The Systemic Threat of Unregulated Finance to Democracy and Social Equality

This podcast episode features Robert Kuttner, co-founder of The American Prospect and professor at Brandeis University, discussing his book "Can Democracy Survive Global Capitalism." Kuttner argues that the post-World War II era saw an unusual and deliberate social contract characterized by managed capitalism, repressed finance, and empowered labor. This period, lasting about 30 years, fostered economic growth and greater equality across the West, largely due to strong democratic governments and labor unions acting as counterweights to capital, and the discrediting of self-regulating market ideologies after the Great Depression.

The narrative shifts to the 1970s, when this social contract began to unravel due to a convergence of systemic and random events. The collapse of the Bretton Woods system, the 1973 oil crisis leading to stagflation, and a weak political environment (e.g., Nixon preoccupied with Watergate, Carter's presidency) created an opening for the resurgence of neoliberal ideologies championed by figures like Milton Friedman, Margaret Thatcher, and Ronald Reagan. This period saw a deliberate shift towards a brand of globalization that undermined national social contracts, leading to financialization – where the financial sector's share of corporate profits surged, acting as a "leech" on the real economy rather than a benefit.

A critical point of discussion is the "disgrace" of the center-left parties (e.g., Clinton, Blair, Schroeder) who, instead of offering opposition, adopted center-right policies and became complicit in deregulation and ultra-financialization. This lack of a genuine opposition meant that when the financial collapse occurred, there was no political champion for ordinary people, leading to widespread disillusionment. The episode highlights how figures like Robert Rubin gained immense power within Democratic administrations, further entrenching financial interests.

Kuttner concludes by emphasizing that democracy is being attacked from two fronts: first, by the increasing power of financial capital and corporations that narrow the scope of democratic governance (e.g., through investor-state dispute resolution clauses in trade deals); and second, by the public's reaction to economic grievances, which manifests as support for neo-fascism, racialization of economic issues, and the demonization of "the other," ultimately leading to a loss of faith in democracy itself. The implicit call to action is to reclaim the domain of democratic government to effectively govern capitalism and prevent further societal fragmentation.

"I think my greatest accomplishment was tony blair"

"it's about the whole fabric of our social system and whether our economics is enhancing our welfare as we're taught in our models whether it's tearing apart the fabric of our society"

"this was a deliberate social contract if you will that was the result of some fortuitous events"

"international finance would not undercut the ability of nation states to have a prosperous egalitarian form of capitalism"

"what happens is not that the workers of the world unite what happens is you get support for neo-fascism you get support for the racialization of economic grievance and the demonization of the other"

"financialization what were the building blocks of stress that led to the resurgence of the usual suspects"

"it's finance it's not just corporation it's financial capital it's wall street it's the city it's banking"

"the financial sectors maybe 12 or 13 of all corporate profits and on the eve of the collapse it's 46 percent so that's not because the financial sector is contributing that much benefit to the rest of the economy rather it's a leech on the rest of the economy"

"the disgrace"

"democracy is being pummeled from two sides first as a corporate capital financial capital increasingly makes the rules the compass of democracy to govern especially to govern the economy is being narrowed"

"investor state dispute resolution it's it's removing from the province of democratic governance to a kangaroo court all kinds of issues involving the governance of capitalism"