Brian Lehrer: It's the Brian Lehrer show on WNYC. Good morning again everyone. Now we continue our WNYC Centennial Series, 100 Years of 100 Things. This week, Things 34 and 35, 100 years of American capitalism and 100 years of American socialism. We did socialism earlier in the week. Now capitalism, with Nobel Prize for Economics winner and Columbia University, Professor Joseph Stiglitz. He is a former chief economist of the World Bank and a former chair of the US Council of Economic Advisers under President Clinton. He is currently the chief economist at the Roosevelt Institute think tank, which draws on the work of Franklin and Eleanor Roosevelt to consider economy and democracy related policies for today. Joseph Stiglitz's latest book, for which he was on with us earlier this year, is The Road to Freedom, Economics and the Good Society. A lot of that book was about the history and philosophy of American capitalism. Professor Stiglitz, we're always happy when you can join us. Welcome back to WNYC in our 100-year series.

Prof. Joseph Stiglitz: Nice to be here.

Brian: We started on Monday by asking our guest Michael Kazin if he could define socialism. Can you define the word capitalism or say where it came from if you know the origin and why it centers the word capital?

Prof. Stiglitz: The origin of the term goes back maybe 200 years as the economy moved out of agriculture into modern industry. Central to the creation of railroad steel was the accumulation of capital. Money was necessary to make these huge investments markedly different from what was needed in a typical farm. Capital became the central feature that people talked about. Today when we think about capitalism, capital doesn't have quite the same central role. When I was writing my book, I talked about progressive capitalism, very markedly different from the capitalism that we've had. I was not happy with the term because I thought really modern 21st century economy, it's knowledge that's important, it's the skills of individuals. It's not so much the kinds of investments that were made in the 19th century in machinery. It's probably not a good term but we're stuck with it.

Sometimes I say maybe market economy would be better, but a market economy again has a problem because when you think of markets, you think of a marketplace where goods are being bought and sold. In fact, the nature of the modern 21st century economy, you have these mega firms like Google, it's hard to think of them as the same thing as the market that you imagine when you go to the fresh food market outside your door.

Brian: We'll get back to the 21st century economy. Let's do some of this timeline. Like 100 years ago, as WNYC was being born, in the 1920s, the US economy was undergoing massive changes. At that time, some of the things you were just referring to, the industrial era and mass production of cars and other consumer goods was really taking off. Although, spoiler alert, the country was also headed for the stock market crash of 1929 and the Great Depression that followed. Can you talk a little bit about the Roaring '20s as they were known, and how the economy and capitalism were changing at that time and changing the country?

Prof. Stiglitz: The most famous quote is that of Calvin Coolidge who said the business of America is business. It was the notion that if we just went ahead and made things, traded things, we would become richer, more prosperous, and in a broader sense, be well off, better off. There wasn't any discussion about where the benefits were going, who was benefiting. This period was right after the period of Theodore Roosevelt, a period where we had the Triangle Fire, where we had realized that we were treating some of the immigrants, some of the people who were very poor in an outrageous way.

Even at that point, of the Roaring '20s, there was a tension between the inequalities that were actually growing and growing at that point reaching a peak just as the stock market bubble broke. There was a tension between over who was doing well. America may, as a whole have had a GDP, although the concept of GDP hadn't been invented. At the same time there were lots of things that were not going so well.

Brian: You're now the chief economist for the Roosevelt Institute, which looks at today's world with the influence of Franklin and Eleanor Roosevelt. Moving from the 1920s to the 1930s, how much did FDR not only battle the depression, but fundamentally change the federal government's relationship with capitalism?

Prof. Stiglitz: What he said is you actually have to have a very well regulated capitalism if capitalism is going to serve the well being of society. That was a critical thing. It had regulations about financial markets like the SEC. It included restoring enforcement of things that had been done in the earlier era that I referred to, that Sherman antitrust law, the Federal Trade Commission, which both regulated competition but also protected consumers.

It included the establishment of the Wagner Act, the National Labor Relations Board that protected workers. It was a transforming capitalism because it said capitalism on its own has some very bad aspects and we have to protect people. It included discussions of minimum wages, a recognition that we intervened in agriculture on its own, farmers might be left with insufficient income and price support programs. It was a massive intervention in the economy. There was enormous opposition to FDR, including by the Supreme Court. [crosstalk]

Brian: Which people forget, because he was so popular, he was elected four times.

Prof. Stiglitz: That's right. His views were very widely supported. You had on the Supreme Court a bunch of very conservatives from earlier era who really didn't want this kind of intervention. They were really on the side of big business. They had these contradictory rulings. For instance, the federal government couldn't engage in minimum wage legislation because that was really the province of the state. When the state tried to do minimum wage, they would say, "Oh, that interfered with commerce." They made it very difficult both for the states and the federal government to impose minimum wages.

We now know with research that has been done, especially in the last 30 years, we now know that minimum wages can actually increase wages and simultaneously increase or certainly not decrease employment. That's because the role of market power in labor markets throughout our economy. We grasp the notion that we don't have that fully competitive model that so dominated the ideology over the last 50 years and that market power makes a difference. We have to do what we can about market power. When we intervene, we have to recognize interventions are not interventions that are occurring in a well functioning fully informed competitive economy. These are interventions that are occurring in an economy that often has very, very big dysfunction.

Brian: Listeners, we're going to continue mostly in this segment to go through the 100-year timeline and definitely spend some time at the end on the present with Joseph Stiglitz. In this 100 Years of a 100 Things segment, does anyone have an oral history story from your family from any time in the last 100 years about being a capitalist, to use that word, embracing the label capitalist or rethinking it in any way? It's 100 years of 100 things, Thing 35, 100 years of American capitalism.

After Monday's segment on 100 years of American Socialism, our guest is Columbia University professor Joseph Stiglitz, among many other things, a Nobel laureate in economics and author of the book The Road to Freedom, Economics and the Good Society. 212-433-WNYC. For anything that might count as oral history in this segment, as we do in this series, 212-4433-WNYC, 212-433-9692 call or text. Moving on to the 1940s and the other side of the ideological spectrum from you, we have a classic book coming out in 1944, The Road to Serfdom by Friedrich Hayek.

He was European, not American, but that title, The Road to Serfdom, suggests the theme that he saw too much government control of the economy as a form of tyranny, limiting the freedom of individuals. Your current book title, I noticed, The Road to Freedom, almost sounds like a direct response to Hayek's The Road to Serfdom. Did you intend it that way?

Prof. Stiglitz: Yes, I did. What I wanted to explain is that Hayek got it 180 degrees wrong. He was writing in a period after the Great Depression where we saw markets didn't work very well. One out of four people were unemployed, one out of five in some countries, even worse than others. The market clearly was not working in the ideal way that the classical economists said and government [unintelligible 00:13:09] could intervene and return the economy to full employment.

Then you had in the Scandinavian countries the development of the welfare state and aspects of that adopted in the United States, Social Security to protect old age people, UK shortly after that adopted the public health system, NHAs that ask, which is a national treasure in the UK and why average healthcare health is better in the UK than in the United States, even though we spend so much more. He worried that all these government programs were, as you said, going to lead to serfdom. What we see is autocratic, authoritarian populism rising, not in countries where government does too much. You don't see it as much in Norway as we see it in countries where government has done too little. [crosstalk]

Brian: They did see it in the Soviet Union, which is the argument that always comes up.

Prof. Stiglitz: The Soviet Union never made the transition from authoritarianism to democracy. I think there is a wide body of opinion that thinks that there was a big opportunity with the collapse of the Soviet Union for democratic reforms. Instead there was shock therapy, there was austerity. What that did is restored a new authoritarianism. He went from communism to something even worse, Putin. That's really an example where a government did too little, life expectancy went down by estimated three to seven years in just a few years. Government did too little. That falls within the category of government doing too little, giving rise to authoritarianism.

Brian: It's 100 Years of 100 things, 100 years of American capitalism with Professor Joseph Stiglitz. When we come back from a break, I want to move into the 1990s. We'll touch the '60s as well, but definitely into the 1990s, when you were a chair of President Clinton's Council of Economic Advisers. There's so much rethinking of '90s economic policy now as causing a lot of the problems we have today, even leading to the popularity of Trump and Trumpism. We'll get to that. I'm also going to ask you, as we move toward the present, if you think there's a difference between progressive capitalism, as you call your philosophy, and democratic socialism, which Bernie Sanders calls his. We'll see if we get relevant calls on oral history pieces of this. Stay with us. American capitalism, 100 years thereof with Joseph Stiglitz and you. Stay with us.

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Brian Lehrer on WNYC. In our Hundred Years of 100 Things, WNYC centennial series, this week, Things 34 and 35, 100 Years of American capitalism and 100 Years of American socialism. We did socialism earlier in the week. We're doing capitalism now with Nobel Prize for Economics winner and Columbia University professor Joseph Stiglitz. Let's take an oral history call. Christine in Westchester. You're on WNYC. Hi, Christine.

Christine: Hi. Good morning. I wanted to share that I recently was doing some research regarding my family in central Massachusetts in the '30s. I came across an article by the AP in the local paper where FDR proposed what he called a share the wealth tax program. In his comments to the Nation, he quoted Andrew Carnegie saying, "Where wealth crews honorably, the people are always silent partners." It was just striking to me how something that seems to me so logical has become considered radical [crosstalk]

Brian: Christine, thank you. Thank you very much for that. Let's go to another one, Kylie in Northern Virginia, you're on WNYC. Hi, Kylie.

Kylie: Good morning. Both my maternal and paternal grandparents grew up in North Carolina on tobacco farms. My mom and her sisters have lots and lots of stories of going down there for the summers and picking tobacco. Then, of course, they would sell the tobacco. My great uncle told me a story once about how they came through, this is about the intersection of capitalism and government regulation. They came through and decided which farms were going to be able to continue to sell tobacco and which ones weren't. Of course, a lot of Black farmers were told, "You can no longer sell tobacco." My uncle tells a story about how my great grandmother's tobacco farm, they couldn't sell tobacco anymore because the government came in and said, "It's now regulated and you can't sell it. I thought that was an interesting oral history on capitalism.

Brian: Is the Lesson in that, that this is an example from your family where they thought the government had too much of a heavy hand in regulating the market.

Kylie: Yes, because according to his retelling, there wasn't-- He didn't say they put out an RC and we lost. I assume that it's a part of the tricky Jim Crow south that I'm guessing Black farmers were edged out, but it didn't sound like they were edged out because of the market, which would have been pure capitalism. They were told that they can no longer sell tobacco. I guess after the government became [crosstalk]

Brian: Because of their race.

Kylie: I don't know. I thought it was interesting as an intersection on capitalism and government [inaudible 00:19:46] [crosstalk]

Brian: Thank you. Good story. Any comment on either of those two callers, briefly, Professor Stiglitz?

Prof. Stiglitz: They're both very interesting. One relates to vocabulary that's used today so often, the wealth creators. There is the assumption that the wealth creators are these CEOs of the big companies. In fact, almost everybody in our society is associated with wealth creation, the workers. You couldn't have a well organized society with wealth creation if the society didn't work together. You need policemen, firemen, everyone. This vocabulary of attributing the success to a relatively few people, I think is very misguided.

If you take that broader view that I've just said, it's very natural that some of the fruits of the wealth creation ought to be public and ought to be shared more widely. Let me give you one particular example where you see this very vividly. Part of the success of the US economy right now is because we developed the internet, the browser, all that was done with public money. Yet the value of that has been appropriated by a few companies, the tech giants.

We, the people should have gotten more stock in their successes. Another big example, during COVID-19, we, the people funded the basic research that led to the COVID-19 vaccine, but Pfizer and Moderna appropriated all the returns from all that public investment. We all should have shared in that wealth creation. I think we could have had a national fund where the government would own a share of all those stocks and then give a national dividend, reflecting our joint work in creating the basic research. I think this reconception of what it means, how our society creates wealth is really important. [crosstalk]

Brian: Go ahead, real briefly.

Prof. Stiglitz: What?

Brian: Go ahead real quick on the other one.

Prof. Stiglitz: On the other story, I'll be very quick. There are two aspects of that. There was overproduction in many Agricultural goods that resulted in prices that were so low that people couldn't live. The market wasn't working very well in terms of providing adequate livelihood. The government intervened with restraints on production. Unfortunately, they weren't designed very well. Some farmers became very rich and some farmers really suffered, the smaller farmers. In many of our programs, and this is just one example, unfortunately, there was a lot of discrimination.

We didn't know it at the time, but as historians have looked into this, we've seen more and more examples. One example are some of the housing programs and student programs, the GI Bill of Rights that came out of World War II, not that long ago. We now see very clearly how those bills that were supposed to increase opportunity, they did that, but mostly for white people. There was, unfortunately, a lot of discrimination in the way those bills were administered. Good idea. Unfortunately, in a racist society, even good ideas can be administered in a way that is not good for significant parts of our population.

Brian: Continuing through the timeline, the 100-year timeline, the subtitle of your book, your current book is Economics and the Good Society. That made me think of the LBJ era in the '60s when he called his economic programs the Great Society and explicitly declared a war on poverty. In brief, do you think there are things Johnson got most right or most wrong? Is aiming for a good society rather than a great society an admission of the limits of policy to fight economic inequality?

Prof. Stiglitz: Yes. I think his heart was totally in the right place, that he recognized that capitalism, American style, was not delivering for significant parts of the population, that we had by that point become a rich country and that we could afford to ensure that everyone had a basic standard of living and that you could raise people out of poverty. I think there was a consensus at the time that, by doing that actually you would make the country stronger. It wasn't like we would as a country sacrificing, we would be helping the people at the bottom, but we'd be helping the country as a whole.

It turned out to be harder than he thought. The real fortunate thing was that he was followed by Nixon and then with a brief interlude of Carter by Reagan. Neither Nixon or Reagan was committed to the agenda of creating a more equal society. More equal both in terms of income, but also the treatment across gender and race. Important initial first steps undone. You can see some of those actually. Initially, poverty going down, racial inequality getting reduced. There was some success, but unfortunately it got reversed.

Brian: In the '90s, you were chair of President Clinton's Council of Economic Advisers. In the early 2000s, you wrote a book called The Roaring Nineties: A New History of the World's Most Prosperous Decade. I think today you look back very critically on Clinton's economic globalization policies of the '90s. Do you still think it was the world's most prosperous decade? Do you second guess anything that you were advising him as the chair of the Council on Economic Advisors at the time?

Prof. Stiglitz: The subtitle of that book was Siege of Destruction. I very much thought even at the time that some of the prosperity that we were creating in that period, there was no doubt we felt a sense of prosperity and it was a shared prosperity, the data showed that there was greater sharing in that eight-year period. I felt at the time, and the evidence has now supported my perspective, that our policies were not creating a sustainable growth and that there would be problems down the line. Those came on.

Two examples. I was very strongly opposed to financial deregulation. We had a major fights within the administration. While I was there, until February 1997, there was not that financial deregulation. I don't know if I staved off, but certainly there were other people working with me. It was in the later part of Clinton's second term where the banks to dominate the discourse and they got what they wanted, and then we wound up with 2008, the financial crisis, the deepest financial crisis since the Great Depression.

Then the way Obama handled that, I think sowed the seeds of the distrust of government. The banks weren't held accountable. Homeowners lost their homes while the banks got bailed out. It was unconscionable. That was one of the examples of the seed destruction that I think have contributed to our current political dilemma. [crosstalk]

Brian: Do you think those policies set the stage for Trumpism in any way? The popularity of Donald Trump, to the extent that it's linked to some people's economic fortunes?

Prof. Stiglitz: Yes, I do. It's not only their economic fortune, it was the way it was done and you can see a lot of history in this. There was a feeling that the system was rigged. That's words that Trump uses. The point was, as I said, that we bailed out the banks to the tune of hundreds of billions of dollars. Workers lost their jobs, they went through a very hard time and millions of homeowners lost their homes. We could have helped the homeowners, we could have done more to help the workers. The real politic of the moment, which was that the bankers were driving economic, they put their well being ahead of homeowners and workers. Again, I had a lot of conversations both with Obama and with people in the Treasury. I try to explain this was not only economically not the best way of doing it, but politically it would have consequences. We now see those political consequences.

Brian: In our last few minutes here, and I know that you would support more of the kinds of economic policies that Kamala Harris is for, rather than Donald Trump. We've been having those debates on many segments on the show. What I want to ask you is, after this whole 100-year arc of history, how different is your progressive capitalism, as you call it from, say Bernie Sanders democratic socialism? Are they the same thing but using those competing words, or are they really different?

Prof. Stiglitz: They're very, very similar. I sometimes say that if I had written the book in Europe, I would have subtitled my book focusing on a rejuvenated social democracy. Let me emphasize one thing that is in Bernie Sanders language that is missing in my term progressive capitalism. That is the role of democracy. If capitalism is going to work, it has to have systems of checks and balances, that there is a natural proclivity in an unfettered market economy for the agglomeration of power, both economic power and political power. Agglomeration of political power, you get under regulation, you get pollution, you get domination of monopolies, you get inequality that can grow without bounds.

Any well functioning society needs then a system of checks and balances. It's not only within government but within society. Democracy is part of that system of checks and balances. If it hadn't been for democracy, the kinds of labor abuses that led to the Triangle Fire in the early part of the 20th century, we would not have remedied that. If it hadn't been for democracy, we would not have limited the abuse of market power of standard oil and the tobacco monopolies.

Today, our democracy is not as strong as it should be. We are not limiting the power of the tech giants. We need to strengthen our democracy. That's why the term, whether you call it democratic socialism, social democracy, I think we ought to, as we think about our social, political and economic system, keep a focus on democracy. That's why I like having the term democracy in the description of our political, economic and social system.

Brian: Columbia University professor and chief economist at the Roosevelt Institute, Joseph Stiglitz. His latest book is the Road to Freedom, Economics and the Good Society. That's our 100 Years of 100 Things segment for today, 100 Years of American capitalism after Mondays on 100 Years of American socialism. Professor Stiglitz, thank you so much for giving us so much time today.

Prof. Stiglitz: Oh, thank you.

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