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Hello everyone.
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Today I am speaking with Adam Tooze, the famous historian at Columbia University.
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I have read all of Adam's books. I am a big fan.
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He is well known for his treatments of German history, the history of the financial crisis, and right now he is covering the financial stresses in our system on Twitter.
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I very much recommend that you follow him. Adam Tooze, welcome.
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Thank you for speaking with us.
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Uh thank you for having me on the show.
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Let's go back to the Spanish flu of 1918-1919.
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Do you think that Western economies were better equipped to deal with the pandemic in percentage terms at that time than they are today?
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Well, it's a it's a it's an interesting question.
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It's an interesting way of putting the question.
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Um I mean, the the what's been striking about the 2020 pandemic is that we have chosen an extraordinarily high-cost route.
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I mean, we have chosen a comprehensive lockdown as the default strategy for dealing with this.
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And as far as I'm aware, no one attempted anything remotely like that in response to Spanish flu.
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At the local level, there were efforts city by city, but there was no comprehensive national lockdowns.
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Um in fact, if you study the economic history record, the archive of that period, the policy decision-making, and say the Weimar Republic, which I've spent some time on, all of the minutes of the Versailles peace conference, the the flu barely figures.
1:31
I mean, it figures in the sense that occasionally a prominent person will get sick, famously President Wilson, but the idea I think of a kind of comprehensive lockdown as part of a public health response, as far as I'm aware, and of course this has taken us all aback and has caused us to reflect on what we might have missed in the historical record, I don't I don't remember it arising anywhere as an option.
1:53
And we know that, you know, the the consequences were of course dramatic in terms of the loss of life, and particularly in the what was then the Imperial world, the the the colonies so-called in in in Africa and India.
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So, I mean, we're much more affluent um than we were then by by an extraordinary I mean, it's very difficult to exaggerate I mean, order of magnitude, broadly speaking, in terms of per capita income.
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And uh we've chosen a very high-cost route for dealing with the epidemic this time.
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And we had a V-shaped recovery back then.
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And it doesn't seem that you're confident about a V-shaped recovery right now.
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And and which feature of the modern economies is the difference?
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Is it percentage of agriculture versus face-to-face services, differences in inventory, differences in personal risk aversion?
2:40
Well, and also, I mean, it's very difficult to disentangle the different effects here because when you're talking about the era of the famous Spanish flu, we're talking about the aftermath of World War I, uh which is a huge shock in both uh supply and demand side.
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So, there's huge pent-up inflationary pressure on the demand side and massive disruption on the supply side from the demobilization.
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It's also a period of revolution in much of Europe.
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Um uh which causes huge disruption as well.
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Um so, you know, if there was a V-shaped recovery there, it was a it was a V-shape that was, you know, it was recovering from many different forces.
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Then, of course, there's the savage deflation of 1920-21, uh which also hits the global economy in the aftermath of the war and the flu.
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Uh this time round, I you know, I'm definitely in the kind of swoosh camp, modified swoosh.
3:24
Um uh I I don't frankly have a strong set of priors about what a recovery from a collective simultaneous shutdown of this scale looks like, and I am quite suspicious of the comparisons which treat China as a national aggregate and then say, "Well, that's our future."
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because even allowing for the exaggerations of the regime's propaganda there, they do seem to have contained the cute virus the pandemic there in one particular province.
3:55
So, we have to be quite careful about um about uh making comparisons with the US or Europe where we've had multiple Wuhan-style uh outbreaks.
4:05
But given the low rate of immunity in most parts of China, shouldn't we be fairly pessimistic about Chinese recovery right now? Uh exactly.
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And so, that given that even in the Chinese case we're saying something closer to a swoosh than a V, the prospects in the West I think are as you I think you were suggesting, quite quite poor.
4:22
Um and um I I I it's just unclear to me how a as you were saying, densely packed urban service sector, face-to-face-based economy of a city like New York, how it comes back under a regime of periodic lockdowns and managed social distancing.
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We do this is just a huge experiment that we're running.
4:46
If there were a Chinese financial crisis coming out of coronavirus, what would that look like?
4:51
What's the weakest stress point?
4:53
Well, I mean, the the the the real estate sector is one obvious one, and some of the hugely um uh highly leveraged Chinese development companies.
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Evergrande is I think most people's favorite as the weakest link in the Chinese real estate development sector.
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I think uh ballpark 100 billion uh dollars in foreign exchange um borrowing on its balance sheet.
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So, an extremely fragile actor.
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Um whether it's systemic in the Chinese context is a different question.
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Whether the collapse in that firm by itself would have a large enough ripple effect is an open question.
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The shadow banking system in general in China I think is a huge worry.
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So, these are the banks which operate outside the uh mortgage lenders of various types, but also various types of lenders um that support local governments.
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And then I think there is the rather horrifying experience of 2015-2016, which is easily underestimated in the West.
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Uh we were we were distracted by a variety of other issues at that point.
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Uh but China went through a really dangerous-looking foreign exchange run in '15-'16, lost about a trillion dollars' worth of reserves, which is large even for the Chinese to absorb.
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And that's another model um of what a what a shock might look like, a financial shock.
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Um mercifully been spared that so far this time round.
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It would be very bad news for the emerging market economies which are closely coupled to China.
6:22
For dealing with the current crisis, financial crisis, what is the statistic you wish we had that we do not?
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I think I think the question that the uh is probably on most people's minds is um the weak hands.
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I'm not sure that I have it's a great very pointed question.
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Is there a single statistic?
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In '08, the the the problem in the end was the what what I call the weak hands.
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So, where the where the risks were concentrated, where the losses were concentrated, where the leverage was, and where therefore a run would be very, very damaging.
7:00
And I think that's really, in terms of managing the financial crisis as opposed to the real economic recession which is coming our way, that's probably the thing that Jay Powell and central bankers in Europe as well are are most worried about.
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Are there actors out there that could be forced into various types of fire sale, um which would then destabilize asset prices?
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I don't think necessarily there's there's one number this time round.
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One of the things I think they're dealing with is that this isn't the bank-centered financial crisis.
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This is as Robin Wigglesworth put it in the Financial Times, he was quoting some some some somebody he'd interviewed that this was a financial market crisis.
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So, it's affecting lots of different markets for credit rather than the balance sheets of individual of individual banks.
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I think in '08 we would have known, like, you know, "We're extremely concerned about Citigroup."
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That might have been, you know, the mantra by December.
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This time round I think the risk is more diffuse.
8:00
Won't it quickly become a bank-centered crisis if, say, 20% of Americans are not paying their mortgages, which is an estimate I've heard, it might be rough?
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Within a month or two, that seems intolerable that even Fed liquidity injections would not get the banks over that hurdle unless we fix it more directly somehow. E- Exactly.
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And I mean, Neel Kashkari came out in the FT I think yesterday calling for a big capital raise on the part of the banking system um to provide them with more shock-absorbing capacity.
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Um whether that hits the big banks this time or whether the neuralgic issue will be the um uh mortgage lenders um who are in the front line of that shock, or the people who are exposed to various types of consumer credit.
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I think that's that's a key issue.
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It's not obvious to me right now that the balance sheets of the really the core group of systemically important largest US banks are vulnerable to anywhere near the same extent as they were in '08 anyway.
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But absolutely you're right, if this turns into a protracted, extended uh real economic recession, if this is a very slow recovery, then feeding up from the bottom by way of households and companies' inability to service debt, you would expect that kind of shock to to develop.
9:13
What do you think of the liquidity of Treasury securities, the bid-ask spread on Treasuries, as a way of seeing how well financial markets in general are working, as a way of tracking the crisis?
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That's that was I think very much on the minds of the central banks um in the critical weeks in March.
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Various uh huge fluctuations in price, um and there gaps in the market where you would normally expect uh Treasuries with different terms to, you know, have a smooth curve of pricing.
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I know that the Bank of England uh around the 18th of March was extremely concerned about um if you like, just gaps in the market for UK gilts, where you would expect a smooth yield curve, and and that was no longer that was no longer um um something they were seeing.
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They were they were seeing irregularity.
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Um, I think that's a that's the guilt the the government debt market is one of the is one of clearly one of the foundations of financial stability.
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Um, so far overall, once we came out of those two really dangerous weeks in the second and third week of March, perhaps not surprisingly given the scale of asset purchases by the central banks, the the normal set of relationships between equity markets and bond markets seems to have been restored.
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There seems to be a safety function being performed by government debt markets, which must be reassuring.
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Um, if that were to become destabilized, it would indeed start you know, that would set off um, warning lights flashing, I think.
10:43
Under what conditions does stagflation and just a higher rate of price inflation become the most likely possibility?
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What would predict that as the end state?
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I'm I'm It is amazing how much we're monetizing, right?
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Some people call it QE infinity and there's more to come and it'll be in more nations.
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Yeah, and you would anticipate, you know, if you were kind of if you had any sort of a shred of monetarist in your body, you would expect at some point for there to be a price response.
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a price response. I mean, in the short run, the sort of secular stagnation scenario seems a little more plausible because you you know, from a kind of Keynesian aggregate demand perspective, you would expect households to respond
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to this kind of shock with a higher savings rate and you would expect and we've seen quite substantial deleveraging after 08 in the American household sector and you would expect, you know, business confidence to be shot and lower levels of investment. That
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That wouldn't suggest that general macroeconomic uh, circumstance which would lead to inflation.
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On the other hand, the monetization is massive.
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Frankly, I mean, if we could have inflation of 4 5% in many ways, that would solve a lot of our problems because it would act as a it would would act as a tax on nominal assets and it's one of the ways historically in which we have dealt with the sort of debt burden that we're running up right now.
11:59
If you look at the history of the 50s and 60s, um, rapid nominal GDP growth of which has a fraction was inflation was a key element in the formula for managing post World War II debt.
12:12
If inflation risk rises, will we be able to target a rate of price inflation?
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So, I do would be happy with 4 to 5%.
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Yeah, but if it's either the status quo and what bond market markets expect now or you leap to 15 or 20% Yeah, because the velocity of money you maybe cannot predict or control in traditional ways.
12:31
Uh, should we still be rooting for more inflation or not?
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Well, I mean, these are these are these are very speculative scenarios that we're talking about.
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We of course in the advanced world.
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Yeah, yeah, but absolutely.
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But the advanced economies um, um, have not experienced those kind of inflation rates for a long time and that's part of what defines them as advanced economies, right?
12:50
There's a real circularity in the way in which we classify the economies of the world.
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Um, Eric Lonergan has a great uh, piece where he says what defines an emerging market is that it has the kind of inflation dynamics you just outlined.
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inflation dynamics you just outlined. In other words, prices actually do respond to um, monetary shocks and that has a social underpinning and I think for me one of the reasons I'm skeptical about a strong inflation scenario is it's not
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obvious to me that we have as it were the sociological guts that would in I don't mean like bravery, I mean in the sense the underpinnings of a wage price spiral, which I think would be crucial to drive the kind of inflation that you're you're talking about. If we were
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you're you're talking about. If we were to be in 15 20%, you seems to me that you would need the mechanics of a of a wage price spiral and indexation of various types to be actually operating and we stripped most of that out in a highly
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conflictual way really from the Volcker shock onwards if not before due to the late 1980s and in the absence of that, it's difficult for me to see the scenario in which we head towards, you know, spiraling inflation of the type you're talking about. Of course, it's an
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Of course, it's an endogenous process.
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It's much much more attractive to join a trade union when you actually need to defend your your wages against nominal price shocks.
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So, that might be a mechanism that would work.
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I find it difficult to imagine that being a something that happens in the, you know, 2021 2022.
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What's the best way to think about which emerging economies are most vulnerable?
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And you're feeling dominate some, but just conceptually, how do you approach the question?
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Yeah, I mean, I think this is an absolutely crucial issue cuz I mean, I've been having an absolutely fascinating conversation online with Brad Setser at the Council on Foreign Relations that I'm sure you must have interviewed and if you haven't, you should and everyone who listens to this program should follow Brad at and uh, uh, follow the money his blog at the CFR and on on Twitter.
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And he he's, you know, he's coined this phrase saying, you know, there's not there's not one emerging market crisis, there are several.
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Um, cuz there's a range of different pressures which are acting on them.
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I mean, starting with their relative exposure to the medical crisis, which we mustn't forget is the fundamental driver here. And oil prices.
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And the degree of foreign ownership of their sovereign debt even if it's denominated in their local currency and the degree of their dependence on foreign borrowing in dollars and potential macroprudential hazards, the balance sheets of really big um, quasi state-owned companies.
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Pemex would be the absolutely classic one in Mex- Mexico, Petrobras in Brazil, uh, Eskom, uh, the electricity utility in South Africa where you could see a kind of doom loop spiral between the credibility of sovereign debt and the imbalance in the private balance sheet.
15:37
If you if you use all of those different criteria, you can pick out a series of relatively vulnerable countries.
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Um, and, you know, South Africa I think is top of most people's lists.
15:46
Um, terrible health risks cuz of the large 7 million plus people living with HIV who we imagine are probably extremely vulnerable to COVID-19.
15:55
Long-standing huge unemployment problem, growth below population growth for a long time.
15:59
Just been downgraded to junk for its sovereign bonds.
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Rand has suffered a huge collapse, which in due course might generate export growth.
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But anyway, that's a a candidate.
16:08
Um, Algeria I worry about as a European.
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Um, 85% dependent on oil and gas exports.
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Very fragile socially and politically.
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Um, Turkey is high on most people's lists.
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Not because it's a desperately poor country, but because of the political risk.
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Erdogan has made clear that he won't avail himself of IMF support despite the fact that the credit default swaps on Turkish debt have blown out to the same extent as South Africa's have.
16:38
Um, that would be a portfolio of high risk places.
16:40
And I think Americans should be North Americans should be profoundly concerned about the situation in Mexico.
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Um, which has suffered a huge shock to the exchange rate.
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Pemex is a is an accident waiting to happen.
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It's hugely politically salient for the current administration because they have bold ambitions for national oil.
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We've seen how hard the Mexicans negotiated over OPEC.
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Um, and it's our neighbor and and tens of millions of people living in the United States obviously are directly their lives are directly entangled with with Mexico.
17:11
Um, so I I I think that would be very high on my list.
17:14
Somebody in Treasury is monitoring that that situation very closely.
17:18
I'll just tell our listeners we're having this chat on April 16th.
17:22
Uh, but let's go back in time.
17:24
Was Keynes right about the Treaty of Versailles?
17:28
Uh, Was it as bad as Keynes said? Um, no no.
17:33
I I think I mean, I'm I'm a I'm I'm a I'm a confirmed liberal Keynesian in my broad politics and my understanding of politics and the way expertise ought to relate to it and the operations of modern democracy I think his his political writings and essays and persuasion are are brilliant.
17:47
Uh, but I regard the economic consequences of the peace as a disastrous book.
17:52
Um, because it essentially um, it enhanced the and gave arguments to the German nationalists who would have turned doesn't mean Keynes was wrong, right?
18:04
It may have had bad effects, but he's writing at a time where the wealth to income ratio is especially low.
18:09
So, a given measure of debt burden is much worse for an economy than what we might be used to.
18:16
Absolutely, but but the the evidence of the 1920s is is that with the right framework, the Weimar Republic was in fact perfectly capable of bearing a reasonable burden of reparations.
18:25
Two to 3% uh, were doable.
18:28
Um, uh, the fact of the matter is the German political class had no interest in in in in accepting that responsibility and it was quite determined to do a variety of different things to escape that burden.
18:42
And there is no doubt at all that the front loading of the demands, which is very understandable from the point of view of the financial needs of the French in particular, caused a huge uh, bottleneck, if you like, early on in the history of the Weimar Republic when it was most fragile.
18:54
And that's that's as it were the moment when I think the critique is most is most valid.
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critique is most is most valid. Um, and that's why for me really the hidden agenda of the economic consequences of the peace is an appeal to the Brits, but above all to the Americans um, for large-scale debt concessions, on which one can only agree with Keynes that this
19:15
was in fact absolutely critical that market economies have unspoken fundamental political preconditions which in the aftermath of a massive war have been disrupted and what you do not want to do is to port, if you like, the bitterness and the antagonism of politicized intergovernmental debt into the post-war period. Or if you're going
19:33
Or if you're going to do that, you need to build a very very solid framework around it.
19:36
But to imagine, as the decision-makers in the 20s did, that you could combine a rapid return to essentially a sort of an Edwardian free market model of capital flows and entangle that with politicized public debt, that that was a a tragic mistake.
19:50
What he's not saying in the economic consequences of the peace is what he said in many memos before he published that book, which is that America is key to the entire problem.
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And he was rejected at Versailles, and he knew that the basic anchor of the reasonableness of his position had been shot down and removed by the Wilson administration.
20:07
And so the book itself is as it were the kind of the fragment that emerges that is that is uh he can place in the public realm.
20:15
Um but he, you know, despite the personal um caricature of Wilson that he delivers in the book, which is of course very damage damning, um he doesn't he doesn't in fact go very far in his criticism of the US administration at that moment, which is So it's he's playing political games in the yeah.
20:35
Was there a better alternative to the managed dirty floating exchange rates of the 1920s?
20:42
Cuz at the time that was thought to have not been working well, the British revaluation of 1926 was a deflationary disaster.
20:49
So what should we have done then with the international monetary order?
20:54
I think um it's it the the you cannot dissociate the the the um the conditions of of successful international order in the 1920s from from politics.
21:08
I mean, the the the question can't be posed from the position advantage point of some sort of abstract technocratic ideal.
21:13
It has to be posed from the question of what's doable what's doable and who are the people with power who are likely to do the things that you're asking about.
21:19
And that's in a sense for me the the problem also with some of Keynes's critique of the gold standard restoration is that he's just refusing what is evidently the rationale behind the position say of the British government which returns to gold at the pre-war parity.
21:35
And the purpose of doing that is clearly uh uh to secure the high rating at the high standing of British sovereign debt.
21:45
And that is the priority of the people making that decision.
21:47
Keynes says it's not optimal for employment.
21:49
He's right, a lower exchange rate for the pound would have been better.
21:52
But if your aim of the game is basically to ensure that people who lent the British government money in 1914 don't do much worse than people who lent the American government money during World War I, then of course the parity with the dollar has you know the aim of the game is to restore it to its pre-war level.
22:09
And that is judged by the political elite uh of the 1920s in Britain to be the key criterion.
22:16
Keynes is adducing as it were well, in fact, if you should if you cared about unemployment, then of course you would have a lower exchange rate, which I which everyone could agree with.
22:23
It just wasn't a priority.
22:25
Cuz the other domestic priority of the group that is governing Britain in the 1920s is to restore class balance.
22:28
And in the aftermath of World War I, apart from the flu, the thing that was going on that was really on everyone's mind is the most dramatic period of class struggle in European history in Western European history.
22:41
It's the last moment of genuine revolutionary possibility in most countries.
22:45
And Britain in particular faced a huge upsurge of labor militancy.
22:47
Um and the restoration of the gold standard is part of a strategy of deflation, which is about undercutting the bargaining power of the British trade union movement, which had coalesced in the triple alliance, the fearsome alliance of railway workers, miners, and dockers, which can paralyze an early 20th century economy.
23:07
Um breaking that alliance is is key to what they're doing.
23:09
And and so when Keynes makes his criticism, it's not simply, you know, what would be optimal from the point of view of maximizing some sort of welfare function.
23:16
He's basically offering an alternative program for Britain, which is the program that also in his view might stabilize the long-run possibilities for a liberal party somewhere between labor and the conservatives to actually have a voice in British politics.
23:29
And to do that you need class conflict not to escalate in the way that the Tories were willing to allow it, the conservatives were willing to see it escalate.
23:36
And you need labor not to be the only voice of progressive politics in Britain, which it threatens to become in this period.
23:43
And that's those are those are the stakes which are involved in Keynes's alternative program, which would have been basically for an adjustment of pegs, um an adjust adjustment of exchange rates.
23:54
Keynes in the '20s is not advocating, you know, floating exchange rates.
23:59
He's adjust he's arguing for a better managed fixed exchange rate system.
24:05
Why exactly did the Weimar Republic fail? Simple question, right? That's a softball.
24:11
rapid-fire series of of actually massive questions.
24:14
Just the head system of proportional representation or cultural decay? It's not.
24:19
I say if you want if you want a one-line answer, it's it's the Weimar Republic's survival is dependent, you know, the certainly the argument I would make in in deluge, the distinctive argument that I'm making is it it it is it does depend critically on the ability of the United States to hold the ring um in European politics.
24:37
Um because on the ability of the United States to hold the ring depends the viability of the sort of centrist moderate politics that anchored the Weimar Republic's survival in the '20s, but also you could say uh the best hopes of Japanese moderates in the 1920s in the Taisho democracy period.
24:57
In each case what you see, and indeed even the relatively moderate phase of Mussolini's regime in the 1920s, uh when he was the darling of Wall Street, um in the in each case what you see is people key actors saying, you know, in this hierarchical global system that we're in, what are the best options available to us?
25:17
And insofar as the United States is able to hold the ring, that is to moderate the aggression of say France within Europe, and to provide a steady uh rain of dollars uh dealt onto the economies of Europe and Japan, then locally, if you like, the optimal strategy is in fact to adopt a position of cooperative subordination within that within that system.
25:39
Um and so you see quite remarkable things happening like the Japanese coming to terms on naval naval rearmament, the British coming to terms on naval rearmament, because America looks like a hegemon.
25:50
Um and it's really when that breaks in the early 1930s that to my mind the the survival of the Weimar Republic is, you know, it becomes it's clear that something else is going to supersede the Weimar Republic.
26:02
It's not obvious it'll be Nazi the Nazi regime, but some alternative it is likely to emerge.
26:07
And not just in Germany, but we see in Japan the same sort of shift.
26:11
We see a radicalization of Mussolini's regime.
26:13
Um it is an it is it is an actual democracy.
26:16
So even if the United States has checked out, why don't German voters opt for something semi-sane?
26:22
Instead you get a hyperinflation well past an optimal rate of seniorage extraction, right?
26:27
That just seems irrational by any standard.
26:32
So culturally, what went wrong in Weimar that so many people made what seemed to be non-optimizing non-rational decisions?
26:38
Well, that can't be the fault of the US.
26:40
Well, no, but in 1928, um in 1928 in the last as it were pre-Great Depression elections of the Weimar Republic, Hitler's party gains uh you know, 1 and 1/2% of the vote.
26:52
The communists are doing badly.
26:54
And the centrist parties, the Social Democrats, the Christian Democrats, various shades of liberals have a solid vast majority of the German vote and a center-left government is formed.
27:05
So after the Weimar Republic had survived that initial shock that you're talking about, the hyperinflation of the early 1920s, exactly as you're suggesting, um Germans can quite reasonably see that there is the prospect, if not for glory and national self-assertion, then at least for prosperity and a functioning politics in the Weimar Republic of the late 1920s.
27:26
What we've got to explain is is is why that is broken apart.
27:29
And and I don't by any means want to say that this is all down to the United States.
27:37
Of course German political elites have choices to make, and a large faction of them are obviously responsible for having made choices which turned out to be absolutely disastrous for their own country and for the rest of the world.
27:49
But if you're asking me as it were to say what I would argue, certainly what my own distinctive contribution to the debate has been, is to is to show the way in which the collapse of the structures, the financial structures of the '20s, which did indeed pivot on the United States in the early '30s, shifted the terms of the debate within Germany and several other potential challenger, if you like, insurgent countries.
28:12
So we don't just see this in Germany.
28:14
So there is a factor which goes beyond particularities of German politics or Japanese or Italian politics or indeed even British politics or Soviet politics, which is this broader which is this broader question about the viability really of a liberal order.
28:30
And when that liberal order becomes less plausible, it changes the parameters of everyone's decision-making.
28:36
And then of course it's up to local local local forces.
28:41
And as you're stressing, of course in Germany there is a powerful militarist group conservative group which is willing to gamble on Hitler to provide them with a democratic base.
28:47
And that turns out to be a epic historical miscalculation.
28:52
Speaking of Hitler, was Hitler in fact a Keynesian? Uh no.
28:55
I mean, Hitler personally absolutely not.
28:58
Hitler's personal monetary ideas are very very conservative.
29:01
He's an anti- He's an anti-inflation hawk.
29:05
Um has to be persuaded um to engage in large-scale um monetary financing.
29:08
Um somebody like Schacht is a contemporary of Keynes, and then uh that's his uh Hitler's central banker, and an adventurous monetary thinker.
29:19
And he'd learned to think outside the monetary box, if you like, in the efforts to stabilize the Weimar's currency in 1923-24.
29:27
And he's certainly an expansionary.
29:27
He's not afraid of monetary finance and of using off-balance sheet vehicles to provide liquidity and to provide credit for an underemployed economy.
29:35
And quite reasonably, no one's worried about inflation in 1933 cuz Germany has massive unemployment.
29:43
So in that sense they are adventurous macroeconomic monetary economists.
29:47
They're not Keynesians for the simple reasons that Keynesians Keynesianism classically, of course, um is is is a liberal economic politics.
29:57
And so it believes in a multiplier and it and and the multiplier's the the the be-all and end-all really of Keynesian economics because what it suggests is that small intermittent discretionary interventions by the
30:10
state, relatively small, will generate outside reactions from the economy which will enable the state to serve a very positive role in stabilizing the economy but doesn't require the state to permanently intrude and take over the economy. That's a post-1945 kind of
30:22
That's a post-1945 kind of vision of a mixed economy.
30:25
Keynes himself, that's why, you know, he wants the multiplier to be three because if the multiplier is three, then $1 of spending generates the government spending generates $3 of private economic activity and you can think of government intervention as sporadic. It's emergency medicine. It's not chronic care.
30:44
Um and that, of course, is the antithesis of what the Nazis are doing because they are ramping up government spending and not across the board, highly focused on rearmament because what they're doing is not just creating jobs, they they do create jobs as a side effect.
30:57
What they're doing is restructuring the economy towards building the foundation for rearmament and a war economy.
31:01
Uh and so what they're actually trying to do is systematically repress the multiplier.
31:07
Um because they do not want people employed in armaments factories to go out and buy clothing and fancy food which requires imports.
31:15
Um they want the money to be circled straight back into the armaments effort.
31:18
So forced saving, various types of financial repression are the order of the day.
31:22
So for me that makes the their macroeconomists, the Nazis.
31:24
They're adventurous macroeconomists.
31:26
They're doing they're doing uh massive intervention but they're not Keynesian.
31:32
Robert Gordon in his review of your book Wages of Destruction argues that you've underestimated German prosperity in the 1930s.
31:39
So he cites the Denison uh table base which suggests Germany had maybe 70% of American per capita income and you seem to think German per capita income then is much lower, maybe as low as a quarter of US per capita income.
31:55
What's your current view on that today?
31:58
So so the the the um my interpretation of Nazi Germany really came out of uh confrontation or you know, reading in the 1990s the work above all of Angus Maddison and then Stephen Broadberry.
32:13
Um and what they point to is um a structural gap between the economies not just of Germany um but of continental Europe in general and two points of comparison, one the UK and the other the US.
32:33
And um and the gap is consists of two different elements.
32:37
Relative to the United States, the productivity in manufacturing per per hour per per hour worked or per man uh per person in agriculture and manufacturing and for all I know in services, too.
32:52
There is a huge gap transatlantically between all of the European economies and the United States and there's an elaborate debate going back really all the way to the 19th century but in the form of Chandler and so on about what constitutes the secret sauce that gives the United States this much higher per capita productivity across all sectors.
33:11
And And we can go into that.
33:11
There's a whole variety of obvious factors that you might cite.
33:15
And then between Germany and France and Italy on the one hand and Great Britain on the other, there is also a huge gap in terms of output uh per person.
33:25
But that isn't to do with productivity difference within sectors.
33:30
So German manufacturing and British manufacturing, you might not believe this but in the 1930s were very similar in terms of output per hour worked.
33:39
But the structure of British of the British economy was far more advanced.
33:42
By 1911, less than 10% of the British workforce is in agriculture and in agriculture very little of it is in peasant farming and it's in big farms.
33:50
By 1930s, it's extremely rare for any women to work in farms in Britain whereas in Germany in the 1930s, four or five million women are registered as working full-time in farms.
33:58
So you have two different types of productivity difference.
34:02
One is across all sectors which is a transatlantic difference and then a huge sexual difference between the German economy and that of Great Britain.
34:09
And what Wages of Destruction was trying to do is to say, "Okay, let's write a history of the Third Reich on against the backdrop of assuming that this makes a difference.
34:17
What do we see if we assume that these structural differences are large?
34:23
Let's not argue about the percentages of how large but they're large by any measure and furthermore, they are something that contemporaries know about and factor into their thinking.
34:33
And what kind of a take What kind of a read do we get on Nazi politics if we take this seriously?
34:37
And so and and and and I as I I hope I demonstrate in Wages, in fact, it's profoundly illuminating to think about this double problem.
34:45
On the one hand, the magic, if you like, of the United States which is just more productive across the board and dramatically so.
34:52
And on the other hand, the structural disadvantage.
34:53
You could add in, of course, the fact that the United Kingdom commands a global empire uh which Germany never does to any substantial extent.
35:01
So what the the wager intellectually of the of the Wages of Destruction is to see what happens when we revisit history on the basis of this very different understanding.
35:12
Different, I mean, because if you grew up in 1970s Britain or between Britain and Germany as I did um and you had the conventional industrial policy assumption, say, of 1980s America, you would assume that Germany was an industrial powerhouse that dominated the world and destroyed the world.
35:28
Porsche, Bugatti, Technik, Audi, Mercedes, BMW.
35:30
Of course, they were, you know, an industrial power since the 1930s.
35:34
It just isn't substantively true.
35:36
Um that doesn't actually capture the the reality of the interwar economy.
35:40
So what what Wages of Destruction was doing was trying to unpick those anachronistic assumptions about the obvious dominance of the German economy and to on the basis of of those of that that double comparison with the US and Great Britain to to reread the history of the Third Reich.
35:57
And so what you see is the significance of the agrarian sector, the profound inferiority complex that drives Nazi planning, their relentless focus on agricultural expansion in the East.
36:05
Um the very severe uh problems of uh labor shortage in agriculture and the relatively uh modest scale of their industrial capacity compared to Britain and the United States.
36:20
It's more or less level pegging with the Brits and hugely inferior to the US.
36:25
Given that partial economic backwardness, why then does Germany beat France so soundly at the beginning of World War II?
36:31
France had a fair number of tanks, right? Yes. Yeah. Yeah.
36:34
So the So the other the other wager of the book is to say, "Okay, so um what So as I was saying, the aim of the game is to take those macroeconomically sized facts and to say, "What can we understand and what can we not understand?"
36:49
And having backed out what we can't understand, how do we explain the stuff we can't understand?
36:54
And so Wages of Destruction is a sort of crash test of the ability of economics to explain history and then an effort to make sense of the moments where the economics fails.
37:02
What do we need to add then?
37:05
What does what what do we learn by virtue of our limited ability to explain?
37:11
And there was a school of thought which said this all stacked up, right?
37:13
There was a school of thought that said the Blitzkrieg victory of the Germans in 1940 was the result of their technological industrial superiority which expressed itself on the battlefield in Stukas and tanks.
37:24
And you know, so the logic was quite simple but if you take this this alternative view, then as you're saying, in fact, comparing motorization, France is more motorized than Germany by a very large degree.
37:35
Renault is a far more substantial motor car manufacturer than any car manufacturer in Germany in fact.
37:40
The only substantial motor car manufacturer in Germany in the 1930s is Opel which is owned by GM and it's only substantial on the count of that and Ford would be the other contender.
37:47
So um what that means is exactly as you're suggesting that there are key moments in the history of the regime that can't be explained by economic factors in any simple sense of the word and clearly the battlefield events of 1940 are one such moment.
38:03
Um but in general, the decision by Hitler to go to war against the kind of backdrop that I'm offering doesn't make sense from the point of view, if you like, of a correlation of forces a material balance type of argument.
38:13
And so the question then is, what sense do we make of the fact that the Germans are going to war with without an evident material superiority?
38:22
And that is where then for me the power of ideology comes into the picture um as an absolutely essential and irreducible element in any kind of meaningful history of the Third Reich.
38:34
Um because we have to explain why they went to war even against odds which really didn't look favorable at all.
38:41
Now, I've lived in Germany and it seemed to me then they have plenty of farmland and of course, we're talking about a time when the country was much larger.
38:50
So why then is Lebensraum portrayed as such a significant motive for Germany wanting to expand?
38:54
They have plenty of farms, right?
38:56
More than Great Britain does.
38:59
Well, I know but but Great Britain in in the beginning of the 20th century is 50% dependent on imported food.
39:06
Uh in Germany, it wasn't as extreme as that and I don't necessarily have the number at my fingertips right now but I think it's something like a quarter of Germany's food supply is imported.
39:13
And by that, you don't just think of what the people eat at the end of the food chain but crucially, animal feed um which is which is vital to maintaining, you know, high highly productive um dairy herds.
39:28
Um and what the Germans the bitter lesson the Germans learned in World War I is that that kind of a highly efficient international division of labor um which is one of the keys to the higher productivity per capita of the overall British economy relative to the German economy is its dependence on imported food because better for somebody else to do the farming and you to do the services and manufacturing.
39:50
Um in the case of a war, a total war, especially if you face an enemy like the British, you deploy the economic weapon as one of their key strategic tools and have the navy to do it.
39:59
Um that dependence is a key vulnerability.
40:03
And in Hitler's paranoid worldview, it it's it's also of course where the world Jewish conspiracy brings its influence and its power to bear on on modern Germany and it's that dependence that has to be broken.
40:15
In practice, what this means is that though you're right, Germany has plenty of land, um it it is not able in the 1930s to feed itself at that at the kind of levels and the standard of living that it's become accustomed to on the terms of trade between industry and agriculture culture which people have become accustomed to.
40:32
Uh and that's the problem.
40:34
What they want the land for is to is to improve, if you like, the trade-off um between the relative standard of living in the city and the countryside on the one hand and the degree of self-sufficiency on the other.
40:44
self-sufficiency on the other. Um so the fantasy is really that you could have a you could have a you could have a Midwest, you could have a Canada, you could have an uh Australia bolted on to Germany and that that would augment and it would provide Germany with the kind
40:58
of balance that the United States, the continental US has, which makes continental United States a largely self-sufficient economic entity, or that the British Empire has with the complementarity between the manufacturing and service hub in Great Britain and the and the agricultural and raw material providers of the empire. In most of these dialogues, there's a
41:18
In most of these dialogues, there's a segment in the middle called overrated versus underrated.
41:22
I'll toss out a name or an idea, you tell me if it's overrated or underrated, okay? I'll try.
41:30
Putting aside coronavirus issues, the economic future of Bulgaria, overrated or underrated?
41:38
Uh-huh, overrated or uh You're an expert on Bulgaria, yes?
41:40
I I I I I've I've written it several articles.
41:42
I wouldn't claim to be a I have I've had a great collaborator in Martin Ivanov who's now the Bulgarian ambassador to Finland of all things.
41:49
Um I wish Bulgaria's economic future was brighter than it may be at this moment. The German poet Rilke. I I quite like Rilke.
42:02
Right, you say poetry a lot in your Twitter feed.
42:04
What's the best German language or other poetry from the World War I post-World War I era?
42:10
I mean certainly he would be up there. Yeah.
42:12
Gottfried Benn, I quite like despite his dubious politics.
42:17
Stanley Kubrick, overrated or underrated?
42:21
Uh slightly overrated, I would say. Not my favorite auteur.
42:26
Paths of Glory as a portrait of the World War I world, an alternative to Renoir's Grand Illusion, showing the elites were truly corrupt.
42:33
Wasn't he completely on the mark there?
42:39
Yeah, I I'm I'm a revisionist on World War I as is clear from Deluge, I think.
42:43
So I understand the force of that argument and and uh but um yeah, no, Kubrick isn't my isn't my favorite director.
42:52
The Bretton Woods arrangements, overrated or underrated?
42:53
Very easily overrated, yeah. Why?
42:58
Uh because we tend to think of them as it were as an order that, you know, overrated when you think of the Bretton Woods arrangement as something that existed between 1944 and say 1971.
43:08
Um but that's just, you know, that's that's one of the most common sort of clichéd errors that you can make in international political economy.
43:14
No such thing system ever existed.
43:18
Um agreed, attempted and then broken by the British paddock in '47, not then reinstituted until convertibility in '58.
43:26
Immediately, now we know from all of the great recent work supported by various types of swap line arrangement, by '67 clearly almost dead in the water, and then in '71 just tossed overboard by the next administration.
43:37
Funny kind of regime that, I would say.
43:39
Um and altogether that to me suggests the need to think of international economic history not in terms of big lumpy regimes which have a certain logic that governs them, but more as a sort of continuous being improvised makeshift.
43:54
The League of Nations, overrated or underrated? Uh uh hugely overrated.
44:00
In the in the current scholarship or highly rated.
44:02
Yeah, and I don't you you'd be you'd be surprised.
44:03
You'd be I'm sorry, I should I should say um yes, indeed.
44:08
It deserves deserves its common reputation as being as being a dead letter.
44:15
How today, how will Italy get through the current economic crisis with no corona bonds?
44:19
They've had no per capita income growth in 18 years.
44:21
Lombardy's taken a huge hit.
44:24
Yeah, it's it's it's Why are they even solvent?
44:27
Is is the ECB going to buy everything?
44:30
I I do think, to go back to an earlier conversation, you know, one of the outcomes of this is likely to be the warehousing of huge quantities of government debt on central bank balance sheets where we just hope it gets forgotten about.
44:39
And that's not the worst of all possible worlds.
44:41
There are many alternatives which are worse than that.
44:44
And that does appear to be the solution that the Eurozone is drifting towards.
44:48
And frankly, if the North European states will accept that, you know, that would be again one of the more tolerable outcomes here.
44:53
But the tragedy of Italy's economic development over the last, as you say, the last 18 years is is um I you know, along with many others, I have been campaigning and banging the drum for years to try and get the political elites in both Brussels and and Berlin to recognize that this they cannot expect, you know, political legitimacy to be maintained in the face of that kind of economic track record.
45:20
And um and you don't need to be a nationalist populist, I think, in Italy to be resentful and furious at the um the lack of hearing that they received for that position.
45:30
But isn't it better to bail Italy out non-transparently through ECB purchases rather than through a common fiscal union where the German voters would resent it more?
45:41
Italy probably would behave irresponsibly, right?
45:42
There's been a fracturing of cooperation with all nations.
45:47
So isn't it better we haven't had a fiscal union?
45:50
Um I I take the the the the the force of that point and it's a kind of classically Keynesian argument for burying a problem you can't fix politically in some technocratic solution.
46:03
It would be truly compelling if uh the German political class had managed to close ranks and as say the French have and basically silence and kill the issue, but they have failed to do that.
46:14
And far too often the Bundesbank and quite mainstream conservatives in Germany engage in a monetary populism essentially, which blames the ECB for low interest rates, which uh which problematizes this de facto round-the-back sharing of risk by way of the ECB balance sheet.
46:33
Hans-Werner Sinn, the notable Munich economist, can command the pages of serious German newspapers with his polemics against the so-called Target 2 balances, which are really just the reflection on the balance sheet of the ECB of movements within the European financial system.
46:47
Um and all of that makes for a very unstable brew.
46:49
What I worry about is a spiral of delegitimation fundamentally in which an unspoken, as you say, convenient technocratic fix to the problem doesn't in fact remain unspoken.
47:03
Then you have us an insurgent economic nationalism against that, which is where the AfD, the the right-wing party which has haunted German politics in recent years, comes from.
47:11
It's not an anti-immigrant party in the first instance.
47:13
It's an anti-Draghi party in the first instance.
47:15
Party directed against Mario Draghi and the Alternative für Deutschland, the Alternative for Germany they want is an alternative to the sort of monetary fix that we're talking about, to activism on the part of the ECB.
47:27
They they bring suits in front of the German Constitutional Court, which is an avenue favored by political activists, and the German Constitutional Court is put in the embarrassing position of having basically to sign off on whatever one understands a legal fig leaf, um to avoid the embarrassment of blowing up Angela Merkel's Europe policy, or rather Angela Merkel's non-policy towards Europe.
47:48
And that's if that channel was not there, I would say I'd be totally with you.
47:53
Bury this stuff, bury it deep, and let's never talk about it again.
47:55
But unfortunately, that is not how the German political system works.
47:59
Very striking contrast to France, which is in a sense, you know, essentially in exactly the same boat, also a risk sharer with Italy, and it's not even a subject of serious conversation.
48:10
I mean Marine I mean, it's never been a serious subject of conversation there.
48:14
And and um that's that's the reason why I find I'm not sure that this status quo will hold, though de facto I think that's where we're headed.
48:24
Will Hungary simply persist as a truly autocratic regime within the European Union? Very difficult to tell.
48:29
I agree, it's flying under the radar right now.
48:33
Um it's one of the it's one of the places where financial discipline might actually help.
48:36
I mean, Orbán has been incredibly fortunate uh in the macroeconomic conditions which he's enjoyed for his experiment.
48:41
Financial markets have not punished him um for his economic nationalism.
48:48
And um the current environment, which is much less friendly to emerging market borrowers, may may be a lot tougher for him.
48:54
Likewise, the massive downturn in the auto industry, I mean, Hungary is basically a is an extension of the German car plant system.
49:03
Uh and when global demand for German cars turns down, Hungary gets very badly hit.
49:08
So it's not obvious to me that Hungary that Orbán's formula will in fact work in a less friendly economic environment than the one he's enjoyed.
49:16
That's a we'll that's kind of a wait-and-see kind of a response.
49:21
As of late, as you know, there's been a deal where Turkey essentially keeps many uh North African refugees bottled up, so to speak, and they're paid off by the European Union.
49:30
There are signs that deal may be collapsing, possibly on both sides.
49:36
Uh if that deal collapses, how does the European Union respond and what what does that world then look like?
49:40
What stops the massive flow of refugees coming up through Eastern Europe?
49:46
No, and especially cuz that then hits the, you know, two of the very weak members of the Eurozone, Greece and Italy.
49:52
Uh, one of the major sources of resentment in Italy is the sense that they were left on their own with the with, um, the refugee problem with this extraordinary Dublin agreement, um, providing again the kind of vaguely for for various types of nationalist selfishness on the part of northern European states which were in a position to absorb migrants much more easily than Italy was.
50:12
The Dublin rules are basically if they come to your country, they stay there.
50:16
You don't There's no There's no formula for redistribution, um, within the within the EU. I I I agree.
50:24
I think that is kind of part of a polycrisis scenario, um, in which, um, and which is what we saw in '15, right?
50:32
In the '15, if you think back to 2015, it's this remarkable moment where we see the Chinese economy under pressure, we talked about that earlier, the Greek crisis blowing up, the Ukraine crisis still very hot in '15, and the refugee crisis.
50:45
And we know how explosive that combination was for European politics.
50:50
We could indeed be heading back to a scenario which was every bit as bad as that.
50:54
And that's one of the reasons why I say worry about Algeria because that could produce a huge new flow of migrants from an economically distressed North African country, uh, which France would be would be ill-equipped to deal with.
51:06
Um, and it's not obvious that we did anything more than stick a sticking plaster on it.
51:11
And the Europeans will defend themselves and I think quite reasonably in saying, you know, they move from crisis to crisis and they do improvisations.
51:18
They move incrementally and they move crabwise and try, you know, Europe is forged in crisis.
51:22
All of those clichés of a kind of EU pragmatism.
51:23
And the question one has to ask, of course, is when do you reach the limit?
51:27
When when do you hit an obstacle which is too big, which is too difficult, and which exposes your fundamental failure to come to terms with the basic issues that need to be addressed.
51:37
And the legacy of bitterness which has built up in the series of make-shifts that you've adopted.
51:43
And what I worry about, many other people worry about, is whether whether we're we're at that point now on several different nations at one.
51:50
COVID-19 itself, the long-standing, um, immiseration of the Italian economy, and as you say, a refugee crisis that might break up.
51:57
And if Turkey is one of the fragile EMs, then of course, you know, all bets are off, if you like.
52:02
Um, though there are again always possibilities for negotiation.
52:05
Maybe a sweetheart deal for Erdogan is precisely the thing that will open the door to some sort of refugee fix.
52:12
Um, Let's say 5 years from now, when the immediacies of the coronavirus crisis probably have passed, how much cross-border mobility do you think there will be within the European Union?
52:24
I think Europe will move I I I mean I mean you should take everything I say about Europe in a sense with a pinch of salt cuz, you know, it's it is my politics.
52:32
It is it is one of the things that I'm most committed to, personal biography, all sorts of other reasons.
52:38
I mean I imagine I imagine that the EU will restore mobility on a similar level to the United States of America.
52:45
Um, uh, I I I imagine Europe will move quite quickly towards, um, the sort of regional deal that seems to be emerging between New York, Connecticut, you know, Pennsylvania, New Jersey.
52:56
That those are the kind of blocks which can move, um, which can move relatively smoothly, uh, back towards a restoration of something like mobility.
53:04
I would be very surprised if there wasn't a relatively free-flowing mobility regime within the EU.
53:09
It's one of the core values. It's what the EU is for.
53:14
Um, and I don't think this crisis is going to blow that off course.
53:16
Does that mean that there won't be various types of, you know, pandemic management structure in place?
53:21
I I That's a different issue.
53:23
Will there be, you know, electronic passports and temperature monitoring devices at most European countries?
53:29
That I wouldn't be surprised by that, nor would I think it terribly significant, to be honest.
53:34
Um, we don't discuss like, you know, the airport security provisions of Italy versus Germany very much cuz they're not very interesting and they don't matter very much.
53:41
And I think that might be the sort of place that we're in.
53:43
The blanket bans on movement will not continue.
53:45
Um, that I think that they're just impractical, um, both at a national, regional, and an international level.
53:56
I have a series of questions about what I call the Adam Tooze production function.
54:00
That's how you get things done.
54:03
This is the final segment of our dialogue. Are you ready? I'll try.
54:07
Your questions are great.
54:09
You've written an enormous amount.
54:09
Just this last week you had a major piece come out in the Guardian, one in London Review of Books.
54:16
Uh, your books are very long.
54:16
What is your most unusual writing habit?
54:21
I'm not sure it's unusual, but I think it's the writing habit that many people have who do write a lot and regularly.
54:26
Is I write every day, basically.
54:29
I I I I I I I didn't find it I haven't always found writing, um, easy at all.
54:33
I've been to a lot of therapy of various types to stabilize myself emotionally and psychologically. I still I still do.
54:40
It's very important for me in handling the stresses that arise in writing.
54:45
Um, and one of the things I realized in the course of that is that actually rather than thinking it was something terrifying that I had to steel myself to do, that the best way to think about it was as as something I do every day. So, it's like exercise.
54:55
If I have the chance, I like to exercise.
54:57
Um, it's a puzzling activity.
55:00
I just treat it as a kind of almost as a game, rearranging words, trying to fix things, and and then I say to all my grad students, like you can do that for 10 minutes every single day regardless of what else is going on in your life.
55:12
You can always find that 10-minute slot.
55:13
So, that is the thing that I I make sure I do.
55:17
And that means even big projects slowly move along because then when you get the the big slice of time, the three or four hours at the weekend or something, you're actually at top of stack.
55:24
You know where to go because you've been puzzling away at it and chewing on it every day, even if it's only for 10 minutes.
55:32
I give the exact same answer, by the way.
55:33
What is your most unusual habit for how you absorb and process information? Right?
55:38
You read an enormous amount. Yeah.
55:41
What's What's your trick?
55:43
I actually I have to say I mean I mean you mentioned Twitter early on.
55:45
That's been transformative for me.
55:46
Um, I've yet to figure out like whether it enters into like note-taking in any kind of conventional form, but that has been And and the odd effect of that is that when I'm for whatever reason deprived of Twitter, I feel suddenly that I'm less motivated to read.
56:03
So, sharing has become like a a key element in my reading.
56:06
And the trying to figure out what the interesting thing is that I want to share is a very good way of focusing your mind on what the core You read a piece, you know, what are the three sentences here I want to cut and paste?
56:18
Which is the graph that is really telling?
56:20
Um, and how do I nuggetize that into whatever it is, 28 characters?
56:25
That's been a very I found that at this stage of my life.
56:27
I I know, you know, this isn't necessarily the best way to read complicated philosophy of history, which I also spend a lot of time doing at various points in my career.
56:34
But from the point of view of, you know, parsing the flow of macroeconomic news, which I know we're both kind of addicted to, this is a this is a good way of doing it.
56:44
It's a bit like sharing slides back and forth amongst, you know, wonky friends. Look at this graph.
56:49
This is a really good one.
56:51
And that's That has become for me that that that that metabolic system of reading and then reproducing and sharing has become a a key motivator of of consumption.
57:00
Um, it's not it's not just, as it were, production for its own sake.
57:04
It's actually a way of structuring how you consume.
57:08
Here's a question from a reader.
57:08
Feel free to pass on it if you wish.
57:10
And I quote, "Your grandparents were nutritionists on top of everything else.
57:16
Your grandmother wrote on the nutrition and health of the wives of coal miners.
57:21
How did that affect your upbringing?" End quote.
57:24
Well, in fact, I was I was on it was on the tip of my tongue.
57:25
So, if you asked me like where my reading habits come from, I would have said the the breakfast table of my grandparents who, if you care to inquire into their history, have have a colored, uh, checkered past and a very complex political history.
57:39
But they they were people of the world and they subscribed to Le Monde, the French newspaper. They were multilingual.
57:47
And their breakfast table would consist of a series of, "Oh, have you seen this article?"
57:50
It was basically like kind of, you know, analog breakfast table Twitter.
57:53
If you God, but you should really check this out.
57:55
Like I'll save this for you.
57:56
They would cut things out and shove them across the breakfast table at you.
58:00
And that's, um, that experience for me was absolutely formative.
58:02
And their engagement with the real world.
58:04
I mean, they they continued writing.
58:06
My grandfather basically died over his word processor in his early '90s.
58:10
And what they did a lot of was, um, digesting and synthesis.
58:14
So, they would go to the Welcome Medical Library in London and they would read all of the papers cuz they were multilingual.
58:18
Lots and lots German, French, Spanish, Russian, some Scandinavian languages.
58:22
And they would they would try and synthesize the best and most recent work on, um, on key issues of concern for them.
58:30
And they were materialists, originally Marxists, but they had become deeply concerned with issues of nutrition.
58:33
You are what you eat in the famous Foyerbachian phrase.
58:36
And they took that and turned it into a politics which was around malnutrition, ultimately, and ensuring that the majority of mothers, crucially, were well enough nourished during pregnancy to ensure that the progeny and the future uh, population of the country were were were not were not were not stunted, who didn't suffer from the damage of poverty, um, before they were even born.
59:01
It says in one of your biographies, and I quote, "He has worked in executive development with several major corporations."
59:06
What kind of advice do you give them?
59:10
I I I had the privilege of working with BP, um, during the John Brown, uh, the earliest engagement of an oil major with the carbon problem in the late '90s.
59:18
BP was, uh, just chose to and it was part of its strategy for entering the US market was to differentiate itself from Exxon by embracing the climate problem.
59:32
And so, uh, John Brown, who was a highly unusual CEO, decided to set up a bunch of boot camps for the leading 300 people in BP, which I guess had about 100,000 employees.
59:42
So, these were very senior, brilliant people, um who would spend a week in university campuses around the world.
59:47
And one of the weeks they would spend was in Cambridge.
59:50
So, we worked through the entire leadership team of this oil major.
59:53
And our job was to unsettle, certainly the Cambridge camp, our job was to unsettle their familiar frameworks.
59:58
So, um and this, you know, the the the questions were political, ethical, how do you think about your license to operate?
1:00:05
So, I used to run, just to give one example, uh a session which started with a series of slides which were American bombing aerial reconnaissance of a chemicals plant in um Silesia.
1:00:20
And I would fly them in still by still until they suddenly realized that we were looking at Auschwitz.
1:00:26
And they were looking at a chemicals plant.
1:00:28
And they had recognized the chemicals plant first cuz they're chemical engineers.
1:00:30
And then they realized they were looking at Auschwitz.
1:00:34
And so, the aim of the game was to confront them with the, you know, the way in which a company like IG Farben, which was a world-beating industrial firm, the best by by a million miles, you know, hugely superior to DuPont in its technology, Nobel Prize winners on the board right, left, and center.
1:00:52
How a how a totally cosmopolitan, globalized company, so not by any means an obvious supporter of German economic nationalism, how it could end up building the largest chemicals plant in Europe at the time at Auschwitz.
1:01:07
Um and that was the sort of challenge that I wanted to confront them with because we have to take seriously the, you know, the historic responsibility of giant capitalist corporations.
1:01:16
And most of the time, of course, their activities are quite innocuous, but but not always.
1:01:22
And their impact and their footprint is huge.
1:01:25
And they can find themselves in situations which which burden them with vast historic responsibilities as IG Farben did.
1:01:31
And and we happen to know a lot about IG Farben because of the Nuremberg trials.
1:01:34
And so, I wanted to I wanted to, you know, it's kind of like a a case study that would blow their minds permanently.
1:01:41
Um and that it actually was hugely, I don't mean this at all cynically, it was an incredibly productive exercise to watch them struggle with this problem, for them to scan their own activities and think about where they might be engaged in various sites and bargains.
1:01:55
Cuz we can get inside the heads.
1:01:55
All of the IG Farben's corporates wrote rather introspective accounts afterwards when they were in jail waiting trial.
1:02:04
Um so, we can really quite we can get quite deep inside the psychology of the decision-makers who who made those disastrous decisions.
1:02:10
So, that was one of the sort of thing that we were doing.
1:02:13
And it it was it totally changed me.
1:02:13
I mean, it turned me turned me into a global historian because you I was a rather parochial Europeanist.
1:02:19
And and then I met these people who were operating this global company whose vision was far wider than mine.
1:02:24
Not academic, but like vastly wider.
1:02:29
And um that really shocked me.
1:02:29
Um before COVID hit, I was working on a book on climate and I will go back to that.
1:02:34
Um but um but in so doing, I was really for me reconnecting with a set of questions that I'd first addressed 20 years ago under the impact of working with these with these people.
1:02:46
Let's say a good friend comes up to you and says, "I've never been to Germany. I have 2 free weeks. I want to go."
1:02:51
Again, this is without coronavirus. "Where should I go?" What do you tell them?
1:02:55
You know the country well.
1:02:56
Yeah, the first thing you'd say is it's an enormously varied place and it's very big.
1:03:01
And you really want to get a you want to get a range of experience.
1:03:03
I mean, I grew up in in beautiful, sunny, provincial Heidelberg.
1:03:06
And it's pretty difficult to recommend anywhere more highly than that for for tourism and to kind of get the dolce vita kind of sense of of Germany.
1:03:14
But it would also be, of course, crucial to visit a city like a Hamburg or an Essen or a Berlin.
1:03:22
Berlin would be the city where if if the universities could offer, you know, the sorts of terms and conditions and and facilities that American universities do, I would probably most like to live and work.
1:03:32
Um that is not the situation, unfortunately, of the German university system.
1:03:37
Um but it's a it's an extraordinary city.
1:03:40
So, it would be a varied tour.
1:03:40
My wife is works in the travel business and she has her own travel boutique travel company.
1:03:45
We were planning a trip that has just been canceled, unfortunately, that goes from Berlin to Dresden to Prague to Vienna.
1:03:51
So, a sort of essential European tour with a historic theme and the best vineyards that we could find of central Europe along the way.
1:03:59
I would say travel, get on the train.
1:04:01
Um unless you're a car nut and you want to experience the freedom of driving a Porsche at, you know, 200 miles an hour, which you can do if you do it at 2:00 a. m.
1:04:08
The roads are clean enough and they're smooth enough.
1:04:10
But other than that, ride the train, sit in a an ICE going at, absolutely no kidding, 200 miles an hour, uh powered by solar power, and and watch your coffee not even vibrate.
1:04:21
It's absolutely stunning.
1:04:24
They have to put speedometers into the trains to make people aware of how fast they're going.
1:04:29
You can you watch the cars on the interstate, and these are un-speed-limited interstates, just you zoom past them.
1:04:35
I mean, you're going faster than a Ferrari or a Porsche flat out.
1:04:39
And you can literally sit there and your coffee doesn't move.
1:04:43
And then compare that, of course, with the experience of your average Amtrak ride.
1:04:47
It's it's uh the best way to do it.
1:04:49
Travel the travel the country, see the countryside.
1:04:51
Um do the extraordinary variety of of landscape and culture cuz it is it's an incredibly heterogeneous place.
1:04:57
One of the bizarre projects of German nationalism was to weld it into a uniform country which it it just it just doggedly refuses to be.
1:05:05
It's Catholic and Protestant.
1:05:07
It's both rural and intensely urban.
1:05:09
Um so, experience that diversity.
1:05:12
It is one of the great underrated tourist destinations, certainly of Europe.
1:05:15
Um very hospitable, English-speaking.
1:05:21
What's your favorite item in German food?
1:05:25
So, there are a lot of familiar ones.
1:05:26
I love sauerkraut, but I grew up in in the south in the southwest.
1:05:30
And one of the specialties there is is a kind of ravioli called Maultaschen.
1:05:36
Um So, they're made with spinach meat filling and they look like giant, overgrown, somewhat inelegant elegant ravioli.
1:05:42
And you have them in a in a stock generally.
1:05:44
Um and that is that is wonderful comfort food.
1:05:50
Um The salads in the area where you grew up, uh I think are fantastic. Yeah.
1:05:56
Uh you know, the flower-based salads, the mushrooms.
1:05:58
You don't hear that much about them, but often better than French food, I think.
1:06:02
Oh, well, the Rhine Valley, I mean, it's in it, you know, the Alsace, you know, it's a merger.
1:06:05
If you go if you go to Alsace-Lorraine, of course, the the local culture is is actually, I mean, that the French now call it Alemannic. But it's just German.
1:06:15
I mean, it's German with a strong dialect.
1:06:16
So, that entire region of the upper Rhine towards the Swiss boundary, that corner between France, Germany, and Switzerland, the standard of living there is just I mean, it's delicious.
1:06:28
That entire zone, either side of the Alps really, northern Italy the same, that the standard of living is is unbelievably unbelievably high.
1:06:36
Yes, and the food and wine are um wonderful. And the final question.
1:06:41
Let's say you meet someone who might be a future historian.
1:06:45
How do you spot excellence in that person? What do you look for? Um uh two things.
1:06:52
Um the thing the thing that you're really looking for is you're looking for somebody who loves to read.
1:06:59
And and then you really want to know how they read.
1:07:00
And you're looking for a combination of somebody who, you know, has an awareness above all, I think, because after all, history is I'm not I'm not going to say it's not a social science, but it's more than a social science because it's also a literary discipline.
1:07:14
So, you're looking for somebody who can see um frankly, you know, our conversation has had the feel of a historian's conversations.
1:07:23
We started out with economics and we've ended up in a very different place.
1:07:27
But it's you're kind of looking for that combination analysis on the one hand, but then also an awareness of the way in which arguments are made in language and how they're framed in writing.
1:07:38
And the ability to read through and around that.
1:07:43
So, interpret if you if another way of putting that same point would be an awareness of the function, the active function of interpretation.
1:07:50
So, I'm looking for a student who can say, "Well, X's view of problem Y is Z."
1:07:57
And that argument Z they're making is different from A's Y because A's view of problem Y, you know, is whatever.
1:08:04
I'm losing my running out of alphabet, W. Right?
1:08:06
So, you an ability to, as it were, triangulate between the subject subject matter that's being discussed, the point of view of the observer of that subject matter, and then the type of argument they're offering that connects the two.
1:08:20
And that triangulation is is crucial for sophisticated history writing.
1:08:22
And the more self-consciously one can set position oneself in that triangle, who am I in relation to my object, and what is the nature of the type of argument that I'm making, which is, of course, it's a you know, one tends to say it's subjective, but in fact, it's a repertoire of arguments that are available to everyone thinking about that problem.
1:08:39
That's that's what you're really looking for in in somebody who's interested and serious about history.
1:08:45
Adam Tooze, thank you very much.
1:08:45
Take the best of care up in New York.
1:08:47
And I hope we're able to meet sometime. Yes, I do I.
1:08:51
It'd be a great pleasure.
1:08:51
Thank you very much for the conversation.