How much do you spend in a week? Not a lot. you know i i massively struggled to spend 10 000 pounds a week so you spend 10 000 pounds a week you live like the queen and then you have 990 000 pounds a week to invest the problem is the economy is not significantly growing so the only thing you can do is buy existing assets so what happens is these very wealthy people they basically have no choice but to buy up existing assets from the middle class from the government become richer these groups cannot compete and what you see is the loss of middle class wealth holding and the reason that living standards have been good in the West for the last 70 years is because we have had an unusually wealth-holding middle class.

5:21That is not the norm internationally. That is not the norm historically. We will lose that. It is as simple as that. These guys, once they get to a certain level of wealth, they have no choice but to rapidly expand their wealth, which means the loss of wealth. And this is why you're seeing, look at government wealth. This is why middle class people can't afford homes because they are being out-competed. They are being squeezed out by this growing super rich class i guess we also talk about the fact that we're getting older you know when the welfare state was set up with 20 working people for every one retired person it's now like less than three working people for every one retired person fewer the big tech companies that you get in silicon valley partly because our capital markets don't work so if you set up some fancy ai company in britain it's going to be bought up by the us because you can't really get investment in britain they take more risk in the US.

6:08That our infrastructure is creaking. We don't really know what to do about our public services. So along with this issue about wealth, there's all these kind of background issues about an expensive, poorly provided for, increasingly elderly society, low productivity, low innovation, even compared to places like the US, where in fact the wealth problem is even worse. So it can't just be about wealth, can it? because the US has got the wealth problem going through the roof, but their economy has grown 50 % bigger than ours in the last 50 years. It's not just about wealth, but if the picture is of a broadly weakening economy, why is basically every stock market in the world at an all-time record high?

6:49Why is the wealth of the rich and the super rich in this country at an all-time high? So this character, and don't get me wrong, there are other economic problems in this country, in other countries, but if the situation is of a broad economic weakening, then why are the rich and the super rich aggressively, extremely rapidly getting richer. Let me flip that around. If that's the big problem, there are far more billionaires in the US. There's far more inequality in the US, but the American economy is growing much faster than ours and their productivity is much greater than ours. Have you heard this term that was bouncing around a lot in the US economics and political discourse the last couple of years?

7:22The vibes are off. Have you heard that term? The vibes are off. So for people who don't know, this is the idea that basically Americans think they're getting poorer, but they're really not. They're just, they're idiots actually. They're getting richer. Listen, again, I went to elite economic universities and now I exist in a kind of politics media space. Most people are relatively rich, relatively financially comfortable. I don't think living standards are getting better for the average American. But the problem you have is, you know, the problem with the crisis of inequality, which is, as you say, if you have a broad economic weakening, everybody will say this is bad.

7:52The problem of a crisis of inequality is it looks great for the top 1 % and it looks pretty good for the top 5%. How many people outside of the top 5 % are in this conversation? Top level politics, top level economics, top level academia, top level media, top level central banking. Basically, what you have is you have a bifurcating economy. You have an economy which is splitting. The top 1 % is aggressively splitting off and the top 5 % are kind of hanging on to their coattails. Let me try this one more time, Gary. The US and European economies were about the same size 15 years ago. The American economy is now 50 % larger than the European economy.

8:29average incomes even in a poor state like mississippi are now higher than average incomes in the united kingdom and they have the most extreme wealth inequality of anywhere on earth and more equal societies germany sweden denmark are not remotely achieving those levels of productivity and growth that they are in the u.s so what what's the reason for that i think there are a lot of reasons the u.s is growing quicker i think you've seen they've moved into things like fracking they've moved into things like tech they managed to capture big tech um we have to accept the fact that the u.s is the u.s is a much larger country with much more natural resources per person it's much lower population density it has some natural advantages it's managed to capture some industries but 15 years ago we were the same size as them so what have they done over the last 15 years in policy terms that we haven't done well i think they've captured these growths right they've captured and they haven't done it captured tech they didn't do it through wealth tax did they no rather the reverse they've gone the other direction but what will happen in the u.s is the US will continue to grow and living standards will continue to fall for the average person.

9:28It's the same thing that's happening here. You know, the US has the same problem. Just on your 1%, 5%, etc. And given that you come from a background where I imagine quite a lot of the people you grew up with will be tempted by the kind of populist far right. Yeah. Because they'll be saying, well, Labour hasn't delivered for me, Tories haven't delivered for me, Brexit's been a disaster, and therefore I'm going to try something that says it's going to blow up the system. even if it's not. What does it say about those people that they're tempted by people who pretend to represent them whilst actually being as 1 % as they come?

10:06I would put Trump in that, I'd put Johnson in that, I'd put Farage in that. I think you just have to recognise that the average person is not super interested in politics and they're not super aware of politics. What people see, I'm always, you probably didn't see, there was a sort of meme video that went around a few years ago of an ice skating race and they're going around and around and around the track and just before the finish line, one of the skaters falls over and he takes out the whole line. They're all neck and neck. And there was one guy who's like, nearly a lap behind, comes around and wins.

10:32For me, that's Farage. And that's also Trump. And that's the whole far right. Just unbundle that. Explain that. What it is, across the Western world, people have voted centre-right, centre-left, centre-right, centre-left. And they've repeatedly seen increasingly rapid falls in living standards. So, you know, people will vote. So people skate in the front. Listen, Obama's big slogan was hope and change. Where are living standards now compared to when Obama came in, for the average middle American. They're lower. They're significantly lower. So, you know, people will vote for sensible hope, sensible change, sensible change.

11:04It is obvious that the political centre is and will continue to fail on the economy. And it's not obvious to the people who are speaking about it because they're rich. So it goes either hard right or hard left? Well, and there is no hard left, right, in most countries. So, listen, people are correct to demand change and to insist that they will no longer vote for establishment political parties who have presided over significantly, increasingly rapid falls in living standards for 20 years. Who did you vote last time? I vote for the Greens last time. But I'm in a safe seat. Because the Greens adopted my wealth tax policy in their manifesto.

11:37So, I mean, it would be pretty remiss of me not to vote for the single guys who literally adopted my policy. I mean, I was looking at some polling last week that said that, I think it was 80%. Now, I know people always say, in theory, I don't mind tax, but when it comes on, but actually 80 % of people say they'd back a wealth tax. What would you, let's try and flip around, just be kind of back as a kind of, you know, somebody on the trading floor trying to work out probabilities. Do you see any downsides to a wealth tax economically? If it's badly implemented. I always remember, do you remember when the Conservatives brought in extra tax on second home buyers?

12:15I was surprised by that because for me, I see the Conservatives as basically a group that represents the economic interests of the very rich. And they bring in the second home tax. And I was surprised. So I looked into it. There was an exemption for people who bought seven or more at once. And then Jeremy Hunt went and bought seven homes at the same time. So this is the problem you have is people like me go out and say, you need a wealth tax. Tax wealth, not work. Reduce tax on working people. Raise tax on the rich. When they bring these in, there are a lot of very wealthy, very powerful people who have the ear of the politicians, can influence the politicians, in many cases, are the politicians.

12:50And they say, yeah, fine, tax the rich, but you can't do it like that. And they fill it with loopholes and it ends up getting put in a way that the actual really rich end up getting through the gaps and it hits the middle class. It's the fish rots from the head down. If you do not catch the people at the very top, they will eat up all the wealth over time. So I think the risk is basically poor implementation such that you end up not getting the very rich and you end up hitting the middle class. How do you feel when you see this debate that's going on at the moment, which Farage is currently trying to tap into, that the non-DOMs are all leaving, the super wealthy are all leaving Britain because they're being taxed too much.

13:23I mean, I know who funds these analyses. I know it's private wealth funds. Listen, I've been doing this work. So, you know, I'm relatively high profile the last two years. I've been doing this work in public for five years. And for years and years and years, I would go on LBC and talk radio and I would say we need to tax the rich for free. And I would go up against somebody who works for the IEA and is paid by a billionaire. This is the truth. Listen, you know it as well as I know. That's the Institute of Economics. There's two ways to make money in media. You sell news to the public or you sell the public to the rich.

13:52There's two ways to make money in politics. You convince the public, you sell the public to the rich. Listen, I know, listen, when I first left trading, the first thing I wanted to do was go to work for a think tank. This is the obvious thing to do. And I went to look for a left-wing think tank because you think these guys are going to be doing work on inequality. I went, I volunteered at a left-wing think tank in London. There was nobody working on inequality. You know why? Because they couldn't get funding for it. So the problem you have here is that the rich are aggressively going to try to prevent any increase on their taxation.

14:20When I was writing the book, I was reading Hard Times, Charles Dickens. There's a section in there where they talk about how the rich were saying if the government raises any taxes on them, they're going to take their factories and throw them into the seat. This is 150 years ago. You know, the problem you have is the rich are going to fight it every step of the way. They are winning. They're obviously winning. And they're funding groups like Nigel Farage. They're funding the far right all over the world. And it's obvious why. because everybody in the street knows the political centre has failed.

14:47Everybody knows. So something has to change. There's a quote from Milton Friedman, American economist. At times of crisis, the new idea will be chosen from the ideas lying around at the time. Everybody knows that we will get something new in politics. And it is really obvious what the loudest idea lying around now is, which is the far right. And the second loudest idea is us, tax the rich. So if you are a billionaire and you know that politics is going to move either towards the far right or tax the rich, what are you going to do? You are going to fund the far right and they are doing it aggressively.

15:17Look at what Elon Musk is doing. These guys know that they don't want to pay higher taxes and they are correct that the way to prevent yourself from having to pay higher taxes is to aggressively fund the far right. And I'm out here with a Patreon, you know what I mean? Tell us a little bit about what you make of Labour. What do you make of Rachel Reeves? What do you make of Keir Starmer? What do you make of what they're up to? So, you know, I don't directly lobby the politicians because I think that I was writing for The Guardian and I switched to doing YouTube because I thought that the fact that I look how I do and sound how I do will make the working class want to listen to me.

15:50But that same thing is a disadvantage when I talk to economists, when I talk to academics, when I talk to politicians, when I talk to, to be honest, a lot of the media until it's becoming popular. So I don't lobby them directly, but I work with people who do. Just let's get for a second on that. We'll get to some of the things. What is it that you think is the disadvantage? I mean, as you say, you've studied economics. So why do you think there's a... Is it that you're choosing to present yourself in a certain way? Could you... I mean, given that you know how to change codes, right? Yeah. Presumably you could quite easily remember what you did.

16:22I remember when I was a kid somebody saying to me, if you want to be successful, you've got to change how you talk. And I remember what I said to him. I said, if I have to change how I talk, there's no point being successful. Listen, I know there's a deeply entrenched prejudice in this country that people who sound posh are smart and people who sound working class are stupid. I don't know. Don't think it's about a posh thing. But you did serious academic economics. So if you were talking to an economist, you wouldn't have to change your accent. But you'd be talking in more technical language, right?

16:49They're going to say, oh, he does. So I'm three years at LSE. Two years myself. We've got a prime minister who famously established a toolmaker. A deputy prime minister who's got a background that, you know, is frankly closer to J.D. Vance than it is to me. we've got for the first time ever a cabinet entirely made up of state educated people. And who makes economic policies? They have a lot of power to direct them, for sure. Yeah, but who are their economic advisors? Who are the big economists in government? I don't know the answer to that. Torsten Bell? What do you think his background is? I know Torsten Bell very well.

17:26I think Torsten Bell's left wing. And do you think he's from a working class background? I don't know. I know he's a twin. He's the poshest man I've ever met. Torsten Bell? Yeah. Poshest man you've ever met? You've just met Rory. That's true, actually. Second now. I've got a feeling, maybe we can check this, I reckon Torsten Bell went to a grammar school, same as you. But anyway, so you and Torsten Bell... Sure, sure. Maybe he lived next door to me. Listen. Listen, before you go on, Rory, when you were hearing Gary do that sort of, you know, whoosh, this is what I really believe. Yeah. On a scale of one to ten, how much were you almost buying into it?

18:00I'm about eight. Because my big worry with it is the reality of politics. My honest response is that it feels like you're getting a party political broadcast. You've taken on the tone of somebody who's like addressing millions of people and whipping them up. That's part of politics. And my guess is if you wanted to engage with politicians, you could. I don't think you need to conclude that the reason... 100%. I don't think the reason people aren't listening to you is that you've got an East End accent for a moment. These people come from backgrounds, most of them poorer than yours. They grew up in families poorer than yours, most of the Labour cabinet.

18:41I don't think they're going to be impressed or worried by your accent. And I think you're overplaying that. I think your class anger is not letting you see some of the realities of politics. I think what's more likely to be a problem is they don't appreciate being patronised. Because they also feel they've done economics degrees. They've studied this stuff quite seriously. And you're talking to them like they're idiots. You're saying, I can tell you what's going to happen in five years. This is the way the world is. This is a good point. I did economics. I'm smart at maths. And Rachel Rees is like, yeah, well, I was a chess champion.

19:11I'm pretty smart at maths too. And she's going to be listening. There's some important background here to understand, which is that when you study economics, the vast majority of economic students want to work in finance. And working in finance is enormously better paid than working in any form of economic public service. And the vast majority of the best students will go into finance. Some of them will choose to go into public service. But you have to consider, imagine you are a young LSE student that has good enough grades to get a job as a trader. And you are not from a rich background. If you go and work in academia, government, central banking, you are going to have to do a master's, a PhD, a postdoc.

19:50And you're not going to make any money for 20 years. You're going to be massively in debt by the time you make money. I was a multimillionaire at 25. And when my brother needed to buy a house, I helped him. Now my sister needs to buy a house. I'm helping her. The truth is the nature of our economy and academic economics means there are very unlikely to be many, if any, economists from working class backgrounds in the public debate. So the end result is the vast majority of economists in public background either couldn't get a job in finance because their grades weren't good enough or they were so rich it doesn't matter.

20:25That's the truth. and these guys they went and saw the best students go work in the city make millions of pounds they went and locked themselves in a library in oxford for 10 years and they don't appreciate somebody coming back after making millions of pounds after beating them in undergrad and saying well can i explain to you listen let me say what happened when i went back to oxford right i went back to oxford we had the lecture on interest rates and i was at that point one of the most successful interest rate traders in the world and we had at that point incorrectly predicted that interest rates would go back up 10 years in a row.

20:56And I went to him and said, why do you think we're so bad at predicting interest rates? This is an Oxford macroeconomics professor. He said, no, no, no, you're wrong. We always knew rates would stay zero for 10 years. This is in 2017. That's just categorically wrong. I was quite shocked. And I tried to explain to him that was wrong. I said, okay, I'm going to go. I'm going to send you the data. I went back, I sent the data. He said, oh yeah, you're right. Yeah, you're right. We have been wrong. We have mispredicted interest rates. We have mispredicted the strength of the broad economy for 10 years.

21:23that was it he wasn't interested in talking these guys have been wrong on the big economic issue of our time for 10 years in a row this guy hadn't even noticed these guys are so bad they are unable to recognise that they are bad I cannot explain to you how serious this situation is listen I know I do patronise them but the truth is they're terrible they're terrible and the world's falling apart and they themselves get rich while it happens but the professors of economics at Oxford are not getting rich while it happens You're confusing two different types of resentment. On the one hand, you've got a model where there's like the super billionaires who are buying seven houses.

22:00You think the professors are not rich. No, no, no. Wait, wait. You're doing two different things. On the one hand, you're like the people who become professors are losers who couldn't get a job in a bank. And if they had been smarter, they would have got a job in a bank. Yeah, yeah. So there are different narratives. They've all got the same narrative, which is I'm angry, I'm working class. These guys who become professors, they don't make a huge amount of money. They are there because they don't need the money. They come from rich families. They come from rich families, Ori. They don't need the money.

22:27Rachel Reeves would be very happy to sit down and listen to you. Yeah, but listen, she wasn't before the election. We tried our best. But my guess is that if you were to say to her, the fact is you're just not smart enough to get a job in a bank. No, I'm not saying that to you. I'm not saying that to you. Or you come from a rich background and that's why you went to the public service. I've been trying to get these guys to speak to me for a long time. I think they'll speak to you. Tell me what you thought of Gordon Brown as Chancellor. Gordon Brown is not somebody, believe me, who's motivated by getting rich.