The cost of losing trust in the US

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What was the last thing you wrote about, Paul?

Oh, heavens. I just wrote about why the trade war is not over, and how the insult, Trump always chickens out, probably is going to make it even harder to bring this thing to an end.

And I wrote a column about why prices in financial markets look rather normal right now. And that's why that might be rather a worrying thing because there's so much financial markets don't seem to be noticing.

I read that. And that's a discussion we could have, though probably not for this series.

OK. I'm Martin Wolf, chief economics commentator at the Financial Times.

And I'm Paul Krugman, a professor at the City University of New York and now an independent newsletter writer on Substack.

And an immensely productive one, I have to say. So in six episodes to run through June and early July, we'll be discussing the ways the old world order, the one we've all been familiar with since the Second World War, has been, arguably at least, permanently altered and what is emerging to take its place? And why that matters.

If you're a regular listener to the FT's Economics Show, you may find that these programmes aren't published at the same time each week that you're used to. That's because schedules being what they are, for Paul and me, we've had to do quite a lot of diary planning, juggling, I would say, to get these sessions into our calendars, and some flexibility has been required.

And we're going to let you know in the beginning of each episode exactly when we sat down for these conversations, in the event that someone, like Donald Trump or possibly someone else, does something outlandish or unexpected. And you'll understand why it isn't in the conversation. For the record, right now it's 3pm, Wednesday, June 4th, in London and 10am here in the real world to New York.

And we're certainly going to talk about more than America alone. Obviously, there are huge economic and political shifts taking place across Europe, China, the world's second largest economy. And of course, there's the huge advances in artificial intelligence, which may or may not have comparably huge effects on the way we all live.

Let's start with one big theme, which seems to me a big part of where we are today, which is the costs of losing trust, and particularly trust in the US, the world's largest and most important economy and the one that has both created and underpinned the global economic order of the postwar, post-Second World War period, which most of us regard as a pretty remarkable success, despite all the problems associated with it.

And the US has been the hegemon in this system. It has been a stalwart ally of western countries, in Europe and in Asia in particular. And it was supposed that it could, by and large, be counted on to champion the principles of democracy and free markets. And now we have something quite different. We have a US administration which has simply torn up its principal trade agreements.

And comparable things are happening in the rule of law domestically, obviously equally important. So what does it mean for the economy and for politics globally and domestically if the government, whose purpose is sort to provide an underpinning of stability within which people can plan their lives and businesses can come plan their futures, just becomes so wildly erratic and unpredictable?

OK, so let me start with something that might seem a bit abstruse, but I think is a good entry point. So for 80 years and in some ways, even before that, international trade was the whole system of international trade and agreements.

It was based on a rather abstruse thing called the Most Favoured Nation principle, which basically said that we make a trade agreement with a country and we guarantee that they will not be discriminated against, that we will not have a higher tariff on imports of steel from the European Union than we have on imports of steel from the UK, or something like that, basically, that everybody gets the same treatment. The different products may be treated differently. And that this is a kind of a non-discrimination rule of law.

On April 2nd Donald Trump just... I mean, everybody looked at the crazy level of tariffs. But in some ways, the most important thing was he just said, we don't care about that. It wasn't even a mention that I am abandoning this fundamental principle of international trade. And it was basically saying that past agreements, as far as we're concerned, are suggestions at most. We don't care about them.

And this is applying to everything. It applies to the trade agreements. As you say, we have free trade agreements with our neighbours. We have a free trade agreement with South Korea and so on, all of which are completely by the board. And I believe that there's a kind of a unity to all of this stuff.

A country that just not even makes a show of tearing up all of its trade agreements, but just plain acts as if they never existed, is not a country that you can expect to come to the aid of an ally if it's invaded. So this is a completely wild world that we're in. And the United States, we built a system in the US.

In America's own image, it's a legalistic system. It's very much a kind of Anglo-Saxon tradition, except even more so because US law is much more the letter of the text than British law. And it's all gone. And how do we even live in this new world?

I think we can put this in even wider context. So you might think in terms of the way a political system operates, in terms of two polar opposites. One is a rule-governed, law-governed community in which the government is subject to the law, the king is subject to the law, as it were, like sovereign. And the people are protected by that fact from arbitrary despotism, which is very much the sort of thing people were worried about when they established these ideas in the 17th, 18th centuries. And then they evolved.

And what you describe is the ways in which the United States is operating exactly in the way of an arbitrary despotism. That is to say, the king says, and inevitably the king says this domestically and internationally - it can't be really separated - that what I say today is the law, that's what you have to do. And if you don't, I'm going to punish you.

And in trade, because so much discretion has already been given to the president by Congress, the president is allowed, apparently by law, or at least he claims to be - and we'll see how it goes - to say, there's an emergency. So it's an emergency, and then I can do whatever I like. He is acting like an arbitrary despot.

And the reason people hated arbitrary despotism, quite apart from the fact that it was frightening and awful in this obvious way, is it made it impossible for anyone to plan because the government might just say tomorrow, OK, you've built this wonderful business over the last 10 years, and now it's ours. And isn't that the really big theme here? That trade is actually as it were a leading example, an exemplar of this profound process of political transformation, which pretty clearly, this administration believes in, that the king can do what he wants.

Yeah, this is really turning back. I mean, even in some ways I think we're unfair to medieval kings, who still felt some restraints on what they could do, right? Outright theft of a baron's property was something you didn't do casually, anyway.

Sometimes people say that Trump is acting like a mob boss. But my understanding of mob bosses, which is entirely based on The Godfather movies, is that, by and large, they honour their promises when they make them, at least to their fellow mob bosses. So we're in a situation where it's all arbitrary. It's turning the clock back.

If I may venture dangerously into British history, we're basically undoing the Glorious Revolution of 1688. We're back to arbitrary rule by a single individual, based on whatever he feels like doing. And that has huge practical consequences. It's not just scary and unjust and all of that. It's, how do you do business? How do you plan?

Actually, I would say, and in fact, I wrote a column on these lines that it takes you back to the pre-Civil War period, namely that this was the time of the civil war between parliament and the king, King Charles I. And he was saying, well, I can levy any taxes I want. And parliament said, well, no, you can't levy any taxes you want. You need the consent of parliament. They fought a civil war on this.

Well, now what have we got? We have somebody who says, I can levy tariffs at will. Tariffs are taxes. And they specifically announced that they're going to generate an enormous amount of revenue, so much revenue, in fact, that they will implausibly deal with the fiscal consequences of their budget. That's a separate issue. But this actually, I think, takes you back in the political history of the English-speaking peoples, to the early 17th century. So it is that fundamental, isn't it?

Yeah. And now the thing is, just a few months ago, we had in the United States what was in many ways a pretty sophisticated system. There was substantial presidential discretion on tariffs, but that was conditional. It was designed to give some flexibility. It was supposed to be limited to certain specified cases. It was supposed to be temporary. It was supposed to be just a kind of a pressure-release valve for political stress.

And it was designed on the basis that the president of the United States would have some broader vision than some congressman who wanted to protect a factory in his district. It was a system that worked beautifully. US trade policy going back 90 years is one of the great success stories of increasingly rational governance.

But it was utterly undesigned for someone like Donald Trump. And so it all turns into a disaster. And the trouble is that it's extending to everything else. I mean, there's no reason at all to believe that two or three years down the pike, maybe closer than that tax bills will be assessed on the basis of the law as opposed to your political orientation.

So the key point is, though trade and trade policy is very, very important, it's part of a bigger and more systemic upheaval in the relationship between the US executive and the rest of society, which challenges what one would have thought was the most fundamental characteristic of the United States, going back to the Constitution, namely, the rule of law that the executive is ultimately subject to the rule of law.

And if so, it is truly - and I've thought this now - a revolutionary moment, or maybe we should describe it as a counter-revolutionary moment in US and so world history.

Well, if it's counter revolutionary, it's going back centuries because these are things that we've really never seen in the United States. And Britain hasn't seen them for centuries. And look, I mean, if you are going to be a real hysteric, you'd say that a government that just tears up its trade agreements, the next thing you know, masked government agents are going to be kidnapping people on the streets, which is totally ridiculous, except it's happening as we speak. So it's awesome and terrifying.

Later on in this series, we might talk about why this happened, but let's just think about it a bit more in the dimensions of it. You mentioned, absolutely rightly, that the first principle, the first article of the General Agreement on Tariffs and Trade as it was, and it's carried through, was a non-discrimination.

Right.

And the second idea they had was that, as you say, also when there are exceptions, there were clear constraints on the way things should operate, which this current system of policy violates comprehensively. And then the third element was that, again, because people understood the economics, that tariffs, which you agreed to liberalise in negotiating rounds... there were quite a number of negotiating rounds over many years, ending in the 90s with the Tokyo round.

When you did that, these tariffs were then bound. You were committed to it. And if you suddenly changed tariffs, you had to compensate countries. So all this has gone. So it is crucial to stress, just looking at the trading system, that we have really blown up, or the US more precisely has blown up the entire system in it, which was very carefully thought out. And it is impossible almost to exaggerate how significant these changes are.

Yeah, we are... the morning, from my point of view, that we are recording this, the United States just doubled the tariff on steel from 25 per cent to 50 per cent, which as a side note, it's crazy economically. I mean, there's a veneer of legality, which is it's invoking the Section 232, the National Security Clause, which does correspond to Article 22 of the GATT.

But that's a clause that has a kind of... I don't know what the legal term is, but there's a come-on-guys-get-real aspect to it. In what sense are imports of steel and aluminium from Canada a threat to the national security of the United States? That's not a plausible argument, unless you have a federal government that has already been so thoroughly corrupted by power that the relevant agencies will say, yes, Mr President, we agree, it's a threat to national security.

Should you build a new steel plant in the United States right now? If we really are going to have 50 per cent tariffs on steel, in perpetuity, yeah. If we're going to revert to rationality and decide that steel from Canada is about as safe an import as you're ever going to have, then building a new steel plant in the United States is a big mistake. You're a business person trying to decide, what do you do? And the answer probably is nothing. You sit on your hands.

It's one thing to have a high level of tariffs, which we do - we basically have tariffs, they're changing day by day. But we're back to kind of not far short of Smoot-Hawley. But Smoot-Hawley, at least people thought, was going to be the law at least for a few years. And here, who knows what the tariff rates will be a week from now.

So one of the bizarre conclusions to be reached. Let's suppose you're a European business, and you're thinking about investing abroad in this situation. And you have two superpowers to choose between, the United States and China. And you probably don't like China very much, though money has been made there, because the Chinese government isn't perfectly predictable. It's a dictatorship, for sure. We know all that. The party is going to clearly have influence on what you are going to be allowed to do.

And then there's the United States, which historically you regard as a safe, reliable liberal, in the best sense, country with the rule of law. And now you're in this situation. I would argue, that in terms of long-term predictability by a government that sort of understands the long-term interests of the country, it's going to look just, not ideologically, just as a matter of practise, that China is a safer bet.

Oh, yeah.

Isn't that a reasonable conclusion?

Look, there are three economic superpowers in the world, the US, the EU, and China. And the EU, for the moment at least and I hope will continue to be, is what we thought western democracies were like. It's a place where laws apply, where things are not arbitrary, where policy doesn't change week by week.

And China? OK, China has always been... there's a lot of corruption. There's a lot of politics. You need to be on the good side of the party. But the Chinese are not completely unstable. They do seem to think ahead. They seem to worry a little bit about their reputation.

And the United States is now the odd man out, which is completely unreliable. One thing I will say is that there's some hope that this does not devolve into a complete collapse of world trade, precisely because the United States is pretty much unique here. We don't see anybody else behaving the way the United States is.

And even in the United States, this is really personal so far. So far, this is one guy, Donald Trump, who for... now, there's a lot, which we'll talk about, I'm sure, in the future, about how it was that this guy gets so much more power to make mischief than any previous American president. But it really is kind of a one-man chaos machine.

And there is a reasonable hope that we can maintain something like a workable international economic order, centred primarily probably on Europe, but with agreements with Canada and Australia and Japan and even with China. And that we can leave... the United States will be constantly throwing chaos bombs at the rest of the world. But maybe it's not a full devolution into global chaos.

Let me just turn to some of the other dimensions, which have such significant implications. So one of them, seems to me immensely important, is corruption. So one of the things that the US did, which we all admired, it forced the rest of the world, notably Europe, to take anti-corruption quite seriously, which Europe was notoriously rather lax about some decades ago because the US really did act against or really reasonably successfully - nothing is perfect - against its own corrupt practises, corrupt practise of its own businesses.

And that was linked to all sorts of other things. Presidents weren't supposed to make money and the politicians out of being in office. They were supposed to be completely transparent about their tax affairs and their property. Their personal property had to be put in a blind trust. Certainly, that was true of officials, in order to make clear that they weren't doing things in order to enrich themselves.

All that seems to have gone completely, and nobody seems to mind, or at least that's the perception I've gone got. Would you agree that this is, in its own way, as significant a change in the US and an example, alas, to the world, which I fear very much in other governments? An example, which sort of makes a lot of corrupt dictators look quite good.

Isn't this really, in its own way, just as profoundly worrying? And certainly for the US economy, a government that operates like this, it's not going to be the old US economy, is it?

Right. It's going to be an economy in which... there's this old ongoing discussion of why do some poor countries stay poor? And we talked a lot about rent seeking, about how policy was shaped by basically who was most successful at bribing people in power, which ended up crowding out success based on actually running businesses well.

You don't have to be totally pure. China is not exactly a model of clean business practises. But it has to be controlled. And now we appear to have a presidency that is entirely for sale. That's going to very much alter the nature that the most successful business leaders are going to be the ones who are best at figuring out ways to enrich the chief executive and his family.

By the way, it's going to be an interesting thing for international relations because if the way to get business in America is to bribe people in power... you know, Europe, Britain, you guys are not set up to do that. You have rule of law of yourselves. And parliament cannot allocate $3bn to buy Trump coins. But a Middle Eastern dictatorship can. And so this is going to be... again, it's a seismic shift entirely for the worse.

And I suppose, in this context, two examples seem to be completely indicative. One is cryptocurrency, and the other is the famous jet plane from Qatar.

Yeah. Although, it appears that there's nobody easier to cheat than a greedy man. And it looks like Qatar may have given Trump a bit of a lemon.

Two other areas which might be of immense significance economically of this loss of trust, which are worth mentioning, financed debt and, of course, the alliance security, which is not our field, but it obviously links.

So one of the striking things - and I think both of us have commented upon it - is that some of the advisers - I won't mention names at this point, but you're welcome to do so - have suggested that given that American debt was incurred in order to defend the free world, as it were.

And it's partly a byproduct of the malfeasance of mercantilist trade partners. They should have the right to convert a large part of current debt into some form of ultra long-term debt. I can't remember what it was. 100-year debt or...

Century bonds.

Century bonds, yes, which, to you and me, sounds like a default. He doesn't sound.... looking at the history of Mr Trump himself as a businessman and some of the ways fiscal policy is now going and the pressure that could bring if interest rates were to start to rise significantly, which could easily happen, that default is sort of on the cards.

And they might feel that's justified. Now, if that were to happen, the effects of that on the world, given the role of the dollar and US financial assets, above all Treasuries, this could be an absolutely devastating change.

Yeah. You know, you need to be a little careful. When we talk about Trump advisers, for the most part, there's no reason to believe that they're actually giving any advice, so that they were hired as a drunkard uses a lamppost, for support, not for illumination.

And so it's not so much that Stephen Miran, the chair of the Council of Economic Advisors, has said this as the fact that Trump wanted to hire someone like him. But the fact that that's not disqualifying, that someone is suggesting, well, maybe we should default on our debt, that that was not an absolute no-no, we're not going to hire somebody like that, is telling you something right away.

Trump is famous for stiffing everybody, for defaulting on bonds, for stiffing contractors and so on. And yeah, US debt plays a very special role in the world because it is the safe asset or it has been. Alternatives, well, the Euro, Eurobonds, the market is too fragmented. China has capital controls. And yeah, there is some arbitrary.

There is no natural alternative. So US government debt is the safe asset. It is the collateral. It is so much required as collateral that sometimes there have been occasions when interest rates go negative because people say, no, putting up cash is not good enough. I want Treasury bills.

If that ceases to be the case... and there's already hints in the market that people are starting to seriously question the reliability of US debt... people would say, well, will something else replace the dollar, something else replace US debt? I don't think there's a plausible candidate for that.

The real risk is that nothing does, that we enter a world system where there is no safe asset. There is nothing that people can put up as collateral. And that just throws a lot of sand into the gears of the whole international economic mechanism. Very difficult to put a number on it, but not a chance you would want to take. And yet, again, the people in the United States who are running things appear to be blithely indifferent to all of those risks.

So the trading system, the rule of law and the underpinnings of the financial system, and then finally the security system - we don't need to discuss this at length - but it obviously follows. And we've seen signs of this with Trump's musings about annexing Canada or Greenland, his treatment of Zelenskyy and so forth. Well, he doesn't look like the world's most reliable ally, does he?

Yeah. I mean, it takes real talent to make a borderline enemy of Canada. I mean, well, there are lots of jokes about that. But the fact of the matter is, Canada is as good an ally, as good a neighbour as any country has ever had. It can sometimes be annoyingly polite. But they are so innocuous as a neighbour.

And then to have Trump say, oh, well, you should become our 51st state and threaten - it's a little complicated, but still - imposing trade sanctions. I mean, our countries are so closely linked that in some of the official statistics, Detroit-Windsor is considered a single metropolitan area because there's a bridge. And some of it's in Canada, and some of it is in the US. But it really is one functioning place. So this is insane.

And then, I mean, we do want to say... I mean, conventional war has returned to the world. There is a desperate war in Ukraine. And the old America might have... well, a democracy defending itself against assault from an autocracy heroically, maybe a previous US government would be cynical and limit aid or something. But to de facto be on Putin's side, which is clearly the case for Trump, this is not the America I knew.

The very final area that, which I think must be very close to how you look at the world that is so shocking to us, is the assault on science and the universities. So to many of us, we would have said, the fundamental underpinnings of American postwar success, economically and in every other way, has been the immense fertility and creativity of the American scientific system and universities.

Obviously, there has been an immense amount of annoyance. And I actually have to share some of the more extreme things that have been going on in the social science departments, but to me, at least, a minor blemish against the enormous power and strength of this system. And this includes, of course, the attraction to foreign students and the influence that has had upon governments and people around the world. That all seems to be under enormous attack now.

And it's systematic. So it's an attack, first of all, on the role of foreign students and pretty soon, I would guess, foreign faculty. I get two kinds of funny letters. It is amazing how little people can know about their own country. But I do get occasional letters from people who say, how would you feel if New York was full of immigrants? And then I get letters that say, how would you feel if foreigners were taking lots of professor jobs?

And of course, there is no first-rate academic department in the United States that isn't at least 30 per cent or 40 per cent foreign born. There's a lot of students at all levels. But above all, we're talking about graduate students in the United States, who come from all over the world. And they don't just study, they do research. They're part of research teams. It's one of the things we have done better than Europe, is collaboration between the university system and the world of business.

All of that is being trashed. I mean, and not simply making people feel unwelcome, but preventing them from coming and on some occasions arresting foreign students, not because they've done anything illegal, but because they've expressed opinions that the current administration doesn't like. I think that the damage is going to be immense. And I don't know if it's reversible. I think it would take decades to get us back to where we were seven or eight months ago.

It's difficult to unsee what the world has seen. So it seems sort of extraordinary acts of self-harm. And that's in a way, to me, the most puzzling thing. The Republicans are supposed to be a party of business. They are supposed to reflect business interests. Certainly the tax bill suggests that.

But they don't seem to understand, in ways that I find really quite bewildering, what actually made the US succeed, what made American business and the economy so successful.

Well, I think we're fundamentally talking about hostility to independent thought. They claim that universities are indoctrinating students with Marxist doctrine, which is nonsense. Yeah, you can find a few social scientists here and there. But, you know there are always people saying silly things.

But fundamentally, the real complaint is that the universities are not indoctrinating people, that they're teaching people to think, that they're teaching science. Science might lead you into uncomfortable conclusions, like climate change is real or vaccines actually work. And so that trumps all of the negative business consequences.

It's all pretty frightening. And I think the crucial thing about this conversation is to establish - and I think we have done so quite successfully - that what is going on is not some little blip, one of those things that will pass, that the president and this administration are behaving in rather extreme ways, but it's like other administrations in the past, which I constantly hear.

It's a fundamental transformation. And of course, it raises the question, which I think probably is beyond our professional competence, but I have strong views about, which is, will democracy in the United States itself survive?

But I'd like to turn to... because in the last few days, we had the death of one of your teachers and a dear friend of mine, Stanley Fischer, who was one of the leading economists of America as an academic at MIT, above all in the 70s and 80s and who was responsible in some way for the rebirth of Keynesian thinking. I want you to talk about that.

And then he went on to become a very leading policymaker at the IMF, controversial but very widely respected, and later at the Bank of Israel and at the Fed as a vice chair, just died. And what's interesting, he was an immigrant. He was originally born in Zambia, I think. And then he came to London. He was taught at the London School of Economics.

Then he went to America and made this glittering career, enormously admired. Tell us a little bit about him, because he taught you, and what he did for economics and what one can say about the value of the thing that is now being destroyed, which is serious policy-making, rooted in serious analysis, which can be flawed because we have no perfect knowledge, but this sort of economics, which is so remote from what's going on now, he meant and he, therefore, embodied.

OK. Yes. So a little context. There was a crisis in macroeconomics in the 1970s, the Rational Expectations Revolution, which said, people are smart, people under... if your model assumes that people will leave things that are different from what the model says, then there's probably something wrong with your model. And that turned into a full-blown assault on Keynesianism, on the whole notion that government can fight recessions.

How did you respond to that? So some people went full in on it and basically said that the business cycle is some kind of statistical illusion or whatever. It's not really happening. And some people said, this is ridiculous, and I don't want to waste my time on it.

But you had... it was really two people. It was Stan Fischer and his very good friend Rudi Dornbusch, came to MIT in the 70s. Both of them from Chicago, actually, where this stuff was for a while reigning supreme.

Listeners may not know, but a phrase coined by Bob Hall - saltwater versus freshwater. As it happened, the schools that went all in on this were places like Chicago and Rochester and Minnesota. And the places that said, oh, Keynes may have been on to something were Harvard, MIT, Princeton, Stanford.

So learn the freshwater economics, be able to do it, but maintain a kind of balance, where you say, look, if these models say something that is clearly not what we see in the world, then say, OK, got to retain some reality sense. And if that means occasionally being ad hoc, which is a term of insult among economists - but it just means, OK, there's something we can't quite explain or can't explain very rigorously, why people act that way, but they do. So we're just going to put that into the equations.

Being willing to be strategically ad hoc while making as much use as possible of these new techniques and new analytical stuff, that's the kind brand of economics that came to MIT. And you had, again, it was very much the pair of Fischer and Dornbusch, who were both masters of that kind of - sometimes I say, doing equilibrium macro - sorry about the jargon-- but doing it in the subjunctive.

If it were true that people behaved like this, this is what would happen. Now, we don't think that's quite what happened. So here's a compromise way to look at stuff that is sophisticated, has a lot of mathematical rigour, but is not completely at odds with what we see in the world. So Stan and Rudi brought that, taught that to MIT students.

And the 70s at MIT - and this was very specifically MIT. The 70s at MIT were a kind of Athens of macroeconomic thinking because you had all these people who were technically trained, up with the latest modelling techniques, up with the latest econometrics, but also hadn't lost sight of the fact that sometimes the real world is a little bit less willing to obey what idealised theory says it would be.

And so the people who came out of that is basically everybody roughly my age that you've heard of: of course, Stan himself became an enormously influential policymaker, Ben Bernanke, Olivier Blanchard, who became the most influential chief economist the IMF has ever had, Mario Draghi, Ken Rogoff, Maury Obstfeld. I'm sure I'm missing a whole bunch of people.

And it was this particular thing of being able to be rigorous, understanding the math, but also being able to be real world. And by the way, one of their most important things was, they wrote the modern undergraduate macroeconomics textbook. There was a point when you really had to get into the modern world, the world of inflation and stagflation and all of that. And it was the Dornbusch-Fischer textbook that taught hundreds of thousands of undergraduates how to do this.

But the thing about Stan is, if you want to understand what did he do for economics, you follow his career, you follow his students. But my god, the influence of that teaching. I spent a large part of my life in this world. Just the things that you remember. He would do these... there was this period when everybody was solving these rational expectations models, which was actually not a trivial thing to do.

And Stan would work his way across the blackboard, putting them down and carefully numbering each equation as you put it down, and then turn to the class and say, it's really important to number these suckers because otherwise you'll lose track of what you were doing. That kind of meticulousness and care, which transferred into an extraordinary era in economic policy-making.

So thanks for that brief discussion of what economics has been doing. I have to say, because I was taught earlier and never became an academic, I've never been able to take rational expectations seriously. But its influence was colossal. So something had to be done to make it work in terms of policy-making. Of course, I accept that expectations matter for sure. But rational? Anyway, that's another subject.

So these are heavy conversations. And one of the things I've been doing in my Substack posts is finishing each grim discussion with something cultural, in my case almost always a musical selection, that sometimes just leavens it a bit, either referring to the subject or just plain giving us some release. We can't give you the music because of the rules under which the FT operates.

But I can tell you that the song that I was going for. And I turned out to have far more eclectic musical tastes than I ever would have imagined when I was younger. So there was an 80s band called Quarterflash, really worth listening to. And their biggest hit was something called Harden my Heart. And it contains the line: 'You gave me your word, but words from you are lies.' And that seemed to be a pretty good line for today's discussion.

Now, I have to admit that for a very, very long time-- I won't even admit how long - I have not followed what I would broadly describe as popular music at all. So I'm a sort of fossil in this area. And as you'd expect of somebody like me, I love opera. But I did love The Beatles. They were the music of my early adulthood, when I was courting my wife.

And it seemed to me I should choose a Beatles song about the heartbreak that is associated with the loss of love, the loss of the loved one, because what we are seeing in the rest of the world is what feels like one's loved one, one's beloved, the United States basically saying: I don't care about you at all, go away.

And that's what the Beatles were singing about in the song For No One in Revolver, one of their greatest albums. And I thought it was brutally appropriate for our time. And it's a very beautiful song. And the links will be in the show notes and enjoy.

Well, so this is the end of our first discussion. Next time, I think we want to talk about a bit of what's been going on, at least economically, that might explain to some degree what's been happening in the US, but also in other countries, because it's pretty clear that all over much of the world, including much of the western world, people are really not very happy with liberal democracy and not really with the market economy as it was.

Do we have some ideas about why that happened and what we should do about it? I hope that I can talk about that with Paul. We can discuss that next time. It's a pretty big subject. Thank you for listening and watching.