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Austrian economics is about prosperity and freedom | Jerm Warfare · UK Column Radio

• 0:35
  None. Austrian economics is consistent
• 0:42
  and has been consistent since its inception.
• 0:45
  That's an interesting word. Consistent, I'd say.
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  I'm not sure I would use that word, but I don't think it's
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  inaccurate. I would say that Austrian
• 0:55
  economics has tended to be stick closer to reality than most of
• 1:01
  the other schools out there. So that that I, I guess that
• 1:06
  corresponds in a way to consistency.
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  But I think it's important for when trying to understand the
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  whole problem, the whole situation, it's important to
• 1:17
  grasp the fact that economists as sort of representatives of
• 1:24
  the academic world that are tasked with explaining to people
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  how the world works, They have to sort of, they have to be kind
• 1:33
  of careful what they say because most of them are paid by
• 1:39
  schools. And that in many cases goes back
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  to government money. So if you say things that the
• 1:47
  government doesn't like, you may risk losing your livelihood.
• 1:53
  And in fact, if you look at where economists get their
• 1:58
  money, particularly 10-15 years ago, most economists in the West
• 2:05
  are all on the payroll of direct, on the payroll of
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  governments, for example, on the payroll of either government
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  funded institutions or central banks.
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  So they were not free to speak freely.
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  And I think even even the Austrian school, which has been
• 2:27
  more daring than the rest is still also bound by that, by
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  those restrictions, by those limitations.
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  I just on average they have been less than perhaps because they
• 2:41
  were already very marginalised for a long time.
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  And as a result they really didn't have much to lose.
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  They were pretty much excluded from the mainstream of academia
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  for many decades, although historically they were much more
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  mainstream and they're the origins of the Austrian was
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  probably many listeners can guess goes back to Austria.
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  And in Austria it was sort of the leading School of Economics
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  in the 1900s and the late 1900s. And many of the central concepts
• 3:20
  that are very mainstream in economics today were invented by
• 3:24
  cunt work first conceived of by the Austrian school, for
• 3:30
  example, time preference. That's probably not something
• 3:35
  that that necessarily all that sort of to understand, but it's
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  basically the idea that how much I am willing to how how how much
• 3:48
  I'm willing to to put off for the future instead of consuming
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  it today. So, so for example, children
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  have tend to have very, very high time preference.
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  They want to have things now, you know, where you can have
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  twice as much if I get, if you wait a year, well, that's,
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  that's not going to fly with most kids.
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  But as they get older then, then their time preference tends to
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  drop. They're, they're, they're able
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  to delay gratification. And that's a very essential
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  concept in economics. Now that actually came from the
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  Austrian school. Also concepts like marginal
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  utility might ring a bell to some of the studies in economics
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  also is a concept that comes from the Austrian school.
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  So a lot of those things became part of what is now mainstream
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  economics. Without people would have
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  realised that it came from the Austrian school.
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  But the Austrian school kind of went underground in I guess the
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  40s or 50s when let's say the socialist type of thinking
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  became very dominant in not only in the East, but also in the
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  West. The idea that governments should
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  interfere in markets, that governments should direct things
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  became very dominant. And that kind of led the
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  Austrian, led the Austrian schools to be very, very much
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  marginalised. And so, so much so that in by
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  the 1970s and 80s, it was almost completely forgotten.
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  And in fact, if you take my own example, I, I studied economics
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  in on the border of Austria in Germany, in Pasa, which is a
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  little city on the border of Austria.
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  One of the leading early thinkers in the from the
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  Austrian school is was a man named Oigen von Bombavier.
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  And he was on the Austrian money.
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  He was on the Austrian 100 shilling note.
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  And so I was, I spent a lot of time in Austria and I saw him
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  every day whenever I looked at those notes.
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  But I had no idea that was, he was actually one of the early
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  thinkers that that ended up in the Austrian school.
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  And I studied economics. I didn't know anything about it.
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  So I didn't, I didn't hear the word Austrian economics until
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  long after I graduated, which is of course absurd given the fact
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  that I went to study the economics.
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  I don't know what 300 kilometres from Vienna where it comes from,
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  but it just goes to show you how marginalised it was.
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  So I got, I got, I got lost. What was your question again?
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  Remind me? Well, no, I mean, you're
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  actually kind of segueing into what I want to know and that is
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  what is Austrian economics. So, so if you in a general
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  setting, say Austrian economics, people don't really know what
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  you mean, but you've kind of alluded to the fact that it's
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  based on sort of the basic axiom that we do things with a
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  purpose, we want to achieve a certain goal and because we want
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  to do that, we don't. I'm sorry, you said it better
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  than I did. That's that's kind of the that's
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  the central axiom. Yes.
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  I had a question. How how do people go about doing
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  that and deserving of reality, what actually goes on?
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  And I guess one way of of defining the one of the the key
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  concepts is the different, the difference between what we call
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  economic and political means to obtain goals.
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  So economic means is defined as doing obtaining benefit through
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  voluntary interaction, voluntary exchange through producing
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  things and political, political means to put it crudely you
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  could say was obtaining goods and benefits through alterior
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  means, for example, stealing them.
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  That might be one way. We could also call that taxation
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  for example. And if I get paid by the
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  government where the government grants me some privilege, then I
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  can gain through those so called political means.
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  And of course that is considered sensitive content.
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  So it's not something that is talked about much in
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  universities, for example, or in the media for understandable
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  reasons. And certainly when I went to
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  school, there was never any hints that we were never told
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  anything about these political means and economic means, for
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  example, for understandable reasons.
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  But if you really look at it, then you see that much of the
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  wealth in society is in fact generated through these
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  political means and not through economic means.
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  And it's in fact, if you look at the recent history of the world
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  in the last 50 years, since exactly 1971, when the United
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  States went off the gold standard and the rest of the
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  world being tied to the dollar, essentially went off the gold
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  centre with the United States. And everyone started printing
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  money faster and faster and faster.
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  And money printing, that's one of the, I guess key sensitive
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  insights that the Austrian schools continue to teach is
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  that that money printing is in a sense, in essence also kind of
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  theft. You're robbing the their entire
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  society through this money printing and it's going into the
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  pockets of a small group. And the once you see that, you
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  realise that that is at the heart of so many of the problems
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  we have in society. And you can say with all these
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  good reasons for it, OK, we need the money to put the money to
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  pay welfare or whatever subsidised industry, all these
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  things. But the net result is that you
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  have people like often cited Elon Musk, everyone's favourite,
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  everyone's favourite example is, oh, look, Elon Musk, he's worth
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  a trillion dollars. And that's so unfair.
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  Well, I, I don't, I personally don't think that is unfair that
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  he has worth worth a trillion dollars.
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  I think he, it's his own accomplishment.
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  But if there weren't all this money printing going on in the
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  background, it would never happen.
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  There's no way he would be worth $1 trillion if all this money
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  printing were not going on in the background.
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  And then the answer that's given by the people that don't grasp
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  the, the theft that's going on here in the background is to
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  say, Oh, well, we let's just tax, tax the rich, right?
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  Instead of fixing the, the root of the problem, which is, which
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  is the money printing and taxing the rich has never worked
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  because the rich are the people that are the best situated to
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  avoid taxation. So who ends up getting bad
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  taxed? The middle class.
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  But this is once again the difference in the reality on the
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  ground and what we're told, right?
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  We're told, Oh, we want to tax the rich because it's there's
• 11:02
  this discrepancy, rich and poor, and we need the money for all
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  these very things. So let's hack the rich.
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  It sounds nice, but that's not what actually actually going on.
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  In reality, the rich are not the ones that are paying.
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  And and once again, you're trying to fix a problem that was
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  created by money printing. As long as you don't fix the
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  source of the problem, you're never going to get anywhere.
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  And the other, of course, that would happen is if there weren't
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  all this money printing, we wouldn't have all these wars
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  going on either, because all the money putting is used to finance
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  the wars, right. So I got a little off topic
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  here, but yeah, but but to get back to the issue of, of what
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  economics can do for the world and for each and the other
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  person, it gives us the framework to understand what's
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  going on. And that's really, I think the
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  most valuable thing about Austria economics is it gives
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  its adherence to those who, who who've studied its, it's lessens
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  a, let's say, tool kit for better understanding the world.
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  And of course other other branches of economics to a
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  certain extent as well. But because they are inherently
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  less honest due to the fact that they're, most of them are bound
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  into the mainstream, it's much harder for them to do that
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  because they're, they're hiding this big problem out there
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  that's causing all these issues. And that's the money printing.
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  And of course, that's the only problem, but it's in my opinion
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  the major problem, the number one problem that's causing all
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  these issues. And because of that, if you lack
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  that key insight, I'd say it's very hard to hear what's going
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  on or how to make things better. But now, Scott, you and I both
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  know that Elon isn't a trillionaire by his own making.
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  Well, I mean he well, OK, what do you?
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  Well, I'll challenge. What do you mean by that?
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  No, he's probably propped up, but I I guess that goes into
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  other discussions. Sure.
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  No, but I mean, but yeah, I mean, he he learned how to play
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  the game and then he's certain. But he's certainly a very
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  talented person and you know, he I don't, I don't think he
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  cheated necessarily within the rules of the game.
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  But the problem is the game is rigged.
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  Well, it's not. Yes, exactly, but but but that's
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  not his fault. He just playing, he just did a
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  good job of playing, playing the game right.
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  And who has faulted him for it? I think they're a little bit off
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  track. It's not he didn't come up with
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  this system. You know, he just played it
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  right and. Sorry, if you if Scott, if you
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  say that the one of the major problems is the money printing.
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  How do you get around that? What?
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  Do you mean how I don't? How do we get around to that?
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  Well, you can't really trade in pieces of gold and silver.
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  It's just too. It's just too inconvenient.
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  Oh, well, sure. OK.
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  Well, but that's you're talking about technicality, sure we can.
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  We can trade in digital tokens of some form or another.
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  But the problem is, is that governments have abrogated the
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  right for themselves to print endless numbers of these tokens.
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  And that is that leads to obviously to inflation.
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  And it means, but it means that they can finance things they
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  otherwise would not be able to finance, like wars, for example,
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  that they could not finance if they didn't have that ability.
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  But you have this ever growing gap between rich and poorer or,
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  or the richer and the poorer in pretty much all of the the
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  industrialised world and including China as well.
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  And the reason you have that is because the of what's called
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  the, the pretty word for it is financialization, right?
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  And that, but what is financialization?
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  It really just means there's more and more hot money floating
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  around pursuing ever small amounts of goods.
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  So people the the upper 5% or whatever they're accumulating
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  more and more of these of this error, larger amounts of this,
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  this hot money, whereas the the bottom 50 percents have next to
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  nothing. And once again, this would all
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  would. This would not exist without all
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  that hot money being created. But now I've heard some people
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  make the argument that pinning pinning the the the printed
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  money to say gold like what the gold standard was doesn't make
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  any difference. Do you think it does?
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  What do you mean? What does it make any
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  difference? The gold standard, for example.
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  Well, if you get any standard that, that money that any hard
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  standard that money were were tied to be it Bitcoin or gold or
• 15:57
  silver with a limited, I mean, gold is produced and silver is
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  produced, but in limited quantities.
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  So yes, that would definitely make a huge difference because
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  they couldn't finance the wars. I'd say that's that's the
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  biggest difference. But there are lots of other
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  things that would be forced to find an equilibrium.
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  And that's, I guess that's particularly if you look, and
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  this is a talk about maybe we'll get to later, is that the whole,
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  this huge economic disequilibrium in the world
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  right now. But that equilibrium could not
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  be sustained without this endless printing of various
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  forms of digital tokens, you know, being called them dollars
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  or yen or EUR or whatever. And they're all doing it, right?
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  I mean, it's not, it's, it's in this case, people talk about
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  the, the, you know, the conflict between China and the West or
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  whatever, but or Russia, but they're all doing the same
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  thing, right? They all, they all depend on the
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  same system, on the none, none of them want to give the system
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  up, understandably, of course. And they're all and, and it
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  really this, this, this wild track we're on right now got
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  started in 2008, even though you could the argument started in
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  2000, in 1971, but it really got started with Avengers in 2008
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  when all the, the, the, the major central banks of the world
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  got together and said, we're always going to how we get over
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  this, this crisis, we're going to print an enormous amount of
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  money. And that way if they all print
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  together, then it will be, it won't be too obvious to the to
• 17:24
  the population because they are their exchange rates between
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  each other won't change that much because they're all
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  printing at a clip of about roughly 10 to 12% per year and
• 17:35
  varies from group from area to area.
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  That's the eurozone, China, US, but let's say roughly there most
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  of around 10% a year right now, these days, China is about 15%.
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  So it's getting worse and worse, but, but it's the same thing
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  that's going on everywhere. And none of them want to give it
• 17:52
  up. But the, the disequilibrium,
• 17:54
  the, the, the imbalances are getting larger and large and
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  large, and at some point something's got to give here.
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  So I mean, if your currency is pegged to something like gold,
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  right, which is stable because it's literally being dug out the
• 18:09
  ground and you can, you can weigh it and count.
• 18:12
  Well, you can dig up a certain amount every year, but it's
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  limited, right? And you can't if the, if the
• 18:17
  government wants to, if, if some government wants to go to war
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  and let's say Iran, well, how they're going to, how they're
• 18:24
  going to pay those bills, right? Well, they, they need dig
• 18:27
  faster. Start digging, of course.
• 18:31
  Now what happens? But what happens now is that
• 18:34
  it's now regulated by policy, so they can just adjust the policy.
• 18:38
  No, they just tell the central bank to to turn the switch and
• 18:42
  perhaps some more dollars, but they could if it were pinned to
• 18:47
  gold or to Bitcoin or they they couldn't do that.
• 18:51
  But of course that's not going to happen.
• 18:52
  If they're not going to pin it to gold, they're not going to
• 18:54
  pin it to Bitcoin. They're going to keep those as
• 18:57
  reserve currencies so they can devalue their paper currencies
• 18:59
  against, which is what's going on right now.
• 19:02
  Which is also, which is also why they do so in South Africa we do
• 19:05
  something called inflation targeting.
• 19:09
  Yeah, I don't know. I didn't.
• 19:10
  I don't know the streets out there.
• 19:11
  You tell me. Well, what they do is they
• 19:14
  adjust inflation first and then everything follows that.
• 19:20
  Well, yeah, it sounds, it sounds like what they had in Brazil for
• 19:22
  a long time, this crawling peg, which seemed which was a
• 19:25
  disaster from what I know. Yeah, it doesn't mean, well,
• 19:29
  you're, you're essentially, I mean, and you're also, I mean,
• 19:33
  there's so many examples, but let's just start with who, who
• 19:36
  pays who, who comes, who, who has the, what's the word?
• 19:41
  How do you say it in English? The short end of the stick, The
• 19:46
  Who, who, who ends up losing. And this is for one thing, that
• 19:50
  the, the retirees, they lose out most of them because most of
• 19:56
  them are, are say, are holding their savings in some sort of
• 19:59
  form that's not being adjusted for inflation.
• 20:03
  Or maybe they're particularly until a couple of years ago and
• 20:06
  then they had the 0 interest rate policy?
• 20:08
  They were getting, you know, 1%, zero point, 1%, nothing on their
• 20:12
  savings. And meanwhile the money supply
• 20:15
  was being blown up by 10% every year.
• 20:17
  So they are losing 10%. So large numbers of retirees all
• 20:21
  across the West have all ended up in poverty because their
• 20:24
  savings aren't worth anything. I mean, it's pretty evil, right?
• 20:29
  But it's the inevitable result because the only way to protect
• 20:32
  yourself against the inflation is, is essentially play the
• 20:35
  asset markets. And you can do it, but it takes
• 20:40
  effort and time and skill. And most people don't have don't
• 20:43
  have all those. And so they end up losing out.
• 20:46
  It's a very unfair setup. I mean, it's nice for the people
• 20:50
  who know how to do it. I know how to do it.
• 20:52
  Nice for me, but not nice for the most of the world.
• 20:58
  Another interesting Austrian economics characteristic is its
• 21:03
  opposition to artificially low interest rates.
• 21:08
  If I'm if I'm correct, South Africa's interest rate at the
• 21:11
  moment I think is around 9 or 1011% somewhere there.
• 21:15
  I think the US it's pretty much close to 0, same as Canada.
• 21:19
  No, no, no. The US now it's they, they, they
• 21:21
  decreased, but it's now what, 3 or 4% something like that, but.
• 21:25
  Those are still artificially low.
• 21:27
  Sure. Well, it's artificially.
• 21:29
  We should define that. What artificially means there is
• 21:32
  it's less than the growth of the money supply.
• 21:37
  And so when, if you're like here in China right now, they're,
• 21:40
  they're, they're growing the money supply at about 15% a
• 21:42
  year. And we have an interest rates
• 21:46
  of, I don't know, 2 or 3%. So, so how you see that that's
• 21:51
  the, those, those interest rates are whoever is borrowing money
• 21:55
  at those rates, including us. We're also we're also we also
• 21:58
  got a nice big fat, we got so good fat loans from the banks
• 22:00
  recently and we're paying how much we paying 3%, 2 1/2
• 22:07
  something like that. Wait, it's Why is it bad?
• 22:11
  Though why is it bad? Why is it bad?
• 22:15
  Well, because only certain members of the society get that
• 22:18
  you most people don't get that or they get only in very small
• 22:22
  amounts. If you're Amazon, for example,
• 22:25
  you can borrow unlimited amounts of money at the official
• 22:28
  interest rate. And if the, if the real
• 22:33
  inflation rate is 10%, since you're getting a subsidy,
• 22:38
  because if you do, if you only, if you only break even
• 22:41
  essentially and you grow with the money supply, then you'll,
• 22:45
  you'll get 10% and you're only paying five.
• 22:47
  So you're getting 5% and you're getting it off of the back of
• 22:53
  the rest of society. It's not, it's not evenly, it's
• 22:56
  not evenly distributed. Who gets The Who gets to benefit
• 22:59
  from those interest rates? I mean, it sounds nice, but in
• 23:03
  reality, it just contributes to making the gap between the the
• 23:07
  rich and the poor at large. It contributes to impoverishing
• 23:12
  the retirees. It empowers just everybody who
• 23:14
  has savings unless they're able to play this game.
• 23:18
  We have a good counterexample out there right now, and that is
• 23:22
  Russia. So Russia is running a
• 23:24
  substantial deficit, public deficit right now because of the
• 23:28
  war. They have to finance the war,
• 23:31
  but they're actually doing it, I would argue the right way.
• 23:33
  So they have said, OK, we can't do anything about the deficit,
• 23:39
  but we can do is we can keep the interest rates high.
• 23:41
  So they, they, they basically have an honest, relatively
• 23:44
  honest interest rate regime to reflect the reality.
• 23:47
  And they're paying 1818% interest, which is substantially
• 23:54
  more than everyday inflation. And it's even more than the
• 23:57
  money supply is being increased. So there's actually a huge
• 24:01
  incentive for Russians to save, which is the way it should be,
• 24:06
  right? So, and so of course, some
• 24:08
  Russians entrepreneurs on companies complaining.
• 24:10
  So we can't, we don't mind to invest because the interest is
• 24:12
  too high. Well, you have a competition who
• 24:14
  who can be the most productive and who if you want to get, you
• 24:18
  know, rubles in Russia, you need to be able to pay at least 18%.
• 24:21
  Yeah, that that's like your minimum threshold of
• 24:23
  productivity or your return. You have to have at least 18% of
• 24:27
  mine and plus something on top to make it worth your while.
• 24:31
  Otherwise, you know, forget about it.
• 24:33
  So, so it narrows down the field and it, and it ends up the
• 24:37
  economy ends up supporting the people that have the higher
• 24:40
  return. So that, that, that that breeds
• 24:42
  efficiency. Whereas you have the opposite
• 24:45
  going on in the US, particularly in the US where there's a lot of
• 24:52
  easy money around and effectively negative interest
• 24:56
  rates, negative real interest rates.
• 24:58
  And the people that have access to it, the particular like these
• 25:01
  days, the people that are financing all these AI product
• 25:03
  projects, they're spending billions and 10s, hundreds of
• 25:08
  billions of dollars on these things that's coming down like
• 25:12
  magic from the sky. And they don't have to, they
• 25:15
  don't have they, if they can, if they can do you know, 4% return
• 25:19
  if that, then then it's worthwhile.
• 25:22
  And it's because there's not enough competition.
• 25:24
  Whereas interestingly enough in China, although we have very, we
• 25:27
  have, we have very relatively low interest rates here.
• 25:33
  I mentioned earlier, I think it's like three 3%, which is
• 25:36
  really, it's actually a real negative, negative interest
• 25:38
  rates. And it has led to a lot of
• 25:42
  capital flight. So people basically look
• 25:46
  elsewhere to invest in money because the returns are so bad
• 25:48
  here in China. And it's, it's had the the
• 25:51
  ironic effect because so much of the money has gone to the Wall
• 25:54
  Street casino that inside China it's hard to get money to
• 26:01
  investor money. So Chinese investors,
• 26:04
  particularly people like in the AI area, are forced to be much
• 26:07
  more efficient. Like they have to do really good
• 26:11
  because they're not getting the money.
• 26:12
  They have to find a way of, of doing it very efficiently.
• 26:15
  So actually being pushed towards efficiency in China one way, in
• 26:19
  Russia another way is a good thing.
• 26:22
  And you look at DeepSeek as the best example of that for this is
• 26:25
  the man I know. DeepSeek is a Chinese AI venture
• 26:29
  that was kind of made a lot of headlines about a year ago with
• 26:33
  their breakthrough new model. And it was all financed by a
• 26:37
  private hedge fund. It got no safe, no, no extra
• 26:41
  investment and they, their breakthrough was really, they
• 26:45
  were 1020, some say 100 times more efficient than what chatty
• 26:52
  BT was doing. And now they, they did it
• 26:54
  because they, that they had, they were bootstrapping in.
• 26:57
  So basically the the answer to your question is the what low
• 27:02
  interest rates do tendentially is they don't, they don't breed
• 27:09
  efficiency, they breed laziness. We get the money.
• 27:16
  However, as a as a counter to that, here in South Africa
• 27:20
  during apartheid, in particularly in the 1980s, which
• 27:23
  was the the height of apartheid, interest rates peaked at around
• 27:29
  24%. I mean, that's not sustainable.
• 27:33
  Well, I guess it depends what your what was the what was the
• 27:35
  money supply growing at the time?
• 27:39
  Oh, I don't know. That's a good question.
• 27:40
  But I mean, that was largely to do with sanctions and all kinds
• 27:43
  of other restrictions. Yeah, it's hard to think about.
• 27:47
  That I mean that's, I mean that's difficult.
• 27:48
  I mean, if you buy a property you have to, then you end up
• 27:52
  paying 1/4 of that property's price eventually on top of what
• 27:57
  you paid. Well, there must have been a lot
• 28:00
  of money printing going on at the time.
• 28:03
  I can't believe that was happening without the money
• 28:05
  printing background. So yeah, but the money printing
• 28:08
  makes everything very complicated.
• 28:11
  Without money printing, that could not have happened.
• 28:14
  There's no way you could have a 24% interest rate without heavy
• 28:17
  money printing going on. No society would produce that
• 28:21
  result without without basically the money being devalued
• 28:24
  constantly. I mean, maybe 2000 years ago
• 28:31
  they say, I think in early Rome, some say the interest rate was
• 28:36
  12% and this is reflecting much higher time preferences than we
• 28:41
  have today. But and that was an era of
• 28:44
  relatively hard money. But 12% is by modern standards
• 28:49
  in terms of real interest rates, it's very high.
• 28:52
  But that was, this was 2000 years ago these days that a real
• 28:56
  interest rate of 212% unheard of, absolutely unheard of.
• 29:01
  So I would I, without knowing the details, I would guess the
• 29:05
  root of the problem in South Africa, of course, sanctions,
• 29:07
  whatever, all these reasons why we had to print the money,
• 29:09
  right. And, and you can argue that here
• 29:11
  or there. You can say, well, we had no
• 29:13
  other choice. OK, well, maybe.
• 29:14
  But regardless of what the reason was, the results will be
• 29:19
  or inevitable if you print the money.
• 29:22
  And that is one of those central insights, I think of Austria
• 29:25
  economics that the school has always stuck with is insisting
• 29:29
  upon that doesn't matter what your excuse is.
• 29:32
  Maybe it's a good excuse, maybe it's a bad excuse, but the
• 29:34
  results are a logical upshot of what you know, garbage in
• 29:42
  garbage. You put this in that you're
• 29:43
  going to get something. You're going to get that out.
• 29:46
  Well, yes, your answer I while you're talking, I quickly looked
• 29:49
  it up. During 1980s, South Africa
• 29:51
  experienced substantially higher growth in broad money supply
• 29:55
  compared to its trading partners.
• 29:57
  The success of monetary expansion was a key factor in
• 30:00
  keeping South African inflation persistently high throughout
• 30:04
  most of the 1980s, even as other countries were successfully
• 30:07
  bringing the inflation rates down.
• 30:08
  So there you go, It's exactly what you said.
• 30:11
  Right. And, and that, and of course,
• 30:12
  that's what the US did in the early 80s.
• 30:15
  They finally stopped their inflationary policies of the 70s
• 30:19
  and they introduced high interest rates and then they did
• 30:22
  pretty much what Russia did two years ago and they got the ship
• 30:29
  back on track. It was, there was some tough
• 30:32
  years there when interest rates were 1215%, but things they got
• 30:38
  within a couple of years things got back on track and and the
• 30:41
  economy settled down and it started growing again.
• 30:44
  It's it when you when you're trying to deal with the the
• 30:51
  result of of massive money printing, the shock is painful
• 30:55
  is true initially, but then interest rates come down.
• 31:01
  So like I said, it's, it's, it's that you can, you can, you can
• 31:05
  talk about it from a normative perspective, what's better and
• 31:08
  what's worse, but you can't all to the fact that these have
• 31:12
  clear effects. And when you choose and, and the
• 31:14
  ultimate example of the, the most extreme example we know of
• 31:18
  is this, this the so called 0 interest rate policy, the ZERP,
• 31:22
  which was followed by Europe and the United States from was it
• 31:26
  2010 roughly until 2022, roughly 12 years.
• 31:32
  And that was just disastrous. It was just huge.
• 31:35
  And one of the obvious, most obvious results of that disaster
• 31:39
  was this, this enormous gap between rich and poor in all of
• 31:46
  in, in Europe and, and, and in the United States.
• 31:49
  And in China we didn't have that problem as much until recently.
• 31:53
  It was only in a couple of years ago that they, they, they
• 31:55
  dropped interest rates as low. Typically through that period,
• 31:59
  Chinese interest rates were around 6% roughly.
• 32:03
  So the, the, the, the, the government was, was printing 10%
• 32:07
  a year or 11% a year. Interest rates were at six.
• 32:10
  So they were, they were five negative, whereas in the West it
• 32:14
  was 10 negative. So the West was considerably
• 32:20
  worse, at least in China that interest rates weren't, were
• 32:23
  that far below that. They were not that negative.
• 32:26
  But in the West it was extremely negative.
• 32:28
  And that just skewed everything to no end.
• 32:32
  Whereas now in China, actually now they're following the, the
• 32:35
  example of the West and now they're they're skewing it even
• 32:37
  more. And we're of course getting the
• 32:39
  same bad results here. Another important vector of the
• 32:46
  Austrian School of Economics is the it's it's opposition to
• 32:50
  centralization. It prefers decentralised models
• 32:54
  and it also has a strong emphasis on property rights.
• 32:57
  Now I remember when I was in Shanghai and I made up with you
• 32:59
  and I asked you what is it that turned China around in the last
• 33:05
  30 years? And your answer, without even
• 33:07
  blinking, was property rights. Yeah, because that's, that was,
• 33:12
  I think that was the number one thing that changed when they
• 33:15
  basically gave up on socialism around 1980.
• 33:20
  And when Deng Xiaoping essentially came to power, he
• 33:25
  was faced with a pile of unusual leftover, what's the word?
• 33:37
  I think the word shreds of capital, but that's not the
• 33:39
  right word. Remnants of the basically they
• 33:42
  used up all the capital. It was all gone.
• 33:44
  And so he decided we got to do we got to rebuild.
• 33:47
  And how do we do that? Well, we have to encourage
• 33:51
  people to accumulate capital. And how you do that?
• 33:54
  Well, it's by respecting property rights.
• 33:56
  If you don't respect property rights, people are not going to
• 33:58
  accumulate capital. And that goes the whole the
• 34:00
  whole is got another discussion about what is capitalism.
• 34:04
  But I always say this court is actually a really important word
• 34:07
  because in Cap 1, central tenet of capitalism that's often
• 34:11
  overlooked is the need to accumulate capital.
• 34:15
  By capital, we're not about money.
• 34:17
  We're talking about productive hardware that enables you to
• 34:21
  produce things in a more efficient way and make your
• 34:26
  society wealthy by using these means of production.
• 34:29
  That's capital. Also, the capital in people's
• 34:31
  minds know how it's all capital, right?
• 34:35
  And we have to accumulate capital.
• 34:37
  And how do you accumulate capital?
• 34:38
  That's by respecting people's ownership of it.
• 34:40
  And if you respect the ownership of it, people are going to waste
• 34:42
  it and destroy it. And that's of course what
• 34:44
  happened in all the socialist countries in China as well.
• 34:47
  So that was the number one thing they did.
• 34:48
  And there was even today, even though it's eroded a bit from
• 34:52
  the, from the, the Deng Xiaoping ideal, still even today, you can
• 34:56
  see in China, I have one near where I live, you can see houses
• 35:00
  on the side of the road that are where the, the road has been
• 35:04
  built around that built around the house.
• 35:06
  Why? Well, because in China, there's
• 35:09
  no expropriation law. I think that the US is called
• 35:14
  eminent domain, where they can basically government can come
• 35:16
  and say, well, you know, we want your land.
• 35:18
  You have to sell to this. Well, China doesn't have that
• 35:20
  law. So if they want to build a road
• 35:23
  or or a motorway through some area and if somebody has houses
• 35:27
  in the middle, the government can't just say we have to leave,
• 35:31
  they have to buy them out. And if they don't sell well,
• 35:33
  they they have to build the road around them.
• 35:36
  So that's just an example. Unfortunately there, there there
• 35:40
  has been a decline in respect for property rights in some
• 35:42
  areas in China. I won't go into that, but
• 35:47
  generally speaking, their respective property rights is
• 35:50
  higher than certainly in the US. The US is the one of the more
• 35:54
  extreme examples on the other side where you have the what's
• 35:59
  that called? What are they called in the US
• 36:01
  where they can basically take your money without even do
• 36:03
  having due process. What's that called?
• 36:06
  They say they catch you carrying $1000, say, well, we think that
• 36:09
  might be drug money. So let's take it first and then
• 36:13
  you can ask it, ask for it back. If you can prove where you got
• 36:16
  it from, then they can do that in a number of states in the US.
• 36:18
  But that's US is one of the only countries in the world you can
• 36:21
  do it without due process in the West in the industrialised
• 36:24
  world. So that's kind of the exact that
• 36:26
  the, the the very opposite of what goes on in China.
• 36:30
  The other, but the other other thing that they changed was they
• 36:33
  went from centralization to decentralisation and they
• 36:38
  decentralised their governments is making as much as possible,
• 36:42
  push it down to the local level and to the provincial level and
• 36:46
  let them decide on their policies as much as possible.
• 36:50
  And that created competition between the provinces and the
• 36:53
  states, provinces and, and and the localities to offer the best
• 36:57
  conditions for entrepreneurs and also for their citizens.
• 37:01
  And that was a very positive thing.
• 37:03
  So when you talk about centralization versus
• 37:07
  decentralisation on the higher, more abstract level, we're
• 37:10
  talking about essentially central planning versus
• 37:12
  decentralised planning. And decentralised planning means
• 37:17
  if you take them to the very smallest unit, means individual
• 37:20
  families, individual companies letting them make the decisions.
• 37:24
  And if you go all the way back to get the real total
• 37:26
  centralised fight. And that the government, the
• 37:28
  national government, the big capital with its, with its army
• 37:32
  of bureaucrats then deciding and for a good 20 years, let's say
• 37:37
  between 1990 and 2010 for the most part.
• 37:41
  And that's what was going on in China.
• 37:43
  Basically the government said, you know, do your own thing and
• 37:45
  figure out how to how to finance it and make up your own
• 37:49
  decisions about what to what to produce.
• 37:52
  And that worked very well. And that's in fact, I would
• 37:55
  argue as what made China the second most important factor,
• 37:59
  which made China a rich. Unfortunately, as we've
• 38:03
  discussed before, many cases that hasn't stayed the same.
• 38:06
  And as the China has become richer, the government has
• 38:10
  decided that, well, they have all this wealth now.
• 38:12
  So maybe we can do a little bit more planning and they've,
• 38:16
  they've gone back to the to dallying with central planning
• 38:22
  and they've started to massively subsidised certain industries,
• 38:25
  like for example, the EV industry.
• 38:29
  And the results have would have been as any Austrian economist
• 38:34
  would be able, would be able to predict.
• 38:36
  And that is terrible. So yes, they do dominate the EV
• 38:40
  industry worldwide because their cost reduction, their skill,
• 38:45
  their what's that word, not cost production.
• 38:50
  Their economies of scale are so are, so are are are so low or so
• 38:54
  high, sorry, that they're able to produce much more cheaply
• 38:58
  than than anyone else. But all almost, I think with one
• 39:02
  exception, all the EV companies are all losing money.
• 39:06
  So it's, it's not sustainable and the government is also
• 39:10
  losing money. So the government's inventing
• 39:12
  all this money, various groups of local governments or
• 39:16
  provincial governments have have essentially through their
• 39:19
  investment funds have invested in these companies and they're
• 39:22
  all competing each other's death.
• 39:23
  So it's kind of in a way when it's sort of typical China, lots
• 39:26
  of competition, but there wouldn't be a little competition
• 39:29
  if the government weren't subsidising them anyway.
• 39:32
  So all I say nothing, nothing good, nothing good lasts
• 39:36
  forever. And what made China rich is now
• 39:40
  unfortunately in part being, being, I wouldn't say forgotten,
• 39:45
  but being ignored. And those factors are declining.
• 39:50
  But this is actually something that's that's relatively
• 39:53
  unappreciated in the world, appreciated in the West, where
• 39:56
  you tend to get more sort of the opposite storyline, namely that
• 40:01
  China is a state capitalist and that China does all this
• 40:07
  wonderful planning and. Or as we've discussed before,
• 40:12
  because they're quote, UN quote communists, because they call
• 40:14
  themselves the Communist Party. They're they're these wonderful
• 40:17
  planners and they're beating the West because they're such
• 40:19
  wonderful planners. Well, as I would say to that, if
• 40:23
  that were, if that were the case, then why were they beating
• 40:26
  the W 40 years ago, right. Why are all these peasants
• 40:28
  starving? When Ma was running the show
• 40:30
  here, then the escape was planning everything.
• 40:32
  It was a complete disaster. Well, no, of course the
• 40:36
  sentiment doesn't work and never has worked.
• 40:38
  And to the extent that they're trying to do that again here in
• 40:41
  China, it's not working. So when people in the West say,
• 40:46
  oh, yes, we need to learn from China, let's let's do more
• 40:49
  planning. That's like completely the
• 40:54
  opposite of a reality, right? That's what's that's, that's to
• 40:57
  the extent that things are not going well in China, That's
• 40:59
  what's causing the problems in China today.
• 41:02
  Is this too much central planning?
• 41:04
  But if you want to study learning room from China, well,
• 41:06
  then do what China did well, which was stimulating
• 41:10
  competition, having respect for property rights and
• 41:12
  decentralising decisions that out there.
• 41:15
  And but of course that that that those lessons are not being
• 41:18
  propagated in the West. So, you know, learning from
• 41:21
  China, that's not going to work by that, by that measure.
• 41:24
  So, OK, So what you're saying to me then is that weirdly enough,
• 41:31
  in the last 30 years or so, China followed more of an
• 41:35
  Austrian School of Economics way than, say, the US?
• 41:41
  But yes, definitely. But they also because of their
• 41:45
  situation, they were in a way forced to because they needed to
• 41:48
  accumulate capital. They were there was very, very
• 41:53
  limited access to capital. So they had to find some way to
• 41:57
  do it. And they did get in a lots of
• 42:00
  investment from the West, but they needed it too, because they
• 42:05
  started from such a low starting point.
• 42:07
  But at the end of the day, the investment from the West was
• 42:09
  only one factor. It really it was the internal
• 42:14
  competitive environment. And of course, the, the, the low
• 42:19
  time preference of the, the Chinese people in general,
• 42:21
  their, their, their, their willingness to save large
• 42:24
  percentage of their income. But also, for example, in tandem
• 42:28
  with that, the lack of a welfare state in China.
• 42:31
  And China never had a welfare state, at least not since the,
• 42:34
  well, under socialism, it did in theory, but in reality, of
• 42:37
  course, that meant everyone was equally, equally bitterly,
• 42:40
  bitterly poor. Now China has a little bit more
• 42:44
  of a welfare state than it did, but still the, the amounts are
• 42:48
  pretty low. So, you know, if you want to
• 42:51
  live off the government, it's not easy.
• 42:54
  And certainly, you know, compared with what types of
• 42:57
  offerings you have in Europe or even in the United States is
• 43:00
  very minimal. So people say, oh, you know,
• 43:02
  China is communist or whatever. Well, some people say that, but
• 43:06
  it doesn't have much of A welfare system.
• 43:09
  Everybody's working out there, right?
• 43:12
  So that's a big difference. Would you?
• 43:17
  OK? So would you say that China is
• 43:20
  fairly decentralised? I certainly was 10 years, 15
• 43:26
  years ago. It's less so now than it was
• 43:29
  then. So certainly the government, the
• 43:32
  central government has in attempted to enforce more
• 43:37
  uniformity is introduced more national systems than were
• 43:41
  around 15 years ago. I mean 15 years ago basically
• 43:45
  none of the prevention systems communicated with each other at
• 43:48
  all. Every probably has hit its own
• 43:49
  system. And even during COVID, for
• 43:52
  example, you know, there's lots of Orwellian discussions in the
• 43:57
  West about about Chinese systems.
• 43:58
  But actually in China we had there was this concept of this
• 44:02
  health code, but each province had its own health code.
• 44:07
  And in fact, in many cases they had several different iterations
• 44:11
  of health codes and the national government had its own health
• 44:13
  code and none of them were compatible with each other.
• 44:16
  So it's just a complete chaos. But that was kind of typical of
• 44:20
  China, right? Not, you know, and not not
• 44:23
  really coordinating things very well.
• 44:24
  Everybody for doing their own thing.
• 44:25
  And there were a lot of loopholes as a result, which is
• 44:28
  I'd say probably a good thing. But anyway, that was kind of
• 44:32
  that was in a way trying to kind of revert it back to the old,
• 44:35
  old standard of having everybody province doing its own thing.
• 44:39
  There's this old saying in China that the mountains are high and
• 44:41
  the emperor is far away. Well, there's some truth to
• 44:44
  that, but that that that's a good thing.
• 44:46
  I think All in all that, that provinces have been able to do
• 44:49
  their own thing and to, to come up with unique solutions and,
• 44:57
  and to facilitate competition between them.
• 45:01
  Less so now than before, but it's still there.
• 45:04
  And, and if you compare it to, let's say the level of
• 45:08
  centralization of systems in the US, I'd say probably China is
• 45:12
  still more decentralised in the US.
• 45:15
  But every country is unique of course, and you can't really say
• 45:18
  across the board because there's so many different aspects of
• 45:21
  that. But certainly decentralisation
• 45:23
  has been a central tenet of Chinese governance in the last
• 45:27
  40 years, since since 1985. About 15 years ago or so, I
• 45:36
  started coming across individuals like Moulton
• 45:41
  Friedman and Thomas Sowell. And I often argue that Moulton
• 45:45
  Friedman was sort of my gateway into Austrian economics
• 45:49
  thinking. I understand you came from, I
• 45:52
  think the Chicago School of Economics or something to that
• 45:54
  effect, but you know, whatever. I found his way of thinking
• 45:58
  pretty great. And then I stumbled across
• 46:01
  people like Ludwig and Mrs and Murray Rothbard and Adam Smith.
• 46:05
  And there was another one now whose name has escapes me, but I
• 46:13
  read a lot of their work and it it was very easy to follow.
• 46:19
  It wasn't this high level complicated economics.
• 46:24
  It was about down to earth reality and logic.
• 46:29
  And it was focused. It was focused on prosperity and
• 46:32
  freedom and liberty. Why on earth are these ideas so
• 46:38
  frowned upon by so many, do you think?
• 46:43
  That's really a deep question. Are they really frowned upon by
• 46:47
  so many? I would say that people are
• 46:49
  misguided. Many people are misguided
• 46:53
  because they people need explanations about the world
• 46:58
  around them and the real the truth is inconvenient for the
• 47:04
  powerful. The powerful are the ones that
• 47:07
  control the schools and the media.
• 47:09
  So people have lack access to these to much of reality.
• 47:22
  And because they lack that access, they are misled.
• 47:28
  I would say to promote to have faith in ideas like socialism,
• 47:37
  like we should redistribute the wealth, right?
• 47:39
  Or we should steal from Peter to pay Paul Howard.
• 47:44
  The thing goes, instead of looking at the real source of
• 47:47
  the problem, which is the ongoing massive theft to go back
• 47:50
  to where we started with all the time through this money
• 47:53
  printing, which is, I would argue, the real source of the
• 47:56
  problem. But we can't talk.
• 47:57
  They, they, they have never heard this in their life where
• 48:01
  they think it's some technicality, right, which is
• 48:04
  not, it's not involved. It's not involved.
• 48:06
  And instead of realising that's really at the heart of all these
• 48:10
  things, they don't like the loss of freedom there the, the rising
• 48:18
  gap between the rich and poor that I mentioned before.
• 48:21
  And they look for other explanations.
• 48:26
  But do they really reject these ideas of, of freedom?
• 48:31
  I don't think so. I think they just they, they,
• 48:33
  they, they know that things are not as they, they have a they
• 48:38
  gut feeling that things could be much better.
• 48:41
  And they lack the context and the information to explain those
• 48:46
  things. And it's because of that they
• 48:48
  grasp with straws, I would say. And then the, and of course, the
• 48:52
  powers will be the, the, the powerful give them these straws.
• 48:55
  They give them, they say, look, here I have an explanation for
• 48:58
  you. Look, if you just agreed to tax
• 49:01
  everybody to death and increase the surveillance systems and so
• 49:03
  on that they really get really better or let's, you know, let's
• 49:06
  let's attack Iran and that will resolve the problem or whatever,
• 49:11
  or let's blame the immigrants. You know, there are all these
• 49:14
  different explanations instead of getting at the things that
• 49:18
  they don't want to talk about. But do you think that there is a
• 49:25
  kind of forced dichotomy between the idea of sovereignty, which
• 49:32
  requires a strong state, and the Austrian economic way of
• 49:39
  thinking, which prefers decentralisation and less state
• 49:42
  interference? It's a good question.
• 49:54
  I think that at the end of the day, the ideal world of course
• 49:57
  would be a world of voluntary interaction, voluntary exchange.
• 50:04
  And that goes back to what we talked about in the beginning,
• 50:06
  which is the difference between the political means and the
• 50:08
  economic means. So if everyone were were happy
• 50:11
  with using the economic means to live together, this would not be
• 50:15
  an issue. Then we wouldn't have to worry
• 50:18
  about the whole sovereignty concept.
• 50:22
  But if significant members of society or people in power are
• 50:28
  not satisfied with that and they wish to live by the the
• 50:32
  political means, meaning to obtain things by theft and
• 50:36
  force, then that's not going to work.
• 50:41
  So if, if, for example, if you want to have a free hand, take
• 50:45
  things by force, then free trade's not going to work for
• 50:49
  you. So, you know, we can talk about
• 50:56
  an ideal world, a realistic world.
• 50:58
  We can say an ideal world is 1, which you don't have that issue
• 51:02
  because people, people all choose to trade, trade freely
• 51:06
  among amongst each other and not rob each other.
• 51:11
  But that's not the reality we have, right?
• 51:14
  I mean, we know that's we live in a world dominated by force,
• 51:19
  where the powerful take what they can and meek must put up
• 51:24
  with what they must. Or some phrase saying like that
• 51:27
  all along those lines. The the.
• 51:33
  And so yeah, I mean, I think that if you I mean, it's to be
• 51:42
  more concrete about it really the the crux of the issue is
• 51:46
  these days is the discussion about the dependency on China.
• 51:51
  And I think that the people in who run the West have come to
• 51:55
  the conclusion that they their ten year long campaign to
• 52:00
  decouple from China is at this point hopeless.
• 52:05
  They really tried very hard to decouple their industry from
• 52:10
  China, to decrease their independence in China.
• 52:12
  This started back under the Obama regime.
• 52:16
  Back in 2014. It was they were already paying
• 52:20
  subsidies to have manufacturers leave China.
• 52:23
  Didn't work out at all really. It was a complete failure, but
• 52:29
  the intent was clearly there to try and decouple.
• 52:33
  The problem is it didn't work because you know, you can give a
• 52:36
  sort of a very high level, you can say, oh, you know, CEO XYZ,
• 52:40
  you, you need to do this, but CEO XYZ also has to survive and
• 52:45
  produce profits. And, and so he's ultimately
• 52:48
  somewhere down the, the supply chain is going to come go back
• 52:50
  to the best source, best suppliers, and those are often
• 52:54
  suppliers from China. So they tried for, for, for a
• 52:58
  long time and eventually they realised not only does not work,
• 53:00
  but their entire military supply chain is completely dependent on
• 53:03
  China. So if they want to keep making
• 53:06
  their missiles and munitions and tanks, then they have to keep up
• 53:12
  a open relationship. A, A, a reasonably, what's the
• 53:19
  word, peaceful relationship with China.
• 53:23
  So is there any route back to sovereignty for the West?
• 53:28
  I don't know. I'd say it's tough because
• 53:30
  they've had this understanding with the Chinese leadership for
• 53:33
  20-30 years that allowed China to massively undervalue its
• 53:38
  currency and allow the West to overvalue its currency, which is
• 53:42
  what created these huge imbalances to start with.
• 53:45
  And of course that this is only possible because the money
• 53:47
  printing, right? It's only costly because China
• 53:49
  prints up an enormous amount of money every year to buy all
• 53:52
  those dollars and EUR, right? If they didn't, if they were
• 53:55
  doing that, it wouldn't be possible.
• 53:56
  So this whole imbalance could not be sustained.
• 54:00
  So but and, and the same time in the West, they keep, they print
• 54:03
  up theoretical dollars in euros to pay the China in theory to
• 54:07
  pay for all this stuff, right? So this, this whole, this huge
• 54:10
  imbalance is being sustained by the system, but they're all
• 54:12
  addicted to it, right? So all this talk about
• 54:15
  sovereignty, yeah, it makes sense.
• 54:19
  You can see where it's coming from.
• 54:20
  But realistically, in the medium term, I don't see how they're
• 54:24
  going to fix that. It's looks, looks hopeless to
• 54:28
  me. On the other hand, at some point
• 54:32
  something like I said, I've said, said often before,
• 54:34
  something has got to give. I mean, the imbalances are
• 54:37
  getting bigger and bigger every year.
• 54:38
  I think last year China had a trade surplus of $1.2 trillion,
• 54:41
  right? And it's, this is and it's
• 54:43
  going, it's getting bigger every year.
• 54:45
  I mean, as somebody said, So what is the rest of the world
• 54:49
  supposed to do? We all serve each other coffee
• 54:51
  and China makes all this stuff, right?
• 54:53
  I mean, this is, this is getting, this is getting, this
• 54:56
  is getting ludicrous, right? So there's something it's got to
• 55:00
  give here at some point. I don't know what's going to
• 55:02
  what will happen, but I know it's not sustainable.
• 55:05
  But in any case, this in a way, it's, it's, I think it's a good
• 55:10
  thing because this theoretical idea of sovereignty really boils
• 55:15
  down to the ability to attack each other and make war.
• 55:19
  That's really what it's all about, right?
• 55:20
  So if we don't have this sovereignty, then then that
• 55:24
  limits the ability to make wars. And, and I think that's, I think
• 55:27
  we could argue that it's a good thing.
• 55:30
  I, as you know, spent some time on your side of the world last
• 55:34
  year and coming from South Africa in the same 30 year
• 55:38
  period, we haven't really moved forward.
• 55:41
  I think we should implement a lot of that sort of
• 55:46
  decentralised thinking that China implemented over the last
• 55:50
  three years. I think it would help us a great
• 55:52
  deal. You know, and it's also, I mean,
• 55:55
  it's not just that, it's also, you know, with the other thing
• 55:58
  we talked about is respect for property rights in general.
• 56:01
  I think that's that is also on an abstract level, it's not
• 56:05
  individual property rights, it's only individual properties, but
• 56:07
  it's also company property rights, for example.
• 56:10
  And when you, when a state for example, enforces a monopoly,
• 56:15
  when they favour large companies through regulatory regimes,
• 56:19
  that's essentially impacting the property rights of smaller
• 56:22
  companies. And that's what you have going
• 56:25
  on throughout the West, in particular in the United States
• 56:29
  and Western Europe where most companies, most of the larger
• 56:32
  companies are all controlled by BlackRock, State Street and
• 56:36
  Vanguard, which are essentially the same thing.
• 56:40
  And as a result, you have very limited competition in very many
• 56:44
  industries. And that's one of the things we
• 56:47
  don't have in China. We don't have that that, that we
• 56:51
  have roughly 25% of the companies under in terms of
• 56:55
  added value under government control.
• 56:57
  But that's far less than you have in the West is under the
• 56:59
  control of BlackRock. And that really limits, limits
• 57:02
  competition in the West because you have ultimately the CE OS of
• 57:07
  Delta and United and Air France and they probably all, they
• 57:11
  probably all report back to BlackRock.
• 57:14
  So then it really limits how much real competition can you
• 57:17
  have under those types of circumstances.
• 57:19
  So that's, that's, that's really that if you talk about property
• 57:23
  rights disorder, yes. But ultimately what made China,
• 57:26
  which was, was providing for allowing competition to take
• 57:30
  place and allowing, of course, the same time cooperation
• 57:33
  between companies and individuals as they saw fit.
• 57:36
  But that company that that competitive element is really
• 57:38
  suffering the West in the last 20-30 years, you have a level of
• 57:42
  centralised control that's really only comparable with the
• 57:45
  Soviet Union. And people don't see that
• 57:47
  because the difference between the West today and the Soviet
• 57:50
  Union is that the Soviet Union, they, the government tried to
• 57:53
  control everything. But the West today is an
• 57:56
  improved version. They realised they they can't,
• 57:57
  they're not going to be able to control all the small companies
• 58:00
  and medium sized companies. So they just concentrate
• 58:03
  controlling the big ones, right. It is a, but much, it's a much
• 58:06
  superior model to the old Soviet model, which didn't work at all.
• 58:08
  It's a disaster. But still you have that basic
• 58:11
  problem that these large companies, their level of
• 58:14
  innovation and competitiveness is limited.
• 58:17
  So think for example, a company like Cisco.
• 58:20
  Cisco has never added a single job to any for anything.
• 58:23
  They just keep buying up companies with all that cheap
• 58:25
  money that they have access to. But they consume these companies
• 58:28
  and they stop innovating once they get bought.
• 58:30
  And they're they got bought out now.
• 58:32
  So I got my money and I made, you know, whatever.
• 58:34
  Now I can retire. And their companies sort of limp
• 58:37
  along as part of this, this, this, the Cisco BLOB.
• 58:41
  But they don't really create any jobs.
• 58:43
  Of course, same thing we have here in China.
• 58:44
  State companies in China don't create any jobs at all.
• 58:46
  They're, they're, they're a black hole.
• 58:48
  They're not innovative. They don't create jobs.
• 58:51
  And it's only the private sector that does that, right?
• 58:53
  The real private sector and then the West, the real private
• 58:56
  sector is the small and medium test enterprises.
• 58:58
  But because the entire large company sector is all dominated
• 59:02
  by BlackRock, it really hampers the, the, the competitors of the
• 59:06
  economy. And and that's, I would say
• 59:09
  that's ultimately the reason why China is so competitive is
• 59:11
  because we've much more competition here than the West.
• 59:14
  So the West can. Yeah, let me give an example, an
• 59:19
  anecdote of that competitiveness that you are referring to.
• 59:23
  So I bought pair of cheap canvas shoes from Timi, which is for
• 59:29
  those who don't know, it's a Chinese app.
• 59:33
  It's like a huge shopping app. It arrived after a couple days
• 59:37
  and it was one size too small. So I so that it was, it was
• 59:40
  dropped off here in the afternoon on the app.
• 59:43
  I, I said the shoes are too small.
• 59:47
  The next morning, right? The Courier pitches up at my
• 59:50
  front door and says we're collecting the the the team you
• 59:55
  purchase. And that's great.
• 59:58
  Wait it within 5 minutes after they had taken.
• 1:00:02
  The shoes from me, the app send me a notification saying that I
• 1:00:06
  had a full refund. I mean, now that's better
• 1:00:09
  service than what I get here. Well, that's.
• 1:00:12
  Chinese vision before you. And that's because of the what's
• 1:00:17
  that word? The what's the adjective use
• 1:00:22
  with competition, the cutthroat competition here.
• 1:00:25
  That's, that's really what it is.
• 1:00:27
  And here you essentially you have all these different apps
• 1:00:31
  offering that type of service. You're not satisfied, send it
• 1:00:35
  back immediately will come, somebody picks it up, exchange
• 1:00:38
  it, whatever it's, it's all extremely efficient.
• 1:00:42
  And that's really ultimately goes back to competition.
• 1:00:44
  I will say, however, though it's once in here, we're also
• 1:00:47
  suffering from a lessening of that because of the government
• 1:00:51
  bureaucracy, which makes it more difficult than it was before to
• 1:00:55
  compete with, you know, the big platforms that offer these types
• 1:01:00
  of services, you know, for new ones to, to, to come, to rise up
• 1:01:07
  and compete with them. And it gets more, more difficult
• 1:01:09
  because of government bureaucracy.
• 1:01:11
  But still, it's still, it's still much better in the West.
• 1:01:14
  So, yeah, that's, that's something where where the West
• 1:01:18
  could definitely learn from China.
• 1:01:19
  I'm not sure if that's the moral of the story, but it's only one
• 1:01:21
  of them. And China could learn.
• 1:01:23
  China could learn from itself how things were going on here 10
• 1:01:26
  years ago. You know, one of the interesting
• 1:01:30
  point though to make here is that China has actually done a
• 1:01:32
  lot with infrastructure. And I and I, and I will say a
• 1:01:35
  lot of the infrastructure in China is very impressive.
• 1:01:38
  And the government has invested in enormous funds in these, in
• 1:01:42
  these, in infrastructure projects, in roads and high
• 1:01:46
  speed rail and so on. And at least I would say to
• 1:01:48
  their, to their defence, at least it's better than building
• 1:01:50
  bombs and missiles, right? At least it's somewhat useful,
• 1:01:53
  right? But it has, of course, it has
• 1:01:57
  drowned out, it has sucked away resources from other, the other
• 1:02:01
  parts of the of the economy. And in so far to that extent,
• 1:02:06
  it's all somewhat of a drain and it results in many fewer
• 1:02:11
  resources going to other sectors like mentioned earlier about
• 1:02:13
  lack of investment, you know, those sectors in China, unless
• 1:02:16
  the government happens to be subsidising it.
• 1:02:20
  But ultimately, even though the government has a much larger
• 1:02:25
  role now in the Chinese economy than it did 10 years ago, still,
• 1:02:30
  let's see the ways of, of competition and let's say
• 1:02:40
  capitalism are very sticky. That's the right word.
• 1:02:44
  But it's a they're very stubborn.
• 1:02:46
  So you, it takes a long time for the government interference to
• 1:02:49
  really wear down an economy. You saw that also in, in, in the
• 1:02:52
  West as well, where you have all these, all these ways in which
• 1:02:56
  government interferes in the economy and slows things down.
• 1:02:58
  But still, you know, economy keeps keeps, it keeps going
• 1:03:03
  forward. It it takes a long time to wear
• 1:03:05
  it down completely. And in China, even though the
• 1:03:08
  government is working on wearing it down and interfering with the
• 1:03:12
  economy and creating graphs, it's still at a lesser level
• 1:03:15
  than it is in the West, significantly.
• 1:03:17
  So that's a big difference you see here between what's going on
• 1:03:21
  here, what's going on in the West.
• 1:03:22
  Even though it's going backwards here, it's still the gap is
• 1:03:25
  still pretty big and and China is still much, much more
• 1:03:28
  competitive than in the West. And ironically, what I mentioned
• 1:03:32
  earlier about the the lack of investment is in itself also
• 1:03:38
  creating more pressure on, on, on companies to be competitive
• 1:03:41
  because of the lack of investment inside China.
• 1:03:45
  So people have to be super, super efficient and always,
• 1:03:50
  always come up with and little particularly medium size that
• 1:03:52
  always come up with new ideas to be more innovative, to have to
• 1:03:55
  create new innovative products because the the competition is
• 1:04:00
  so intense. That's the way it should be,
• 1:04:03
  right? And everybody, everybody
• 1:04:04
  benefits from that ultimately. And I think that's certainly one
• 1:04:07
  moral of the story, that that's what that's the type of
• 1:04:10
  prosperity that a wealthy society should be giving to
• 1:04:14
  everyone in the society. All right, Scott, your group sub
• 1:04:19
  stack is Austrian china.substack.com, is that
• 1:04:23
  correct? Yes, we're not too active on
• 1:04:25
  that there these days, but definitely sign up and every now
• 1:04:29
  and we write a useful writing article in English, so please,
• 1:04:32
  by all means.