In this explosive episode of Going Underground, economist Professor James Galbraith breaks down the harsh realities behind U.S. economic policy, sanctions, and power politics. From Russia’s unexpected economic rise to Trump’s tariff strategies and the oligarchic control of Western democracies, Galbraith reveals the cracks forming in the foundation of the American-led global economy.
🔍 Key Topics:
– How Cold War economics misled generations
– Why U.S. sanctions made Russia stronger, not weaker
– Trump’s tariffs: a return to corporate monopolies?
– What the 2008 crash really revealed
– The illusion of Western democratic systems
– Why the U.S. is losing its technological and industrial edge
– What “Entropy Economics” says about the future of value
📚 Guest: Prof. James Galbraith
📺 Host: Afshin Rattansi
🎙️ Show: Going Underground
#JamesGalbraith #GoingUnderground #USSanctions #TrumpTariffs #Oligarchy #EntropyEconomics #RussiaEconomy #WesternDecline #ColdWarPolitics #2008Crash #AfshinRattansi #AmericanEmpire #GlobalEconomy #TechIndustryCollapse #TariffWar #EconomicCollapse #FinancialCrisis
#JamesGalbraith
#GoingUnderground
#USEconomy
#SanctionsOnRussia
#TrumpTariffs
#Oligarchy
#EntropyEconomics
#AfshinRattansi
#GlobalPolitics
#ColdWarLegacy
#RussiaEconomy
#FinancialCrisis
#DemocracyIllusion
#WesternCollapse
#AmericanDecline
#EconomicTruth
#CorporatePower
#TariffWar
#USvsRussia
#EconomicEntropy
🔍 Key Topics:
– How Cold War economics misled generations
– Why U.S. sanctions made Russia stronger, not weaker
– Trump’s tariffs: a return to corporate monopolies?
– What the 2008 crash really revealed
– The illusion of Western democratic systems
– Why the U.S. is losing its technological and industrial edge
– What “Entropy Economics” says about the future of value
📚 Guest: Prof. James Galbraith
📺 Host: Afshin Rattansi
🎙️ Show: Going Underground
#JamesGalbraith #GoingUnderground #USSanctions #TrumpTariffs #Oligarchy #EntropyEconomics #RussiaEconomy #WesternDecline #ColdWarPolitics #2008Crash #AfshinRattansi #AmericanEmpire #GlobalEconomy #TechIndustryCollapse #TariffWar #EconomicCollapse #FinancialCrisis
#JamesGalbraith
#GoingUnderground
#USEconomy
#SanctionsOnRussia
#TrumpTariffs
#Oligarchy
#EntropyEconomics
#AfshinRattansi
#GlobalPolitics
#ColdWarLegacy
#RussiaEconomy
#FinancialCrisis
#DemocracyIllusion
#WesternCollapse
#AmericanDecline
#EconomicTruth
#CorporatePower
#TariffWar
#USvsRussia
#EconomicEntropy
Category
🗞
NewsTranscript
02:56That's one of them.
02:58That's one of the issues that you explain in the book, but actually come to think of it,
03:00what is entropy economics at all?
03:02The title of this book?
03:04Well, the basic thesis of the book is that our conventional view of economic life, which comes down to us from 18th century from Adam Smith and was reinforced in the 20th century by the, you know, the mathematization of the discipline, is rooted in the idea that the ideal system is a self-organizing competitive economy.
03:30And that the forces of the market, supply and demand, will give you a good outcome, an optimal outcome in the jargon.
03:41And this is not the way science has – science took a very different turn long ago in the 19th century.
03:49The ideas of evolution, the idea of thermodynamics, the introduction of the entropy law into general understanding in biology and physics underpins everything that we understand about the natural world and mechanical world.
04:07But out here in economics, it has never penetrated people's understanding.
04:13And so they – although businesses get it because they have to operate in the real world, economists and policymakers frequently don't.
04:21And they generally design policies on the basis of a model, a paradigm, if you like, which doesn't serve their purposes.
04:31So the normal way we think about things is supply –
04:34The effect of the sanctions on the Russian Federation over the last 11 years, but especially the last three years.
04:41Yeah, I'll get on to that, but just – I'll get on to that.
04:44But just – so just how we basically understand economics is supply and demand, then it reaches some sort of equilibrium.
04:49And time and time again in this book, you show that whilst that whole idea is actually not how the world works, equilibrium is actually death.
04:57Well, yeah, I mean, it's really a fiction, I would say, that in the real world, life processes depend upon tapping in to what one can describe as low entropy resources.
05:14That is to say, into sources of economic value.
05:18And that is – underpinning that, of course, is energy.
05:21And classical economists in the 19th century understood this, and they understood energy to be labor.
05:27Jevons understood that coal was important.
05:29Well, we ought to understand now, while there are a panoply of resources that are available to us, whether they are abundant or expensive, matters a great deal to the ability to do anything else.
05:42And so, for example, if you look at the American New Deal and say, okay, why did it succeed in transforming America into the top-level industrial economy that it became in the 20th century?
05:57And part of the answer to that is clearly the sudden availability in the 1930s of vast amounts of inexpensive oil.
06:04That was discovered in Texas at the beginning in 1930.
06:09And part of it is the application of hydropower to the electrification of the country, Tennessee Valley Authority, Bonneville Power Authority, and many others throughout the country.
06:20So the basis for the industrial and economic success of the United States in the post-war period was laid in this period by building up a new energy-based infrastructure.
06:32That's what we mean by tapping into low entropy.
06:35And, of course, what that tells you is that if you pursue a policy which raises energy costs in one area, let's call it Europe under the sanctions, while keeping them stable or even reducing them in another, then you're going to see a differential in the economic effects.
06:52And that's very clear.
06:54It's also clear that in the U.S. in the age of fracking that the U.S. has had an advantage over Europe for the same reason.
07:01Yes, since we keep going to the sanctions, people who say why, try to explain why Russia seems to have economically benefited since 2022 are saying it's because of sanctions busting.
07:15And that's why Russia is doing well.
07:18Just explain how your economics theory shows one explanation of why Russia has actually done so well out of European and United States policy.
07:30Sure.
07:31We offer a very simple theory of value in which the economic value of any kind of new project depends basically on two factors.
07:45One of them is scarcity, very well, very familiar.
07:47Both of them very familiar.
07:49Scarcity and the other one is market power, monopoly power.
07:52And so what we're arguing is that if you have a large market that you can build into, that's very good for potential profitability.
08:04And if you have fewer competitors, again, very good for potential profitability.
08:09And that is a dynamic process, which as you build out and saturate the market, the economic value of what you're doing is going to go down.
08:20So what happened with sanctions?
08:22The idea behind the sanctions on the part of their authors, which they laid out very clearly, was that you're going to deprive the Russian Federation of capital, advanced capital supplied by the Western corporations that were operating there.
08:37You were going to deprive them of labor by encouraging immigration of technical people.
08:42You were going to deprive them of finances by cutting them off from Western banking systems.
08:49And what in fact happened was that by removing the competition that Western firms were already present in providing in the Russian economy from fast food restaurants, big park stores, automobile companies, you name it, the sanctions created market space within which Russian companies could grow and prosper.
09:15And, of course, the fact that Russia has become substantially a business economy operating under the same principles of any other business economy, it's no longer a centrally planned Soviet-style economy, meant that they could, in fact, just applying ordinary business principles, take advantage of this improvement in the climate.
09:40And that's a very simple story, actually.
09:43What is astonishing, though, is that you don't arrive at that conclusion if you apply the principles of mainstream conventional economics.
09:53And, you know, people say, well, the sanctions didn't work, the Russians evaded them, and so on and so forth.
09:58And that is contradicted by the Russian analysts themselves who have, you know, who write very frankly that the sanctions had a crisis impact when they were first implemented in 2022.
10:12And so the problem here is not that the sanctions didn't have an effect, but that, in fact, they did have the very substantial effects exactly as they were designed to.
10:22But the designers didn't take account of the real world conditions that they were creating and the capacity of Russian businesses to accommodate themselves and adjust, which, after a short period, they were able to do.
10:37And is this because European policymakers, people in the Biden administration were idiots, or is it because of fundamental problems in their understanding of the way economics works?
10:51I mean, I'll return to that, because time and time again in your book you show about theories of knowledge, and I'll go on to that.
10:58But, I mean, what is the reason? Were they just idiotic?
11:02Because that doesn't even involve entropy and economics, what you just said, that explanation, necessarily.
11:08Well, it does, actually.
11:10Tell me. Tell me how.
11:11I'm disinclined to regard people as idiots.
11:15Sure.
11:15But I do think they were pursuing a vision which has been the predominant one in American economics since the 1950s.
11:27And it was developed for particular ideological purposes also associated with the Cold War to give, let's say, advanced capitalism a model of development that would look attractive and compete ideologically and maybe also practically with the Soviet Union at that time.
11:48And that was what neoclassical growth economics was all about, and it was about smoothing out the elements of conflict and overlooking the enormous command over cheap resources that the United States and its allies enjoyed in that period.
12:07So when you put those two things together, you get a model, which was periodically challenged, and the challenges were always brushed off, but which basically controlled the mentality of American economists of my generation.
12:21I went to graduate school in the 1970s, and it was exceedingly clear that this was the vision, and it was already falling out of date at that time.
12:30And it certainly should have been abandoned long ago, but it never has been.
12:36And now fundamentally academic economics departments are incapable of adjusting, making the changes in their worldview because everybody's committed to the previous one, and they filter out anybody who has a tendency to dissent.
12:50So it's a structural problem, a structural intellectual ideological problem, which is, I think, trapping our economy into a – and affecting it right now the policies of the Trump administration are very much in the same – affected by the same intellectual malady, intellectual narrow-mindedness.
13:19So it's not just relating to the Biden administration.
13:23It's a very common problem.
13:25Yeah, I'll get on to the tariffs, which I think you're referring to there.
13:29But when you were talking about how FDR's New Deal relied on these new energy resources to make what became the greatest economy in world history,
13:40related to what you were just saying about structural class formations, I suppose, you quote from Orwell about the need to separate ourselves from those at the coal pit,
13:55and presumably right now what we're wearing from the oil workers that produce fibres and the cotton picking and so on.
14:03Just explain why that's so important a component to equilibrium, supply and demand, neoclassical economic theory.
14:11Yeah, we quote, I guess it's the road to Wiggum Pier, Orwell's great tribute to the coal miners who underpin everything.
14:22And in another little snippet in the book, we talk about the situation in North America in the Yukon or northern British Columbia,
14:33where there were towns that were substantial, prosperous towns a century and a half ago rooted around gold mining.
14:41And if you went up there and conducted an economic survey, you'd find that only a tiny fraction of their economic activity measure, as we now measure it,
14:52was actually related, was actually mining itself.
14:56They had saloons and they had hotels and they had cabarets and they had, of course, food stores and everything else.
15:02And you add all that up and say, well, mining was only maybe 5% of what was going on here.
15:08Professor Galbraith, we're going to have to return in part two. Hang on a second.
15:11The towns disappeared and they became ghost towns.
15:13Professor Galbraith.
15:14That's all over the American West. Yeah?
15:16Professor Galbraith, I'll just have to stop you there for part, end of part one.
15:19I'll just stop you there.
15:21More from the University of Texas at Austin, professor and co-author of Entropy Economics,
15:25The Living Basis of Value in Production, after this break.
15:27Welcome back to Going Underground.
15:40I'm still here with the University of Texas at Austin, professor and co-author of Entropy Economics,
15:44The Living Basis of Value and Production, Professor James Galbraith.
15:49Professor Galbraith, I rudely interrupted in part one.
15:51You were in the middle of talking about the Yukon, I think, as an example of how the original resource that one's after is just a tiny part of the full story.
16:04Sure.
16:05And if you, as I say, you do the accounting the way we now do it, those resources looked like they were very small, but they were abundant.
16:13And when they ran out, everything else fell apart.
16:15So that just tells you that the resource base of the economy is not the only thing, but it is a crucial element to, let's say, building up a successful position.
16:29And so you were talking about Trump, who clearly thinks that tariffs are a great way of rejuvenating the U.S. economy and helping the deficit problems that the United States have.
16:43In your book, Entropy Economics analyzes tariffs and comes out with a different conclusion.
16:49We do, and let me just address where I think the Trump vision is short of what would be required over the long run, if it were possible, to rejuvenate the American economy.
17:04Basically, it consists, the vision consists of putting up tariff walls, which may or may not, in fact, go up, although some of them are already in place, with the idea that at that point, private businesses, major corporations will expand their operations in the United States.
17:24But that overlooks the fact that if you leave it entirely to private corporations, they have an alternative strategy, which is simply to restrict output and raise prices.
17:37And that's a very profitable strategy from their point of view, but one which leaves the American consumer and the firms that use the product, steel and aluminum and so forth, in a position of having much higher costs and lower profitability.
17:52So it's not at all obvious that it works.
17:55I'll come back to the situation in the early 1940s in the United States, when the government needed private business to radically expand the capacity to produce armaments, to produce rubber, to produce clothing, for that matter.
18:14And they deployed to produce ammunition, deployed a whole range of tools, including building the factories itself in order to get that capacity.
18:25Private business didn't want to do it.
18:27They didn't know how long the war was going to last.
18:29They didn't know how much they what they could do without capacity once it was over.
18:34They had to be essentially directed and led by the nose.
18:38And we still have laws, the Defense Production Act, that could make that possible.
18:42But the Trump vision is just put up the tariff walls and the markets will do it for you.
18:48And there again, they're falling into the trap of allowing people with this 18th century mentality or people who basically do only pretend to have that mentality but are essentially acting as predatory monopolists to control what will actually happen behind the tariff wall.
19:07And that is a serious, that's going to be a serious problem toward the implementation.
19:14If you concede the vision has some merit to it, it's a serious problem for its implementation.
19:19So there's a deep ideological reason to propagandize for the idea of supply and demand and so forth,
19:26because the people who formulate it knew that monopolies were going to be the consequence of this kind of economic model.
19:37I mean, we obviously have oligarchs now and they're obvious how a few big high tech companies rule our lives and so on.
19:44So there was a reason to stop other economic models from coming to the fore.
19:48Yes, of course.
19:52And the hyper-libertarianism of the oligarchs reflects their own ideology.
19:59But it's an interesting situation, actually.
20:02And then a group of tech oligarchs, of tech tycoons, who were a few years ago, a few weeks ago, free traders, have suddenly come into the Trump tent and align themselves with the tariff policy.
20:19And why is that?
20:20I think partly because they want to stay in the government's good graces for purposes of contracting and partly because they feel that the technology that they operate is no longer the world's cutting edge.
20:36And, of course, the arrival of DeepSeek a few weeks ago gave them a pretty shocking lesson into what can happen to their capital valuations when a superior competitor suddenly appears on the scene.
20:50And so they would like to have the trade protections.
20:52And this gives you some sense of what their objectives may really be.
20:58I mean, they would deny that.
20:59Let me make a broader point.
21:00They would deny that and profess to say it's all Ayn Rand and kind of pseudo-Hayek economics.
21:07I mean, it's that that informs this kind of oligarch class.
21:11It is, of course.
21:14And what I think the real world will tell you, that there is no sophisticated market that exists without capable regulation.
21:27Not every regulation is worth preserving.
21:29Not everyone is a good idea.
21:31But it is regulation that gives you the possibility to have long supply chains and sophisticated production processes because it's regulation that assures you the quality of what you're dealing with.
21:44Otherwise, the costs of transacting and the risks become unbearable.
21:50So I would argue, in fact, yeah, that regulation, good regulation, is the key to economic development.
21:58And this has been realized by those countries that have developed successfully.
22:02But the worst crisis of recent years has been 2008.
22:05And you explore that it's not, in the book, you expand on the fact that it's not too little regulation that caused the crash in 2008, which is the widespread myth that's propagated.
22:18It was too much predatory regulation.
22:20Well, it was – the financial sector had been deregulated systematically since the end of the 1970s, culminating with the repeal of Glass-Steagall in the late 1990s and basically the abolition of the government's monitoring function in the early 2000s.
22:41And this facilitated an enormous amount of financial fraud, which looked very good on the books up until 2006, 2007, when everybody began to realize that the paper they were holding in their own portfolios wasn't worth anything, and then the financial system melted down.
23:02So you have – this is exactly the analogy of a nuclear reactor that runs too hot, that runs without a cooling system, you'll get – and the metaphor is the same.
23:14You've got to meltdown sooner or later.
23:16Yeah, but it's regulated to run hot, arguably.
23:20Anyway, I know we're running out of time here, and there's so many mathematical equations in here where you –
23:26No, there are only a few.
23:27Co-author Jing Chen – I don't want to frighten people off from reading it – Jing Chen models some of the entropy economics in a variety of different fields.
23:39Perhaps most dangerous is the one regarding democracies that you talk about how and why it is that so-called democracies in, I don't know, NATO countries, in two-party systems, they always benefit oligarchs and not the masses.
23:56Just take us as briefly as you can through that.
23:59It's easy to –
24:00You quoted Churchill.
24:02Yeah, sure.
24:03It's easy to model divide and conquer in this way.
24:08But you can see that it is to the advantage of the top dogs, as we describe them, to keep the bottom dogs basically competing with each other for the scraps of resources that they are permitted to have.
24:27And the right strategy for the larger community is one of cohesion.
24:35Now, that's a very simple application of the mathematics.
24:39Well, people will have to read it to explain – to see how democracy will always tend towards helping the oligarchs.
24:46Just very finally then, very quickly, you explain the distribution of nuclear weapons among different countries, again using the model.
24:54I'm just telling you, pick a few different cases.
24:57Yeah, a nice example of the modeling is that you have a small number of nuclear weapons countries which have permitted them to each other and deny them to the rest of the world.
25:15I'm not necessarily objecting to that.
25:18But what we point out is that other weapons, so-called weapons of mass destruction, are banned altogether.
25:25Why?
25:26Because they're widely accessible to other actors and they were much more easily obtained.
25:34And so this is – you get a good sense of how – let's call it opportunity hoarding or the hoarding of power plays out in the modern world.
25:44And that's why those countries get to have them and others don't.
25:49So when we hear Donald Trump talk about common sense, the phrase common sense, that's actually a kind of code for hiding behind the neoclassical economics that you're in your book saying is actually not the way the world works?
26:04Well, I'm not entirely sure where Trump and his – that you can define this administration in any single consistent way.
26:12Trump himself appears to have an old-fashioned nationalist view, going back to William McKinley, of supporting national industrial development.
26:24And then he's empowered all these people who are free market libertarians within that perspective, hoping that they'll carry out the work for him.
26:31And that's not how it happened in the United States.
26:36It wasn't William McKinley.
26:38It was – it was – it was – the beginning with it was Theodore Roosevelt and then Franklin Roosevelt under very different structures of management control.
26:49Maybe it's Marxist – maybe it's – maybe it's Marxist dialectic, having both of them there.
26:53Well, there's, of course, Marx was in the age of Darwin, and the dialectics are a real thing, sure.
27:03Ultimately, in your books, it suggests that only some kind of revolution arguably can change the current status quo,
27:11because you're predicting using these models, shorter lifespans, harsher inequalities, smaller populations.
27:17Well, I think that that points – it points certainly in that direction.
27:24And one way to apply the basic ideas here is to ask, how does the modern household make economic decisions?
27:34And what one finds is that in an advanced society, the household has lots of fixed commitments.
27:41It has mortgages.
27:42It has utility bills.
27:44It has tuition payments.
27:45It has savings for retirement.
27:47All these things, which then, when you put them under resource constraints, you put them under austerity policies,
27:56they look for ways to try and make ends meet.
27:58And, of course, from the standpoint of the individual household, one of the most expensive things they can do is have more children.
28:06So, perfectly rationally and perfectly – in a perfectly self-protective way, families decide that they will have fewer children or no children,
28:16that they will have more income earners relative to the number of children that they have.
28:20Both parents will work.
28:22Maybe multiple adults in a household will work.
28:24And this makes it very difficult to meet – for any rich society – to meet the replacement rate on individual fertility.
28:34And, in fact, there are – in fact, I don't think there are any rich societies now who meet that stand, meet that target.
28:41Professor Galbraith, we're out of time.
28:43Thank you so much.
28:45Thank you very much.
28:46I enjoyed very much having a chance to talk to you.
28:48And that's it for the final show this season.
28:50Entropy Economics, the Living Basis of Value and Production, is out now.
28:53We'll be back with a brand-new season on Saturday, the 3rd of May.
28:57Until then, we'll be airing your favourite episodes of this season every Saturday and Monday.
29:00Remember, you can still keep in touch via all our social media if it's not censored in your country.
29:04And head to our channel, Going Underground TV on rumble.com, to watch new and old episodes of Going Underground.
29:09See you very soon.
29:53You