Interview with Rana Foroohar by Jeremy Repanic, Playboy July 12, 2016
Back in 2012, Mitt Romney and his running mate Paul Ryan divided America into two classes: makers and takers. In that more genteel era of Republican politics, the GOP candidates for the White House argued that a growing portion of America had become dependent on the hard work of others through government assistance. Romney pegged the number at 47 percent while Ryan said the mooching class was much bigger. If this kept up, they intoned, the American economy would go to shit.
I have been a business and economic journalist for 23 years. I would constantly be talking to CEOs that I knew were smart guys and not bad guys. They would be doing what they were incentivized to do. But they’d be making really short term decisions. A lot of it had to do with outsourcing, a lot of it had to do with cost cutting. It was always about marshalling your capital and making sure you were controlling the capital, but not thinking at all about people; not thinking at all about what does this mean for 5 years, 10 years.
The first chapter of my book details this whole bizarre phenomenon where Apple, the richest company in the world, has $200 billion dollars in cash sitting in offshore bank accounts. It doesn’t want to bring it back to the U.S. to pay the corporate tax rate here so they’re borrowing money instead. They’ve made promises to borrow almost the exact same amount, close to $200 billion, to do share buybacks. To give you a little background, share buybacks are when companies go and buy up their shares on the open market and it artificially jacks up the share price because you decrease the number of shares. It’s like a numbers game. It’s a shell game.
Exactly. There have been so many companies in the Valley that have gone this way. HP is a great example: Once a great company, now just really sort of a lame, has-been conglomerate. You think about what Steve Jobs did and you can’t imagine Tim Cook going to Wall Street and going hey, we’re going to build a bunch of giant glass boxes and put three products in them. It’ll be super cool. And we’re just going do it. He would never give that message. The analysts would laugh him out of the room and that would be the end of it. But Jobs did things like that. That’s why the brand became such a hot commodity.
Two things. A lot of people associate the rise of Wall Street with the 1980s, but I actually think it goes back further. In the late ‘60s and early ‘70s—around the time of the Vietnam War—growth was slowing. There was a guns and butter debate about whether we’re going to spend on the war or spend on social programs at home. There were really hard questions being asked in society and in the economy, and Washington didn’t want to deal with it. They didn’t want to have to choose between voting blocs, basically. So they threw the ball to the markets. By 1980 you had deregulation of industries under Jimmy Carter. The Reagan administration continued it, so did Bill Clinton’s administration. Each time it was like politicians didn’t want to do the hard work of reforming education or building new bridges or rethinking manufacturing because that’s hard, and not easy to sell to the public.
It’s a sugar high. The Fed—God bless them, they were the only organization that could do anything after the crisis, because Washington was so gridlocked—but they threw $4 trillion into the economy. And it has barely got us to 2 percent growth. But it has jacked the markets way up because that’s what easy money does.
The Efficient Markets theory is amazing. If there’s anything that 2008 showed us, it’s that markets aren’t always efficient. But this is still what’s being taught in business schools. It’s a really hard slog to get people to think about things differently. The killer stat in my book is that if you think about what banks are supposed to do, they’re supposed to take all of our money and hold it in the form of deposits and then lend it out to businesses that create jobs and growth.
All the metrics that the financial industry can produce, there’s one metric they haven’t come up with since the crisis. That is a number showing a clear measurable benefit in terms of lending and the type of deals they’re doing for society.
It’s funny, one of the things I remember is that right after the fall of Lehman Brothers, Marxism started trending on Google. And it has remained high ever since, interestingly.
I think that’s absolutely right. The way I had thought about it is, to me, the idea that you can be in an economy like America’s that is 70 percent consumer spending and have nobody have gotten a raise since the early 1990s in real terms, at some point that stops working.
[Laughs] I guess maybe I am a stealth radical. I mean, the truth is that I really respect business people. I’ve covered business for over two decades. I actually worked in venture capital briefly myself. I know how hard it is to make anything well, and to make things happen in business. It’s so much easier to write about it than to make it happen.
One thing that’s been super fascinating to me: I thought I was going get tons of Fortune 500 CEOs calling me saying, “This is such a great book, thank you for standing up for us.” Not at all. Interestingly, a bunch of financiers have been calling. Hedge fund guys, you know, big deal sort of traders, saying, “We’re really interested in this thesis. Tell us more about this.” Because they know that it’s a growth problem. They know the fact that finance has gotten too big is actually starting to erode Main Street and that will eventually hit their portfolios. So to the extent of Wall Street itself has become nervous about this problem, in a Machiavellian way it might be a good thing, that they’re starting to pay attention.
Definitely. I think that Millennials, for starters, are questioning capitalism. Harvard did a study and it basically asked “Are you a capitalist and do you support capitalism?” Only 18 percent of Millennials considered themselves capitalists. Only 30 percent supported the capitalist system as a whole. Which is kind of amazing.
Yes, but technology shifts are happening that are empowering individuals. The fact that you and I as journalists—we might not be successful—but we could go out and start a website. We could start a publication in a way we could not have 10 or 20 years ago. I think that we’re just at the beginning of what that change is going to evolve to.
Conservatives have always been much better at doing this than liberals. In fact, there is a group called INET, the Institute for New Economic Thinking, which is funded by George Soros, and they were one of the big supporters of my book. They are doing this in the economic profession right now. They’re basically seeding funding chairs at universities, they’re supporting journalists like me—not monetarily but with sources and backup—that are doing more questioning of current paradigms, and they have a 20-year plan. The idea is we start now and then hopefully things are better later.
I’ll say something which may rub certain liberals the wrong way, but I think it’s true. The left dropped the ball around the time of the Vietnam War and afterwards, and got very focused on identity politics and racial politics and not on the economic changes that were coming. Maybe that made sense at the time, but this is a battle that’s just starting to be fought with Bernie Sanders coming to the fore, we’re now seeing what minorities and working class whites have been struggling with since the ‘70s, everybody is now struggling with. Millennial women aren’t worried about electing a woman, they’re worried about electing someone that will get them a job. Black Millennials are not so much worried about racial issues as overall economic issues. So suddenly there’s this larger banner that the left can kind of rally under that has to do with the 1 percent versus the 99 percent and I think that conversation and that shift is starting to take place in politics.