And we are back with another edition of the Federalist Radio Hour. I'm Matt
Kittle, senior Elections correspondent at the Federalist and your experienced Shirpa on today's quest
for Knowledge. As always, you can email the show at radio at the
Federalist dot com, follow us on x at FDRLST, make sure to subscribe
wherever you download your podcast, and of course to the premium version of our
website as well. I'm joined today by Rusher Sharma, chairman of Rockefeller International
and founder and chief investment officer of Breakout Capital, an investment firm focused on
emerging markets. He's also the author of a compelling new book, Went Wrong
with Capitalism. It's not a question, it's a statement of fact, of
according to the author, and he joins us now in the Federalist Radio Hour.
Thank you sir for being here. Thanks Matt, thanks for having me.
This is an interesting book, and of course it just dropped this month,
and I think it's already getting a great deal of buzz because well,
I guess I want to start here. I think your theme it can be
encapitalized in this if you will, among some other very very important points,
but capitalism didn't fail, it was ruined. I guess the question I have
to begin is, are we talking about capitalism now in the past tense from
all that you note in this book, Yes, man, I think that
the capitalism we have today is very distorted and very different from what anything the
founders had in mind, because the capitalism today is one where risk seems to
have been socialized. And that's what I document in the book, which is
that it is this asymmetric form of capitalism where on the upside, everybody,
everybody who is in gets to gain. On the downside, their risk seems
socialized or protected because the government's always there to underwrite it. And what I
do in this book is to show the progression of capitalism from its very raw
form which existed right up until the nineteen twenties, and after that, how
the progression began of more and more government involvement in the economy and the suite
of government habits which has expanded over time to the extent today that the capitalism
we have today is very distorted. And therefore the tagline on the book that
capitalism did not fail, it was ruined. Because there are a lot of
people today in America and across Western societies who are not happy with the economic
outcome, They are feeling the fact that the system is almost rigged against them.
They're only thirty five percent of Americans today who believe that they're going to
be better off than their parents, compared to seventy to eighty percent that number
used to be, let's say, fifty years ago. So I'd say there's
been a big sort of change in the attitude or the way that Americans are
feeling about economic mobility, about social mobility, all those are close to record
lows. And I address in the book why are they feeling that way?
What has happened? And that's really the main purpose of this book, which
is that the first step to occure is to diagnose the problem correctly, and
that's what I've tried to do. First step to a cure is always to
recognize that you have a problem. Do we have policy makers who actually recognize
we have a problem? People in authority? And as your book I think
really outlines in I think an extremely successful way is are Americans now so trained
to, as you note a century of expanding government in the distortion of financial
markets? Are we so used to as Americans the government coming in with bailouts.
I think about what happened, of course in the COVID era, which
is exhibit A between corporate America and the average America, that the government is
here to bail everybody out at any time, facing any level of resistance or
trouble exactly, but as showing the book that this is not how America used
to be. In fact, right up until the nineteen seventies, there was
no culture of bailing out private sector companies in America. In the nineteen seventies,
when the American government tried to do that in a couple of instances,
there was a lot of pushback from from Washington policymakers there they would do that,
and then you get the first big bailout in nineteen eighty four of Continental
Illinois as the big first financial institution to be rescued. And after that it's
become bigger and bigger with every single crisis, with the Savings Alone Crisis LTCM,
after that, the two thousand and eight two thousand and nine financial crisis,
and then last year when we had the Silicon Valley Bank which got into
trouble, and there the bailout was almost preventive in nature that was a mid
size bank, but I think that most people were, like, of the
most policy makers, well, if you don't do this, we'll get another
great depression. So that's really become the pattern now, which is that bailouts
have become bigger and bigger, more preventive in nature, and also the feeling
that a lot of the average Americans have that Okay, these guys keep getting
bail bailed out, and what about me? Why don't I get bailed out
of any trouble that I ran into on a daily basis. I think it's
that sense of unfairness and iniquity, which is I think crept into the American
psyche so too big to fail, which was the marching order, of course,
it seemed in the late two thousands when we saw the Great Recession as
it was billed, of course, in two thousand and seven, two thousand
and eight, and the government's response to that. Having lived through the actual
Great Recession, which was the early nineteen eighties in this country, where I
remember factories in the Midwest where people would come out wearing sandwich boards with names
of the hundreds who were laid off on a single day. That truly was
a Great Recession. But you note that this actually goes back to the eighties.
It seems to me that over the last forty plus years in this country
this has been a bipartisan problem. Did it begin with a real true conservative
in Ronald Reagan? How much did the Reagan administration play into this reshaping of
American capitalism and where has had gone through each administration since. Yes, That's
one of the big points I race in the book, which is the fact
that what happened in the nineteen eighties, You know, in terms of the
fact that so many people buying to this narrative in the nineteen eighties started some
new liberal era where the governments went into retreat and then you had the unparalleled
expansion in markets that took place. And I sort of addressed that that firstly,
the argument of the government went into retreat in the nineteen eighties. Yeah,
in terms of there was some slow down in the pace of government spending
under Reagan, and he surely spoke very highly of free markets and being pro
business. But as I show in the book that on many metrics, in
fact, things kept expanding even under Reagan, whether it was the regulatory environment,
whether it had to do with this culture of bailouts, which I said
began with nineteen eighty four with Continental Illinois, and then you had the savings
and loans crisis of the late nineteen eighties or early nineteen nineties, and then
also the expansion in the role of the US Federal Reserve. A very key
point happened in nineteen eighty seven under Alan Greenspan, which is the stock market
crashed by twenty percent in one day after having been film disconnected from reality for
a while, and then the FED chairman then decided to immediately intervene in the
market by cutting interest rates again, thinking that if he did not racily the
stock market, it could end up causing a big, great depression. There
was very little economic impact from their twenty percent stock market crash at that point
in time, but I think it totally changed the investor expectations because then they
started to believe that that evident the market would go down, green Span or
some person the FED would be there to rescue them. And that's what I
think has led to this big increase in valuations that's taking place in the markets.
And when valuations increase, it increases the wealth of the few people who
owned those companies listed there, and you've had an explosion in a number of
billionaires out there. So that was sort of this culture of easy money that
set in, which is that not only could he get bailed out, but
also that the FED would be there to protect the system at the slightest hint
of any financial trouble. So it was that on the upside, everybody could
benefit who was in the market, but on the downside they'd be perfectly protected
by the Faith. So it's that big change which took place I think in
the nineteen eighties, and this all happened at least technically with Ronald Reagan in
office. Well sure, though, doesn't this go back farther. I mean,
I certainly understand the big bailout of the bank in nineteen eighty four,
We saw the savings and loan crisis, you know, all of that sort
of thing, and federal intervention in that. But I mean, if you
look back at the twentieth century, you see under Woodrow Wilson a massive expansion
of government. Some of that was in the name of, you know,
protecting against the you know, the fiercer forces of capitalism, so to speak.
We certainly saw that with FDR in the Great Depression. Moving through the
Great Depression, we saw that with Lyndon Baines Johnson just three examples, and
you know Richard Nixon as well other Republicans joined in two Exactly, aren't are
these aren't these footprints or these fingerprints going back to the massive expansion we saw
in the early part of the twentieth century and through the twentieth century. Absolutely
so, I think that you're right, which is that this has been a
progression, right, which is the fact that we went from an approach right
up unto the nineteen twenties where the government spending in the share of GDP was
just and the approach of government was that we just delivered the mail and we
do some basic services like protecting the country. Otherwise the government's role is minimal.
That was the approach right up until the nineteen twenties. And then after
you had the Great Depression, then you had the expansion of the welfare state,
and then every decade, as I've shown in the book, you've had
an expansion in the role of government which has taken place. But I think
the narrative that most people have in their heads is the fact and which has
been propelled a lot, i'd say by the left of center econalumus in media.
Is that somehow in the nineteen eighties onwards, given Reagan's red trick and
what Thatcher was doing in UK, that sort of marked a turning point where
the governments went into retreat and the market forces went firmly on the ascendant and
almost too much on the ascendant, and gobbled up a lot of the government
and its influence. And sure, I think in the book quite convincingly that
that just did not happen that on so many metrics, whether it's the bailout
culture, spending as the share of the economy, it's the regulatory environment,
the micromanagement of the economic cycle, the protection of the stock market. All
these things happened in the nineteen eighties and continued to happen in a bigger and
bigger way in the subsequent decades, and to the extent that we are now
at a point where the role of government has become so big and there's some
real consequences for this. I mean, the question people ask me, okay,
so what the government's role has expanded so so much. So far,
there's been no financial prices of the government. The government is still running massive
budget deficits and debt levels are so high. So what And my point and
response to that is that you've already had some very serious consequences of this one.
Productivity growth has declined a lot over the last thirty to forty years.
And the key to economic growth is productivity growth. If you don't have that,
it's very hard to grow at the kind of rates that America, you
know, could a spy to grow at. And the second thing, as
I said, is a feeling that many Americans have that the system is written
against them, that they don't have the economic and social mobility that was the
hallmark of the American dream for many decades, if not centuries. So it's
had that in city as corrosive effect on the economy. And the most telling
statistic is the decline in productivity. The productivity growth over the last thirty to
forty years in American r of the Western world has declined significantly, and that's
contributing to lower per capita income growth and just generally in Americans being less well
off than they would have otherwise been had it not been for this interference of
government in the destructive fiber of the ecliomy. Did fed chair j Pal have
a Freudian slip? Watched Out on Wall Street podcast with Chris Markowski. Every
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Wall Street podcast with Chris Markowski on Apple, Spotify, or wherever you get
your podcasts. Yeah, the so what question is a quite lazy question in
my as I've reported on this America for a long time now, and yeah,
I get it. It's well, at least you know, federal intervention
has staved off depression or recession or economic ruin. You we heard over and
over again during the so called Great Recession. It's what we heard again during
the pandemic. But take a look at just how much that has cost all
of us in terms of inflationary pressures that we all well know today that's affecting
the same people who feel like the system is truly rigged against them, because
in many ways it is. And one point that you note, and I
think you go into in great detail. I know you've talked about this before,
but you can see the evidence in the spirit of entrepreneurialism. Startups are
down and down, as I understand it, quite significantly over the last couple
of decades in this country exactly. So I think that that's the other consequence
of that's grief that he brought that up, which is that we're keeping a
lot of dead would alive by all these artificial support measures by the government intervention.
So the number of startups right up unto the pandemic when you, of
course, got some video the pandemic the twenty thirty year history of America,
within the number of new companies being formed at startups declined in this country.
And that happens because if you keep a lot of the deadwood alive, you
know, like there's less space for new growth. And what do I mean
by deadwood? I think it comes at two levels. One, as I
have a whole section in the book about the zombification of capitalism. What I
mean by that is that the number of zombie companies today in America as a
share of the total is that it record high. Zombie companies are defined as
companies that don't make enough profits to even cover their interest payments for three years
in a row, so they're forced to keep going to the market to borrow.
And as long as the interest rates are very low and you have very
relaxed lending standards, those companies are able to keep borrowing from the market and
stay alive. Now, the number of zombie companies in America back in the
nineteen nineties used to be just two percent of the total number of listed companies.
At that point in time, this term zombie companies was popularized in Japan,
and a lot of the American media, through the New York Times and
all, used to write articles mocking this phenomenon in Japan that that's the land
of zombie companies. In this is America, and in American capitalism there is
almost no room for such zombie companies. That was back in the nineteen nineties.
Today, by some measures, twenty percent of the total number of companies
listed in America can be classified as zombie companies. So that's all the deadwood
which has been kept alive. And when you keep so much deadwood alive,
you are keeping out new companies from entering. So you have this big squeeze
in the middle which is happening of the great middle that at the bottom you
have these zombie companies which are be kept alive, and at the top you
have the formation of more and more polygopolies. The reason why you have the
formation of more and more polygopolies as well is because you have a few companies
you know, that are able to exploit regulation because regulation in general tends to
be pro incumbent. And also the fact that when you have so much easy
money, these companies are able to easily borrow or you know, have the
kind of valuations where they're able to gobble up any new company that comes,
or even prevent new companies from being formed who they deem as competition. So
they have the muscle power to outregulate some of the smaller and mid sized companies
and also the power to buy out new companies or even just prevent them from
really growing much. So you've got this squeeze happening of small to medium sized
businesses in this country. Because of this zombification of capitalism, and it comes
down to the all notion of picking winners and losers. We've seen an explosion
of that, not just at the federal level, but of course at state
governments, where you have all these sorts of taxpayer funded incentives going to you
know, make somebody the idea to make them a lot richer. The whole
concept, of course, is to benefit the community, but ultimately we end
up getting again a winners and losers mentality. You note that progressives are right
in part when they mock modern capitalism as socialism for the rich. But let
me ask you, this is modern capitalism in America today leaning more toward socialism
like we see in Western Europe. Yes, so I think that, as
I say in the book that you know, like often a lot of the
American commentators say, you know, especially like who are defenders of the guide
state? Is go that, yeah, you know, like so what America's
got these problems? Look at Europe? How much better we you know,
We're like, we're in Europe. And my point is that, yeah,
Europe's the worst benchmark because capitalism is even more distorted than Europe, and we
don't want to go down the European way. So Europe's in terms of their
government spending, their regulatory environment, their general interference in the economy is much
greater as far as Europe's concerned. The risks over Americas that we catched down
to Europe, which is that so far America in the last couple of decades
has been able to remain much higher compared to compare to compare to Europe.
But I'd say that the risk is as we expand, and that our welfare
state now also becomes almost as big as that of Europe, and we have
the general socialization of risk, most gallingly for the rich. I'd say that
America could go down the part of Europe and catch down to Europe. That's
not a good situation to be in. So that's really what I'm trying to
do in the book, which is that you know, as I said,
the first step to a cur is to diagnose the problem, to show as
to what's happened. And obviously America is the country that matters the most.
It's the country most associated with capitalism, and the capitalist brand is damaged.
I have a real concern. I came from India, which was largely a
socialist country when I was growing up in India back in the nineteen eighties,
and I don't want America to go down that way where, you know,
like, and I think a lot of young Americans, and especially a lot
of the young Democrats, who say they rather have socialism rather than capitalism,
I'd say that, you know, like, I'd want to remind them one
what socialism is all about. And two I think that also show that they
vote against capitalism is because they currently think that we have capitalism. And my
point is, no, we don't have true capitalism. Far from it.
We have a very distorted form of capitalism and a lot of perverse consequences.
We Shir Sharma, chairman of Rockefeller International, found under in Chief Investment Office
or a Breakout capital an author of an intriguing new book, What Went Wrong
with Capitalism? You know, you mentioned that you grew up in a massively
populated country, obviously in India. That's an important point because I've heard the
left and I've heard other economists who you know at least, say that they
are not taking a political position that eventually America will become too populated to be
a true capitalist country. And as you argue in your book, it's really
not a true capitalist certainly not a Lasafer capitalist country now. But aren't we
just heading there where some of the economists are and policymakers are leading us because
their argument is we cannot be a capitalist nation and survive, right, I
mean in terms of the fact that I'm not sure where the arguments coming from,
because you know, like for years, America you know, like has
had uh, you know, like had successful immigration for for a long you
know, for decades. I mean like obviously we you know, like we
gan't have immigration, which undermines the social fabric of the country. And the
other argument I often here, which is that you know, like, uh,
democracy and capitalism are not compatible. I mean I find that so ridiculous
because again, America for centuries had both democracy and capitalism. Flower So I
think the most important thing I find focus in the book is that we have
to give people much more economic freedom. Economic freedom is what we really sort
of you know, need to focus on. That's how America used to be.
But America's rankings on the economic freedom have slipped considerably in the last few
years that we for for decades or even centuries, been consistently rank in the
top five countries in the world for we getomically free. Our ranking is slip
to number twenty five now. And in the book, I have an entire
chatter which speaks about the fact that where this capitalism is still working. I
start with Switzerland, which is the world's richest country and also one of the
world's happiest countries, which you know, sort of has done very well in
terms of giving people economic freedom, limiting the role of government, and also
the fact that it's got a lot of you know, like it seems to
strike to write talents between having the right amount of regulation and yet not being
too intrusive. And then I, you know, cite country like Taiwan and
Vietnam, which are not as rich as we are here in America, but
at least they're moving in the right direction. I mean, Vietnam is still
a very poor country, but when but by giving people more economic freedom in
the last couple of decades, it's fast moving up the the ink curve and
getting less poorer. And then you have a country like Taiwan, which is
a great study here because in Taiwan, government spending in the share of GDP
is like around twenty percent, half that of America, and yet you know,
it seems to manage the state very well. It was widely lauded in
the twenty twenty pandemic as being this model country for how efficiently the state handled
the pandemic. So it's a great example. You don't have to throw so
much money at the problem to get good results as long as you have an
efficient state designed for the twenty first century, I think that it's like workable.
But instead, the easiest solution we seem to find in America is that
whenever you're in trouble or sorry or whatever, there's any sort of you know,
kind of issue, you just throw more money at the problem. But
that is not the way to deal with it, especially like how much money
I'm going to keep throwing in. Who's there to be accountable for them and
assess what the outcome is. Yeah, I want to get to that in
just a moment, because there are obviously other consequences to this style of capitalism,
if you will. But you had mentioned Vietnam, and I thought that
was interesting because this is a country, of course that was torn apart by
war for many years, but it was also torn apart for many years by
communism. The extreme form of socialism. They seem to be learning what we
seem to be forgetting. Is there truth to that statement, Yes, yes,
I think that's very true. In fact, that's what you in China
did, you know, like in terms of that China sort of gave it
to people much more economic freedom. We here seem to believe that Chinese growth
was state directed toward state capitalism. Yeah, But in China's case, what
happened was they started from a point where the government was heavily controlled by the
government, heavily controlled economy, and they gave their people much more economic freedom
over time, and that's how the Chinese economy had this incredible miracle for thirty
to forty years. And then of course it's been reversing that across in the
last few years under jijingpain. But again Vietnam is taking off with China left
off, which is the fact that you know, a China left that it's
giving its people much more economic freedom and seeing huge gain the crew to the
country. You note in your book, and you've said this, i think
in some other interviews promoting it. This very important point, and it now
more than ever is striking to me because I think the parallels are so tied
together. You say, corporate bailouts are like our culture of pain management,
and you were first specifically to opiate addiction. And I definitely see that,
and I definitely saw that with the Stimmies as they were colloquial call all the
stimulus checks that went out, the trillions of dollars that ultimately future generations will
have to pay for, and we have to pay for now because there is
a cost to that much debt in terms of basic American dream principles homeownership,
business ownership, you know, doing better than your parents did. Those three
things some up the American dream. But if you wouldn't mind expound upon this
culture of economic culture, policy wise, of pain mitigation. Yes, I
think that's exactly what's happened. That when you look at the opid crisis,
we know that a lot of the opid crisis has to do in the fact
that we prescribe drugs or give drugs at this you know, at the slightest
hint of any pain, which sort of you know, got people to be
addicted to drugs. And now on the economic cycle front, you know we
have gone to a similar kind of approach, which is the slightest hint of
trouble, we have to give the economy some stimulus, because if you don't
do that, then the pain is like insufferable. So the extended economy is
not got fooked to that kind of stibulus becau, which is more debt or
just general for the government to be there to soothe air, like any pain
that anyone suffers from. So then we have to also face the consequences Like
that are all said, so like all the enormous side effects of this,
which is lower productivity, lower number of startups coming up, and just the
economy losing its natural resilience to deal with it even the slightest crisis, which
makes the whole system feel more fragile and brittle. That Okay, one day
something falls between the cracks, like it briefly did in two thousand and two
thousand and nine, the whole system could come crumbling down because the fragility of
the system has increased so much, because it is a loss its natural ability
to find anything, you know, with the government always there to inject stibilus
and bailouts to protect the downside. I think you've described this in our conversation
in overarchingly but let me ask you specifically, what are some of the most
detrimental policies on the modern creating modern day capitalism spoke, so to speak,
in America, the most detrimental policies from the federal government, from the Fed
to economic policy in general today, And what are some of the worst policies
that we've had on the books for a long time contributing to the ruin of
capitalism. I'd say that the most goal example for me, have a number
of regulations we have in the economy today, which is that for the last
twenty years, the number of new regulations we've been adding, like to the
economy just keep going up with extent that we've been adding nearly three new regulations
in the Federal Register for the last twenty years, on average three thousand a
year. The total level of regulations we have withdrawn over the last twenty years
has been twenty in total, you know, and that really hurts small and
mid sized businesses because the cost of doing new business in America has gone up
significantly given the amount of regulations you have to comply with, and regulation by
definition tends to be pro incumbent. And also, you know, like in
terms of pro big business because the big companies are able to afford the cost
of these regulations much more, and also they're able to have their lobbyist in
Washington to influence the way that all these laws are withen So, I think
that that is a very important point here, which is that the regulatory cost
and burden has gone up enormously, and this has to do with the small
and mid sized business owners. I know from personal experience that today, if
you want to set up a new investment fund, the cost of doing so
is ten times larger than it was twenty years ago. So the incentive is
therefore to remain at a large firm that can absorb all these costs. And
the large firms keep growing larger because the cost of a new person to survive
has gone up that much and become that higher. And also it shows up
on the everyday life as well. That I've got some data that I pulled
in the book from other sources to show that the average American today at work
spends nearly sixteen percent of their time dealing with legal compliance and other regulatory and
Red Taperson, sixteen percent of the daily work life goes in that. Now,
that's such a big task for any business or any employee to deal with,
So that I think is something which we need to again be aware of
that. Listen, there's a cost to this and that was my thing that
you know, the under President Trump that he started off by saying that he's
going to diregulate, but at the end, the number of regulations that sprouted
even under him were incredible, which is that there were more than three thousand
new regulations coming through the same average as Saunder Obama or his predecessors. Interesting
you note sixteen percent of our working day is wasted in trying to go through
the hoops and hurdles of course of regulation, and another forty percent or more
is spent on our smartphones trying to get away from more work in America today,
it seems, which is another pacifier that we could talk about for a
different time. What do you think the FED specifically, what do you think
about the FED and its position on interest rates right now? How as you
look at how are they handling it? And obviously FED dictates a lot of
what's going on in American economic policy today. Yeah, you are. My
main criticism of the FED has been that it's too narrowly focused on consumer price
inflation, which is that just looks at consumer prices and not at the general
role of asset prices in the economy. As I said that asset price inflation
is something which is as pernicious as consumer price inflation. Why do I say
that, What do you mean by asset prices? It means stocks, bonds,
and most importantly, property prices. That if the feed's policies are boosting
property crisis or there's too much liquity boosting property prices, that is good for
the very narrow band of people who own those properties, but it puts the
average home out of reach for the average American. And I think that the
FED is not enough focused enough on that. And also the other criticism of
the FED was that it can't have this asymmetrical reaction, which is that you
know, which they've officially said so in fact, that we don't know how
the spot of bubble. They say, so if a bubble is being formed,
it's we ignore it, but the moment the bubble bursts, we are
there to clean up the mess. Now that again is a very sort of
asymmetric way of thinking about things, which is that we only burst that we
want do anything to burst the bubble or even manage expectations there. But on
the downside, we are there to clean the mess up by pumping liquidity and
what we do. So, I think that if I have two main criticisms
of the FED, it's these two and is there's the third one. It
is the fact that even during the expansion the twenty tens, it kept on
carrying on with this policy of quantity easing, of buying you know, government
bonds, even when the economic crisis of two thousand and seven two thousand and
eight was where in the rear view window, they kept on doing that along
in the two thousands and tends. As I said, there is a role
for the fair, there is a role for the government, but we need
to restore the balance here. There's no going back to the nineteenth century Lassiefair
type of catalysm we have, but we need to restore the balance here where
there is a role for the government but needs to prioritize what it wants to
do. But this idea that every excuse is used to expand the role of
the government, that needs to I think change and be a reeve. Is
it off, here's a loaded question for you. It certainly comes with a
lot of perspective. My own perspective on this as a free market for a
people guy. How disastrous has Bidenomics, as the White House likes to coin
whatever this economic policy or suite of policies are from the current administration, How
disastrous has Bidenomics been to the the economy? Well, I think you know
what my dynomics is Dan, is that it's operating on two false premises.
One, when they came to power, their sort of premise was that we've
been in this era of small government for the last thirty to forty years and
we have to reverse it and increase the role of the government to fix out
of problems. As I show in the book that in the last thirty to
forty years, we've never had an era of small government. So to say
that we're going to reverse that post was convenient but just not factually true.
And the second thing is that we keep invoking the example of China and how
the state in China, with its industrial policy and other subsidies and staff helped
the Chinese economy grow. Again, that's a wrong characterization I think of China.
What really worked in China, And more importantly that of late, the
Chinese economy has been faltering, so why follow a model that is faltering.
So I think that those are the two things that I would, you know,
like point out in terms of great problem with bidynomics. And you know,
like I'm a bit wary of speaking too much about debt and deficits because
a lot of people glaze over saying, oh, we've heard these warnings for
years. It's not decades, and nothing has ever come off those But if
you put it in perspective now, of course Biden is running a budget deficit,
which is exceptional square because in the past, America's budget deficits would be
about three percent of GDP over the last twenty years, sort of in line
with other developed countries. Today the budget deficit is more than six percent of
GDP and far higher than any other developed country in the world. So they've
taken this to another extreme out there, and we yet to know what the
consequences of this will be. But clearly they are overstimulating the economy here and
feeling saying that, you know, the visually feeling good about it. But
they've already been one big negative side effect visible to everybody, which is the
high inflation that has wiped out the wages of many poor and bill income Americans.
But more importantly, I think the long term consequences of this could be
quite negative, just because of the fact that we have now sort of just
dropped all caution and are treating the government's finances with complete abandon perfect economy.
For you, would it be returning to the days of Coolidge, the whole
idea of hands off the economy las fair as it is called. Of course,
there has been a considerable amount of debate over the last eighty ninety years
in this country about that policy and did it lead to the Great Depression?
And that argument that it has has, Unfortunately, I think in many cases
prevailed, so that that created the groundwork for exactly what we're talking about today.
But the question is, again, would you like to see us return
to the Calvin Coolidge style of economic governance? No? I mean, as
I say in the book, that that there's no going back to you know,
such an extreme environment, that there is no going back to a Lassifier
type capitalism. It's not practical. And you know, like societies evolve,
economies evolved. So I don't think that in working any period in the past
is going to be any good. But I think the balance needs to return.
I mean the Calvin you know, Coolist economy with Herbert Herbert Whober after
that was characterized by this feeling that the government almost liquidated the cycle, and
so therefore this pejorative term came into being of being liquidationists. I think now
we have like at a situation where we we just want to keep you know,
liquidfying the economy, and I think that there's got to be a middle
ground between the between the two. And I point too countries like Switzerland,
etc. Which have found the middle ground. So I think the balance needs
to be restored between the two. There's no going back to the nineteenth century.
And the other thing which I think is important is the fact that you
know, with the twenty first century, we need to stay to be designed
for the twenty first century. There is a role for the state, but
the state need is to prioritize what it does rather than just deal with you
know, like every single problem in the world from you know, like the
green energy and climate change and defense and increase national security and like you know,
an increased homeland security in everything that the government just keeps on playing a
role everywhere. There is a role for the government to be played in crisis,
there is a role for the government possibly even to be played in things
like antitrust. There's a role for the government to be played as far as
some basic welfare is concerned. But the idea that the government should be playing
such an extensive role is not consistent with any form of capitalism. And clearly
the outcomes that we have today with this very expanded role of government are not
satisfying people. In fact, the trust of Americans in their government today is
at a record low. Indeed, final question for you as it relates to
that, and I appreciate the generosity of your time today, but you noted
earlier that we have a majority in some polls, a vast majority of young
people who say they would prefer socialism to the idea that they have of us
capitalism. Right now, with what we have experience in this country over the
last forty years, the bailouts, the constant assistance the welfare state in America,
there has been clearly an indoctrination into what the government is supposed to do
in the minds of young people in America. So, with that said,
is it possible to strike the balance that you're looking for. I mean to
the fact that they said that my objective in this book is to at least
point out what the reality is in a very data based way. I mean
all the data in the book with its regulation, government spending, the costs
of the bail outs, the enormous size or the financial markets relative to the
other economy. It's all in the book. So the whole idea of the
book is to sort of make it accessible to as many people as possible,
given my background as a writer and I've been writing now regularly for over thirty
years. Is to make it as accessible so that people know what the basic
problem is. And I think that enough people on both sides of the aisle,
who at least if my early readings are correct, us seeing the merit
in this argument that yeah, you know, there's something to this that the
government just can't be doing all of this and expecting a good outcome. I
mean, even the people the left degree that you know in my statement that
yes, you know, as they say that the road to hell is paved
with good intentions. So find if the government's intention. Let's say that people,
let's have a more generous view of the government. But you know,
I say that find the intentions are good, but let's see what the outcomes
are. I think there's a broad agreement which I'm sensing from the people,
the early readers of the book on both sides of the aisle, that yeah,
you know that there are so many negative, perverse consequences of these actions.
So you're right. I don't expect there to be, you know,
like any big radical shift, but let's at least start the post correction in
a sensible way by first becoming aware of what the basic problem is and in
the bargain learning what the history of capitalism is intriguing book and driving a lot
of important conversations, And I think that's the intention altogether. Yeah, the
book is again, if you are looking for it, what went wrong with
capitalism? And quickly, where can our listeners find your book? The book's
available everywhere. It's available on Amazon, it's available across bookstores. It's been
published by Simon and Schuster. And I know this is a radio interview.
I wish they could see the artwork on it, because I'm very proud of
the cover of this book that it's you know, like God w slash across
the major president so over the last one hundred years that America has seen.
But the book now is widely available, and I hope you know, people
sort of read it through your program and we can carry you on this conversation.
Yeah. I thought the cover was very, very clever. Thanks to
my guest today, Rusher Sharma, chairman of Rockefeller International and founder and chief
investment officer of Breakout Capital and investment firm focused on emerging markets. He's also
the author of this new book, again available everywhere, What Went Wrong with
Capitalism. You've been listening to another edition of The Federalist Radio Hour. I'm
Matt Kittle, senior correspondent at the Federalist. We'll be back soon with more.
Until then, stay lovers of freedom and anxious for the fray for the
reason. And then it faded away. Mm hmm.