- There's quite a lot of people who are saying, well, thank God we've actually got an America that's not pretending to be anything other than anyone else.

You are no better than anyone else.

You are a rapacious, self-interested nation that's out for yourself.

A lot of the governments, Left or Right, of the last 10 or 15 years, have underpinned their economic growth with mass immigration and not been sufficiently attuned to how that was being experienced by people.

(upbeat music) - Coming up on "Laura Flanders and Friends," the place where the people who say it can't be done take a back seat to the people who are doing it.

Welcome.

(upbeat music continues) (upbeat music continues) (upbeat music fades out) Is the West's experiment with social democracy over?

Is survival of the richest simply our fate?

With tariffs, trade wars, and a looming recession rattling the markets and capturing public attention, we thought it was time for another conversation with my sister Stephanie Flanders, the Head of Economics and Government at Bloomberg News.

Stephanie, as regular viewers of this program may remember, was previously Chief Market Strategist for Britain and Europe for JP Morgan Asset Management.

And before that served as the Economics Editor for BBC News for five years.

We have our differences, as you can imagine, but this annual conversation has become something of a viewer and listener favorite.

And so we've brought it back.

You can find our previous conversations in the archives at our website.

And don't forget, if you have favorite episodes or stories you'd like us to revisit, let us know via email.

To switch things up, this year Stephanie and I sat down in a park in central London, surrounded by spring flowers in the city where we both grew up.

Can capitalism and democracy mix, or are we at the end of that experiment?

That's where our conversation kicked off.

Stephanie, this is such an exciting innovation.

We are now doing our annual check-in here in St. James' Park on the most gorgeous day in London.

Of course, it's always like this in spring, right?

- Always like this, yes.

(Laura laughing) And we're actually very close to where they had the beach volleyball during the Olympics.

There were a lot of Olympics events that were just around here 'cause they were obviously playing up to all the great monuments.

They wanted to get them all in.

- And I remember that the lead up to the Olympics was nothing but rain for weeks and weeks, and then, suddenly, it all cleared up.

So maybe that's a good metaphor for where we are today, because I will say I've been feeling... You know, the slogan of our show is "The place where the people who say it can't be done take a backseat to the people who are doing it."

- How's that doing?

- Well, there was a little part of me after the Trump election that thought maybe we should rename it to the place where the people who say it can't be done were right.

(both laughing) Because sometimes it feels as if we're going backwards.

And I think that's what I wanna talk to you about.

In this gorgeous place that just sort of inevitably makes you think about history, I guess I want to ask you and have us think about whether the sort of social democracy model of the 20th century was just a blip.

What do you think?

- One of the things that we should draw from the last couple of months, which is seen by any estimation, the most successful first couple of months of an administration, certainly of my lifetime.

If you measure success by impact, by the methodical way that the administration has found out across different parts of government agencies, departments, key positions, and put in place people who will forward Donald Trump's agenda with a real focus on the instruments of power, not just lots of executive orders that say we wanna do this, we wanna do that, but actually a focus on changing things, if you think about how effective that's been, even if it's been very worrying, and scary, and sometimes it seems like illegal, some of the things that they're doing, you know, it should have at least one positive message for radical people that you can do a lot.

- Yeah.

- You know, that there are things, that you can change more than you think.

- Well, it certainly shows that if you spend four years between one administration and the next thinking deeply about each department, that you really can use government to your own ends, even if there ends, in the case of the Trump administration, in Project 2025 has been to sort of unravel government.

- So, and I think that speaks to, there's a sort of whole agenda here, which lots of people, you know, I've heard talking about, whether it's Ezra Klein or any of these people who are talking about a focus on the thing that Donald Trump has focused on, and has got him a lot of success, which is a focus on the failings of government, the things that people haven't got out of government.

So when you talk about, you know, is this the end of the social democratic model?

I mean, there is one view of this which says no, it's a reflection of the failure, after decades of very successful social democracy.

And you might not even call it in a US context, social democracy, you know.

That means lots of things to different people, but a kind of model of democracy that was, at least, nominally about raising people up, about supporting the working class, allowing the rich to be rich, but only in the conjunction of also growing the economy for everybody else.

That model, which has been pursued in lots of different ways, you know, progressively didn't deliver for people in lots of different ways from the sort of late '80s, '90s, onwards.

And that one of the things that we are living with with Donald Trump is a response to that.

- Yeah, absolutely.

- So it's sort of like we can sort of, you know, bemoan the fact that things don't seem to be going in the right direction.

But actually things have been going in, you know...

If you are sitting on the ground, things have been going... Well, voting for Brexit in the UK.

Things have been going in the wrong direction for quite a long time.

- We should probably start with defining terms.

So how do you define social democracy?

I think of it as the idea that we can allow there to be a role... That government will play a role in kind of evening out some of the social imbalances in the economy, helping basic needs get met through taxation, through basically redistribution.

- I think what I'm talking about is not even social democracy.

I think it's about having, you know, the balance between democracy and capitalism, which, you know, if taken to natural extremes, the one can undermine the other.

And what was kind of magical, what happened after World War II because of these big international and domestic institutions that were created, in part, in response to the collapse of the global trading system in the '30s and everything else that happened in the '30s and the war, which no one wanted to repeat, the institutional framework kind of allowed democracy and capitalism to be in balance.

But then something's gone out of kilter from the '80s onwards.

- Would you say that's neoliberalism?

- Well, I think, so there was a view that democracy or what had developed in terms of democratic institutions was actually stifling the economy in certain ways.

We'd fallen into bad habits in terms of inflation, in terms of some of the sort of paralysis of some industries by unionization.

You and I would probably disagree on some of that, but there was a response to that on the Right and the Left, which is to say, okay, we actually do need to open up markets, we need to have a more capitalist version of what we had.

So maybe social democracy was kind of more tightly woven into the market, and we brought the market into lots of things that we'd previously thought of as kind of progressive objectives.

But I would say, you know, I was in the Clinton administration, the sort of new Democrat view that in retrospect went too far.

- [Laura] Yeah.

- And certainly in some areas we had the kind of imbalances build up the global financial crisis, all of those things.

So I think, for me, it's more about there was a space for social democracy, but also for some other things in that balance.

And then the balance has been out of kilter.

- I mean, people look to the 1950s, and talk about taxation in the United States, which was a huge proportion of very wealthy people's income.

And yet, at the time, it was a time of great growth and a time of great sort of development.

And you could say there was enough kind of surplus swirling around to be taxed and plowed back into national services.

In the UK, you have a National Health Service.

In the US you start programs, like the Great Society, and Medicare, and Medicaid.

In, as you say, the '80s and '90s, I would say we saw, like, massive tax cuts and the idea that wealth would trickle down, and it hasn't.

And it didn't.

And in fact, much of it got sort of siphoned off into the financial sector, which became sort of an economy of itself on its own, not even making things, not necessarily plowing back into wages or quality of life for most people.

So that's all I would add is that there is this kind of financial sector of the economy today that wasn't even imagined at the beginning of the century, I would say.

- I met someone who embodied that.

When I was working at JP Morgan, there was someone who was a bond trader, probably all the things that you would imagine if you think of a bond trader.

And he was saying that his father in the '60s had also been a bond trader in Wall Street.

But in those days as a bond trader on Wall Street, it was hard enough to make a living for a family of four that he worked nights as a subway train driver.

Can you imagine that now?

- No, exactly.

- A bond trader having to do a second job as a train driver?

- No, exactly.

And I think when I started looking at any of these things, it was sort of shock, horror that the CEO is making 40 times what the lowest paid person is making in a company.

And now it's, at least in the US, over 400 times or even higher.

So I guess my question is, once you have that kind of wealth, and we could sort of talk about Elon Musk, but, you know, he's just a symbol, how do you reign that back in?

How do we ever get back in any kind of kilter?

Because they're gonna have political influence, of course.

- It's obviously a massive question.

I do think that the read across from corporate power to political power is much more direct and much more obvious in the US than it is in most European countries and certainly in the UK.

I would push back a bit on the idea that we are all in the same place.

- Okay.

- And I think, actually, that what happens often in the debate in Europe is, because the discourse is completely dominated by what's happening in the US, whether it's income inequality, wealth inequality, what's happened to wages, a lot of the things that have happened in the US have actually not happened to the same degree in Europe or even at all.

Like, equality's actually gone down in the last few years in Europe and the UK.

I think wealth inequality has risen but nowhere near as much, in part because we haven't produced all these massive tech firms.

I would push back a little bit that, you know, there was a reason why progressive movement, you know, social Left, left of center parties, centrist parties continued to support a market-led model for all those years, because, actually, it was still delivering quite a lot.

So the Blair years, you know, are a good example in the UK where you had... And I would say, you know, the last time you had, until very last few years, wages were growing for the bottom 30, 40% of US workers.

That was under the Clinton administration when they ran the economy hot.

Yes, he talked about reinventing government.

He talked about the end of big government.

But actually within that, there were programs, you know, for, you know, equivalent of SureStart programs in the US.

So providing the space for a social democratic government to be in power for as long as the Blair government was was a valuable thing.

And in the meantime, by the way, lots of cheap goods were coming in from China.

The liberalization of trade was benefiting people in their pockets in terms of the cost of day-to-day things.

But, the flip side of that, which you mentioned, is that the making of things and the kind of heart of the action in the global economy, people felt further and further away from, kind of culturally.

People felt kind of the quality of their jobs had got worse, even if they were able to buy cheap toys.

And they didn't know, you know, that the things that they were buying were not things that were made near them, and they didn't feel the same pride in their work.

They felt more and more isolated from the sort of the world as seen by people, you know, sitting around here, sitting in London.

So I think that sort of cultural piece of people feeling disaffected and not supported was a much bigger driver certainly in Europe than the sort of, you know, direct consequences of job loss.

- I mean it should be said the Clinton years are a very interesting period to look at 'cause what you've said is true, but what's also true during those years is you saw the deregulation of finance, you saw the deregulation of the internet, the Federal Communications Commission.

You know, you've seen the deregulation in those days that led to a lot of the financial crisis, you could say, particularly around banks and trading, and then has also helped to unleash this extraordinary concentration of power in Silicon Valley, which potentially good, potentially now feels very frightening, leads us to this moment.

And then would you be fair to say that Biden's effort to raise wages, to put money back into infrastructure was just too little too late?

People didn't feel it?

- You know, I think there's just, there's so many ways in which the left of center parties had sort of got removed from their working class roots, you know, were no longer perceived to be working for that.

And that's also true in the attitude to immigration, whether you like it or not.

You know, that is a universal thing.

A lot of the economic models, a lot of the governments, Left or Right, of the last 10 or 15 years, underpinned their economic growth with mass immigration and not been sufficiently attuned to how that was being experienced by people.

And the countries that were... Like, Denmark was actually very focused on what did it mean for demand in local schools?

What is the infrastructure implications of having lots of immigration?

They have actually managed to have a much smoother path on that.

But the countries that just sort of let rip, you know, it has ended up really hurting those left of center parties.

- So now we're in a situation where, with the US, we have the reelection of Donald Trump, we have, you know, a new sort of geopolitical positioning on the part of the United States withdrawing, as it were, from... Well, actually withdrawing from Western Europe, specifically, putting up trading barriers even higher with China, expelling large numbers of experts, scientists, officials, all sorts from around the world, as well as maintaining, you know, launching this immigration detention program that has people scared at the grassroots.

All of that feels from the United States as if, okay, we're just on a path to removing ourselves from the world as China is growing, as AI is coming in.

Europe will probably get itself together.

It feels like a frightening time to be American.

- I think we are only just starting to see the consequences or sort of grapple with what does it mean to have the US step back from those things and also for the US to publicly renege on deals that it's done and reject the kind of global order.

Now, there's plenty of people who would look at what Donald Trump's doing.

In fact, I was struck by this when he was elected.

When you talk to people, you know, in emerging market economies, in India, in Russia, there's quite a lot of people who are saying, well, thank God we've actually got an America that's not pretending to be anything other than anyone else.

You are no better than anyone else.

You are a rapacious, self-interested nation that's out for yourself.

And we've always known you with that.

But now, you know, you've sort of admitted it.

You know, back to Donald Trump being a transactionalist.

We can just do deals, and we don't have to have this kind of insufferable lectures, hypocritical lectures.

And there, you know, you would have to admit there's something in there.

- Well there is, and that takes me back to where we began.

Again, we're in this gorgeous garden.

You could sort of trace human development perhaps, or the economic development from, you know, peasantry to monarchy to representative government, you know, right here.

Are we going back to kind of feudo-fascism?

Some kind of strong man rule?

Is that where we're at?

- I mean I think Donald Trump definitely seems to be quite fond of...

He sees the advantages of strongman government for sure.

And strong women.

We've got a few strong women now in Europe either close to power or in power.

There is, I think, again, something I was talking about with Martin Wolf for the Financial Times on my "Trumponomics" podcast only recently.

That basic kind of question mark about the rule of law in the US, his transactionalism going so deep and involving such opaque or sort of non-transparent lines between corporate interest, personal interest, private interest.

I think that does disturb people.

It does disturb investors, even the ones who were terribly excited when he was elected.

So I think even if you don't think, you know... A lot of people thought that the democracy was pretty imperfect already.

And then we are now kind of going on a further path towards that.

But, you know, one thing you'd have to say is this guy was democratically elected, in fact more democratically elected than many people anticipated.

They did not necessarily anticipate him to win the popular vote.

And even if it's not the amazing historic margin that he claims, you know, as with Brexit here, one of the keys to the Brexit vote here, because it wasn't done by constituency or, you know, by particular district, because it was just you add up the votes on one side nationally and you add up the other, you had a lot of people voting who'd never voted before 'cause they didn't think there was that much point because their area was solidly Labour or solidly conservative.

And it was one of the more democratic results that we've had, you know, in terms of turnout, in terms of, yeah, people voting who hadn't voted in decades.

So what we can't say is that this is not democratic.

- Right.

Those phenomena speaking exactly to the dissatisfaction that you talked about at the very beginning.

I think we all agree about that.

So I guess we go to what the heck do we do?

I mean we are looking at massive shifts in the economy geographically, geopolitically, locally in any particular area.

Technological change that's gonna put a lot of people out of work.

I think we can't imagine what life will be like actually for your, you know, wonderful children just now going into college.

How do we think we create society, maintain society when it isn't a simple matter of trying to kind of even out the rough edges of capitalism through redistributive taxes and when there isn't work for everyone, when there isn't a sense of social purpose for everyone?

Big question.

Hope you've got the answer.

- We listen to the rhetoric of Viktor Orbán or sometimes things that come out of Donald Trump's mouth, and you hear that sort of talk of special emergency.

You know, we sort of know when governments start talking about emergency legislation and I'm taking emergency powers to do this, you know, often, certainly in the developing countries, that often doesn't end well- - Bells go off.

- For democracy.

So there's a sort of fear that you are then in this kind of much extreme sort of '30s-style scenario of different, extreme models of politics.

And I think there is a concern for that, and I think there's a concern on both sides, right?

'Cause the reaction to Donald Trump or the reaction to other sort of strong man leaders could equally be extreme because, you know, in the face of this scary person, well, I have to do my own scary things.

But I think your show and the focus that you've always had of local action and people making things better, building communities, and supplementing or pressuring government at the grassroots level, you know, that clearly has to be part of this.

You know, people want communities.

Part of what Donald Trump is playing to is people want communities.

They wanna feel part of a gang.

They also want to see government and see things happen.

They want someone who does stuff.

You remember he came to public notice, you know, New Yorkers first heard of him when he promised to fix that ice rink that had been closed for years and years.

And there was a sign of kind of New York City not having its act together, and he got it done in a few months.

That was the beginning of him as, you know, the get it done guy.

- Well, get what done though is the question.

And I guess I want to come back away from politics and democracy a little bit just to economics.

Some of the experiments that we've looked at in this country of the UK as well as in the US have to do with building community wealth through democratizing local spending decisions and local investment.

Towns may not have a lot, but they have some stuff.

They have some people working.

They have some assets.

How can local taxation go back into local businesses in a way that engages people, in ways that gives them some sense of ownership and maybe sometimes actually a share in the business through a work around co-op or something.

That it seems to me, some people call it community wealth building, is a kind of alternative to this, on the one hand, sort of state socialism, on the other, kind of out of control capitalism, I would say.

But it hasn't had a chance.

I'm always like, it hasn't had a chance to really be the kind of model that people can look to and say, okay, that's the alternative.

So one question I have for you is, do you see alternatives that could produce an economic basis for the kind of democratic climate that you're talking about?

- One of the things that, it's interesting in the UK has become sort of agreed by Right and Left is that the sort of one lever that we haven't pulled yet is decentralization.

You know, we are a really, relative to the US, super centralized state.

All the money is just controlled by, you know, Whitehall.

We're in this one bit of the UK, one bit of London, and even for the city of London that's bad because the central government controls a lot more of what the city can do than is true in New York, or LA, or any of these places.

So, and if you seriously gave more decision making power over the resources that are already spent in their area, you know, whether it's Manchester, or Preston, or Sheffield, there's, you know, huge chunks of government money that are already spent there, but they have no control over because they flow in from these different pots, from these big buildings around here in Whitehall.

I'm not identifying a single model, but I think models could come out of that where you're just joining up.

I'm less ambitious.

I don't need to create a whole different economic model or alternative to capitalism.

I would like an alternative way of spending money in a local area where, you know, the person who's spending on health and education, they're all the same person, you know, that they're able to work together.

You know, you think about how you're investing in a community, and you think, well, maybe if we give more primary care, or we have more house visits, and take from this pot of money, then there'll be less needed in this pot of money, which is accident and emergency units in hospital because people haven't had any home care.

I'm just looking for that, Laura.

- (laughs) Alright.

- Could we just have that first?

- I'll let you have that.

Finally, you know, how's your job these days?

You've got a very big one at Bloomberg.

How are you even grappling with this moment?

- We are playing it straight.

You know, I mean, I think this is a time when you've got, you would hate this phrase, resistance journalism.

- That would be me, I guess?

- You know, you and maybe the New York Times quite often.

you know, there's a lot.

It is a polarized time, and that means it's very hard for people not to be on the polls.

And we're actually doubling down in terms of investment.

We're actually bringing more resources into Washington 'cause we're not stepping back.

We're not sort of taking the knee as people say, or flinching at uncovering everything that's happening.

And actually to be fair, I think, you know, Bloomberg, because of our financial expertise, we kind of talk to the Trump administration in a way that sometimes they don't have people talk to them because we actually understand that many of them come from finance, the people who work for Trump.

But we also understand when things are underhand, are happening, when there's kind of shady business deals happening.

So we won't flinch from that, but we are gonna try and stay absolutely straight down the line.

- Alright, here you go.

Good luck with that.

I won't try to do any of those things, but it is wonderful to be here with you in this place.

And now, I'm feeling kind of good about all these, you know, plantings happening around us.

Maybe something- - There will be growth.

- Great will grow.

Stephanie Flanders with Laura Flanders.

This has been Laura Flanders and family.

'Till the next time.

Stay kind, stay curious, and thanks for joining us.

(upbeat music) For more on this episode and other forward-thinking content, subscribe to our free newsletter for updates, my commentaries, and our full, uncut conversations.

We also have a podcast.

It's all at lauraflanders.org (upbeat music continues) (upbeat music continues) Hey, that was fantastic.

Thank you so much.

That was really fun.

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