Percival Manglano is a lawyer, former Minister of Economy and Finance of the Community of Madrid, former member of the Spanish Congress, and the author of Pisando Charcos. He was a key operator in the implementation of the policies that became known as The Madrid Model.

While others wrote the manifestos that built what we now call The Madrid Model, Manglano was inside the machinery. Up late drafting the laws, cutting the budgets, sitting through the meetings, taking the eggs thrown at him in Lavapiés. This conversation is an attempt to understand how that machinery actually works, told by someone who spent twenty-five years operating it from the inside.

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We begin in unlikely places. Manglano was born in London in 1972 to Valencian parents who wanted an English name for their child and settled on Percival. He studied in France, took a master’s at Johns Hopkins, and at twenty-five bought a one-way ticket to Indonesia. It was July 1998. Suharto had fallen two months earlier. Manglano arrived into a country teaching itself, in real time, how to be a democracy.

His political awakening came on a closed-off avenue in Jakarta, where he found himself between police and demonstrators, talking to both, until a whistle blew and the police opened fire. He picked up bullets from the street and kept some of them. “If you end up a liberal,” he tells us, “violence is a very important part of what you are against.” He was, he says, a liberal before he realized he was one which, he suspects, is more common than people admit.

From there, the conversation traces the long arc back to Madrid. Manglano returned to Spain in 2000, walked into the offices of the Partido Popular in February 2001, and has been there ever since. He passed through the FAES think tank under Aznar’s post-government rebuilding, advised on foreign affairs in the Spanish Congress, and in 2006 joined the regional government of Madrid which was the laboratory where Esperanza Aguirre and her circle were translating classical liberal ideas into actual policy.

Three through-lines emerge.

The first is the open society. Manglano was directly involved in crafting Madrid’s approach to immigration during the great wave of the early 2000s, when Spain went from less than 2% foreign-born to over 23% in two decades. Diego reads from a previously unpublished 2007 FAES memo Manglano helped draft — A Liberal Vision of Immigration Policy which laid out six principles, beginning with the most radical of them all: the immigrant is a person, not a member of a collective or ethnic group. From this single premise flows everything else: rejection of multiculturalism, equality before the law regardless of origin, refusal to plan ghettos, suspicion of any policy that treats human beings as blocs. The contrast with Catalonia becomes the episode’s most pointed case study in what closed societies actually look like.

The second is the discipline of reform under fire. In 2011, Aguirre took Manglano by the hand at her own re-inauguration and asked if he’d be her finance minister. He didn’t sleep that night. He took office in the worst of the Spanish double-dip recession, with the regional government’s revenues collapsing and Spain weeks away from a possible bailout. He approved three budgets in a single year. He cut expenditures in the middle of a crisis by going back to first principles: what is a regional government actually for? Health, education, infrastructure. Everything else, including the union privileges, the liberados, the artificially low tasas, the bureaucratic accretion of policies that were never the regional government’s job to begin with, was on the table.

It is also under his watch that Madrid passed the famous libertad de horarios — the law allowing shops to open whenever they wish. The article doing the actual liberalizing is one sentence, thirty-five words long. Aguirre had ordered it shortened. Manglano draws a comparison to the Thirteenth Amendment. The substance of liberty, he suggests, rarely needs much paper.

The third is the fear of power. This is the conceptual spine of the episode and of his book, Pisando charcos, an idiom that can be translated literally as “Stepping in Puddles” or a more meaningful translation: “Get your hands dirty”. Manglano is unusual among politicians in that he distrusts power in himself. He sees it as fire: useful for cooking, dangerous to hold too long, certain to burn the careless. He believes most people enter politics because they want to wield power. He believes the liberal alternative is to enter politics in order to use power for something else and then leave. The reforms are the point; the office is the cost.

Along the way, the conversation visits the Euro Vegas pitch to Sheldon Adelson at seven in the morning in Las Vegas (Manglano lost a hundred dollars at blackjack the night before; Almeida, the future mayor, won); the years in opposition to Manuela Carmena’s communist administration in Madrid, including the day Manglano, Aguirre, and a pregnant Begoña Villacís were physically harassed by far-left activists on the steps of city hall; the internal civil wars of the Partido Popular, the rise and fall of Pablo Casado, and the rifts that still shape Spanish politics; the citizenship-by-descent law that has put 2.5 million potential new voters on Spain’s electoral rolls; and an entirely sincere defense of Sylvester Stallone as a man who beat Hollywood at its own game.

The episode closes on a Robert Caro line that Rasheed offers: power doesn’t corrupt — power reveals. Manglano accepts the friendly amendment. The two ideas, he says, are the same idea seen from different angles. What power reveals, in his case, is a man who used it to change concrete things, distrusted it the entire time he held it, and was relieved to put it down.

This is a long conversation. It rewards listeners who want to understand not just what Madrid did, but how it was actually done.

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Full Transcript Below

Michel Houellebecq’s Submission is often discussed as a novel about Islam in France. In this conversation, we argue that this is both true and radically insufficient. Beneath the novel’s political surface lies a deeper and more unsettling question: what becomes of a civilization when it loses confidence in itself, and what becomes of a man when he no longer possesses any inner reason not to submit?

In this podcast episode Rasheed and Henry take Submission seriously as a work of literature, not merely as a provocation. They examine Houellebecq’s use of J.-K. Huysmans as the novel’s hidden key, the meaning of the epigraph from En route, and the book’s larger preoccupation with decadence, desiccation, faith, and civilizational exhaustion. The discussion moves beyond the usual journalistic reading of the novel as a simple warning about Islamization and instead asks whether Islam in the book functions as cause, consequence, mirror, temptation, or verdict.

Along the way, they explore François as one of Houellebecq’s great modern antiheroes: inert, intelligent, erotically tired, emotionally depleted, and profoundly available to history. They discuss whether the novel is fundamentally deterministic, whether its ending represents genuine conversion or mere surrender, and why the final line carries far more force in French than it does in English translation. They also consider the importance of sex, male desire, polygamy, and status in the novel’s architecture, not as incidental scandal, but as essential clues to Houellebecq’s diagnosis of liberal society.

The episode also situates Submission within broader French and European intellectual history, touching on Huysmans, Wilde, Dorian Gray, René Guénon, Schopenhauer, Delacroix, French imperial imagination, and the long-standing Mediterranean and Arab dimensions of French self-understanding. The result is a reading of the novel as both political dystopia and metaphysical diagnosis: not simply a book about a regime change, but a book about the internal vacancy that makes regime change feel strangely acceptable.

This is a spoiler-heavy conversation intended for listeners who have already read the novel, ideally more than once. It is less a summary than an extended attempt to think with the book and through it. What does Submission say about liberalism, faith, masculinity, exhaustion, and the possibility that modern societies may not be conquered so much as quietly give up?

A conversation on literature, philosophy, religion, sex, and the suicide of the West.

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Key Books Mentioned In This Episode

Michel Houellebecq

J. K. Huysmans

Oscar Wilde

Jonathan Swift

René Guénon

Transcript

Rasheed: Hi Henry and welcome back to the podcast.

Henry: Always a pleasure.

Rasheed: So today we’re going to be doing a single book dive, and I was looking forward to this for quite some time. This is a long time coming and I think there might be some spoilers for people who haven’t read the book.

So I would say this is a post-reading episode, probably even read twice before you come to the episode, I would say. And we’re going to discuss literature, philosophy, and sociology of the book ‘ Submission’ by Michel Houellebecq.

Henry: It’s one of those books. I hate plot spoilers. I hate plot summaries.

I think it’s just a disease of literary criticism, but we can’t discuss it without talking about the ending, at all.

Rasheed: That is the problem.

Henry: Look away now kids!

Rasheed: So here we go. So again, I’m going to assume you’ve read the book at least twice, a priori. Now Henry, the first thing we need, I think, to get to terms with is the surface reading of the book.

Which is, this is a book about Islam in France or broadly in Europe, and that is a “bad thing”. I’m using air quotes here for listeners. That is generally how most people perceive.

And of course that is the completely wrong way to see the book. But what’s your view on that one?

Henry: I don’t know if it’s completely the wrong way to see the book. What happens is that an Islamic government is elected and France becomes governed by Shia islam. Men have multiple wives. Women wear the burka. Educational institutions are reordered according to religious ideas. And the main character that we follow is a professor of French literature, and has been under the western system alienated, dissatisfied, typical Houellebecq. He’s dead on the inside, everything is miserable.

And eventually he submits to the governing order, but also to the idea of Islam. He’s no longer a Western individual. He decides to become a member of that order, temperamentally or ideologically, however you want to say it. So I don’t think it can be right to say that the idea of an Islamic, quote unquote takeover of France is the wrong reading, even though I agree it’s not the whole reading. But there is an extent to which Houellebecq is, I think, genuinely concerned with that question.

Rasheed: Okay. I think that’s fair.

When I want to say it is not about, or I stress about Islam, it’s usually how it’s perceived. It’s like the point of the book is to discuss Islam. From non-Islam to Islam is the arc of the book.

Of course, yes, that’s clearly too surface.

So that’s why I try to push hard against that interpretation. But yes, the Islam idea features as a core tenant of what, I guess you will come to, the underlying raison d’être of the book essentially speaking.

Henry: If it’s not about that, what is it about?

Rasheed: That’s what we’ll get to!

Henry: I do think Houellebecq is writing about this, what he calls in this book and in “The Elementary Particles” and elsewhere, the “suicide of the suicide of the West”. And there is an extent to which, what happens in this book is that France gives up on itself and Islam, the French version of Islam does not give up on itself.

The replacement, as some people would say, happens. It is left open, I think, important to say this, that there will be future elections. And so it may be that in the future this government is removed from office. But it seems pretty clear that culturally there’s a sort of great acceptance of what happens in the novel. Houellebecq sometimes makes the point that this is for economic reasons, sometimes for political reasons, sometimes for, frankly sexual reasons.

Maybe it’s not about from not-Islam to Islam and it’s more about what he calls the suicide of a culture. But are the two not entailed within each other?

Rasheed: Yes, the Islam feature of the book is relevant to the suicide feature of the book, but I think the Islam feature is more or less almost superficial to the underlying suicide part.

And I take that reading from the beginning, which is the preface or the epigraph to the book from “En route“ by Huysmans. Of course, the book starts off the first line itself with a reference to how he is a scholar of Huysmans, and this was his most important time, when he was finishing his dissertation on Huysmans, but the page prior.

The first thing you read when you open the book is a quote from Huysmans, of course, “En route“. The character that Huysmans is writing about is complaining about the effort or the absence that he is feeling and that where he wants to potentially get to is Catholicism. And to me that opens the core irony of the book. We are talking about something which we are not talking about, which is obviously the suicide part. So Islam is a good counterweight to thinking about the real core features that make us think, “Hey, what is that absence that we are missing in our own societies?”

So Islam just holds a mirror up to it. I think that is why I try to push the idea that you have to talk more about the absence more than the actual thing itself.

Henry: Yes. And it’s certainly true that this is a feature of other Houellebecq novels that do not feature Islam or do feature it in this kind of structural way.

And his criticism of individualism, I think entails both that it is secular and therefore that it does not offer a suitable foundation for human progress because it leaves people without any kind of meaning, belief system, purpose. So I accept all of that, but I think the point of this book is that the suicide of the West is endogenous as some of our colleagues from Mercatus colleagues might say.

It’s so inherent to western liberalism that rather than going back to Catholicism, which is the foundation on which the culture was built, the foundation of the liberal idea, they will submit to Islam, which is a fundamental break. I think Houellebecq would say it wasn’t a fundamental break, it was the sort of long evolution out of something that ended up killing itself.

Islam represents a fundamental break. And I think this book is actually pretty clear that it is a break that allows people to act on some of the desires that they had not previously been allowed to act on. And that’s one reason why the break is so accepted.

Rasheed: I’m not sure if I agree that it is such a clear example of Houellebecq putting up a clear example of Islam being a fundamental break from what has come, what’s currently here, or what’s currently being exhausted. So I made that point in reference to some of the flourishes that come through the book.

One quick example is how the Paris Mosque was introduced to us in the book, and it was introduced via the two colleagues. François and the younger one…

He says, “Hey you wanna get some coffee? Let’s go to the Paris Mosque.” Now, people who are not very familiar with France might think this is a complete fiction. It is a real place. The Grand Paris Mosque is there in Paris. It’s a typical place to drink tea. Here they went to drink tea and have some baklava, and you can go right now to the Paris Mosque in go to the touristy area and have some tea and baklava. It is such a central part of Paris.

I do wonder why that was the initial choice made. Of course I could be reading too much into this, but when the Paris Mosque was constructed, it was not commissioned by invasion forces. It was built by the government of France to give reverence to the Muslims that fought for the country in World War I.

And they paid for it. The city of Paris gave the land. It’s one of the very few times where the government of France broke its secular rules to build a “religious institution”. But they called it a Muslim institute. It’s got study rooms, a tea house and things to make it seem much more secular than it really is.

And now it’s just seen as a normal feature of the Paris skyline. It’s the same Moorish-Hispanic culture, architecture as Andalucía in Spain. So when I see that I wonder if he is trying to hint at a sort of continuity? To me that’s why it’s a bit darker in the sense that the Islam isn’t the break, it is the haunting that you can actually just move towards quite easily. It’s not a jump, it’s a slip.

Henry: I agree with that. I think that’s absolutely right. I found that on this reading, it affected me more emotionally.

And I think part of it is because of what you’re saying. The suicide of the West evolves out of what the west is in this novel. What I mean by a break is, for example from monogamy to polygamy, things like that. Whereas liberalism and Christianity actually are apart from secularism in many ways quite similar, by the time the France of the novel has become Islamic, all sorts of things are changing overnight. Basic norms are being fundamentally changed. And I think part of his point is it evolves out and it’s a normal part of French life. But that’s exactly the problem because at that point, you’re prepared to step into this new order, this new system. And to begin with, he doesn’t want to do it. He’s offered a job. No, he’s not offered the job. He takes the retirement money and he finds out he could have a job if he signs up and converts to Islam. And he thinks that’s crazy, he’s not gonna do that.

And as you say, he just accommodates himself to it quite naturally, it’s just already within him. But that doesn’t mean it’s not a fundamental break to become. Houellebecq goes to some length to show this. He goes to the boss’s house. The head of the president of the university who then becomes secretary of this and a cabinet member.

And he meets in the hallway, a young woman or I think she’s a teenager, 15. And she is just wearing ordinary clothes, or what secular French liberals would consider ordinary. And she shrieks and runs away and the president of the university comes down and says, “Oh, she’s appalled that you’ve seen her without the burka”. And we learn that she’s one of his new wives. So that’s a very clear example of those scenes in previous Houellebecq novels. It would’ve been on the beach. It would’ve been highly sexualized. It would’ve been maybe a bit perverted, there’d be something like that.

The girl is now in a fundamentally different position, morally, socially, economically. Her life will never be what it would otherwise have been. She’ll never be seen in the same way. I think those sorts of breaks are fundamental.

Rasheed: Yes. We will come to more of that too. I want-

Henry: Where is, just to make the point, doubly clear, if they’d reverted to Catholicism, there would’ve been much more continuity for her.

Not as much, but as much but more.

Rasheed: That was on page 218 in the English version - the lesser version - of the book. This is the polygamy point, “And look at how he lived…” This is the boss we’re talking about. “A 40-year-old wife to do the cooking. A 15-year-old wife for whatever else ... no doubt he had one or two wives in between, but I couldn’t think of how to ask.” So this is an interesting point. This sexualization of Islam is a key feature of how he thinks about why he wants to potentially convert to Islam, and we’ll see some hints of that in other places in the book as well.

But before we get there, I wanna pull back a bit more to a recurring feature of the book that runs through every page, every hint, every thesis, every comment: that Huysmans is the mirror to everything we’re doing here. And people haven’t really taken much time to think about why of all the potential people in French or world literature, did Houellebecq choose Huysmans to be the core anchor of the literature professor’s work. How about you? I have some views on this of course, but why do you think that Houellebecq, or Huysmans is so relevant to understand, to really think about the themes here in Submission?

Henry: It is an interesting point and it is reinforced to us when the narrator is offered the chance to do the Pléiade.

That’s Houellebecq reaching out and saying, “Please realize that Huysmans is underappreciated and he’s so important.”

It’s a very good moment. And it’s dealt with so wonderfully because Huysmans is a sort of nihilist and there is a wonderful moment. Obviously it’s upsetting, but there is this wonderfully done moment when François is working on his preface to this edition and its stimulating, rewarding work, and it’s the pinnacle of his career.

And he’s spent his whole life becoming capable of doing this. And he’s finally getting this guy into this edition and people will pay attention. And he’s so dead on the inside. It’s such a dramatic letdown and leaves some other kind of emptiness, which is a very Huysman-esque response. And I think that there are obviously varieties of nihilism in the European novel, but Houellebecq is not a nihilist in the sense that Bazárov in “Fathers and Sons“ is a nihilist. Actually Houellebecq is opposed to that. He’s not a blunt materialist. He doesn’t think everything can be explained with a chemistry textbook or whatever it is   Bazárov carries around preaching to people about. “The Elementary Particles” is an earlier statement of that view.

And Huysmans gives him a source or a fount of not quite nihilism, but what it means for a man or a person to just become inert, to just lose all feeling, to stop being, to become idle, in the real sense. And that is the strain of European culture that he thinks is leading to the suicide.

He’s not a   Bazárov and he’s trying to position himself in that line. And it’s not a line of thinking actually, that gets as much airtime. The question of whether  Houellebecq is a nihilist is a live question. And it shouldn’t be because he’s gone to great pains to show that he’s the opposite of a nihilist.

And one of the things that’s so moving about his work is that he understands the hedonism of ordinary life. I think in this book, François talks about the undeniable will to live. And Huysmans is the place he goes to get the material for what it means to lose that.

Rasheed: So going back again to the epigraph. Coming into the book and you read the epigraph, you don’t think that much about it, but then you get to the end.

And then if you go and read Huysmans for the first time, you have to wonder why of all the Huysmans texts he chose En route as the epigraph. Because when you really think about this book (Submission), you would think it would be something from “Against Nature“.

I actually don’t like the title in English of that.

It’s “À rebours” in French and “A contrapelo” in Spanish, which means “Against the grain“, another gritty translation. That’s also sometimes the English translation too. That seems like the logical choice, but En route was in the Catholic cycle tetralogy for Huysmans.

Is he mocking me with this particular epigraph?

It feels somehow even more haunting to see that En route epigraph from Huysmans to open this particular book of all books. This is not a fun story. This is the end in the place that we think is gonna end. That alone to me is very odd.

Henry: I think you’ve read more Huysmans than I have, so I can’t give you as good an answer, but I think you’re talking about the right thing. And François does talk about the conversion of Huysmans and the change in his work and his plan for the work to be in two volumes reflects that break in Huysmans.

I took that as further evidence of what I was saying earlier, that the West because it is committing suicide, will not be going back to its “own religion”. And I think that’s why that opening epigraph is mocking you as it were because the provocation of the book is becoming desiccated in the way that Huysmans describes, and there are some wonderful descriptions of human desiccation and submission. François’s problem is not that he comes to accept life or that he becomes revivified with the idea of having restraint and structure and all the things that Houellebecq thinks are necessary for meaning that liberalism can’t provide.

It’s that he’s prepared to just submit because there are indulgences available or pleasures available. The restraints that Catholicism would put upon him are one way of thinking about this, restraints on him. Whereas submission puts restraints on the women. Islam puts restraints on women.

And I think that is part of the desiccation of François.

Rasheed: And you just let the big correlation slip.

Henry: I know!

Rasheed: It’s that Islam means “submission”. The title of the book is doing a lot of work.

Henry: Indeed.

Rasheed: There’s another thing I want to point out, which is to me in terms of this Huysmans nexus here. So I have a personal view. I read François as Dorian Gray.

Henry: Okay.

Rasheed: Not Dorian Gray in the world, the picture of Dorian Gray. So literally the picture of Dorian Gray leaves the house and is walking about.

Henry: François is the painting.

Rasheed: François is the painting.

Henry: And modern France is the real Dorian.

Rasheed: Yes exactly! And I say this in the sense that in The Picture of Dorian Gray, the painting is what absorbs the decay.

It absorbs the atrophy, it absorbs the moral degradation, absorbs the decadence in many ways. But then that is hidden away, and you Dorian, the real Dorian is allowed to go into the world and be looked at as unmaimed. However, François to me is the trapped, real Dorian and the painting in the world is where you see all the decay and moral atrophy as it is.

And we are forced to look at the painting. And I have that view because of how the literal book, the Picture of Dorian Gray, is pretty well established. The book that corrupts Dorian, along with Lord Henry, the yellow book referenced is Huysman. It even came out on the trial of Oscar Wilde where he’s asked, “Is the book you’ve mentioned... Was it Huysmans? It’s actually very decadent.” So we know that Oscar Wilde loved Huysmans. And even when you look at Wilde’s “Salomé“, it’s not Saloméfrom the Bible, it’s Salomé from Huysmans.

Henry: Yes!

Rasheed: It’s very clear.

Henry: Yeah.

Rasheed: So Huysmans is a very big feature of Dorian Gray. So it feels to me like mocking again when he’s saying this is actually something different from what we are thinking about on the surface.

Henry: I think this is all very apt and I think, the Wildean interest in Huysmans, as you say is clearly at least a parallel to Submission if not some sort of direct influence. But do you think that if we take François to be the painting that he is mocking you because he’s saying you’d sooner give in. The Wildean system can’t hold. It’s fundamentally unstable and you would rather submit.

Rasheed: This is why it’s very uncomfortable to read this book, because I think that’s the case. I do think most people, I’m not sure personally, as more introspection has to happen. But I think more people would rather submit to this new world that offers you all these other things.

Henry: I suppose Houellebecq’s point is that most men would rather submit.

Rasheed: And it’s weird, this is the first time anyone’s using the sexual drive of men to talk about this. What’s the term we use now? The promise of incels is actually quite a good example of why Islam could be taking root in our Western culture. Not something you hear about enough. You don’t think of Islam as sexualization. Granted, given how well that pushes it here, this is actually a pretty substantial drive.

Henry: Yeah. And he talks about that in the conversation between the President and François. And François is interested in how polygamy works, and the President says it means the high status men can be married. What I find so interesting about Submission, is that some of the things he’s concerned about in a way have already happened in the West, which is that high status men are much more likely to be married now than incels and so on. And François says, “Oh I’m not a high status, I’m just some desiccated old professor of French literature.” And the professor says, “No, we could get you some young wives. You are probably a three wife kind of guy. We can pay you some money.” And at this point  François goes “Oh, maybe is system sounds good to me.” And there are other books that deal with this topic like the “Handmaid’s Tale“. It’s got something in common with 1984. And the dystopia that has often been imagined, like by P.D. James, is in response to some kind of internal crisis to the society, an authoritarian government taking over from within.

And I think Houellebecq is not talked about as dystopian in a genre way. It’s not compared to Atwood and Orwell so much. But it is interesting that the dystopia could come from without. Obviously it’s not without exactly, but from a different tradition. As you say, with the incels and many other aspects of contemporary society, the emphasis that’s put on status in in marriage and in partnerships and so forth, assortative mating, just the way those things are discussed, I think it has a lot more in common with Submission than with the Handmaid’s Tale. And maybe the liberal West does need a warning from Houellebecq more than it does from the Handmaid’s Tale.

Maybe not, but it’s an interesting topic.

Rasheed: It definitely is. Let’s focus on the sex part a bit. Because this is a very substantial theme in the book that I think some reviewers... well that’s the only thing they talk about, the misogyny aspect. One of the curious things about the sex discussion, it is very frequently extraordinarily, not in a bad way, vulgar. There was frequent vulgarity in this book.

Henry: Do you think this book’s vulgar?

Rasheed: Vulgar in the prime basis of that term. Not vulgar like, “Oh my gosh, clutching my pearls” vulgar.

It takes the way men think about women, seriously.

Henry: I find “Serotonin“ vulgar in the straightforward sense. Okay. I think The Elementary Particles is at times very good at representing vulgarity. And there’s a voyeur in that book.

It’s really quite unfortunately, unforgettable. One thing I like about Submission is that he handles the vulgarity quite, very sensitively, much better, much more subtly. The sort of symbolic meaning of all the sex acts is much more apparent.

Rasheed: I … agree.

I think we had mentioned this in a previous conversation. The last time he had sex with Miriam, a student, he woke up at 4:00 AM.

Anytime in western literature it’s suddenly 4:00 AM, we know what that signifies. But the way he approached that sex scene it’s hard to read that and think, “I hate women”.

Henry: I think what’s happening in Submission, like in The Elementary Particles, there’s a lot of sadness and a lot of the difficulties of love. But there’s also, as I say, the hedonism of ordinary life.

And it’s really affected me. It’s a sad book. People find it so hard to just be in love, just have a normal relationship just to live with sexual pleasure without it becoming complicated or deadening or whatever.

And the characters in that book have managed that and then they don’t. And in this book, he manages it much less and much more fleetingly. And that scene stands out as really almost the only happy moment in the book. Certainly the only happy sexual moment. Not the only moment of gratification, but the only happy, joyful moment. And this is part of the desiccation or the suicide of the West. That it has lost the ability in Houellebecq’s mind to do what should come naturally which has been building in his work for some time, but comes out, very poignantly here. And so I don’t think of it as vulgar.

I think it’s more tragic. I think he thinks it’s tragic. I think he presents it as a tragic thing that they can reach that point and then they go their separate ways and they just don’t have the will to stay together or make it work.

Rasheed: And it is actually curious how right after that scene, there was a completely separate scene, where they basically say, “We forgot about that. Let’s move on.”

Henry: And that’s what happens to Miriam. She moves on, she forgets about it. He gets that sort of email later. Now I do think that’s because François, as part of his being so decadent and degraded, is sleeping with his students.

So part of the suicide of the West is that he’s conducting his romantic life in a purposefully ephemeral and detached manner. But it is more tragic because of that. Yes. Yeah. ‘cause they did in, out, out of that ridiculous situation they did find something happy. And again, in The Elementary Particles, there’s a lot of talk of 40-year-old men finding 18-year-old girls attractive.

And in that book, the unworkability, because of the as I say, vividly  Houellebecqian voyeurism. But in this book it’s really just sad.

I sound sentimental, but I think sentimentality is actually a big part of  Houellebecq. I don’t hear it discussed very much, but he’s got a broken heart.

Rasheed: Yeah, I never read him as particularly angry or nihilistic. I’m gonna get back to that point. But before that another literary figure that was mentioned, not super often, but mentioned at particular strategic points: René Guénon. Again this is part of the “Houellebecq is toying with me” arc.

Henry: The cat and the mouse.

Rasheed: Yes.

Henry: Yes.

Rasheed: One major issue we have today is that people don’t read anymore. And even in France, people don’t read either, unfortunately.  René was a French metaphysics philosopher in the 1900s. He was a well-known French meta-physician. He was well read and he converted to Islam.

He converted to Islam for the reasons that  Houellebecq is toying with here in Submission. He even wrote a book called “The Crisis of the Modern World“, where he expressed the opinion that we are exhausted. We are running on fumes. We are not dynamic. We’ve lost our way. Essentially, the suicide of the West arc yet again. But unlike Huysmans, who did the Catholic transition, René Guénon already believed that Catholicism was also exhausted. I wonder why Houellebecq didn’t put more emphasis on Guénon in the book, but rather Huysmans. Again, I feel like he’s, again, toying with me here again. What is trying to tell me by not really centralizing Guénon more and just sprinkling him here via other main characters.

Henry: What do you think he is trying to tell you?

Rasheed: I feel like for all of the tragedy that the book is bringing, I think there’s some kind of hopefulness still in a sense.

Maybe we don’t actually have to succumb to the determinism of the west.

But I still feel he’s at least until the very end within the book, pushing back on his own argument. Maybe there’s actually still potentially a way forward. Maybe we don’t have to succumb to suicide. We still have hope. So perhaps there is a kind of optimism layered in with the tragedy and it still feels like he’s toying with the idea.

Henry: You don’t think Submission is a deterministic novel?

Rasheed: I do not…

Henry: Why?

Rasheed: So Houellebecq wrote a book about Schopenhauer.

Henry: We should say to anyone listening, bloody miserable book, don’t read it before bed.

Rasheed: It was published around 2005. I read the Spanish version. One thing of note, the Spanish version was translated by Joan Riambau. He’s actually from Barcelona, that’s a Catalan name. He’s the same person that translated the book Submission into Spanish.

That’s why I think that the Spanish version has a bit more oomph to the feeling of Houellebecq compared to the English version. So sometimes I’ll have to go between the French, Spanish and English versions and I’m left to wonder “What is Lorin Stein doing?” We’ll get back to that. So the book on Schopenhauer, you read it and you get the impression that Houellebecq is arguing.

It’s not as simple as me thinking Schopenhauer is correct, this is simply not enough.

Henry: And that’s why you think submission isn’t deterministic?

Rasheed: I think so.

Henry: I think that submission may not be a Schopenhauer-ean book whatever. I don’t think Submission necessarily expresses the Schopenhauer philosophy. But I do think that Huysmans is one influence on this. I do think that François is guided by the circumstances around him into his conclusion.

He’s not guided by himself. And that is the most pessimistic thing about the book. And I think that’s pretty deterministic. Because he tries to opt out and he doesn’t believe it, and it gets him anyway, and much more subtly compared to other dystopias.

It happens much more slippingly or slidingly, there’s no sort of dramatic moment. I know there’s that joke about having these wives but he comes to it gradually and he doesn’t quite realize. Maybe we won’t quote the last line since we’ve given spoilers and that would be too much.

But the last line is really upsetting and powerful.

Rasheed: We have to quote it. And we’ve already warned you. We’ve warned you. It is the key line of the book. It can’t be avoided.

Henry: So having submitted, converted to Islam, taken-

Rasheed: But we don’t know if he’s converted to Islam.

Henry: Because he has to get the job at university, doesn’t he?

Rasheed: Yeah, but we don’t know.

Henry: How else will he get his job at the university if he doesn’t convert?

Rasheed: I agree with that. I agree with that, but we still don’t know if that happens. And the reason why I am pushing the last line is because in English the last line says, “I would have nothing to mourn.”

Henry: Yes, but it should be as you told me, “regret.” I haven’t looked at the French copy.

Rasheed: Correct.

Henry: It’s ‘regret’ in the French version.

Rasheed: “Je n’aurais rien à regretter.” Now in the Spanish version it is not ‘regret’, but it’s a similar vibe to French. However, and this might be a leap on my part but it is an important connection of note. In France, this line has a very unique connotation as well.

There’s a very famous song in France by Edith Piaf, that you might know.

Henry: Of course.

Rasheed: It’s the same name. For anyone who hasn’t heard, go check it out on Youtube (it was also the introduction song at the start of this episode).

Henry: And it’s a sort of song of resistance.

Rasheed: It’s not just about resistance, it’s deeply interwoven with French political history. The song that she dedicated to the troopers in the Algier’s war, and it was a whole thing.

The troopers adopted the song for themselves and used it when they had parades and were marching. It’s not just about mere resistance to anything. It’s tied into French culture.

Henry: It’s the French equivalent of “My eyes have seen the glory.”

Rasheed: Yes, exactly! [Laughs]

I don’t think you would use that line, in a singular paragraph, at the end of a book.

Henry: As soon as you told me that it should be ‘regret’ instead of ‘mourn’, I thought, “Oh, so it’s a reference to Edith Piaf. It has far more weight and resonance that the use of ‘mourn’ completely kills.

But to me, that only reinforces determinism. Let me go two pages back. I’m going to read you a passage. Because I’m a literary person, we have to resort to going back to the text.

This is François narrating. He says at the beginning of this page, “The conversion ceremony itself would be very simple and it would take place at the Paris Mosque”, as you referenced earlier. “The idea was that I should bear witness in front of my new Muslim brothers. My equals in the sight of God.”

So whether or not he has converted at the end of the novel, which I agree with you, is not said outright. He narrates what will happen in his conversion. So I think we can assume that the novel ends before the conversion. But it ends with, what is perhaps more important to Houellebecq, an internal conversion.

He has decided to submit. He has converted already, in the eyes of God, as it were. He’s made this decision. He’s changed, and he says, “That morning I would be specially allowed inside the Hammamy, which was ordinarily closed to men. Wrapped in a bathrobe, I would walk the long corridors with their arch topped colonnades, their walls covered in the finest mosaics.

Then in a smaller room, also covered in mosaics of greater refinement, bathed in a bluish light, I would let the warm water wash over my body for a long, a very long time until my body was purified. Then I’d get dressed in the new clothes I’d brought with me and I would enter into the great hall of worship.

Silence would rain all around me. Images of constellations, supernovas, spiral nebulas would pass through my mind. And also images of springs of untouched mineral deserts of vast, nearly virgin forests. Little by little, I would penetrate the grandeur of the cosmic order. Then in a calm voice, I would pronounce the following words, which I had learned phonetically.”

And I’m not gonna say those words ‘cause I will get it wrong. It would be offensive. But he says, “I testify that there is no God, but God that Mohammed is the messenger of God. And then it would be over from then on, I’d be a Muslim.”

That is unarguable.

And then you read the last paragraph, in the light of that.

“I’ve been given another chance. It would be the chance at a second life with very little connection to the old one. I would have nothing to regret.”

It’s straightforward enough. Don’t you think? ThoughI know that you never think it’s straightforward enough.

Rasheed: My issue Henry, is that these last few pages here feel so estranged from the François that we’ve met.

It’s just all just paragraph on paragraph on paragraph of conditionality. And I do wonder if it really is that straightforward. It just feels so foreign to the  François that was in the Church of the Black Madonna, and felt nothing.

And now he’s now talking about being bathed and purified. It does feel like he’s discussing something in such an abstract, literary way that is so foreign from his own life.

And I feel like that last line goes to the end because it’s such a strongly sounding conditionality. It could go either way. We could just forget what has happened and strive for something else.

Henry: I’m gonna read you another paragraph.

“The reception was winding down and the night was surprisingly balmy. I walked home without really thinking in a sort of reverie. Yes, my intellectual life was finished, though I could still participate in vague, colloquial and live on my savings and my pension.

But I started to realize, and this was a real novelty, that life might actually have more to offer.”

François has changed. That’s what makes the book so upsetting.

Rasheed: I’m not saying that he definitely has or has not changed. I’m saying that the playfulness of this part of the book is to me could be leaning towards a hypothetical.

Henry: What is it in the text that brings you to this view? I’m not against, I’m not against what you say.

Rasheed: To me, it’s primarily the way he described his experience in the Church of the Black Madonna, when he was praying to get some light in the same route as Huysmans one, to feel something spiritual with God. It was such a banal discussion about how he felt nothing,

I don’t think you go from that quickly. From that to this kind of waxing poetically about the purity of your body. It’s not like it has happened or will happen. This is all prefaced by preface. It’s just so strange to place these comments within a conditional at the very end. It feels like we’re being toyed with again, especially given where we started out with Huysmans. There’s no mention of Huysmans in this part of the book, which is peculiar in many ways too, given where the book starts off from the epigraph to the end. When you read the other books of  Houellebecq you don’t really get a character.

Of course people change their writing style. But you don’t usually get a character that has such epiphanies.

Henry: But isn’t that the whole point of the idea of Submission? The internal change may not be authentic. But it is a huge internal change. He’s decided that since he’s desiccated, he may as well submit.

Not that he’s necessarily found true meaning, but Sure. But he has fundamentally converted. That’s the whole point of the conditional writing.

Rasheed: It is possible that one could read it that way. What I’m trying to say is that the path from En route all the way to where we are, leads me to contest the deterministic view of the submission. That is what I have some pains with.

Henry: The conditionality of it at the end, and the fact that it’s a submission rather than an explicitly genuine conversion, I think makes it more deterministic.

He has been left without a choice other than to submit. All the talk about the building of a new Roman empire, the expansion into the exact territories that Rome used to occupy, this being, this sort of explicit policy of the university president, who by the end is the third most senior man in the government, only reinforces that, doesn’t it?

This is a movement of history. And François’s mistake was to think that he would be an authentic individual or could get back to being an authentic individual during the movement of history, but no. And the bigger determinism is the revival of Rome. It was Rome then it was Catholic.

The revival of that will not be either of those two things. It will be this break and this new thing. And he’s caught up in the, in that great wave and there’s nothing he can

I think Houellebecq goes to quite a bit of trouble to place the determinism, not just at the level of his immediate circumstances. He pulls back quite quickly and shows you that this is happening on a very big scale.

Rasheed: That’s fair. I’ve noted that point you mentioned about Ben Abbes and Robert Rediger, who became a very senior person in the government of Ben Abbes, who was the Muslim Brotherhood leader, who became president of France.

I love how this was just inside politics, a bit of world building because it wasn’t all that necessary in the grand conversation.

I also like it because it is realistic for France in this sense.

We tend to forget that Napoleon III had a big vision for France as an Arab kingdom.

It was his entire preference towards being more Mediterranean. Even Charles de Gaulle had a large third wave view after the Cold War, where he wanted France to have a bigger roland be a key ally to Muslim nations. It continued with Jacques Chirac who had his large idea of declaring Arab policy as being key to the future of France.

And even the Mediterranean Union idea mentioned by Ben Abbes in the book, it’s a direct statement from Nicolas Sarkozy because he had an entire view of the union of the Mediterranean, where France was at the center. So this was not some random thing that Houellebecq plucked out of the air. This was and is the French polity at its top.

Henry: And it’s an explicit alternative to the secular liberal individualism of the EU.

This is an interesting part of French history. I’m not by any means well-read in French culture, but I was just at the National Gallery looking at Delacroix and his painting of I think it’s literally called “Arabs fighting (skirmishing) in the mountains.”

And Delacroix had a view that these were real men living in a sort of natural, strong, energetic way. This was proper manhood compared to the decadence of modern Paris. I’m not sure Houellebecq’s so far away from that point of view.

So I think that goes along with the Roman thing. As you say, it’s deep in French culture and French history, or a certain strand of it. And Houellebecq is giving up a fully deterministic alternative. And François comes to feel as a smaller part of that. And that’s why he goes into that second chamber.

He goes all the way in. He’s completely rebirthed, he’s passed through the valley of the shadow, all that stuff.

Rasheed: Yes. I think you’re right in that sense, if you look at it as the grand movement of history.

Henry: I’m here to depress you.

Rasheed: No I think this is true as a grand movement of history, especially when Houellebecq goes out of his way to actually make these large political rants, in French politics, of course. When you think of this not as some fiction, but grounded in France, as we know it today. It’s also peculiar in many ways that he chose Marine Le Pen as a real character in this book.

It shows you that this is not a foreign France that he wants to portray. It is close, it is possible.

Henry: Yes. Exactly. She’s the obvious foil. And I think they make a point of her ignorance. I his point is that what French nationalism thinks of itself is ironically wrong, and it is part of the French national character for this dystopia to happen.

I think he makes his point quite forcefully, but with a sort of subtlety that’s often missing from dystopias.

Rasheed: I think he’s very good at dystopia. I don’t think you’ve read “The Possibility on the Island”

Henry: No, I haven’t read that one.

Rasheed: But that’s also dystopia. Debatable. But the dystopia there, it wasn’t like your typical blockbuster where there’s a boom or some disaster and then there’s and after. This dystopia was more of a thinning away. And the dystopia was built on isolation where you just don’t know people around you.

This isolation after the end was the real dystopia. There is no massive disruption per se. In a realistic dystopia, there’s ignorance, movement, complicity.

I was just thinking that if you were to put this all in a movie… Mayor Mamdani of New York would be a great stand-in for Ben Abbes. He’s got that twinkle in his eye, he’s charming, flirty and has charisma and is very non-confrontational. This is Ben’s description in the book. This is from 2015, you fast forward and there’s Mamdani, running NYC. I thought I was being punked!

Henry: That’s what I said earlier.

I do think it’s remarkable that some of these things are real now, not in the sense that France will become Islamic Nation or whatever, but he clearly has a reasonably good sense of some of these internal dynamics in the culture.

Rasheed: Tyler Cowen made a point where he asked if isn’t this a very Swiftian novel?

Henry: I don’t know what Jonathan Swift would think about being compared to a French author. He obviously was a great admirer of many French authors and he liked the regularity with which they attempted to treat their language. But yes, the preoccupation with personal immorality under a regime which allows for too much religious diversity and opposition and therefore brings in the hypothetical absolutism, is very Swiftian. This could be a book of the travels. If Gulliver turned up and experienced all this, we wouldn’t be so surprised, would we?

Rasheed: How then do you think we should talk about this book in terms of ongoing real world effects? And particularly, most people who read this book don’t get into this conversation we’re having now. Even the reviewers, your favourite group, don’t seem to get to this part of the conversation either.

I believe the only review I found that was particularly good, at least in English, was by Knausgaard.

And gets there very quickly.

Henry: He’s read Huysmans.

Rasheed: I want to read a couple quotes from his review.

He says, “At least as I read it, in the Norwegian rendering, which I think is perhaps closer in style to Houellebecq’s original than Lorin Stein’s graceful English translation.” Very tongue in cheek as I’m sure he doesn’t really find it graceful at all.

But the quote I really want to bring attention to is this. He says, “This lack of attachment, this indifference is, as I see it, the novel’s fundamental theme and issue much more so than the Islamicization of France, which is the logic of the book is merely a consequence. What does it mean to be a human being without faith? This is in many ways the question posed by the novel.”

Henry: I hate to say it because I am the same as him, but I do think now Knausgaard is being a hopeless liberal in that statement, the idea that you can separate the consequence from the real substance of the book.

This book makes me uncomfortable, and I’m sure it makes most liberals uncomfortable. But I think we have to accept that the book is about the islamification of the French state and therefore a French culture and the willingness of François and the others to merely submit to that. Yes, because of the loss of meaning, the loss of faith, the desiccation of the individual.

I think both in this book and in The Elementary Particles, Houellebecq makes it very clear that he thinks that this is the natural evolution of the liberal order. But I think the power of the book is not incidental to the choice of Islam. If it had been some other religion, if it was in fact a reversion to Catholicism and that the French government became non-secular, reinstated, some rule of the Pope or whatever, that would not be the same sort of book at all. And the consequence changes how we think about all those other elements that he identified. So I don’t want to fully disagree with him, but I do think that’s a sort of weaseling out and one reason why Houellebecq is controversial, but also undeniable and fascinating.

And he’s constantly getting press coverage and people always want to know what he thinks and everything because he has chosen the right conclusion to make the book scary.

Henry: And let me just add this disclaimer so people don’t think I’m saying anything nasty. That is not an anti-Islam statement. The idea that the west might give up on itself in these, as I say, fundamental ways, is obviously scary and living through a period of disastrously low fertility, inertia, and political indifference to some of these issues. I think his warning is real, or at least to be taken seriously.

Rasheed: I think it’s taken even more seriously when you read ‘Platform’ and his comments on Islam in Platform. Not a core comment, not a core feature of that book, but it was just violence.

His view of Islam in Platform was, it was a terrorist attack in Thailand.

And then you come to Submission. I don’t think anyone can step away from this to claim that Houellebecq is writing a Islamophobic book. It is, especially with one of the most compelling characters, president Robert Rediger.

It feels extremely welcoming and the presentation of Islam is framed as “this could be good.”

Hence why it’s also seductive to François.

Henry: It could be good for François who is a hopeless, semi suicidal alcoholic who is depressed, has given up on his work, has no love life, and is hardly an advert for the Islamic takeover as a generally good thing.

Rasheed: Rediger is a parallel person in the book. His conversion to Islam, to me it was very strange, whimsical.

Henry: Yeah, exactly.

Rasheed: That’s a whimsical conversion. “Oh I was walking in Brussels and the cafe was closed and my God, Europe is dead!”

That was what actually happened in the book.

Henry: Isn’t it a bit like French cooperation with the Nazis? Just the sheer willingness to go with whoever because of the lack of meaning. When Houellebecq said he was a bit of an Islamophobe, I took him at his word.

I think it’s often a mistake to think that writers are trying to be clever with you.

Rasheed: I don’t think you can read the book and easily come away with Islamophobia because people don’t mean it. And when people say that they don’t usually mean it as some philosophical way of anti-Islam, they just mean that they hate the people.

Henry: Oh, I see.

Rasheed: You can’t get that quickly from the book.

Henry: No, you are absolutely right. None of them, none of the Muslims in the book is presented as being personally obnoxious or repellent. They’re all presented quite nicely.

Rasheed: Especially Robert.

Henry: But that is part of what’s sinister.

Half the faculty just signed on the next day. The whole thing is insane.

Rasheed: I was recently listening to a podcast, a Spaniard muslim convert viewing Submission. He read it as a utopia. He read it as something that could show people that this concept isn’t necessarily foreign.

Henry: What is it in the book that suggests that? I think Houellebecq is going to great pains to show you that it’s very different and that the secular Paris mosque is one thing…

Rasheed: I think it’s more of how the character of Robert brings someone into the Islam conversation without trying to break them so far away from their own past. For example, when Robert was discussing how his Muslim brothers thought of him when he was a hardcore Christian. To them this is normal and what they would expect as someone in this natural society. So they don’t see it. This is just a different version of that thing you were discussing before and that Christian view, we aren’t so far apart, me and you.

Henry: But that is what makes it dystopian. That’s a lie.

Rasheed: I agree with that. That’s a lot. I agree with you on that.

Henry: Sure, I can see why someone who was converted in the way that the character was converted would emphasize that point. And as I say, I want to be careful not to say anything that makes me sound Islamophobic, but I do think the book gives you plenty of evidence to work out for yourself that’s a lie.

And I think it’s hugely important that the single point of continuity in François’s life is that he is studying. He’s still going to be studying and teaching and professing a writer who prophesied the inner death of the Western individual and the need to submit. What an extraordinary point of continuity to emphasize when the West quote unquote falls and the whole Roman Empire becomes the Islamic Empire.

I think Houellebecq’s too obvious in a way.

Rasheed: When I first read this book, I was extraordinarily skeptical about any realistic ways that Western society, Western Europe, could actually become more Islamic.

How could people that grew up in a very Catholic and apart society, actually take it on like François. I was so abrasive to the idea. And then I started visiting Abu Dhabi and I started to think about things a lot, and I tried also to visit other parts of the UAE.

And if you go to the Louvre in Abu Dhabi, just open the Louvre Dhabi. You walk in and you’re immediately struck by what’s happening in front of you. Think about François.

What they do in the Louvre in Abu Dhabi is they have this central exhibit that juxtaposes Christianity, Islam, and Judaism in the same exhibit to, and they call it, “This is our universal civilization.” And the Louvre Abu Dhabi isn’t just a private institution. This is the government of the UAE signalling what they want to present to the world. And then you go to the Grand Mosque in Abu Dhabi, the Grand Mosque. You walk in the tunnel and on exit is this hard hitting view. There are two giant photos at the entrance of the mosque. The Pope and the Queen of England. They are saying, “Dear tourist, this is not foreign to you, this is us”. They are trying to make the thing that we call Islam a central part of this universal civilization. This is quite serious.

To a weak-minded person, this could be a very seductive and acceptable premise.

Further, on my visit to Sharjah, another emirate of the UAE, I visited the Museum of islamic Civilization. Here there is a massive exhibit that features Andalucía in Spain as a part of the historic islamic world. This was indeed true at one point.

Andalucía was part of the Islamic civilization, and they hold it, they talk about it as part of Islamic and you see that and you’re like, who’s right? Who’s wrong here? Are they right? Those things aren’t that simple.

There was a dating TV show here in Spain where they, it’s called Blind Dates, where you come together, you meet the people and like different ages, different sexes and so on.

There was an episode that really struck a chord in Spanish social media.

It was a young couple, a 19 year old girl and a 20 year old guy. The guy was Muslim. Very good looking guy. After the guy said she wasn’t muslim so it would work. But the girl said she would simply convert, and she was serious.

Rasheed: When you encounter things like that you come back to Houellebecq.It doesn’t really seem like it takes that much.

Henry: No. I think of Houellebecq as very much like V.S Naipaul in this respect. And interested in similar issues. He doesn’t present in similar ways, literally, but otherwise and in some ways that attract controversy. But he’s very much working from the material of the news and of developments in the world. And this is what makes him resented, but also unavoidable. He’s not making it all up.

And Naipaul obviously, was in some ways terrible. But he had seen something real in the world.

Rasheed: The final thing I want to mention here is how surprising it is to me how poorly analyzed this book is by people who do this for a living.

Henry: Why?

Rasheed: I don’t usually read reviews of books.

Henry: Oh, I see.

Rasheed: Now that I’m actually reading reviews I’m wondering how is it that these people are so blind?

Henry: One, one answer is that a lot of the people reading book reviews will not have read the book already.

And so they require a book review that is contextualizing, explanatory, expository, whatever, and therefore doesn’t have time to come to these issues. Another answer is that book reviewing is not always done by people who are primarily book reviewers. So they have other preoccupations, which may be quite legitimate in the broader context of the newspaper and what it’s offering its readers.

And the third thing is that Michelle Houellebecq is a genius at attracting this sort of controversy. He was trolling people long before Twitter was invented. And it may be in his best interests to have lots of reviews that don’t come to this point. A fourth point would be to say that books like this are not easy to understand straight away either for the individual or at the sort of population level because they’re so closely bound up with what is going on in the world, particularly when it was published.

It was very provocative about what was in the news and what was happening in France. And it’s a natural human thing to be startled by that. But I agree with you. The quality of book reviewing is not. Superb. But to read 19th century book reviews of books that are classics is instructive in this manner.

It is not only a modern problem. It’s a sort of slightly blighted genre. And I don’t think it’s so unusual. I think you’re right to pay more attention to Knausgaard than to others. ‘Cause he’s going about things very differently and he understands the European novel.

It may be that there aren’t enough people writing in English who understand the European novel. One feature of modern literary culture is that there are these breakout international books. Houellebecq is no longer a French novelist in that sense. He’s a global novelist, and so he becomes part of a reading list of those types of books.

But that doesn’t necessarily mean he’s being read by people who are thinking about, quote unquote, the French novel or the European novel or, European history. So he’s being pulled out of his context in that way as well. And I should say I’m not as deeply read in some of those aspects as I should be before I start telling everyone else.

They’re no good. I’m also no good.

Rasheed: It may not be the best question to close this kind of conversation on…

But it’s hard not to be pessimistic about Liberal Pluralist Thought in modern times if you really take Submission seriously. I think that of course more people should not just run away and hide behind the curtains if you read Submission. But it does really bring the call for more thought on people who discuss classical liberalism, like us here at Mercatus Center.

I do feel like sometimes these people don’t try to really bargain with what is gripping liberal society as it is today.

And sometimes I wonder who’s supposed to do that?

Henry: The other way I think about this is aliens, which is obviously a slight change of tech from what we’ve been talking about. But there’s so much information coming out that makes it impossible to any longer be the sort of person who says, “Oh, UFOs poo. This is all very nonsense.” And yet everyone is just going about their lives as if nothing is and it’s quite extraordinary. I was at a party a few months ago. Everyone is milling around, having a nice time. There’s beautiful weather, and we have those funny little cakes that we like.

And meanwhile, Congress is getting testimony about aliens and watching these videos that senior members of the military cannot explain, and it’s all very. Extraordinary. And this was, to me, it was like a scene from a novel, yeah. The parties going on and they’re all talking and Oh my God, did you hear about this?

Oh, she didn’t say that. The aliens guys, it’s right here. The, and I think actually Houellebecq is very good at showing us that. I don’t know that no one’s thinking about it or talking about it. I’m not sure.

Rasheed: Maybe not no one, but probably not enough. I can’t think of anyone right now.

Henry: I can agree with you that there’s a comp, a deep complacency to in the west and in the liberal west, and I think a lot of people are aware of that complacency. But Houellebecq’s point is that it’s very hard to break. And I don’t think we know how to do that

Rasheed: Henry, thank you for coming on the podcast

Henry: as I’m English. I love to end on that disappointing note. Thank you so much for having me.

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Full transcript below

In this episode of Somewhere/Anywhere, Diego and Rasheed step outside the studio and into the home of one of Europe’s most important classical liberal thinkers: Pedro Schwartz. What follows is less an interview than a conversation across generations about freedom, institutions, and the intellectual life of modern Spain.

Schwartz’s life traces the arc of European liberalism in the twentieth century. As a young Spaniard coming of age under Franco, he left a closed country and found himself at the London School of Economics, studying under Karl Popper and alongside some of the great figures of modern economic thought. Those formative years exposed him to a cosmopolitan intellectual environment that would shape his lifelong project: bringing the traditions of classical liberalism —Popper, Hayek, Friedman, Robbins — into Spanish intellectual and political life.

Over the decades, Schwartz became not only a scholar but also a conduit of ideas. He translated, introduced, and debated liberal thought in Spain when it was still intellectually marginal. His influence extends through generations of economists, journalists, and policymakers, many of whom first encountered liberal ideas through his seminars, essays, and public interventions.

The conversation moves fluidly between intellectual history and lived politics. Schwartz reflects on the intellectual atmosphere of the LSE in the 1960s, the role of the School of Salamanca in Spain’s liberal tradition, and his encounters with figures such as Friedrich Hayek and Milton Friedman. At the same time, we revisit decisive moments in modern Spanish history: the democratic transition, the 1981 coup attempt, Spain’s entry into NATO and the European project, and the reformist wave of the 1990s.

Schwartz also speaks candidly about his own brief experience in politics —founding a liberal party, serving in parliament, and influencing the policy debates that helped shape Spain’s market reforms. Yet he ultimately returns to the role he values most: that of the public intellectual who helps societies clarify their principles.

Throughout the episode, one theme recurs: liberalism is not simply a set of policy preferences but a civilizational inheritance. It requires institutions, intellectual seriousness, and a broad cultural horizon — one that ranges from economic theory to philosophy, history, and literature.

At 91 years old, Pedro Schwartz remains engaged in that project. This conversation is both a reflection on a remarkable intellectual life and a meditation on the enduring challenges of defending freedom in democratic societies.

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Diego: So welcome everyone to yet another episode of our Somewhere/Anywhere podcast. We are coming to you from Madrid, but not from our studio, but rather from the residence of our very distinguished guest in today’s podcast recording. So I’m joined, of course, by my cohost and friend Rasheed Griffith. Rasheed, how are you?

Rasheed: Hello, Diego. How are you doing?

Diego: Very well myself excited about today’s recording. We are about to host an interview with Pedro Schwartz, who is one of the most relevant thinkers of the classical liberal world in Europe and obviously in Spain. And it is truly a privilege for us to be speaking to him today. Isn’t it?

Rasheed: Yes, I’m very excited and looking forward to the conversation. It’s surprising how many people I come across in my kind of liberal life in the US or the Caribbean, who know of Pedro Schwartz, I think from his Cato publication, actually. So I think it’s gonna be good to hear him in person now in English.

Diego: Well, before we introduce Pedro formally, although he’s sitting right next to us right now, let us just tell everyone that Pedro had a very remarkable career as an academic. He was also involved in politics at some point as well. Of course, his voice is one of the more popular in the classical liberal sphere. He has been instrumental in the diffusion of liberal thought.

He was a student of Karl Popper. He was the president of the Montparnasse Society. His credentials are certainly those that you only come across once in a lifetime. We are truly honored to be here with Pedro. I don’t mean to extend this too much because Pedro is blushing right now, but yes, Pedro, welcome to the interview.

Pedro: Thank you very much for this interview. I hope to be up to standard.

Diego: Let’s jump into it. By the way, we will be using Pedro’s “Las cicatrices de la Libertad”, his biography, as a kind of guiding point. So for our Spanish audience or Spanish reading audience, that is a good companion to today’s interview.

Rasheed: Pedro, I wanted to focus initially on your time in England. Of course, I, coming from the Caribbean, have a much more vivid appreciation of England during this time period in my own history. I believe that from your book, your first time in England was around 1953/54, when you went to learn English. What was that experience like for you the first time?

Pedro: Well, it was a big change and surprise because I came from Spain. At that moment, there was very little freedom in Spain, and I was sent by my father to live in Spain because he wanted, and I wanted to be a diplomat. But when I passed the exams, they were difficult, but I passed them. I was told by the people on the examining board that they sadly couldn’t have me as a diplomat because I wasn’t enthusiastic about Franco, and it was well known that I had been an activist student. I went on to perfect my English in the United States, not in the United Kingdom. And then after I was here for many years, because I was a student at the London School of Economics, it turned out that I’m very much pro-English. You can ask me questions, i’ll tell you what I think.

Diego: We very recently held an interview with Esperanza Aguirre. She spoke of the 1980s when she became involved in politics. She, of course, considers herself to be a student of yours and referenced the influence of British tradition. You were a student there in the London School of Economics under Karl Popper, nonetheless.

Pedro: I was indeed. That was very lucky. I found very good teachers there at the London School of Economics when I did my PhD, and stayed there for I think seven years. I worked with Karl Popper, and I was pretty active there, so I’m both Spanish and British.

Rasheed: I’m curious about your intellectual growth at the time of LSE. It was the early sixties in LSE, when Sir Arthur Lewis was there, when a lot of the changes in the imperial system of the UK were happening, and the entire “colonial experience” was heating up in London. I’m curious, how did that affect you when you were thinking about economics and those topics?

Pedro: Well, the way it affected me... I learned my economics and also my politics from the people I met at the School of Economics. And there I was, pretty active.

For some time, I was the head of the Students Association, and therefore, I was very active, and I admired what I found there and thought I would apply it in Spain if I could.

Diego: It should be noted that today ideas travel very fast. We have to put ourselves in the shoes of someone who, 70 years ago, was traveling in a world from a closed country, traveling away from it, and setting himself in the center of European cosmopolitanism, like London.

So it was definitely a culture shock, but one that you fully embraced because you had that inherent drive for freedom internally.

Pedro: Indeed. What I found is that I could apply the things I was learning in London, in Spain. At the moment, we didn’t have political freedom in Spain, and it was easy for me to translate.

“Let’s have the same thing there.” I even became an MP in the Spanish Parliament, and in general, was very clear that I wanted freedom for my country, and I was then, how could I say, a little more in favor of socialism than I was there.

Diego: I believe John Stuart Mill plays a key role in your thoughts at this stage of your life.

How did Stuart Mill’s thinking influence you, and how did you later drift away from some elements of it?

Pedro: Well, I studied John Stuart Mill and decided to write a thesis about him, which I did and published. It was Karl Popper who told me, “Why don’t you do something on Mill? Why don’t you do your thesis on John Stewart Mill?”

So I did. I followed the advice he gave me, and I wrote and published a book on John Stuart Mill. And I found very many things to learn and to imitate about John Stuart Mill, and with the help of Karl Popper and also Lionel Robbins, who was the head of the board that gave me the PhD. So in the end, I learned from Popper, from Lionel Robbins, and many other people there.

And also John Stewart Mill, who is a very broad thinker, and I think there was lots I could learn from him and apply in my country. Not only in my country, but in general, to organize things in any country.

Rasheed: Why did Popper give you the advice to study Mill?

Pedro: Well, I remember I saw Popper’s “The Open Society”, the book, at a bookshop here in Madrid and bought it.

I bought the book, read it, and didn’t really understand what he was saying. Though at one point I was going to have lunch, and at one door I saw a little name, ‘A.R. Popper’. So I went in. And said, “Are you AR Popper of the Open Society?

He said, “Indeed.”

“Can I come to your lectures?”

He said “Yes, you can.”

And so I went to his lectures and followed, studied a lot of Karl Popper’s thoughts.

Diego: For many of us today, who consider ourselves to be students of the liberal tradition, these authors are unfortunately long gone. But the truth is that you were not just a very intellectual thinker through the years, but also someone who was acquainted with many of these individuals. For instance, you brought Karl Popper’s ideas to Spain, facilitating his translation. You even brought him physically!

Yeah. And, uh,

Pedro: I remember how I drove a little Fiat and took him to different parts of Spain.

Diego: Yes. North of Spain, I believe. Right?

Pedro: That’s right. And in general, it was not only learning what Popper and John Stuart had to say. They transformed the way I saw the world. I had very, very good teachers.

I was very lucky in the people I studied with, not only Karl Popper and Lionel Robbins, but many others at The London School of Economics, which changed my view. And little by little, I moved away from interventionist liberalism to become a real classical liberal in a sense.

Rasheed: I’m curious about, call it the critical intellectual distinction, between your training in economics and then law, when it comes to adopting a more liberal approach to politics or to society.

Pedro: Yes. Well, I studied law and was bored by it. Now I repent because the law is very important, as we know from Hayek’s books too. Laws are very important, so I slowly moved to study law more deeply. Karl Popper’s lectures also had some influence from him about how to organize a country by thought as a liberal person. And so I didn’t look back after that. I remember Karl Popper’s lectures very well, and they were very, very interesting. In fact, perhaps i’ll show you later, his piano is at the house because it was given to my wife, by him, by Karl Popper. And we’ve just repaired the piano.

He really was a very important person, I should say, a friend. He met my children, of course, and my wife. He left the piano in his will, and here we are. The piano, I don’t play. My wife does, and also my daughter, who’s a singer. And so there’s a lot of music in this house.

Diego: One thing that I shall say is that, beyond bringing that British tradition to Spain, Pedro was also instrumental in channeling other ideas from the liberal realm into the country.

Because in Pedro, you have not just a thinker with his own entity and body of work, but also someone who was a student of the Public Choice School, of the Chicago and Monetarist School. You’re also a very acquainted intellectual in regard to the Austrian tradition. So you have a little bit of all of those, and you have played the role of a curator of sorts by not just developing your own work, but also facilitating the importing of this thought into Spain.

Pedro: Indeed, I was instrumental in bringing many ideas back here. Not that I am the cause of them, I learned them. We have a great deal of influence from all these thinkers whom I have diffused here in Spain and have become a sort of instrument to discuss liberalism.

Diego: I must say that I myself was a regular attendee at Pedro’s seminars at the university back when Pedro was finishing up his more active years in academia. So I also consider myself to have learned a lot from Pedro, being one of the younger members of that club. But if we think of the list of people who have been influenced by Pedro.

In Spanish academia, intellectual life and policy, you have names such as Carlos Rodríguez Braun, Francisco Cabrillo, and Maria Blanco. These are some of our most cherished and relevant scholars in free market thinking and open society ideas, and also students of Pedro. You imported that LSE, that London School of Economics, intellectual climate of ideas into Spain through many decades, and you’ve touched many different generations with your work.

Pedro: Yes, indeed. Many people consider me as one of the influential liberals here in Spain, and as time passes, I become deeper in that kind of thought.

I’m not really deep in learning thought, but it’s also had some consequences for my life. As I told you before, I wanted to be a diplomat. I passed the exams, and they told me, “No, we don’t want you as a diplomat.” Thank goodness I became a student. I became a philosopher in the sense of freedom, and that has favored me forever and influenced me a great deal. So it’s not only the kind of liberal thought that you get at the London School of Economics that I learned and then passed on to Spain. All those who wrote their thesis with me, I’m very proud of, as well as the people who followed me at the time.

Rasheed: So, beyond the simple academic intellectual aspect of politics and freedom, you were an active part of the Congreso, the Parliament here in Spain. Why did you decide to actively go into politics?

Pedro: Well, it’s a question I asked myself. Now that time has passed, I think it was a mistake in the sense that being a politician is a very special thing.

You have to bow to ideas that you may not want to. And so I became an MP here, and I was very vocal indeed, even founding a political party. And that stayed with me because I was one of the members of the conservative party here in Spain. And now with the passing of time, I have become a source figure in liberal economics, in liberal political thought.

And that, I think, has been my main contribution to Spanish life.

Take it down. (Pedro gestures to a nearby photo)

Have a look.

Diego: Okay, so we are looking at a Liberty Fund meeting, a picture of it. It was organized by Kurt Leube in the late 1980S. We see a young Pedro Schwarz wearing a red vest, and beside him, it’s Peter Bauer, and Kurt Leube.

Pedro: Look at those!

Diego: Friedrich Hayek, Ronald Coase, George Stigler.

Rasheed: My goodness.

Pedro: So it’s a very special photograph of one of my activities as a student of liberalism.

Diego: We shall add this picture to the podcast so that everyone can take a look. I always think you are a bit too critical of your time in politics.

Let me tell you why. I obviously understand that it is certainly not the place for someone who wants to keep his independence, certainly not in Spanish politics. But I don’t know where the center-right reforms from the 1990s would’ve come if there had not been an intellectual structure that ingrained itself into the popular party machinery.

So in a sense, I think that what Aznar culminates in the 1990s is a byproduct of you setting up a small liberal party, which then became a founding element of the new Popular Party. So I understand your hesitations about that period of time. I agree with the self-criticism, but I think you are leaving out of the equation some very important contributions.

Where would the Spanish right wing be, economically speaking, if it weren’t for that?

Pedro: Well, not only that. I voted for NATO at the time when there was a lot of discussion about NATO. And I voted for it, and in fact was punished in the right wing of Spanish politics.

Diego: For context, they wanted to abstain for tactical reasons, just because they wanted to hurt the socialist government.

But Pedro said, “Well, based on principle, we can’t be tactical about something as relevant as NATO accession.” And this led to your demise in politics.

Pedro: It led to my demis,e and I’m very proud of that.

Diego: As you should be.

Pedro: Because I foresaw some of the things that are happening now. So I was very much for NATO and the sort of politicians that were in favor of defense, in favor of attacking or setting aside the people who were socialists. And we wanted to establish freedom, not only personally, but also militarily. I am proud of that moment in my political life.

Diego: By the way, there was a certain woman in your party. Of course, she was not known at the time, but she has become a towering figure in Spanish politics.

Your disciple and friend, Esperanza Aguirre.

Pedro: I chose her. I pointed at her when I was the head of a party. I said, “Esperanza, come with us.” And she worked for the party here in Spain, and ever since, very kindly says that I was her teacher. And so we’re very much proud of that point. Politics, NATO, Esperanza Aguirre, and the defense of freedom are some things that I was able to foster.

Rasheed: Well, that seems like a pretty accomplished entry into politics. Very successful. When you think of the general calculation, one can make on that. You mentioned you founded the party.

Diego: Union Liberal.

Rasheed: What was this particular reason at the time when you said, “We need to have a different kind of party in Spain.”

Why did you do it?

Pedro: I was very much at the end of my time at the LSE, a believer and defender of economic freedom. And so I wanted the new party that was being organized by Aznar to become a defender of freedom. It was made, and he’s still remembered as somebody who changed the way that we see economic policy here in Spain.

I was very much in favor of economic freedom, which is something that many people didn’t accept here, and they did once I founded this small party, and then it fused into the conservative right. And so if I’m asked what things I achieved as a politician? NATO, economic freedom, and the influence on the conservative right.

Diego: There is one element here that is interesting to note. It’s very hard to think about it these days, considering the way our current government is operating. But in between 1982 and 1986, there were some reformist policies enacted by a socialist Minister of Finance, Miguel Boyer, who was later known for being married to Julio Iglesias’ former spouse and whatnot.

But at the time, between 82 and 86. He did approve some reforms that in principle resonate with the ideas you were defending, like liberalization of business hours, liberalization in housing, which were later taken down by his own party, of course. But this was an interesting situation in which we have probably the most liberal socialist ever in the Spanish parliament, competing with the most liberal MP from the opposition conservatives.

Pedro: Indeed, I remember well when Boyer, who was in the socialist party, defended the idea of freedom of shopping hours and freedom of rental housing and other reforms of that kind. And I was across on the other side, I was within the conservative party. And so what I did after he’d spoken, I crossed the floor and congratulated him.

He’d finally done something very good, and that congratulations wasn’t quite popular with some of my friends.

Rasheed: I wanna go back a few years before that, which is the transition period in Spain. And of course, now from the outside, inside even, there’s still a lot of debate about the correct way it should have happened, the different counterfactuals.

I’m curious, from your perspective, living through it, participating, helping, how did you see the process of the transition being productive?

Pedro: One thing that explains it is that I was a monarchist, and I defended the idea of a king because I thought it was a defense against many mistakes that could have happened.

If I want to pick up the things that I did right, one of them was defending the idea of a king, which we did, and now he really has made a difference in Spain. I had met him and tried to help him whenever I could, and he now still calls me Pedro, something I remember.

Diego: King Juan Carlos has been, of course, involving some scandals. At the same time, this last week, as we’re recording this, the papers from the 23-F, which was an attempted and failed coup d’état that happened in 1981, one year before Pedro became an MP, have been released by this government.

One could speculate a lot about the reasons why they are declassifying these files now, but beyond that, these files paint Carlos in a very positive light, which sort of resonates with the idea that “yes, we can second guess some elements of the transition now, but most people that lived through it are actually pretty proud of what was accomplished then.”

We’re sitting here with someone like Pedro, who was essentially not allowed to pursue his own career as a diplomat by the regime. And for someone like him to question the role of the monarchy as a facilitator for democracy would be a no-brainer because it brought forward freedom.

Pedro: Indeed, indeed, I remember when that coup happened.

I was in Barcelona putting forward the idea of my party. I was giving a lecture. I finally saw people listening to the radio. A guy said, “Come on!”

“Please, you be a little polite to me. What are you doing?”

And he said, “There’s been a coup.”

And I remember well how King Juan Carlos appeared on the television screen, saying to his officers, the officers of the Army, “Obey me. Don’t you dare go against democracy!”

And I remember saying to myself, “Oh my goodness, not again. It can’t happen again. We had Franco once, we didn’t want to relive that.” I remember him in full uniform, telling the officers who were staging the coup, “ Will you please go back to barracks?”

And the tanks were there. The tanks were in València, so it wasn’t an easy thing to do. And this was a very big step for us. We are now a democracy in Spain. You may criticize some of the things that people do, but we do need to have the voice of the people heard. And that is something to be defended.

Diego: Both Rasheed and I are supposed to have an episode at some point about the monarchy. I just want to throw out there that the two most notable attempts against Spanish democracy were de facto stopped by the monarch. It was King Juan Carlos in 1981, and it was King Philip, the current king, in 2017 when the separation was attempted by Catalonia, which many would consider to have included elements of a constitutional coup as well.

So I think that there are great arguments that one can put forward in theory. In practice, however, the monarchy has remained instrumental for freedom in Spain, or at least that is my take.

Rasheed: But I’m curious at the time of the transition, why did you support the monarchy as a tool for democracy?

It would seem a bit counterintuitive.

Pedro: Well, in part, it was an inference for my family, who had met the monarchy group in Switzerland. And also because I thought in Spain we needed to return to something that wasn’t an absolute way of considering the Spanish politics. We needed to have somebody who would pull together the people who had been in favor of Republicanism this time and so on. We were a small group of people who thought the monarchy was a kind of institution that you need in a country that is a loggerhead with itself.

And indeed, yes, we have a king. We can see that as something very lucky, a very good thing. So that’s another good thing I did!

Diego: A lot of people are actually fascinated by the process that led to political change in the nineties. Even Rasheed and I, alongside Manuel Llamas are currently doing a lot of research and perhaps preparing a book about these specific years. Your name has come up when we talk about who was involved in the closed-door discussions on how to articulate a center-right, free-market alternative policy. Can you walk us through this timing in which, in the Fundación FAES, in the circles of PP in 94’, 95’. You can smell that political change is coming, but you need a plan. You need a program, and you were involved there as well.

Pedro: Yes, indeed. I think that we don’t underline how wonderful it was that we had a change. After all, a king is a funny thing, and you want a king when you have a democracy. Having a king and a democracy seemed to be at loggerheads, and what we needed was somebody who was above the political fights that had happened in Spain, even during the Republic in the thirties. There were a number of people who thought that if we had a king who was above politics, who could make us stop fighting each other. And that I think has proved to be so well.

People have criticized Franco very much, but he was the one who wanted a king here in Spain, and he was quite right. It was a good thing to have somebody above politics. It seems that Franco was talking to one of his ministers one day, an economics minister, and the king said to his minister, “Don’t get into politics.”

Diego: “ Don’t go into politics.” Seems that Franco saw himself as being above politics.

In a way, when politics are very partisan and very divisive. This may not resonate with audiences from some countries, like those where coalition agreements and whatnot can be formed. But definitely in a country like Spain, where unfortunately, there is a lot of partisanship, that mediating factor has remained relevant.

But I don’t know if you want to keep this a secret, or if you forgot to answer my specific question, but I am very interested to know about your involvement with the Aznar preparation of government. I know you played a role there. It’s come up in discussions with the man himself.

Pedro: Aznar was somebody we backed, because we thought he could do the right things, which he did. He established many democratic things, but mainly he was in favor of the sort of institution that is above politics. The king today is not really about politics, and that is something that you have a lot in Europe.

So again, defending the king was a great achievement, not only for me, but for many people.

Diego: Another way in which Aznar wanted to take out too much policymaking from the partisan sphere was by joining the Eurozone.

Now you have spoken a lot and written a lot about monetary policy. You acknowledged, that for Spain, joining the Eurozone was a net positive, and at the same time, you also argued that for the UK, they should be considering a common currency but not a single currency. Because that all obviously depends on your relatives, on what you can expect from the domestic.

Can you walk us through this distinction you made at the time?

Pedro: The idea for Spaniards was getting into Europe to solve many problems in the sense that for many people being pro-European was a way of saying pro-free and pro-democracy. And that was very much the attitude of the opposition here in Spain.

By joining Europe, we forget about the less wonderful parts of our politics. And that was indeed what happened. So being pro-European was not only something that Aznar wanted. Many other people also wanted to join as a safeguard for what we were doing.

Diego: In fact, today, if you look at the economic freedom rankings, Spain’s best scores come in those areas where economic policy is not decided strictly domestically, but also jointly. Take the case of financial freedom, freedom to trade, or monetary stability. Also, another question, Pedro. When Aznar came to power in the mid-nineties, he obviously had a plan.

He has a plan for liberalization in telecommunications, energy, and airlines, as well as privatization of government-owned enterprises. He has a plan to cut spending and cut taxes. What was your role as an intellectual in those years, trying to influence that process?

Pedro: Well, he wasn’t just an intellectual, but also a friend.

I think that many of the things he proposed and carried out were necessary for Spain and have left a sort of tradition that we have for economic freedom. Whatever the President of the Aznar government did has stayed. People really remember the time of economic freedom, and I think we shall go back to it when the time passes.

And so Aznar was, for many of us, a hope and a realization. He went really far in what he did. And now we once again, turn back to him. He left politics, but we go back to his ideas so that we can change the way we do politics and economic policy in Spain.

Rasheed: Why do you think Aznar was so committed to these ideas of liberalization of Spain and was actually able to push it through Parliament?

Pedro: Well, I don’t know. We don’t know why or where he got his ideas. But he certainly got them. And I think there was the influence of his wife as well. Very important. Wives are important!

Diego: They are indeed. One question I also wanted to ask you today is about the time in which your student, in a sense, becomes the governor of Madrid.

While she was in office for a very long period between 2003 and 2011, she accomplished successful tax cuts, spending cuts and deregulation. And all across the board agenda of freedom. You were also, once again, very involved with her, and the net results have been amazing. They are still in place today!

Pedro: Indeed! The influence on Madrid politics was pretty important too. And this is still with us. People still refer to that time of economic freedom as a hopeful one, given the time we’re going through at the moment. So we did influence her. She has said very often that I taught and influenced her.

And she indeed, in that sense, became very pro-economic freedom, and that stayed.

Rasheed: So I’m going to change the gear a little bit, back to the more intellectual aspect of your career. So you made many remarks about how the Anglo-Saxon view of liberalism, the LSE influenced your thinking, and you had brought that to Spain. But at the same time, you’re also well known for your work on the School of Salamanca type histories and work.

I’m curious as to how you see that aspect of liberal thinking. How does it relate to how you learn about liberalism in England?

Pedro: Liberalism in England is in a difficult time, I should say. Therefore, the influence of the economic freedom of the School of Salamanca and other things that would be referred to as parents, the idea about it, men, but many others in the liberal school that have come to say, and that is something that has influenced the politics of Spain much more than people think.

People are growing impatient, and voters are impatient with the kind of mistakes this government is making. And therefore, I think that period, not only of Esperanza Aguirre, but also of the liberal club and other ideas in defense of pre-trade and pre-economics, is something that, thank goodness, is here to stay. And we will go back to them as soon as this very difficult period we’re going through finishes.

Diego: That anchorage effect of the school of Salamanca it’s relevant because at the end of the day, it is a way for Spanish liberals to not just simply accept foreign thought, which of course is far superior in many cases, but also to anchor your own intellectual history to some elements that came before you, such as the Cortes de Leon or the writing of the Scholastics back in the day.

But it should be noted that this tradition has been rediscovered. For instance, the Marjorie Grice-Hutchinson book about the School of Salamanca, from the 1950s, is when Pedro is essentially stepping out of Spain to learn at the London School of Economics. So it’s interesting to see how today a Spanish liberal can relate more to 16th century Spanish liberals, than they did back in the time.

Pedro: Indeed, the liberal thinking, liberal economics competition, and an open system are things that are here to stay because of that period. When we helped introduce those ideas into Spanish life, I remember the great fight that we had to face was, people who said they were liberal, but they were really interventionists. Now people agree that we have to do something different. So we must have the tradition, this short-run tradition of free economics, liberal thinking. For the moment, it seems worth it, despite the kind of government we have.

Diego: We will have to speak about this government.

Pedro, of course, has made several references to this, and it comes very naturally to ask. Pedro has been involved in the diffusion of ideas in different roles. He has authored books and literally hundreds of op eds for different newspapers. He even brought Milton Friedman’s ‘Free to Choose’ TV documentary to Spanish television alongside a student of his very renowned scholar, Carlos Rodriguez Braun.

How important what do you think is the role of a journalist?

Pedro: Well, it isn’t a journalist. I would not call it that. It’s simply somebody who writes essays. But here we have a photograph of Milton Friedman and George Stigler. It’s curious that in that photograph, Milton Friedman is in the middle with other people listening to him. The idea of being in favor of free economics, free trade, is something that has come to stay in Spain, mixed a bit with the hope that Europe will find its way. But in any case, I think it’s something that has really struck roots.

Diego: I also wanted to ask you about your book, a fantastic essay, which, if I’m not mistaken, was originally your speech to become a member of the Royal Academy of Political Science and Morals.

It is being labeled as “In Search of Montesquieu” (En busca de Montesquieu), and you have expressed through the years that, at the end of the day, the difficult conquest that is freedom needs those institutions and this limits and provisioning of power.

Pedro: Yes, you need to be able to look at the back and to remember what your traditions are. And people who fight those ideas of freedom are not so important in Spain because for a long time we’ve been working with  Montesquieu, with Milton Friedman, and with others.

We’ve been working to establish the roots of free economics. It is here, it stays here. I think that again, it is a very good step forward.

Rasheed: Coming now to the end of the podcast... One of the topics that we discuss a lot is the problem of the young liberals not really reading that much and discovering these more cosmopolitan ideas of history and thinking.

The start of your last book about your life, the monograph is a Chinese quote, a Greek quote, a Spanish quote. It really makes my point here. In your generation, this idea of a broad view of the world was so important. Is it still so important to have broad reading?

Pedro: Yes. I think, how can I say, the temptation for people who think of freedom and defend freedom, both economic and political, is to fight each other and to say, “Look, I’m different from them. Look at this small group, they are somebody we have to fight.” And I think that is something that we have worked well here, where people in favor of freedom are together and work together.

And that perhaps is something we can teach other people. Britain is one of them where we need to have a different way of organizing society, and that, here again, is something we have struck roots with. Here in Spain, we have liberals who have different ways of understanding society. But we are not fighting each other; on the contrary, we’re more or less, even with our differences, going forward in what is more traditional with our political and economic thought.

Diego: I wanted to ask you about your relationship with some of the most relevant thinkers of the past century. We’ve spoken about Karl Popper already, but you also dealt with Friedrich Hayek and Milton Friedman.

Any anecdotes or stories or just overall opinions of your dealings with both Hayek and Friedman that you could share with us?

Pedro: Well, Milton Friedman has a great deal of influence in Spain because of his television program. It’s something that has left a mark on the way we see freedom here in Spain.

So that’s one thing that goes well. And I remember Milton Friedman, coming here, being attacked, but defending himself because he was wonderful and replying to what people said about him. And then you had the same with Hayek. I remember when we went to Salamanca, and he was there. He was in the chair of the School of Salamanca, defending the idea that if you have confidence in people, then you have confidence in freedom. And the idea that being a liberal means that you tend to believe that people will, in the end, defend what is right, is important. And Hayek was a difficult person, but what he’s writtenhe wrote about the philosophy of freedom is something that stays with us forever.

Diego: Pedro, this would probably be my last question to you. You’ve made several references so far to the challenges that this current government in Spain has created for us. I think that we obviously can identify economic issues, minimum wage increases that are completely blown out of any proportion, and tax increases by literal hundreds.

But the one thing I am more concerned with is the hindrance of the rule of law and the power grab of many institutions of the Spanish democracy. So how do we go forward? If there is a new government in place. What are the priorities?

Pedro: Well, the priority is to obey the constitution.

We have a constitution that should be obeyed. Instead, it’s being attacked. It’s being seen the wrong way, mainly by special socialists who are in power. The socialists have no qualms about attacking freedom. So again, we are lucky to have the 1978 Constitution. Difficult at times, but what we have is the reference for how we have to organize our lives. Not easy, but we can do it. And the basic ideas are there. Seriously, people go back to the Constitution! We need politicians to obey the constitution and to push it in practice. And this is something that sometimes seems to be in danger, but I think the opinion of Spaniards in general is in favor of establishing a free constitution and defending it.

Rasheed: I guess I’ll have the final question, and because it is the final question, I have a very different kind of question. I’m curious, in your opinion, at 91 years old, you’ve done quite a lot, of course. There are some references, I’ve found while reading your books, your views of art and music.

The literature in general is quite wide, as you can see, even right here in your library. What pieces of music or art do you still really enjoy today?

Pedro: Oh, very clearly history, because I taught history. Going back to earlier centuries is something that resonates with people still.

Sometimes wrongly, because some people are thinking of splitting Spain into many different systems, and that is not helping us. You are showing the book there, and so this again, is a book about the traditions of freedom, a very old tradition of freedom in Spain.

The word liberal was really first used in Spain when Napoleon invaded us. Therefore, the idea of a liberal is something that has a tradition behind it, and that’s very important in politics. So that’s something now we are able to defend, and that’s what I try to defend in my book.

Diego: I want to close by saying two things.

First of all, Pedro has always said that there is still a lot of work to do. That is why even today, he’s wearing his boots, writing, and actively engaging in intellectual debate. For that, I think we’re all very thankful. I also want to say, of course, I’m very thankful for this opportunity, and on a personal note, I certainly could never repay all the learning I’ve done in your seminars, conferences, talks, and writings. You have my gratitude for today’s talk, which feels like a talk between friends. My gratitude for all your work and your fantastic legacy.

Pedro: You’re being too kind. Many people together have tried to establish a different way of doing politics. We may not be very many, but we still are there, and we are a voice in Spanish politics, which ought to be treasured. So, having you here with me, I hope that what I defended is something that resonates with you. I’m very glad and very grateful for this conversation.

Rasheed: Thank you so much, Don Pedro.

Madrid didn’t drift into greatness. The street life that runs past midnight, the density that actually works, the sense of momentum rather than maintenance. Those are downstream of decisions. In this episode, Diego and I sit down with Esperanza Aguirre, former President of Madrid, for a case study: what happens when a politician is a serious defender of classical liberalism and then gets enough power to try implementing it.

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Aguirre traces it to a specific intellectual and institutional pipeline: the Liberal Club of Madrid under Pedro Schwartz, weekly immersion in The Economist when it was more explicitly liberal, and Hayek’s argument about the Industrial Revolution’s brutal optics but longer-run moral calculus. She even gives a wonderfully concrete “de-programming” moment: a 1979 trip where seeing telecom competition in the U.S. made the “natural monopoly” story feel less abstract and more attached to a Spanish administrative instinct.

From there, Madrid becomes the application layer. Her version of liberalism is not just lower taxes, but choice plus speed. Choice in schooling and in health care, where she describes making it normal to choose schools, hospitals, doctors, and specialists, and bluntly frames the political resistance as a Leftist preference for “captive clients.” Speed in how a city allows people to build and open: she explains the pivot from slow, permission-first licensing to declaración responsable, an ex post enforcement model that lets small businesses start operating without waiting a year or two for a stamp. Layer in the other pieces: hospitals built quickly by giving land and contracting private construction and sometimes operation, with reversion later; an aggressive metro expansion; and finally liberalized opening hours and Sundays, turning Madrid into the “always open” city that residents and visitors alike now take for granted.

If you think “classical liberalism” is too abstract for real politics, Aguirre makes it concrete: it’s a set of institutional defaults about who gets to decide, how fast they’re allowed to act, and whether the public sector can be made to behave as if citizens are customers rather than files to be managed.

Recommended

Podcast episode: Madrid - the Capital of Capitalism - Diego and Rasheed

Una Liberal En Política: Por qué lo que funciona es el Liberalismo by Esperanza Aguirre

Sin Complejos: Solo una derecha unida y orgullosa de su historia puede volver a gobernar España by Esperanza Aguirre

Madrid: A New Biography by Luke Stegemann

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Does government power exist by default or must it always be justified?

Prof. Somin’s answer is consistent and demanding. Liberty is the baseline and the burden is always on the state.

In this episode, Rasheed speaks with Ilya Somin, Professor of Law at George Mason University and the B. Kenneth Simon Chair in Constitutional Studies at the Cato Institute. His research focuses on constitutional law, property law, democratic theory, federalism, and migration rights.

The conversation ranges from Founding-era constitutional structure to modern Supreme Court doctrine, drawing connections between immigration law, zoning and takings, war powers, tariffs, and public-interest litigation. Throughout, Somin defends a consistent liberal constitutional vision: government power must be justified, enumerated, and constrained, not assumed as an inherent attribute of sovereignty.

Full transcript below

Key Arguments

Madison, the Alien Acts, and Enumerated Powers

• Discussion of James Madison’s Virginia Report of 1800 and its critique of the Alien and Sedition Acts.

• Madison’s warning against allowing government to define its own “necessity.”

• The constitutional danger of importing European ideas of inherent sovereign power into a system built on enumeration and limits.

Immigration and the Chinese Exclusion Turn

• Analysis of Chae Chan Ping v. United States and the birth of the “inherent sovereign powers” doctrine in U.S. immigration law.

• How the Supreme Court wrongly justified federal immigration power without grounding it in Article I.

• Why Somin argues this move directly contradicts the Constitution’s original structure and Madison’s warnings.

Zoning, Property Rights, and the Takings Clause

• Exclusionary zoning as a major barrier to opportunity and internal migration.

• How Village of Euclid v. Ambler Realty constitutionalized zoning under due process but not the Takings Clause.

• Somin’s argument that zoning can be lawful under police powers and still constitute a compensable taking.

• The incorporation problem: why early zoning cases avoided the Fifth Amendment and how that can be doctrinally revisited.

Tariffs, Emergency Powers, and the Supreme Court

• Discussion of current tariff litigation involving the International Emergency Economic Powers Act.

• Why the Court may rule on statutory grounds, the major questions doctrine, or non-delegation.

• Somin’s view that unchecked executive tariff power is incompatible with constitutional structure.

War Powers, Noriega, and Maduro

• Distinguishing military legality from criminal jurisdiction.

• Why Noriega’s capture did not strip U.S. courts of jurisdiction—but still raises war-powers questions.

• Why Maduro’s capture presents a harder constitutional case absent congressional authorization.

• The dangers of normalizing unilateral presidential war-making, even when outcomes seem attractive.

Obergefell, Equality, and Movement Strategy

• Why Obergefell v. Hodges reached the right result but with muddled reasoning.

• Lessons for migration and property-rights movements:

  • Emphasizing shared humanity over group exceptionalism.

  • Rejecting zero-sum framings.

• Comparative discussion of Spain’s constitutional path to marriage equality.

Reading Recommendations

1. Somin - Immigration is Not Invasion

2. Braver and Somin - The Constitutional Case Against Exclusionary Zoning

3. Somin - Free to Move: Foot Voting, Migration, and Political Freedom

4. McGinnis and Somin - Should International Law Be Part of Our Law?

5. Somin - The Grasping Hand: “Kelo v. City of New London” and the Limits of Eminent Domain

6. Rasheed Griffith - The Case for an EU Progress Studies Law Movement

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Rasheed: Thank you Prof. Somin for joining me on the podcast today.

Ilya Somin: Thank you for having me

Rasheed: I wanna jump right in.

Madison’s Virginia Report and the Exclusion Cases

Rasheed: Was Madison basically correct in his Virginia Report of 1800, where he argued against the Alien Enemies Act of 1798, in that allowing broad interpretations of enumerated terms would let the government create its own necessity, and that would invert the constitutional structure.

Ilya Somin: Yes. So I think the report of 1800 which you’re referring to which attacks the Alien and Sedition Acts of 1798 is correct in most of its points. Today almost everybody would say that he was right to condemn the Sedition Act which restricted speech that would criticize the government in various ways. On the other hand there is even to this day more controversy over the constitutionality of the Aliens Act which had given the President the power to deport and detain virtually any non-citizen he deemed dangerous in some way. But I think overall Madison was right to argue that the Constitution as originally drafted did not give the President or the federal government, in general, any general power over immigration or any general power to deport whatever non-citizens he wanted.

Rasheed: So given that then in the 1889 case of Chae Chan Ping vs the United States, what exactly was the move the Supreme Court did in interpreting the constitution? Or for example, was it a suspension of constitutionalism altogether in the name of sovereignty or what we in Europe would call Parliamentary supremacy?

Ilya Somin: It is not a suspension. Essentially the text of the US constitution does not include any explicit provision saying The federal government has the power to restrict immigration. It does include a naturalization cause which is a power to set rules for citizenship eligibility but both in the 18th century and 19th century and today people could migrate and travel and work and so forth without necessarily being citizens.

So Madison argued and others argued correctly that the fact that the Constitution did not grant such a power meant that such power did not belong to the federal government. And indeed throughout the first hundred years of American history almost all immigration controls were actually adopted by State governments not by the federal government. But beginning in the mid 19th century and continuing on through the 1860s and seventies there was a large racist outcry particularly against Asian immigration. So in 1882 the federal government enacted the Chinese Exclusion Act which, as the name implies, barred most Chinese immigration to the United States.

This was challenged on constitutional grounds in the courts and the Supreme Court, and in the Chinese exclusion cases that you mentioned a moment ago, in 1889, they ruled that Congress did indeed have this power but they couldn’t tie it to any specific provision of the Constitution! Normally, powers the Congress exercise are supposed to be linked at least in some way to the enumeration of Congressional authority and Art. 1 of the Constitution. Here the court couldn’t really do that because there isn’t actually a specifically enumerated immigration power.

So they said this is an inherent power of sovereignty that all governments must have in some way and therefore we have to assume that the federal government has it. Actually this sort of argument is exactly one of the points that Madison warned against in his report of 1800, that you mentioned. He said we should not assume that the US federal government has all the powers that European governments typically have because the whole point of the US Constitution was to set up a new system of government.

It would be different in many respects. For instance, unlike Britain and some many former British colonies, we do not have a principle of Parliamentary Supremacy. Rather, we have a system at least as a general rule where the powers of governor are derived from enumerations in the Constitution and that there’s not some general inherent power that just automatically goes to the government no matter what. But in the area of immigration and in a few other areas like the power of eminent domain, the Supreme Court has said that the federal government has this authority even though it’s not specifically listed or enumerated. Because they say this is a power that all governments are supposed to have. They say it just goes without saying in some sense that the government has this authority. I think decisions like this are generally wrong and they have been criticized on various grounds but that’s what the Supreme Court did in the area of immigration. In one or two other areas even though in most other places the court has held to the view that if the federal government claims a power it has to be linked in some way to something that’s enumerated in the constitution.

No Justification for Deportation of Criminals

Rasheed: So in that sense, can there be any justification for deportation, barring any kind of particular criminal activity?

Ilya Somin: So I suppose that depends on what is meant by justification. I would argue that any such deportation is unjust. We should not restrict where people are allowed to live and work simply based on who their parents are or where they were born. In other contexts we readily see that such discrimination is highly unjust. We would not say that within the US we can determine where you’re allowed to live or what jobs you’re allowed to have simply because of where your parents are born or having a particular background or you were born in a particular place or something like that.

Even regarding people who have committed crimes, I have written that I think it is unjust to punish immigrants more than natives who have committed these same crimes. If somebody commits a crime and that deserves punishment then sure, punish them with prison or fines or even the death penalty, perhaps in some extreme cases.

But don’t say that we have two people who have each done the same crime but when it’s an immigrant, in addition to whatever ordinary criminal punishment they get, they also get the punishment of deportation. That I think is very clearly unjust because it’s punishing people extra based on their parentage and place of birth.

We readily see this in a context like racial segregation. If we say if a white person commits a crime he gets a particular punishment but if a black person does he gets that punishment plus he also has to live in racial segregation for the rest of his life. That’s pretty obviously unjust and the international version of this kind of segregation is unjust for the same sorts of reasons. In both cases we are punishing and restricting people’s liberty not based on anything they did or on anything under their control but based simply on who their parents are or where they were born.

Doctrinal Correction in US Immigration Law

Rasheed: Is there any route to a doctrinal correction in the US on this topic? Given it is so, so deeply jurisprudentially lodged into essentially everything you think about immigration?

Ilya Somin: I would say a couple things. First, the route to completely getting rid of the Chinese Exclusion cases (mentioned earlier) is a long and difficult one. And it will require the sort of efforts over a period of many years similar to the effort that was done in the early to mid 20th century to deal with racial discrimination under the law. The NAACP and others spent decades on that.

That said, there are roots to gradual improvement. For example even if the federal government has the power to restrict immigration we can at least impose the same constraints on that power that are imposed on other government powers like constraints based on illegal discrimination, freedom of speech, and so on. We can get rid of cases like Trump vs Hawaii which upheld Trump’s Muslim ban in his first term on the grounds that it wasn’t explicitly a Muslim ban but rather used criteria that correlated with being a Muslim and, obviously, even if we can’t fully restore the correct constitutional principles here, there’s obviously lots of room for incremental legislative reform.

So just as the struggle for equal rights within the country based on race, ethnicity and gender and so forth had many stages. There was a lot of incremental improvement before we reached a point where you know racial discrimination by the government was generally presumptively thought to be unjust. Even now we’re fighting over issues like racial profiling so similarly here there can be a lot of incremental improvement. That can happen and that in the short term is more realistic to achieve than what I think is the ultimate goal that we should strive for, which is to replace the current presumption of exclusion with a presumption of freedom of movement under which it will be rarely, if ever, will the government be permitted to restrict where people are allowed to live and work simply based on who their parents are or where they were born.

Cultural Tensions, Assimilation and Political Influence of Migrants

Rasheed: So on this similar topic, your book, Free to Move, about voting with your feet, essentially there is this tension that comes up a lot. For example, here in Spain, recently, the Socialist government declared, via a decree and bypassing Congress, that they’re going to give an amnesty to almost a million illegal migrants that have come to Spain. Now there is this issue, structurally speaking, we would like to have people to have more freedom to come to any country they want. But there is the thing where.

Call it the Houellebecq Risk, which is, if you have people from particular cultures that are materially less liberal from your own, they might try to impose different value systems. And if you, if you’re a liberal, in a liberal country, a more mass migration of people who don’t share this worldview would cause extreme tension. How do you resolve that kind of tension when it comes to just really allowing large numbers of migration from anywhere?

Ilya Somin: So this is something I wrote about at length in Chapter 6 of my book Free to Move and there’s a number of different points that can be made here. I would just note a few highlights in the book I go over into much more detail. First, if we’re worried about threats to liberal values in western nations, history shows that not once, with one notable exception I’ll get to, has liberal democracy been overthrown by migrants. Whereas many times it’s been overthrown by native born nationalist fascists and others or Vladimir Putin and Russia and so on. We’re looking in the wrong place for the threat.

The one exception that I will note is one that sort of proves the rule which is Adolf Hitler’s role in overthrowing the Republic and establishing Nazim. Hitler was an Austrian immigrant to Germany but obviously he could lead the German nationalist movement because he essentially came from the same ethnic and linguistic group as the dominant majority in Germany itself.

So ironically it seems like migrants only genuinely threatened on a large scale potentially liberal democracy if they’re actually people from the same ethnic group as the majority in the country already and therefore can lead a native born nationalist movement.

Second to the extent that some migrants may have bad values, there are what I call keyhole solutions to addressing this. That is, mechanisms for dealing with possible negative side effects of migration that do not involve actually keeping people out. One is there are many incentives for assimilation and change such as that if you learn the language in the culture of the country you enter you get better opportunities. So having open labor markets, which many European countries often don’t have, speeds various kinds of assimilation to the point where in the U.S. when we look at the views of Muslim migrants on most issues they don’t differ enormously from those of natives.

And indeed a majority Muslims in the U.S actually support same-sex marriage. It’s a pretty strong indication that they’re not somehow trying to impose some kind of authoritarian vision. There are other keyhole mechanisms that can be used. For example, in the U.S it is already the case that even an illegal immigrant cannot become a citizen without having been in the U.S for at least five years and they pass a civics test that most native born Americans would fail if they had to take it without studying for it.

You can make those waiting periods longer or make the test more difficult and so on. Finally it is also worth noting that recent immigrants in both the U.S and in Europe participate in politics at lower rates and have less political influence per capita in many respects than native born citizens. This can be a bad thing if you like having lots of political participation but if you worry about them influencing the political system this reduces the likelihood that they will.

There is also the crucial point that many migrants who leave one country for another with a very different political system and culture it’s not because they want to spread the political system and culture they grew up with but rather because they didn’t like living under that system. And therefore it is unlikely that they’re going to want to try to replicate it in the destination country.

For example my parents and I left the Soviet Union. We didn’t do so because we liked the Communist system and wanted to spread it. Very much the contrary, we wanted to be free of communism. And similarly today, say, Iranian migrants are not leaving Iran because they want to spread radicalism. They’re leaving Iran because they hate the current regime that governs the country and don’t want to live under it. And the same thing is true of a large number of migrants from the Middle East, Africa, and elsewhere. So it is a little bit scaremongering to say that people who have traveled long distances and made difficult adjustments to be free of a particular type of culture and regime nonetheless actually want to try to spread it. In most cases that’s not true.

Rasheed: What do you think accounts for the apparent discrepancy between the attitudes of Muslims in the U.S versus Muslims in the United Kingdom, which seems to indicate stark difference in how they perceive social values?.

Ilya Somin: So I haven’t seen all the data on political views of Muslims in the United Kingdom. I do think if you look at it you will not find that most Muslims in the UK have the values of Saudi Arabia or the government of Iran or whatnot. They may be, at the margin, more socially conservative than native born UK citizens. That’s very different from saying they want to institute some kind of Muslim theocracy or whatnot to the extent that Muslims in the UK are a bit less assimilated in those in the U.S, it may be that in the UK, as in continental European nations, there is there are less liberal labor markets that impedes assimilation to a degree. In the UK they’re somewhat more liberal than they are in many continental European nations but still less so than in the US or in Canada. So what you want to do is have the employment system and the education system be as open as possible and that significantly accelerates assimilation particularly in the second generation.

Exclusionary Zoning and the Takings Clause

Rasheed: Another major part of your work is focused on the Takings Clause, within the Fifth Amendment. Now as I see it, there is a doctrinal tension that I find in this topic. Primarily with Euclid, that is Euclid vs Amber Realty in 1926. Which I believe basically constitutionalized zoning as an exercise of the general police power and under due process.

If I read it correctly, your move is, we can leave Euclid standing and still say exclusionary zoning triggers the Takings Clause. So how is that feasible? How can a zoning ordinance be valid in Euclid, but then yet still be a taking that requires compensation?

Ilya Somin: So here we have to delve a little bit deeply in the US constitutional doctrine.

First let me briefly explain what exclusionary rezoning is. Exclusionary rezoning is a set of rules or a type of rules that exist in many places in the U.S which say that only certain kinds of buildings or certain kinds of housing can be built in this area. The most common is only single family housing and not any other kind. This severely restricts the availability of housing particularly for lower middle class and poor people and makes it very difficult for millions of people to move to opportunity.

Now the takings clause of the Fifth Amendment says when the government takes private property they have to pay compensation. And I have argued in an article called the Constitutional Case Against Exclusionary Zoning, that when the government significantly restricts your right to use property they are in fact taking property. After all, in most cases when we own property the most important reason, the most important right we have, is the right to use the property. Now in 1926, as you mentioned in Euclid vs Amber Realty court case the Supreme Court upheld exclusionary rezoning against constitutional challenges and this has usually been held to say the Court immunizes zoning from challenge or most challenges.

But as we mentioned in the article, the case does not actually mention the takings clause. Not even once. That case was litigated primarily under the due process clause of the 14th Amendment. You might ask why did the Supreme Court focus on that rather than on the takings clause. Well, if you read the lower court decision in that case it is based on the takings clause and that’s part of the reason why they struck down the exclusionary rezoning in that case. But I think the reason why the Supreme Court did not address it is that when the Bill of Rights, including the takings clause at a Fifth Amendment, were first ratified in 1791 the understanding was that they constrained only the federal government not state and local governments. And it is state and local governments that do almost all zoning and most land use regulation generally.

In 1868 the 14th Amendment was enacted and one of its purposes was to incorporate the Bill of Rights against state and local governments as well as the federal government. But for many years the Supreme Court refused to recognize that incorporation had occurred. So the 1920s incorporation was beginning to occur but the court had not at that point ruled the takings clause applies to the state and local governments. Indeed even to this day the court doesn’t have an explicit case saying that it applies. Rather, what the Court has done is it has pretended that it always applied and it pretended the previous decisions that didn’t really did.

But the upshot for us with respect to Euclid is that if you want to get rid of Euclid, or essentially neuter it, all the Supreme Court has to say is that Euclid does not apply to the takings clause. It only applies to the due process clause. The Supreme Court has to some degree already said that in the 2005 Kelo case. Now that still leaves us with some other doctrinal obstacles to dealing with the exclusionary zoning under the takings clause. My co-author Josh Braver and I get into this in our article which I already mentioned, for now I’d merely say that you don’t even necessarily have to overturn any other cases to apply to the takings clause to exclusion rezoning but you would have to limit the scope of some earlier takings clause cases. You would have to reinterpret them in various ways and we describe how that can be done in our article.

Originalist Interpretation of the Constitution

Rasheed: A question on a method. So given that the US constitution was ratified in 1788, then the Fifth amendment in 1791, and later the 14th Amendment was ratified in 1868, when you’re talking about originalist interpretation, anything, is there actual distinction between those periods?

Ilya Somin: So most originalists would say that any given constitutional provision should be interpreted in accordance with its original meaning at the time that it was ratified. So the original meaning of the original constitution that was ratified in 1788 and 1789, should be understood the way that it was understood then. But obviously the original meaning of the 14th amendment should be understood as of 1868 and the original meaning of other amendments at the time that those were enacted. And to the extent that a later amendment supersedes or modifies things that were in the Constitution earlier it would be the original meaning of that later amendment that controls.

Now obviously what exactly counts as the original meaning at a given time is itself in dispute among originalists. We could have a whole separate podcast about that probably. And there’s also a dispute about whether originalism is really the correct constitutional theory in the first place. But if you are an originalist I think most originalists, almost all, would agree that the original meaning that matters for a given provision is the understanding at the time that it was enacted. And in the 1860s obviously there were motivations and understandings that in some respects were different from those of 1789. Most obviously on questions of racial and ethnic equality. Part of the whole purpose of the reconstruction amendments after the Civil War was in fact to get rid of most, if not all, of the racial discrimination and ethnic discrimination that was permitted under the original constitution of 1788 and 1789.

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Supreme Court and Trump’s Tariffs

Rasheed: Okay. So I have a pre-question to my question actually. Why do you think SCOTUS granted a cert petition to Learning Resources Inc v. Trump, even though it was actually concluded in the lower court.

Ilya Somin: Ha. I can’t know for sure why they did what they did. And full disclosure I’m one of the lawyers representing the plaintiffs, not in that case but in the Trump v. V.O.S Selections case which is combined with that one. But I think first, the lower court decisions in the cases they had addressed the major legal issues of whether Trump’s massive Liberation Day tariffs were legal or not. There are some other more procedural issues in the case that could have been addressed more but I suspect the Supreme Court thought that between our case and the Learning Resources Inc. case and also the case brought by 12 state governments, the major issues at stake had been fairly significantly canvased.

They also wanted to resolve this big issue perhaps sooner rather than later. But obviously they don’t tell us what, in most cases at least, why they decide to hear a given case instead of another one. Usually they just say they grant writ of certiorari (or commonly called a cert petition) in this case which, in plain English means, we want to hear the case but rarely do they tell us why they want to hear it. But I suspect it’s a combination of the importance of the issue plus the fact that we did already have several lower court decisions which went into some detail about the legal issues in the case which have to do with whether Trump had the authority to start the biggest trade war since the Great Depression by imposing massive tariffs on imports from almost every country in the world.

Rasheed: So now my core question is this. In your case before the Court, the Court could either a) read IEEPA very narrowly and declare tariffs are not a competent power of the President, or b), read it broadly and then confront the Major Questions Doctrine and the Nondelegation doctrine. Which outcome do you want to happen?

Ilya Somin: I would be happy to win under any of the possible options that we have put forward the International Emergency Economic Powers Act of 1977 (IEEPA) which is the act under which Trump claims the authority to declare these tariffs. It doesn’t even mention tariffs or have a synonym such as Duties. So one possible simple resolution is the court could just say this law doesn’t authorize tariffs at all. Even if it does authorize tariffs it is only in the event of an unusual and extraordinary threat to the economy.

The court could rule correctly that the trade deficits and other rationales for these tariffs don’t qualify as such. If there is uncertainty about what the law means the Major Questions doctrine applies. I think because the major questions doctrine says that when the executive claims some broad power over the economy or over American society, and here it pretty obviously is a broad power, then that claim has to be backed by a clear statement in the law. Here at the very least it is not clearly stated that the president has virtually unlimited power to impose tariffs.

Then also there is the Non-delegation doctrine which says that there are limits to how much Legislative power Congress can delegate to the executive. What exactly those limits are is not very clear from previous Supreme Court precedent. But if there are any limits at all it’s gotta be the case that it’s unconstitutional for Congress to delegate virtually unlimited authority to impose tariffs to the president for any reason he wants against any nation he wants for as long as he wants.

That’s essentially the power that Trump is claiming here. We have some additional arguments as well. I would be happy to win under any of those. I would merely note that the Major Questions and Non-delegation argument would have broader implications that go beyond the specific case of the IEEPA statute because that would influence potentially the interpretation of other tariff laws as well and might make it harder for this President or other future Presidents to use broad interpretations of other laws to claim a sweeping executive tariff power.

But in terms of this case it would be desirable for us and our clients to win on any of those bases. And I think all of them are valid but which, if any of them, we will win under, if we do win, we’ll have to wait and see for the Supreme Court’s decision.

Maduro Capture and U.S Military Intervention

Rasheed: You wrote a blog about the Maduro capture. You may have written more, but I at least read that one. In it you referenced the Noriega episode and U.S intervention in Panama as a comparator of War Powers where you contrast with Venezuela. You say that unlike with Noriega, there was no triggering of War Powers to justify U.S intervention to capture Maduro.

On that doctrine, it seems like to me the core doctrinal interpretation of the Noriega case, this is Noriega vs United States 1990 in Southern District Court of Florida was not about the War Power aspect, but on the Ker-Frisbie procedural doctrine, which is that even if Maduro was illegally captured, this illegality does not divest the U.S of jurisdiction from actually doing the adjudication in the U.S. If that’s the case, then why does it matter too much about illegality relative to War Powers?

Ilya Somin: Now with both Noriega and Maduro I think it’s important to separate out two issues. One, is the legality of the U.S military intervention. The other is the legality of trying this foreign ruler once he’s captured.

In the Noriega case that you referenced, the court was considering the second issue. That is, Noriega was in U.S custody. He was being charged with various crimes and the court said that even if the US intervention in Panama was illegal, and went beyond the powers of the executive under the US constitution, that’s not relevant to the question of whether Noriega could be tried for various crimes he was accused of once he was in U.S custody. I expect that when Maduro raises objections to his prosecution, courts will rule the same way.

But that still leaves open the issue of whether the two military interventions were constitutional. I think in the case of Noriega the answer is that probably it was legal. Because Noriega, about four or five days before the U.S intervened he had actually declared a State of War between Panama and the U.S. So therefore when the other country’s government essentially starts a war the President of the U.S does not need Congressional authorization to fight it.

On the other hand there was no State of War between Venezuela and the U.S before the U.S launched the intervention to capture Maduro and therefore I would contend that sending forces into the other country and capturing the ruler is a large enough act of war that it requires congressional authorization.

And I say that even though I shed no tears for Maduro who is a brutal socialist dictator and I think if he ends up spending the rest of his wife in prison I will shed no tears over that.

Also though I think it’s problematic to charge him with U.S drug crimes and it would be better if he does spend that time in prison it would be better if he spent it for his many horrific crimes against the Venezuela people. Whereas on the other hand I don’t think it’s right or just or even legal for the U.S to somehow extend its war on drugs to people in Venezuela where we have no jurisdiction even setting aside the fact that the war on drugs is in general unjust, there is some irony here. That justice, as with Al Capone, famously went to prison not for killing people but for evading taxes. So similarly you could say that if Maduro ends up being in prison and spending the rest of his life there not for his genuinely horrible crimes but for these supposed drug crimes that will be a kind of rough justice even though the legality of it is problematic.

Rasheed: But what about Article 2 powers, specifically the enumerated foreign Policy power. The intervention in Venezuela was fairly small. Is there an actual consequential view where you have to have a particular amount of activity, militarily speaking, to justify the argument that you can’t “start a war” without congressional authorization? It was a very surgical operation.

Ilya Somin: Yeah. So my answer is that first there’s a legal answer which is that the Constitution gives Congress the power to declare war and that includes the power to authorize the initiation of war and that’s for the good reason. That we don’t want any one person like the president to be able to take the nation to war. You could say sometimes the president can just get away with things and the results are good. Whether the broader results here will actually be good is questionable given that the Socialist dictatorship in Venezuela still remains in power and Trump seems perfectly happy to allow that to continue so long as they give him some oil concessions and the like.

But even if occasionally you can achieve good results by circumventing Congress I think in the long run it is a bad thing if one person can take the nation to war and modern technology actually makes it easier to get swift Congressional authorization than was the case in the 18th century when congress was in session only about half the year and gathering them took a long time cause obviously people had to use sailing ships and wagons to get from their home districts to Washington DC. Now Congress is in session almost all the time and even if it’s out of session given plane flights you can get people together pretty quickly, so if you’re going to start a military conflict that’s like a war there’s good reason to get congressional authorization.

Obergefell and Equal Rights Movements

Rasheed: Is Obergefell a model that can be replicated, say, in property rights, housing, or migration or do you think its success depended on features that don’t travel well across constitutional domains?

Ilya Somin: So Obergefell is the decision where the Supreme Court struck down the ban on same-sex marriage. I won’t go too deeply into doctrinal issues in the case because the court’s decision was very much a muddle. I say that even though I favored the result but the way it was reasoned by Justice Kennedy who wrote the Majority Opinion is in many ways very unclear. But I think advocates of immigrants rights or transgender people and other such causes can learn from the experience of Obergefell and also from the experience of previous movements for equal rights like the Civil Rights Movement, the Women’s Rights Movement and others.

In each case it took quite some time and also in each case they triumphed in large part by emphasizing how the group in question was actually similar, or at least more similar than different. Martin Luther King famously said People should be judged by the content of their character not by the color of their skin emphasizing that skin color is ultimately superficial and what really matters is fundamental humanity which is similar across people of different races.

Similarly to the women’s rights movement they emphasize how ultimately women are fundamentally similar to men in terms of their capacities for functioning in society, their ability to think rationally and so forth. And the gay rights movement prevailed on same-sex marriage in part by emphasizing how same sex relationships are fundamentally similar to opposite sex ones. In same-sex relationships people love each other. They raise children. They have economic needs that can be met by marriage and so forth. I think over time people saw that the differences of race and ethnicity and sexual orientation and gender in most spheres of human action were actually Fundamentally superficial.

And what really matters is the things that we have in common. And that there’s no good argument for giving white people liberty that doesn’t also apply to black people. There’s not ultimately a good argument for letting opposite sex couples married if it doesn’t apply to same-sex couples and so on. And similarly with respect to migration rights for instance we can emphasize the point that there are fundamental human rights that apply to all people and also that it is wrong and unjust to restrict people’s liberty based on who their parents are or where they were born.

In each of these cases there is also an issue of the majority being harmed by giving rights to groups and that also can be addressed in various ways. So emphasizing, for instance, the economic benefits of migration the way migration increases innovation disproportionately in the US and also in Europe, migrants have massively contributed to scientific medical and other innovation. Without which it would be vastly worse off and it’s worth stressing that too. But I think that emphasizing common humanity and and how the supposed differences are actually superficial that is how a lot of these earlier movements including the movement for same-sex marriage succeeded. Whereas on the other hand if you want to argue, as I think some on the political left sometimes do, you know that each group is special and deserves its own special status, and we should have quotas for particular groups, and the like that in addition to being problematic policy in itself, it also tends to alienate people. Also it tends to reinforce the idea that there’s a zero-sum game between groups and these groups are fundamentally different from each other rather than similar.

Rasheed: It’s curious, you mentioned the Majority Opinion on Obergerfell was muddled. Curiously here also in Spain, the government changed the civil code in 2005 to allow same-sex marriage by decree. It was challenged in the Constitutional Court from the opposing political party. Now, the Constitution of Spain, in Article 32.1, says that a man and a woman have the right to contract marriage. So one would think, okay, that’s pretty closed off from same-sex marriage. But then the Court decided that, yes, it says that, but it doesn’t say it has to be between each other.

Ilya Somin: Ah Yes! When you mentioned that text I was going to say yes this is the way out because it says both men and women have this right but maybe the right exists not only with other members of the opposite sex but also the same sex so that’s a clever piece of textual legal reasoning.

Rasheed: Exactly. Okay. Moving to my penultimate question. In your support or defense of public-interest litigation, is it mostly grounded mostly in outcomes, like more freedom, or in process - forcing the government to justify coercion? Which one do you think is overweighted or are they equally both weighted?

Ilya Somin: Both. In that I think there are some areas where we just want the categorical rule against certain types of coercion and the U.S Constitution, in some places, does create categorical rules like cruel and unusual punishment is banned regardless of how severe the crime is that the person committed. But also there can be cases where what we want is some kind of strong presumption against some kind of coercion or restriction of liberty. There can be extreme cases we might want to allow it and the courts should in that situation compel the government to prove that sort of extreme situation really does exist. That is that there’s some great evil that can only be countered by using this particular type of coercion.

Public Interest Litigation in the US and Europe

Rasheed: In Europe, there aren’t that many example groups specializing in public interest litigation. And I’m curious if you have a view on why that is, and then if you also have a view on perhaps how that should probably be pushed forward in Europe, similar to the U.S.

Ilya Somin: Public interest litigation groups are groups like the Pacific Legal Foundation, the ACLU, Institute for Justice, and others which litigate not so much for the purpose of helping a particular client win or from making money but for a purpose of shifting legal doctrine a particular direction. I don’t know that much about the state of public interest litigation in Europe to the extent that there is less of it than in the U.S maybe there is a gap that can be filled here because public interest litigation groups often have an advantage over ordinary litigants in pushing through beneficial change, though admittedly also perhaps harmful change as well.

One issue may be that sort of litigation under, say, the European Convention on Human Rights has been somewhat more recent than large scale public interest litigation in the U.S which dates back now well over a hundred years. Another possibility may be that most European countries are on average poorer than the U.S. and it does require considerable resources to do public interest litigation at a large scale.

But maybe also just the right kind of entrepreneur hasn’t yet come along in Europe to show how it can be done and how it can be effective. I would also note of course that things may be different in different countries even though the European Convention on Human Rights applies to every member of the European Union and I think still even in the United Kingdom which still incorporates it, even though that they’re not part of the European Union anymore.

Rasheed: Right. Yes.

Ilya Somin: Also each EU member state has their national legal systems and systems of judicial review function differently in each of those countries and differently in some ways from the U.S.

Rasheed: That’s true. The 1998 Human Rights Act of the United Kingdom incorporates the European Charter. And that is ironic in many ways.

Conclusion

Rasheed: Well, I think that’s all of my questions. Thank you so much for coming on the podcast.

Ilya Somin: Thank you for having me on.

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Show Notes

What if the most subversive libertarian of the twentieth century wasn’t Hayek or Nozick, but Michel Foucault? In this episode, Rasheed and Mark Pennington dismantle the worn-out cliché of Foucault as the Left’s philosopher of suspicion and instead expose how his late work aligns disturbingly well with the libertarian project. Forget the caricature of Foucault as the theorist of discipline and surveillance. In this episode, he appears as the radical voice warning that freedom erodes not just under authoritarian violence but under the bureaucrat’s file, the planner’s map, and the expert’s soothing discourse of “safety.”

By pairing Hayek’s critique of the “pretense of knowledge” with Foucault’s genealogy of “regimes of truth,” the conversation makes an explosive claim: both thinkers diagnose social engineering as a theological fantasy, a bid for God-like authority over human complexity. And if Hayek valorizes entrepreneurial discovery, Foucault demands a relentless critique of the categories that normalize us into docile bodies. The convergence? Freedom is not a polite legal boundary but a restless act of self-creation: always experimental, always at risk, and always opposed to those who claim to know better.

This episode pushes further: into Milei’s Argentina, where Foucault is suddenly a touchstone for right-wing politicians; into the culture wars, where “identity” becomes just another disciplinary cage; into Judith Butler, recast as an unwitting libertarian entrepreneur of the self. The provocation is clear: maybe libertarians abandoned Foucault too quickly, and maybe Foucauldians ignored how close their master was to undermining their own collectivist pieties. What if the true scandal is that Foucault, at his most dangerous, was never the enemy of liberalism — but its most radical ally?

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Mark Pennington | Mark Pennington @ King’s College

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Foucault and Liberal Political Economy: Power, Knowledge, and Freedom (Philosophy, Politics, and Economics) - Mark Pennington

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This transcript was automatically generated by AI and lightly edited. We don’t catch every error, so if you spot one, send a message/email via progress@cpsi.org.

Rasheed: Hi, Mark, and thank you so much for joining me on the podcast today.

Mark Pennington: It's really good to be here. Thanks for the invitation.

Rasheed: So we're going to be primarily talking about your new book, about "Foucault And Liberal Political Economy". I have it here on Kindle. The physical copy wasn't available yet when I started to read it, and I've been waiting for this book for probably over 10 years. And my friends that know me very well always know I'm saying, "Hey, there's so much Foucault when you think about classical liberalism, and no one seems to actually be synthesizing these ideas".

So I'm like, "Okay, this book has to be probably the most important book this year, in my opinion".

Mark Pennington: Very high praise. Thank you very much.

Rasheed: So, to get into the conversation, I always remember this quote from A.C. Grayling: "What is philosophy? It's too much of a smooth cliff. You can't really get up too easily." What is Foucault and liberalism? It's kind of the same idea. So I want to ease into it a bit carefully.

To start off, I'm curious about your view on this aspect. So I know you did your PhD work on the UK planning system and public choice economics and so on. I'm curious, if you had to bring your early work on planning together with your new work on Foucault, what fresh perspective does this synthesis give us about housing and urban planning in the UK today or in Europe, for that matter?

Mark Pennington: A really interesting question. So that work that I did on urban planning was really looking at the system of land use regulation in the UK from a kind of public choice theory perspective. Which, in some ways, I've kind of moved away a little bit from in more recent years.

But the key idea there was that many of the rules and regulations are not there as a kind of public interest manifestation. They're a product of what public choice theorists called "rent-seeking behavior". So it's interest groups trying to influence the regulation to benefit themselves, often at the expense of other groups. And also people working in bureaucratic agencies who are often engaging in programs of effective self-aggrandizement by maximizing the number of regulations that they supervise and the size of their bureaucratic agencies. And it's a kind of nexus between those forces, the interest groups, and the bureaucracy that produces a system that chronically restricts the supply of housing. So you've got various interest groups that benefit from restricting housing supply, and you've got a bureaucratic structure that also benefits from this regulatory apparatus. Now, if I were applying the perspective, I, developing this book to that very question, I'd be looking at the planning system as a form of what Foucault calls "power knowledge". It's a kind of power knowledge complex. So I'd be looking at the way in which these actors, the bureaucratic actors, and various interest groups deploy various examples of what Foucault would call discourses, actually justify aspects of the regulatory regime. And I'd also be looking at the way in which these discourses, and the kinds of systems of classification. That goes along with their work to effectively exclude or marginalize certain kinds of actors. So they fix both people and, in this particular case, conceptions of the way in which land ought to be used into categories that actually block various forms of experimentation. To give an example of that, in the UK, with that land use planning system, we have a very strong green belt policy. Particular areas are designated as open space. The notion that certain areas are, if you like, naturally almost always be open space is constraining because it fixes a category of the kinds of land uses, but also the kinds of people that are associated with those land uses that should be allowed to be in certain kinds of spaces. That can have all kinds of exclusionary effects. So when you have interest groups, what are often called "not in my backyard" interest groups, people who don't want new housing in the area where they live. Sometimes that is just because they don't wanna see more housing for understandable reasons, perhaps if they've got a nice view. But it might also be because they want to exclude the types of people who might come in to occupy that housing. So that kind of lens, I think, is more the one that I would be deploying if I were using this Foucauldian framework.

Rasheed: Hayek criticizes the pretext of knowledge in scientific planning, and Foucault maps how expert discourse crystallizes into regimes of truth. Do these critiques converge on the same warning, or does analysis of power reveal hazards even within Hayek's market epistemics?

Mark Pennington: That's an interesting question. So I think the area where Hayek's ideas and Foucault's ideas overlap is the idea that there is no God-like perspective on the world, no one who can have access to a kind of totalizing understanding of the world. And by that I mean of other human beings and of the way they interact in various social settings. Now, in Hayek's case, it's the idea that there are what he calls complex phenomena, where the number of variables and the character of their interaction, intertwined with the creative aspect of human agency, means that there are no stable law-like relationships that can be observed and manipulated in a predictable way by planners. So in Hayek's view, the knowledge that is relevant to social coordination is always dispersed. It's subjective. It's often contradictory. Even at the individual level. People aren't necessarily sure of which actions they should take. Now Foucault, he is very influenced by Nietzsche's ideas on a sort of Perspectivalism. So it's the idea that each person tries to exercise what Nietzsche calls "a will to power", by sort of imprinting their perspective on the world. That perspective is only ever partial. It's only ever reflecting your own experiences or your own attempt to influence other people. But people will often use claims to scientific truth, to try to claim that their partial perspective is actually something like a God-like or objective perspective on the world. So you could combine those by saying that, both Hayek and Foucault would see people who claim to have the knowledge to be social planners or social engineers as claiming that they have a kind of God-like expertise to enable them to manipulate and manage society. Which for different reasons both Foucault and Hayek are suggesting that they don't actually have. Now you also asked a question there about whether Hayek's own views about market epistemic the coordinating properties of markets. Could we consider those as an example of a kind of power-knowledge claim, now on a Foucauldian view? Yes, they are. Because all claims to truth about social coordination are examples of that. I think the reason that the kind of claims that Hayek makes are not as susceptible to that kind of critique as are the claims of the, would-be planners or social engineers, is that central to liberalism or at least the kind of liberalism that Hayek supports, is the notion that all truth claims including the ones that liberals make, should be open to contestation and to competition. So on the Hayekian view, in a sense, there's nothing wrong with people engaging at a local level in kind of experiments in socialism, if you like, that challenged the claims of liberalism. What the objection is to is a kind of totalizing attempt to introduce those kinds of practices on a society-wide basis.

So liberalism itself should always be open to contestation. We shouldn't necessarily, I think, try to prevent people from experimenting with non-liberal methods, provided they don't try to extinguish. The potential for other people to continue engaging in liberal practices.

Rasheed: The way I see it, Hayek prizes freedom because it lets unforeseen knowledge surface. And Foucault values critique, his idea of critique. Because it opens space for unanticipated knowledge and ways of being, his terminology. Is this openness to the not-yet-known the common core between these two projects?

Mark Pennington: I think it very much is. So you can think of Hayek's understanding and many other people in the kind of Austrian tradition, of what entrepreneurs do as a practical instantiation of Foucault's notion of critique. Critique in the Foucauldian sense is always taking place within a tradition. Or within a discourse or a set of practices that you can never completely escape from your whole mind, your thought processes are constituted by these discourses, but that doesn't mean that you can't spot ambiguities or gaps within them or contradictions within them. That's what critique is for Foucault. Likewise, Hayek and the Austrians would see entrepreneurs as looking at various market practices or gaps within the price system, within sets of prices, or contradictions between particular sets of cultural ideas, and looking to use those as spaces that create something new or different. So you could think of what entrepreneurs do as challenging the status quo and being a form of practical criticism in the business world, but also potentially in the cultural and ethical sphere as well.

Rasheed: This idea of Foucault and critique. I'm gonna come back to it later because it's one of the things that I think is most overlooked. And I realized that also when even Stephen Cochrane-

Mark Pennington: Yeah.

Rasheed: The historian did some classes with Foucault at Berkeley. He has maintained this idea of Foucauldian critique throughout his entire work since then.

But we'll get back to that. So I do want to go to another point. Deirdre McCloskey recuperates justice as one of the virtues among many and knows justice as a strict side constraint on coercion, but Foucault treats justice as a historically contingent tribunal of truth.

Can these three be made compatible inside, liberal order, or do they clash?

Mark Pennington: Well, I think it depends on how you ground the notion of justice. So, if you take it from a kind of very strong, Nozickian or rights-based libertarian perspective, which emphasizes notions of self-ownership, that there's something about the person that means that they own themselves, which is rooted in some particular capacity for reason, a form of liberalism is in line with Foucault. Because he would want to say that there's nothing really essential about people. That means that any particular set of rights might follow from that. He might see certain forms of liberalism in that sense as being excessively individualistic. So they'd be prioritizing very much. Rights that are based on a notion of self-ownership. What I think he would be more sympathetic to is based on, his notion of a kind of pluralism of rationalities, that given that our understandings of ourselves are actually always historically contingent, we should be open to the possibility of there being, multiple constructions of individuality, some of which may be if you like, more individualistic, some of which might be more communalistic. And although he isn't, he doesn't specify. And this is arguably one of the reasons why some people have problems with me, doesn't actually specify what that looks like in practice. I think there are many commonalities there with the final part of Nozick's anarchy state in 'Utopia', what Nozick calls the meta 'Utopia', which doesn't depend on the rights-based or self-ownership foundations that he sets out earlier in that book. So the meta, Utopia is talking about a pluralism of communities, you have some that are more individualistic, others that are less individualistic, and people can kind of move in the gaps between these different sorts of communities or cross into different sorts of communities. That is, I think, precisely the kind of social environment that is compatible with KO's notion of freedom. So for Foucault, freedom is about self-creation, the capacity to reinvent yourself, to experience different ways of being, which could be more or less individualistic, more or less communalistic, so that there wouldn't be any one ideal type of human life.

So I think the meta Utopia idea in Nozick is very compatible with that, and any form of liberalism that emphasizes a kind of radical pluralism that tries to found its notion of what justice is around that notion is also compatible with it. So I would say if you're looking for the tradition that is probably closest to that in a more philosophical sense, in a deeper philosophical sense, it'd be a kind of Hayek-Hume synthesis where what they call rules of justice are not justice in the sense of reflecting some deep, underlying moral truth.

It's more like a kind of compromise to cope with the fact that in the world around us, people radically disagree about many things, and therefore, we need some basic rules of interaction to facilitate social existence in the face of deep-level ethical disagreements.

Rasheed: So on that notion of the self and the creation of the self, there's a famous poet from the Caribbean named Derek Walcott, in England also, I guess. And he has this poem called "Love After Love". The very last line is "Sit, feast on yourself, feast on your life." And that always reminds me of this quote from, well quote, and idea from Foucault.

So when Foucault says "The self is not given to us," he echoes his earlier claim that subjects are power effects. And in asking us to create ourselves as a work of art, I think the famous life from Foucault, is he shifting from an oncological diagnosis to an ethical imperative, or simply making explicit what was always implicit in his genealogy?

Mark Pennington: I think those two ideas are very closely related. So he certainly has the idea that our conceptions of ourselves at any point in time are largely powerful effects of the various discourses. Or what somebody like Hayek, or Michael Oakeshott would talk about as being the traditions or conventions or norms within which we are always embedded. So even the way we think is conditioned by these cultural practices or routines that we didn't actually invent ourselves. So we're always products of that. Now, Foucault believes that we do have a capacity for agency, though we are always shaped by these discourses or practices, we're not determined by them. The notion of self-creation is the idea that you can play with the rules or discourses within which you're situated to create something new and different. You can reinvent yourself. He's looking at that from a kind of, if you like, ontological or descriptive understanding of what happens in human societies. But people do reinvent themselves. But he also, I think, does believe that there is a kind of ethical imperative for this as well. So his ethics are about giving people the space to engage in this freedom of self-creation, enabling people to make their lives a work of art, as you mentioned. So there is an ethical aspect to this, but that ethical aspect is intimately entwined with his ontological view that we are always power effects of the kind of social systems in which we find ourselves.

Rasheed: Tyler Cowen, in his "Complacent Class", laments the emergence of the risk or risk-adverse stagnation in people. So Foucault diagnoses this idea of normalizing power that breeds docile bodies. Do you think they talk about the same thing?

Mark Pennington: I think they may well be doing so. So I mean, this goes back to the previous point. These self-creative acts that Foucault is talking about, where people make themselves a work of art, often entail risky behavior. They involve acts of transgression, in various ways, where people challenge aspects of the status quo in ways that can often be quite dangerous. putting yourself at physical risk because of the challenges or active resistance that you might be engaging in. So there's a very active sense of Foucault about what freedom entails. It's not a passive state; it's an active state where you are challenging aspects of the status quo. Now, what he calls a normalizing society is a type of society that deadens that actually fixing people into categories and limiting their capacity to engage in these acts of resistance. You can think of the way in which many western societies have, if you like, encased themselves in various safetyist or precautionary narratives, around public health, environmentalism of various kinds, as examples of this. They are telling people that they should be risk-averse, that risk-taking is something to be fearful of rather than to be something that is embraced. So increasingly people are sort of encasing themselves in various forms of control, which give the illusion of safety in many ways actually produce not greater safety, just subjects who lack resilience in the face of the inevitable changes or challenges that will confront them in their lives.

Rasheed: So to put it crudely, maybe you won't agree, but classical liberalism broadly defends-

Mark Pennington: Yeah.

Rasheed: negative liberty, freedom from coercion. Does the microphysics of power suggest subtler forms of coercion that libertarians generally overlook speaking?

Mark Pennington: Yes and no. So the classic critique that a lot of people who are influenced by Foucault make about the focus on negative liberty and classical liberalism would be that if you simply focus on intervention, in terms of acts of direct violence against people or infringements on property rights, you are ignoring all the other ways, decentralized ways, the way that you're brought up in the home, in the education system, other sites that can lead to feelings of, constraint or unfreedom. So norms around gender or sexuality would be the obvious example of this. That if you simply focus on freedom as non-interference. In the classical sense, you'd be ignoring how people can be constrained, their freedom limited by the circulation of discourses or narratives that mean that certain actions, around gender and sexuality, are considered to be beyond the pale that marginalizing certain actors. Now that is a classic reading that often Foucauldian critics of classical liberalism give. It's not clear that it's the one that Foucault himself would endorse, at least not the late Foucault. So he makes very interesting remarks about the only guarantee of freedom being freedom. And I think what he's getting at there is the idea that we can never escape from these decentralized forms of constraint, or if you like, cultural interference that actually shape our very sense of who we are. A potential benefit of negative freedom is that it leaves individual subjects with the greatest space to find out for themselves how to challenge those norms or practices that they're situated to engage in acts of rebellion. Whereas ironically, positive theories of freedom that claim to want to liberate people from cultural processes that may discriminate against people who've got certain sexual orientations, or gender identifications, or racial or ethnic identities, actually end up imprisoning those people because they construct them as passive agents who aren't actually capable of challenging the power relations in which they find themselves. So I think a really interesting example of this, which is one I mentioned in the book, is to look at what Iran has been doing in the recent past to challenge incredibly restrictive theocratic practices. Now, those challenges that those Iranian women have been engaging in have been crushed by direct violence from the Iranian regime. But the point is that those women, even though they're in a very constrained situation, have had agency; they've been able to challenge themselves without requiring some external liberator to come in and free them from what they see as forms of cultural oppression. And that is true, I think, in more liberal societies for many groups, whether it's gays, lesbians, people in ethnic minorities, or other actors, that they've often got space in a liberal regime to figure out their own ways of actually challenging the power systems that they find themselves in without requiring some external agent to liberate them.

And the process of supposedly liberating, liberating them, actually just pigeonholing them into various kinds of categories and routines that end up just perpetuating stereotypes about various group identities.

Rasheed: Foucault's governmentality thesis says that, modern state regulates conduct through welfare, health, and security. Does that genealogy strengthen the libertarian warning against mission creep, or does it suggest that even in a night watchman state, it inevitably grows pastoral tentacles?

Mark Pennington: When Foucault speaks about governmentality, he refers to the interaction between different types of power. So some of that power could be what many people usually associate with power, which is sovereign power, like the power of the state to issue commands or orders elsewhere. It could be examples of what he calls disciplinary power, which targets specific individuals who are considered to be troublesome actors in some sense. And then thirdly, he talks about bio power, which actually overlaps with what you call security mechanisms there in your remarks. So by that, he's talking about narratives that target the whole population as the focus of control or the focus of government. He has interesting things to say about that biopower when he's discussing liberalism. So he basically distinguishes between forms of this biopower that are very constraining, that lead to the proliferation of regulations and controls over people in the name of improving the welfare of the population. And you can think of public health as being something like that. And those elements within, if you like, neoliberal or liberal discourses, which emphasize the importance of various kinds of controls and operating instead through incentives and signals, which enable people to coordinate with others but without actually subjecting them directly to disciplinary types of power or to command control techniques. And he seems to think that things like the price system or various market-like processes, and you get this through his engagement with people like Gary Becker, are forms of power that nonetheless allow subjects greater freedom of maneuver than some of the other types of power techniques that are operative. I think to go back to the core of your question, does liberalism completely avoid those kinds of power? No, it doesn't. Because all societies have these power mechanisms operating. But I think if you are giving a kind of liberal reading of Foucault or trying to square aspects of liberalism with some of his concerns, the argument would be that the types of power that operate in liberal societies are less controlling. They are less pastoral than the types of power that might be operated in other types of regimes. And that's how you could make a kind of Foucauldian case for certain forms of liberal rule.

Rasheed: So I want to move now into what I would call the applied Foucauldian analysis of the world. And, you know, people would not normally know this, but the most important place right now for Foucault is Argentina and generally right-wing politics in Latin America. Again, very, a very funny case.

I'll get to why that is the case. So perfect, because you could then kind of help me understand it.

So I was actually going through, preparing for the interview. I was going through some of the old Foucault essays, and I remember I found a note where Foucault actually quotes Jorge Borges-

Mark Pennington: Yep.

Rasheed: - the Argentinian writer, in the beginning of " Order of Things", in one of his frameworks for thinking about how to actually structure knowledge and so on.

So Borges is also a well-known writer. He's not well known for politics. He's a very strong libertarian in the literally Nozick level of things. There's actually a very good book, in Spanish, about Borges and economics and so on that kind of discusses these ideas. And of course, now one of the most popular figures when it comes to Argentina or far-right politics or right-wing politics is Javier Milei from Argentina. So interestingly, Milei talks quite a lot about Foucault. People don't know this, of course, and I will get to why this is, and why he actually thinks his interpretation of Foucault is correct. So in this book from 2018, called "Libertad Libertad Libertad", which of course means liberty, and you will see it as of course libertarian, talking about liberty, blah, blah, blah.

This is actually a line from the Argentine national anthem. So he grounds his view of liberalism as an Argentine quality. Now he opens the book with a very stark quote from Borges, where Borges essentially said, "the state is the enemy of the individual." Very strong, very strong words.

Okay? Now, what I find most interesting about this book, at least in the introduction, is Javier Milei-

Mark Pennington: Mm-hmm.

Rasheed: - mentions Foucault. He said Foucault knew it. " First, you need to change the people." So he mentioned this, it's become a long leader, but he mentioned this in the context of his politics. He views when, for example, in an interview when he was doing the election for president, his circuit, an interviewer asked him "what's the most important problem in Argentina, the politics or the economics?"

And Milei said it's morality. And in his view, you cannot have good politics or good econ policy if the people treat it as an actual moral pursuit. So he's using Foucault in this context here to say, "Well, nothing you do in politics matters unless the people themselves are different people." And. I'm curious because I think this is a wrong interpretation of Foucault in the sense that Foucault wouldn't say first you change the people, as Milei suggests. He would say, "Well, you have to change the institutions, the truth, values, the structure in which the people themselves inhabit, and that will allow them to change. And that's how you start off the future. "So the thesis or the people or the bodies need to be actioned upon, I think it's correct.

But do you think this idea of "well, the people need to change first" is actually a good interpretation of how Foucault himself would set it out?

Mark Pennington: That is a really interesting question. I mean, I wasn't familiar, and this is one of the problems of being a British person; we don't read other languages. I wasn't familiar with these connections at all. I think the answer to your question is a difficult one.

'cause you can read this in two different ways. So Foucault makes a statement, I think it's in one of the late essays, I think it may be in the essay, ‘The Subject and Power,’ which is one that kind of summarizes his previous works. And it was written in the early 1980s. He says that he has a line where he says the problem is not individualism, but the type of individualism linked to the state. Now what he means by that is that it's not that individuals don't exist, it's that the way we see ourselves as individuals in today's world has often been shaped by these systems of classification that often come down from the state or that link the state apparatus with various other sites in society that, and actually constrained people, within various constructed categories. Now, in a case like Argentina, or other very heavily regulated economies, and I think actually this is also true increasingly of Europe and the United States. You actually do have forms of individuality that are linked to the state. So we have the distinction between, if you like, the regulators and the regulated, between those who are the nudgers and those who will be nudged. Now, perhaps what people like Milei are getting at is that people in societies like Argentina have become so used to seeing themselves almost as passive agents who were just there to be manipulated by the state authorities, that it's that kind of construction of themselves, which needs to be challenged. So when you say that Milei says that we need to change the people, what he's getting at is the idea that we need agencies see themselves in a much more active sense as being, if you like, entrepreneurial actors, not actors who have to ask permission, or to engage perhaps in bribes, just if they've got to do anything, but people who see themselves as being more self-directed. Now, the question, and this is the difficult part, I think, is where does that come from? Foucault, I think, would be very resistant to the idea that creating a new, more entrepreneurial self is something that can be generated from the top down, a kind of political liberator, the form of maybe Milei or anybody else. What will be required is a much broader set of cultural changes where people start to see themselves in a more kind of entrepreneurial or free light. I don't think that perspective would exclude a role for some form of political change at the governmental level. So maybe having a kind of inspirational figure like Milei or somebody else could be a part of that process. But you wouldn't want to get into a situation where you've got a kind of cult of personality because that would actually be reproducing the very phenomena that you're wanting to challenge, which is the idea that people can't lead their own lives, they need leaders or pastors to put them on the right path when that freedom is something they have to discover or create for themselves I think for Foucault.

Rasheed: You used the keyword, which is what I want to talk about for the next few questions. It's “culture”. So this, the culture war, is a very big conversation in Europe and in the US. It's a much bigger conversation in right-wing Latin American politics. So there is a book, here it is. It's called "The Culture War."

Mark Pennington: Yeah.

Rasheed: It's essentially, rules for a new right wing in Latin America. And this was written by another Argentinian, very important to Milei, named Agustín Laje. He's a close advisor of Javier Milei, and he is also a YouTube influencer. He has over 2 million subscribers on YouTube and, big TikTok following. And he is what he called a public intellectual in Argentina and essentially the Hispanic world for the right wing, even here in Madrid.

He's always here giving lectures and so on. Now he talks a lot about Foucault too. And so in this book about the Culture War, essentially he talks about Foucault, essentially about Foucault and the power he Foucault. He says that Foucault talks about the words we use, the knowledge we have, and the science we teach.

Those are terms that he calls power and discourse. But Agustín Laje says, "I mean, the exact same thing, but what I mean is culture." So he's actually using the Foucauldian framework to tell people why the culture war is so important for right-wing politics in Latin America, in Argentina, and so on. This, to me, is the core tension because, in this case, not Foucault per se, but can libertarianism fight a culture war given the negative liberty, negative coercion, ideas of libertarian thought?

Mark Pennington: Well, I think it can, but I think you've obviously gotta be very careful about how you use the term culture war. So when I hear that, I find it very hard to separate it from all of the kinds of debates around identity politics that are raging in Europe and in the United States. Now the way I think I might want to embrace an element of what you might call a culture war would be trying to emphasize what we were mentioning earlier about this notion that at least in Foucault's view, have the capacity to make themselves works of art or to use some of the language that he uses late on, to be entrepreneurs of the self, that they can reinvent themselves. And what you could think of as being, if you like, a kind of positive culture war rather than a negative one, is to be talking about the spaces that enable that self-entrepreneurship, that self-creation to take place and to unfold. And perhaps in many societies that have been very constrained by sort of paternalistic discourses which see them as just passive agents who've got to be manipulated by their rulers and by their betters. That's exactly the kind of cultural war, if you like, you need to be fighting. But what you're challenging there is the idea that there are rulers and ruled, that people have to have their lives directed by planners or regulators rather than having the capacity to direct their own lives. But going back to the point about identity politics, and this connects to what I was saying a little bit earlier in the conversation in the European and the North American context. I think there's an argument from a Foucauldian position for a culture war, which challenges the current terms on which the culture war is being waged. Because that culture war, as it's unfolding in the US and Europe, is a collectivist one. It's about reinforcing notions of group identity, it's around sexuality, gender, ethnicity, race, these sorts of things, and whichever side of it people are on. It's about keeping people in sorts of categorizations. I think a Foucauldian view would be much more individualistic, it would be about enabling people to break outta these categories, to create new identities across differences so that we can have new forms of individuality emerging rather than keeping people stuck in collective categories, which in different ways are reinforced both by the social justice warriors on the left and by, if you like, the reactionary right wing response to those culture warriors.

Rasheed: I think that is correct, and I think that is how Milei views it. And you, you know it because obviously one of his core theses is he created a new ministry called the Ministry for Deregulation and State Transformation, which was headed by a very, very good economist. And he closed down a bunch of other ministries, from 22 Ministries to 8, and the core one being this Ministry of Deregulation.

And you can see it because they're saying, we are gonna take away all of these state structures to allow people to obviously be entrepreneurs of themselves. And it's almost also the same Foucauldian idea of technologies of the self as well. We're gonna free up this space so you can have more of that for your own view. That's a very different approach to culture war than in terms of the US or Europe, as you just said.

So to tie this in, I have another question. So there's another book I want to highlight since this book. This is actually about Gramsci and Milei. So again, in Argentina, it's amazing.

These people go on the night news and talk about these topics. This theorist Aravena, this is his PhD thesis.

So he doesn't use Foucault at all. He does mention Foucault in the book. He says that Milei, however, has a more Gramscian approach. So his view is this, he says that Milei and the right, but he really means Latin American right, has mastered Gramsci's war of position, turning schools and media into trenches.

And now my question is this. I'm not sure I agree with that, but if liberals or libertarians jump into the same cultural trench warfare, do they preserve freedom? Or do they risk installing a new soft discipline of their own? Is this the same tension here in the Foucauldian system? On one level, you have to actively do something to get rid of these barriers to yourself.

But you could also, in the same sense, risk installing new disciplinary actions as well. And I'm not sure to what level one could come out in, obviously I have my views, but I'm not sure exactly, really, how clear those views are. And just to add in one more point before I get to the question, there's another theorist here in Spain, he's very popular, where he talks about culture war also in this much more nuanced way, where, when Foucault said politics is war by other means.

A theorist I mentioned here in Spain said, "Culture wars are always lost." And in some sense that's true. But at the same time, I think Foucauldian critique has to be true also, you need to actually actively use power as a production and actually pursue these ways to allow people the space to do them, to create themselves as a work of art.

So anyway, that's a lot to say, but how do you see this very meta tension, being able to play out as politics?

Mark Pennington: I think on the Gramsci point, I mean, obviously I'm not familiar with these works that you mentioned, but I would imagine the concept that they're interested in there is the Gramsci notion of hegemony, there are sort of hegemonic ideas, which are quite similar to some of Foucault's concepts. Like when Foucault talks about a dispositive or an apparatus, in some ways, that's quite similar to Gramscian hegemony. Now the Gramscians, of course, what they want to do is, as they would understand it, they see there being, or the left wing Gramscians, if you like, a kind of liberal or capitalist hegemony in the culture, and you want to replace that by taking over various cultural institutions. So you basically install a kind of leftist, sympathetic, or socialist hegemony. Now that is very much because it's these powers residing in institutions of the states, still quite a top-down kind of view of how you change a society. That is the type of view that you could see now unfolding in the United States. The way in which people in the Trump administration are trying to install a new hegemony, if you like, within US educational institutions. So there's direct interference in the university sector, from a whole group of people around the Trump administration who are trying to install a more conservative, friendly hegemony, if you like, in that system. Now, I don't think from a kind of Foucauldian position that that is the way you would want to go, because it is very much emphasizing the idea that we need external liberators. So you are right, I think that if you want to free up spaces in heavily regulated systems, you do need some deregulation of the state.

You can't avoid engaging with the state apparatus. You've got to maybe do some of the things that Milei is doing, which is abolishing certain government departments, abolishing certain ministries. But there's a difference between doing that, and I think what is happening in the United States where you then try to penetrate aspects of private and civil society to, install your own ideas or your own practices, because then that becomes a very top down sort of project, which is actually denying the agency for people to engage in their own forms of resistance or entrepreneurship or whatever you want to call it.

Does that make sense?

Rasheed: It does. It does. As we were talking, I remember a tweet that was made last year. I just pulled it up. Mind my crude translation. So this is Milei as president of Argentina, posting a long tweet about Gramscian sociology. He said that the most wonderful thing about the culture war brought into politics based on the principle of revelation is that when one points out the sacred cows of Gramscian structure, it automatically creates a dividing line between those who live off the privilege of the state and decent people. It's funny because there are a bunch of biographies about Milei that came out last year.

I have all of them here on my shelf. None of them discusses this theological Foucauldian analysis that he has with the world. It's a very odd blind spot.

Why is it that, given Milei is viewed by essentially everyone as a libertarian capitalist, strong Hayekian, strong person of von Mises, he knows it. They know all these connections, but yet again, the libertarian or the European liberals among us still do not understand the Foucauldian aspect, even though he literally mentions Foucault.

He talks about Gramsci. Even his framework of policy is the same thing. It is a continuing example of this disconnect between libertarian thought and Foucault, as essentially your book points out.

Mark Pennington: It probably is, but I'm obviously part of this, I think, which reflects what I was saying before. I think people, certainly in the circles I work in, would simply be unaware of these connections. I had no idea until you mentioned it to me conversation about what is going on in Latin America.

It's a great example, the fact that people like Milei, and some of the other people you've been speaking about, are using Foucault's ideas or Gramscian ideas, but using them in a very different context from which many other people in those traditions have used them. They've been traditionally associated with more kind of radical left politics. That's a wonderful example of how once ideas get out into the world, the theorist is not in control of what happens to them. They can be appropriated, reinterpreted by other actors. And that is arguably what you are describing in the case of Latin America. Now, the bigger point I think you're getting at is why is it perhaps that certainly in Europe, and I think this is true in North America as well, people in the classical liberal movement or the libertarian movement more generally, haven't really engaged with, people like Foucault. and I think, I said that in this, in another interview I did recently. I don't think you can do this without the kind of cultural history. You've been talking about cultural wars, but the kind of cultural history of Europe and North America over the last 50 or 60 years, where many people in the libertarian movement are very formed by the backdrop of Cold War politics. And as they see it, lots of people who are postmodernists like Foucault or post-structuralists, whatever you want to call them, were people who had some kind of association with the Marxist left at one point. Even though they, in many cases, abandoned those connections and in fact developed concepts in Foucault’s case that fundamentally challenged Marxism, are still in the eyes of many of these people tarred with that Marxist aunt brush. And therefore, people just don't want to go near those sorts of ideas. There are all kinds of prejudices that people have about, "Oh, you just shouldn't read these French thinkers." And I think it's very misguided because there are really productive ideas that can be taken from these thinkers, irrespective of whether or not they move towards liberalism. In the case of Foucault, I think there is a good case to be made that towards the end of his life, he was moving towards something like a liberal position. But frankly, even if he wasn't, he still has fascinating ideas about the way power is used. It's manipulated the way it controls us, which can be of use to libertarians, and it's a great shame that they haven't engaged with it more.

And this is one of the reasons I wrote my book to try to show how that engagement can take place.

Rasheed: Beyond your book and also your book is very important here, but what else would be useful to have the libertarian crew actually engage, not superficially, I mean, really engaged by understanding proper biopolitics and night watchman state-

Mark Pennington: Yeah.

Rasheed: collisions. What would that take?

Mark Pennington: Can you explain that a little bit more? I'm not quite sure. Are you talking about what other thinkers, those kinds of liberals, might engage with?

Rasheed: In the sense of this. You have a very popular figure in politics, and you have a lot of academics who talk about the figure a lot. And he talks about these things a lot. But even then, that wasn't enough to encourage more column libertarians to actually think about Foucault and other people like that still.

So I'm saying, is this a problem in just the educational path when it comes to these things, where one could say, you do an econ degree, don't do econ history? You definitely don't do any kind of Foucauldian either. But I'm curious how you would want to improve the awareness of, not only Foucault, but if your term is what?

Postmodern liberalism? How does that now become a more widely used concept for thinking?

Mark Pennington: Well, it's very difficult because you've got obviously in an academic environment, which is the one I'm most familiar with in universities, social science in particular. You've got this very strange divide between economic disciplines, economics itself, you might potentially include business studies or areas like that also, they tend to be the areas that attract more, if you like, libertarian oriented people. Because economic theory is perceived as something that is relatively speaking, more sympathetic to markets than some of the other fields. The irony there, of course, is that the kinds of economic models that dominate economics departments are actually very technocratic, very scientistic, very anti-individualistic, very anti-creative, in many ways. On the other hand, you've got the situation where in the arts and humanities and the non-economic areas of social science, that's where you have, if you like, many of the more creative or entrepreneurial understandings of culture and the way that culture shapes us that are anti. But these fields tend to attract people who at least identify themselves as being more left-wing, being concerned with more left-wing sorts of issues around cultural freedom, for example. And I think what's required is an attempt to bridge these areas. And I think the great potential of the kind of Austrian economic type tradition that I'm very sympathetic to that although this hasn't happened, it has the potential to bridge these areas. Because, on the one hand, it is an economic form of analysis. But on the other hand, it's a form of economic analysis that embraces the creative aspect of human beings, embraces the idea of uncertainty, flux, change, disequilibrium. And I think the trick is to show that this kind of economic understanding can speak to the concerns of the arts and humanities. And I hope my book is a kind of small step in making that bridge more apparent. But it's not only me who's doing this, I think Deirdre McCloskey's work is very much an example of someone who's economically informed, but she's using an approach that should have appealed to people in the arts and humanities. And I think it's only when those kinds of bridges can be created and people can start to tentatively, if you like, from either side, put their feet on those bridges that we might start to get the movements that you're talking about.

Rasheed: Interestingly, he credited a professor here in Spain, in Madrid, for his knowledge of Austrian economics. And he actually directs a very popular economics graduate program here in Madrid about Austrian economics, and most of the well-known Spanish thinkers about Austrian economics have actually gone through that program.

Every time Milei talks about his ideas of economics, he credits Austrian thinkers, obviously, as people know first. But the reason was because of this particular school here in Madrid that does the lectures actually from my think tank. We put them online, and that's how Milei actually watched them in Argentina.

It's very interesting. So I think that probably is one of the best options one has, and I'm hoping a lot more of that becomes the case. Ironically enough, we're living in that Foucauldian nightmare of the discipline constraint of academia, causing this.

Mark Pennington: And I think what's very important is that people who are classical liberals or libertarians who do have this understanding of Austrian economics, what they shouldn't do is to attack the people in the arts and humanities as being economic ignoramuses. I mean, this is what often does happen. There is an element of truth in that, in the sense that many people in arts and humanities are resistant to economic forums of explanation, even if I think the kind of Austrian kind. And I think what people in the Austrian tradition need to do is to reach out to these people in more sympathetic ways to say, "Hey, look, we have an understanding of economic theory that is actually compatible with many humanistic understandings that many people in the arts and humanities are interested in exploring."

So instead of dismissing these fields, which I think is often what happens, people in the tradition need to think creatively about how to engage these people. Because it's in the areas of arts and humanities or the non-economic social sciences, these are the fields that have had enormous influence in the cultural sphere and ultimately in the political sphere over the last 20 or 30 years. And if Austrian economics and classical liberalism are going to have a kind of broader revival, we need to engage people in these fields, not to treat them as a kind of inherent enemy.

Rasheed: I think Tyler Cowen has a comment, and he told me, or maybe he was public, I don't remember where he said, we need to have some more defenses of postmodern thought because it's too easy to say, "Oh, it's so silly." But it's so important, and a lot of it is so relevant. But there are very few defenses, not even speaking from a right-wing or a libertarian perspective, which I think your book obviously contributes to.

But on a broader scale, there's so little defence from, call it more serious, but sympathetic audiences of these ideas that is just either the people who will co-op Judith Butler without actually understanding things she wrote, or people will say, everything Butler wrote is bad. There's no in between.

I didn't think that way. Austrian economics, Austrian scholars could really be this pivot point between these different schools.

Mark Pennington: I think they can. There's a paper I read recently, which was arguing that Butler's conception of gender fluid, sort of notion, is very compatible with, kind of, Austrian ideas around entrepreneurship. So you can think of people who are inventing these kinds of multiple gender identities as kind of cultural entrepreneurs who are saying there are multiple different ways for people to be men and women.

You don't have to get into the debate about whether sex is real or socially constructed. Just to recognize that even accepting that there are two sexes, men and women, what that actually means to people and how they express that could be done in multiple ways that in the past have been overly constrained. And that people who adopt different comportments, different styles of dress, want to express gender in different ways, they are being creative entrepreneurs in a sense, in a way that somebody like Butler should be able to engage with.

Rasheed: I fully agree with that. I've been there for a long time, like Butler is one of the most important libertarian thinkers there is. However, I am crucified every time I say that, but it's fundamentally true.

Mark Pennington: I watched a very nice video that she did about, about 18 months ago, on gender and what she was trying to get at. And the whole thing is about her saying we want people to have more spaces where they can be free to express themselves in different ways.

Rasheed: Exactly.

Mark Pennington: It's very libertarian. You don't have to buy into all her silly economic ideas. In fact, I think what we need to do with people like Judith is to say, "Well, look, if you've got all this emphasis on pluralism, dynamism, and gender, why don't you have the same view about the economic system?"

"Why do you want a top-down, centrally planned system where bureaucrats decide things?"

Rather than wanting a kind of equivalent of what you're talking about in the area of gender and sexuality?

Rasheed: It's the same idea where there are a lot of popular libertarian public intellectuals that themselves have pretty bad ideas with econ policy, bad monetary policy, you have some core libertarian ethos, but your actual economic operation, operation knowledge is so poor that to me is irrelevant. But the core thing is so important. But when Butler talks nonsense about economics, it's like, "Oh my God."

Rasheed: I have one last question to kind of sum everything. When you are trying to talk about postmodern liberalism, why do you think that choice of terminology was the most appropriate to use?

Mark Pennington: In some ways, it's deliberate, it's deliberately provocative because many people who are liberals, postmodernists, or who identify themselves as liberals, see postmodernism as the enemy position. I want to explain to those people that that isn't the case. There are many liberal friendly or libertarian, even friendly themes within postmodernism. But equally, people who identify themselves as postmodernists often see postmodernism as being antithetical to liberalism. And I'm also directing my comments towards them to show that, actually, the liberal spirit. If you like, and I hesitate to use the term true, but if you like the true, postmodern spirit, so I'm, I'm using liberalism as a deliberately provocative phrase to provoke or to engage.

I hope creatively, and I genuinely mean that two different audiences, the liberal audience and the postmodern audience, to show that they've got much more in common or they should recognize they've got much more in common than is, than is often thought to be the case.

Rasheed: Mark, thank you so much for joining me on the podcast today. I really enjoyed this conversation.

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Show Notes

Libertarians in the EU have forgotten how to win. This episode explores an idea that sounds counterintuitive at first: that the very machinery of EU law, so often criticized for its bureaucracy and regulatory sprawl, can actually be repurposed into a tool for liberalization. My guest, Adrián Rubio, Law Professor at the Universidad de las Hespérides, makes the case that while the EU as a political project has a natural tendency to centralize power in Brussels, its jurisprudence and procedural mechanisms remain remarkably open-ended. Those tools can just as easily be used to dismantle unnecessary restrictions as to expand them. What matters is who picks them up, and to what end.

For decades, libertarians, conservatives, and progress-minded reformers have treated the European Union as something to fear or resist: a sprawling technocracy that smothers local autonomy and regulates markets to death. And yes, the record is full of Green Deal mandates, ESG governance schemes, and Brussels-driven sovereignty claims. But if you zoom in on the nuts and bolts of EU case law—Simmenthal, Gas Natural, even the VTC Barcelona licensing fights—you find something surprising: doctrines and procedural devices that national courts can deploy to strike down over-zealous domestic regulations. In other words, Europe’s much-maligned legal order might also be the sharpest weapon against the sclerosis of its member states.

The provocation here is simple: perhaps libertarians and classical liberals have been negligent. They have abandoned litigation as a strategic weapon, leaving the field to environmentalist NGOs, precautionary regulators, and bureaucrats eager to stretch their mandates. But what if pro-freedom lawyers and institutions mobilized? What if they took preliminary references seriously, used proportionality tests to challenge precautionary bans, or demanded real enforcement of the internal market? Every national courtroom in the EU is, in effect, also a European courtroom. Yet the docket is shaped by those who bother to bring the cases.

This conversation, then, is not just about diagnosing Brussels. It is about reimagining the battlefield. Like technology, it can either entrench power or liberate markets. What Adrián and I argue is that the next generation of lawyers, NGOs, and think tanks should stop treating the EU as a monolith to complain about and start treating it as a laboratory to experiment in. If procedural law has already been leveraged to delay infrastructure and halt development, why shouldn’t it also be leveraged to expand freedom and accelerate growth? The challenge is not legal impossibility—it is strategic neglect.

Follow on Twitter

Adrián Rubio https://x.com/_adrubio

Rasheed Griffith https://x.com/rasheedguo

Recommended

• Preliminary References to the European Court of Justice - Morten P. Broberg, Niels Fenger

• Four Functions of the Principle of Primacy in the ECJ’s Post-Lisbon Case Law - Katja Ziegler, Päivi Neuvonen and Violeta Moreno-Lax (eds), Research Handbook: The General Principles of EU Law (Edward Elgar, 2021, Forthcoming)

• Liberalisation and the pursuit of the internal market - Niamh Dunne

• Mutual Recognition In Goods And Services: An Economic Perspective - Jacques Pelkmans

• The Preliminary Ruling Procedure - Davor Petrić

• La relación de los taxis-VTC y los conceptos autónomos del Derecho Europeo - Natividad Goñi Urriza

This transcript was automatically generated by AI and lightly edited. We don’t catch every error, so if you spot one, send a message/email via progress@cpsi.org.

Rasheed: Hello, Adrian. Thank you so much for joining me on the podcast today.

Adrián Rubio: Thank you so much, Rasheed. It's my pleasure.

Rasheed: So I want this episode to be a bit broad, but pretty deep when it comes to legal issues in the EU and therefore all the EU member states. And something I've been pondering the last year, two years or so, is this issue with the perception of EU law when it comes to people who are, what they call, broad libertarian or conservative or even progress studies oriented. And my first question is essentially to frame the conversation. Do you think that libertarians or conservatives really do not think enough about how EU law has liberalized many of the economies in the member states? Not only Eastern European economies, but also countries like France and Spain as well.

Adrián Rubio: I think you mentioned two different things that are relevant here. Yes, historically, the EU law allowed some national markets to get liberalized, especially in heavily regulated sectors such as telecommunications, airlines, or energy. But, and I must highlight this, having seen the latest developments in EU regulation, we can see that the EU tends to concentrate power at the center, at the Brussels bureaucracy, at the Brussels machinery. And so I think it might be a bit nostalgic to think that EU law, per se, in general favors liberty or favors liberalization. So what I would say is it tends to do so once it removes power from member states and or regions.

So let me explain this a little bit better. You can find a pattern, for example, just get the green deal regulations and directives, but also all the ESG governance mandates, or even the AI Act, or the notion of digital sovereignty. You see there that they liberalize those sectors, but once they've already gathered the bureaucratic control at the center in Brussels.

So they develop a bureaucracy, an institutional apparatus that yes will favor liberalization, but once it's under the control of Brussels. So I think from a classical liberal and or conservative position, I would remain skeptical. And if you think about this, we are not necessarily ideological about this.

So it's not yes or no to the EU as such. EU law has indeed liberalized markets. And we can see this especially in Eastern European countries. And also as you were saying, in many Western countries, especially from the South: Portugal, Spain, Italy, or Greece. Just because the Europeanization of these countries came at the same time as their neo-democratization, if you want. In other words, they had to reinvent themselves and agree to the "Acquis Communautaire", in other words, agreeing to the European set of norms involved, also liberalizing markets from an economic point of view. However, I just keep highlighting this point. EU law is a powerful tool when used adequately by lawyers and also by member states.

But EU law, per se, I think, is neutral. And so one needs to actually pay attention to specific measures because the tone might sound liberalizing, but then the mechanics involve giving away all the power and getting it centralized in Brussels.

Rasheed: So let's talk about this mechanical aspect. So one of the things that comes up a lot when it comes to EU law, as favoring or countering liberalization policies, is this reaction with the member states and how they interface with EU law. So yes, you have EU laws that are literally imposed upon member states, depending on the various complex levels of the EU and the member states. But it seems to me that when the many member states transpose EU directives into their local laws, they essentially maximize the potential regulatory aspects of the law to full effect. Rather than using it in, let's say, the intended, but let's say, the more liberalizing effect. But as you mentioned, EU law could be neutral sometimes.

Who essentially has the blame, if you were to put it that way, for this obtuse, regulatory increase over the last 20 years in the EU?

Is it the member states via transposition, or is it core EU-centric law?

Adrián Rubio: Actually, that's a really good remark that you're making, and I don't think I would find guilty parties while having the other hand, innocent parties.

I think first of all, there is ignorance about the EU machinery and the EU law mechanism. Not only domestically by legislative and executive powers, but also sometimes you can see it in the judicial power.

For example, you see some sociological behaviors that are somehow concerning. For example, in Spain, now you are mentioning Spain, that some courts are skeptical about using some mechanisms, some actually decent procedural mechanisms that eulo favors or allows just because it might seem like a political game.

So there's always that tendency to politicize, even procedural law. In other words, once a domestic court acts or activates an EU law procedure or mechanism, alarms and alerts by media, usually mainstream media controlled at this moment in Spain, are mostly directly or indirectly by the main party in power.

It becomes something political, not strictly legal. So who's to blame here? I think both first, it's the EU per se, as a pro, as a project, is to blame insofar as any other project is thirsty for more power. It has some inertia, which I think is problematic. Not only sclerotic in many liberalizing ways, or thinking about increasing freedom.

Because it paralyzes it or freezes it, it can also foster it, as we just discussed. In other words, that's why I said that my initial point is always neutral. I would call it Euro realist, meaning let's take it case by case. Let's take policy after policy and consider what normative judgment we can make on EU behavior as an institution.

So the problem sometimes is just that the institutions themselves need to prove that they are relevant, especially the European Parliament, and which European Parliament has been. Empowered throughout the latest primary sources reforms, like treaty reforms, just because it is. The EU always faces this issue of the democratic deficit.

And so to tackle this, I think the European Parliament has gained some increasing power. The problem is that there are some factions within the European Parliament that really have a different understanding of what the speed and the ambition of the EU as a polity, not as a union of law, not as a union or an inter-governmental union, but rather as a growing state, should be doing.

And so sometimes competencies are taken to. To their upper limits. I don't think I'm think I might I'm being clear with this, but it is something really remarkable when you see the European Parliament from the inside, that there's a thirst to show off, a thirst that they are relevant, that they can do stuff.

And so they bring in some sort of impetus to the European project that, earlier on, when the European communities were created, wasn't there. And I think that's also somehow denaturing, the entire technocratic aspect of some EU policies that used to work well, especially those that, for example, removed barriers to the internal market.

Rasheed: It sounds as if you're saying an increase in democratic say of the parliament has led to a decrease in democratic value of the EU project.

Adrián Rubio: Absolutely.

And I would wholeheartedly agree with this, with that statement. However, let's recognize that there's some tension here. In other words, we don't want a Brussels technocracy that there is, in other words, it exists technocrats, or let's actually get the general message first. Expertise is needed for important and especially tough decisions to be made.

Let's say it, for example, the starting point of my career at the European Parliament. Back in 2014, I faced a debate in which I saw how protectionist Spanish MEPs were about ports.

Ports, in other words, are a heavily relevant core, even a strategic sector for commerce. And you saw how the Spanish MEPs agreed only across parties in a multi-partisan way just to support the rejection of liberalization and the opening of the doors to competition.

But Italy faced, not so long ago, also a problem with the beaches and the control of those concessions. And they showed some sort of anti-liberal rising forces. So technocracy in those situations actually works better. In other words, if it is clear that free open markets favor more trade and not only trade or commerce in a.

In a worrisome way, but actually creation thereof. In other words, create trade creation, commerce creation rather than diversion with not only just rent seeking, but also governmental control that actually acts in a way that doesn't seek efficiency, but rather maintenance and increasing their bit of the, of their piece of the cake.

So yeah, technocracy is actually an ally for some key strategic sectors. In other words, paying attention to data, to figures, and to what works is necessary. Call it technocracy. I mean, you might call it technocracy just because they are those bad or. Hardly palatable decisions that some sectors in society will not agree easily with because they don't resonate with their intuitions in their hearts and minds.

Let's say that way. The EU actually is a great force to enact some tough decisions that at the political level would be very costly, and I think that should be the way EU law could help us lovers of freedom to foster freedom. In other words, that's why I said EU law is a powerful tool when being used, when used properly.

So I wouldn't demonize the tool that we've got. It's just like technology. You can hear now in all conversations about AI, and you find some. Techno optimists and techno pessimists. In my case, I'm more of a pragmatist here. The tool in and of itself is neutral. Whatever we do with it is what leads me to be optimistic or pessimistic.

So I think the value judgment is also here. Technocracy, per se, EU technocracy even, could be beneficial if oriented towards the actual public goods that we seek, meaning maximizing individual freedom. That also includes economic freedom. And unfortunately, I think that is part of the past in the EU.

In other words, when understanding fundamental freedoms, the EU is somehow reluctant now to take economic liberties as part of those fundamental freedoms. And you see it in many different areas. And this is concerning because this has a spillover effect. Spillover effect meaning at the domestic level, member states are also somehow in a tendency to replace the central, even primordial role of economic liberties as necessary conditions, not sufficient, but necessary conditions for the flourishing and the progress of societies and communities. So, EU law in terms of technocratic elements, yes, when used adequately.

However, if we grant all power to technocracy, the democratic deficit becomes unbearable. And you see this, especially in a very frustrating way, when you see that the EU machinery, Brussels, let's say it this way, uses double standards. And I think this is what annoys me the most about the current situation of the EU.

EU institutions do not enforce EU law equally, meaning first they create some room for political discretion, I would say, so that they enact or they initiate some procedures only and solely when the actor is somehow reluctant to the EU grand vision of what the EU ought to look like. However, when the same or almost the same decisions have been taken by any other member state, if that member state or its leaders are somehow favorable in general to the EU project, those mechanisms are not taken seriously or not even considered to begin with.

So I think that increasing or tackling the democratic deficit by increasing democracy is also dangerous. In other words, I'm not in favor, for example, of a more direct democracy at the EU level as some people on our side of the political spectrum on the right are. I don't think that the EU should be doing great or grand politics.

I think the EU should be doing what it's good at, which is tackling some specific sectors in which cross-border cooperation and mutual recognition, for example, of products, substances, or favoring a single union or a unified market that actually operates in favor of customers and producers, and citizens in general.

Do not forget the political dimension of the market player. I think the EU could do great things with that when focusing on that precisely. However, if we become a polity with all letters, then of course, democracy's a necessary condition for it. And I don't think that interacts or connects well with fostering the right decisions that, at the political level, are very hard to swallow.

For some things that Spain, in this case, or Italy, or like Bulgaria, are not happy doing at home, the EU is used as an excuse or almost even as an alibi. Technocracy can be your friend. Technocracy can be an ally for politics. So what is an administrative lawyer like me concerned about?

Mechanisms to keep that technocracy not only transparent, but also legitimate and accountable, that, when I teach administrative law or when I practice EU administrative law, that's everything I fight for. What I'm fighting for is making sure that whenever EU institutions exercise some political discretion or some technocratic discretion, if you might, we have the necessary legal and procedural tools to defend ourselves when our opinion hasn't been heard, we didn't have a chance to participate adequately or in a meaningful way in the decision making process or decisions have been taken in the shadows, in other words, with black boxes that are very hard to see some sort of throughput, transparency, and some scholar say.

Of course, judicial review then becomes the necessary tool that any lover of freedom, also at the EU level, should be ready to use. And I cannot emphasize this enough. I think libertarians, conservatives have given up on litigation in many ways.

Rasheed: Why do you think that happened? So courts have grown very comfortable, not only in Spain, but definitely in Spain, to annul, for example, urban plans for strategic environmental assessments.

Adrián Rubio: Yeah.

Rasheed: Do you think that judges are more receptive to procedural rights claims, environmental review, and consultation than to economic freedom claims? Is this why you think classical liberals or libertarians do not do litigation as much as they should, or is there another reason?

Adrián Rubio: That's an excellent question that I also pose to myself very often as an EU administrative lawyer who actually avoids litigation as well as part of my work. So some of the reasons that motivate my choice of preferring alternative mechanisms is that once you grant the decision to a third party, in this case a judge, you lose a bit of control.

But this is not unique to EU law. In other words, this is not an innate problem of EU law or EU law in terms of judicial mechanisms or procedures. No, this is part of any system in which you can go to court. Adding a hetero composed decision making solution or resolution mechanism will always increase uncertainty.

Of course, uncertainty is not only a cost, but also a transaction cost that comes with time.

Time, when understood properly, means money. So, of course, any reasonable, I would say reasonable lawyer, when your client is pushed or a silent decision means concrete costs for expected positive outcomes without the certainty that they will be that.

It's an economic analysis of the law that I think we libertarians and conservatives actually developed not only in practice, but also as an economic or scholarly discipline, which is important. In other words, the law and the legal processes do not operate without any economic efficiency consideration.

However, I definitely see a window of opportunity here. In other words, if we train like-minded lawyers, especially young lawyers who are mostly EU natives, if you might. In other words, the EU legal system, which is very unique, is no longer foreign to the new generations of European lawyers.

We grow up studying constitutional law, knowing that constitutional law is at the level of EU primary law. So that coexistence between domestic law and primary law at the EU level is part of the general mainstream understanding of any lawyer trained in the EU at the moment. So we can use that.

Judges. So what's the issue with judges? First, judges are also part of the general society; in other words, yeah, of course, they are experts of one kind. I wouldn't call it technocratic so much. I would call it counter-majoritarian, which, understood wrongly, could also mean anti-democratic. But for the same reason that I argued in favor of some technocracy, I will also argue in favor of some counter-majoritarian mechanisms in the legal system of any polity, community member, state, region, or EU as a pseudo-generous polity. However, domestic judges are somewhat reluctant in general to be the ones who move the debate forward. So what do I mean by this? And this is actually part of my professional experience.

This is what I've seen so far. Judges are not in a position to actually advance EU law. And it's not their role either. So let's actually be honest about this. We cannot expect a judge to introduce arguments of economic efficiency or economic liberty when you see the trends of not only domestic policy, but also EU policy going in different directions.

So if the focus of EU law right now is, for example, on SE or on ESG environment, social, and governance, introducing the pillar of protecting economic individual freedom sounds a bit pushy; in other words, it sounds a bit outside of the scope of the interests of the current EU. And so I think that we cannot expect judges to be heroes.

I think they might be at some points also villains. It goes both ways. But what I'm saying is we should not expect them to become martyrs. So I think that there's a great window for legal mobilization, a concept that in the US, for example, is very common. In common law systems, it's very common to use litigation strategically to get some topics back on the table.

However, it is not so much part of continental law tradition, and I think that's something that EU law especially fosters and favors us to try. Let me go back to my teaching. EU law is not taught as other courses that I teach, like administrative law in Spain, for example, or comparative administrative law.

In EU law, when you read cases and you use case law, there is some combination, an interesting combination between some very continental law, civilian law doctrines, but also there is some element of common law. I would say physiology, in other words, not so much the instrument but the methods, the way it works.

The case law of the Court of Justice, the EU, evolves in a way in which we study cases by their name. That's something that, for a Spanish law student, is very uncommon. So, EU law, I think, offers the possibility to be a bit experimental. And this is something that I encouraged my EU law students back in the past.

EU law is almost a laboratory, a legal laboratory. In other words, since it draws from so many legal cultures and traditions, you might try, for example, to use some legal mobilization. In other words, why shouldn't classical liberals, libertarians, or conservatives use those tools and try some strategic litigation?

For example, you just said in Spain, there's the case of the urban planning and the local municipal plans for the environment or design of cities, et cetera. It seems like only some elements would be read by judges as substantial or necessary elements for an adequate plan, but it is not necessarily the case.

EU law grants and allows you to actually talk about other fundamental freedoms of the EU. Economic freedom is there, of course, very conditioned. Very conditioned, and always somehow in a secondary order, which is indeed by design, a problematic feature, not only for the EU, but also of constitutional law across the globe.

Spain, for example. Of course, there is a right to private property, but it is always subject to the general interest. So there is already a door for abuse of power by the public institutions, public authorities, who are those who interpret what the general interest looks like and entails. You are already somehow getting your economic freedoms and liberties a bit decaffeinated because they are subordinate manner.

In other words, they're of a subordinate character. They're not as primary as, for example, environmental rights, which are very novel in many different ways. In many respects, some elements of environmental law are unique legal experiments. Like talking about rights of nature or animal rights, those debates weren't there 100 years ago.

In other words, using even the language of claim rights and privileges and liberties, and no rights. So if the EU was experimental, creating and developing legal mechanisms to protect animal welfare or environmental safety, or protect your public health, why shouldn't it also be good for us to become a bit experimental and, through litigation, try to get the EU judiciary, in this case, not only in Luxembourg, but also at the member state level.

Remember, every single courtroom in the EU member states is also a potential EU court. Why shouldn't we try that? Has it even been tried?

Rasheed: That's my question to you. Has it? So one case comes to mind very quickly,

This is the case in Barcelona, here in Spain, a licensing problem where Barcelona restricted the number of licenses for things like Uber.

And they took that case to court and used a preliminary reference in the Cataluña court to push the EU to have the EU say, "yeah, this actually contravenes different economic freedoms that EU law guarantees.

I would think you would have a lot more of those things happening. Is it a fact that the lawyers themselves don't try to push these things?

They don't actually try to use EU law via preliminary reference, for example, to actually get EU law input into these deregulatory cases.

Adrián Rubio: Excellent example that you bring in. So, something that I would say that I already mentioned earlier, it is true that at the moment, Spain might not be the best example for this because courtrooms are seen almost as quasi-parliamentary entities at the moment. So we have ministers from the current government accusing specific judges, targeting specific judges with name and surname, for "lawfare."

In other words, for abusing the legal system to accuse members of the government or members of the president or the prime minister's family. So, at the moment, it might not be representative, what we find in Spain. So I would be interested in checking what's going on in libertarian or conservative circles out in other member states.

Because what I know at the moment is from Spain. So yeah, there is some skepticism by lawyers to actually invoke EU law. First, it feels a bit remote. It feels remote, especially for the older generations. I think there's a sociological element to it. Younger lawyers, I think, would be more comfortable, I believe advancing some EU law arguments before the courts because we are more knowledgeable, or as I said, more native to EU law in general.

It would be a bit risky for an older person. Older people tend to be litigators. That's the point. That's why I said the sociological element. If you see the structure when you're a junior associate, you'll most likely work just with paperwork. You'll be preparing paperwork. Sometimes you'll litigate, but you'll usually litigate with civil or criminal cases.

Not so much public law, administrative law, and regulated sectors law. When you do that, though, I don't see any veto for us to try. Yeah, we've been humble about it. And this is not something I would like to say about ourselves, about us, but I think we have become comfortable knowing that there's nothing good in the EU.

In psychology, they call it learned helplessness or something like that. Meaning you somehow naturalize that life sucks, meaning EU law sucks, or EU law only favors arguments on ESG or environmental protection, or social welfare elements.

And it is true that the EU mostly is about that. But let's be honest, the agenda or the docket of the courts in Luxembourg is not made up by itself. It is also on us to bring up cases. So yeah, I think we, especially us, those liberty lovers, fight freedom fighters if you want. We shouldn't be afraid of trying, we shouldn't be afraid of trying new things.

Rasheed: My friends in Ireland, they always lament about the standing given to them by the Arrhus Convention, and they use that standing to go and block all these potentially very good infrastructure projects. And they're saying, because of EU law, that this is possible, slowing down progress in Ireland. But at the same time, it seems on the flip side that pro-freedom organizations or NGOs could also have standing to do litigation in favor of more development, but they don't. So where is the tension coming from here?

Adrián Rubio: First of all, the Arrhus Convention is not necessarily an EU innovation. I would call it more of an international law, piece of legislation or treaty, that is adopted, that has been adopted by the EU as such. And I think this is the key. So the Arrhus Convention is now "Europeanized."

However, that Europeanization of Arrhus logic is again, somehow biased or linked to some specific causes. Why? Because Arrhus, in fact, is a great convention to secure access to justice, transparency, and participation in environmental law matters, in environmental decisions in general. However, it is not of unlimited abuse that it comes.

In other words, access to justice cannot come with unlimited abuse of it. So suppose, for example, that there is a case in which some limits for emissions come up. Of course, a lower and economic system would say there are schemes to control negative externalities without actually preventing companies and industries from functioning or growing.

There are some mechanisms to actually make things even; however, our responsibility of participating in the decision making and especially access to justice, in other words, enact or initiate judicial review, is mostly and solely monopolized by environmentalist NGOs. So those who speak about themselves as being the protectors of the environment, as if conservationism had never been conservative to begin with, I urge them to read Roger Scruton and his treatment of the environment and green conservatism, et cetera. So, besides the political element, from a legal point of view, Arrhus would allow an association, a think tank, an NGO with a legitimate interest, which we need to discuss more on further what that means.

Of course, also something that is being, has always been debated at scholarly events and conferences is whether the Plowman, like the main landmark case granting access to the courts in the EU, is too strict.

Rasheed: So in 2019, the Gas Natural case, the Supreme Court used indirect effect to align restrictive Spanish energy rules with EU liberalization tools.

In my view, this is a very good thing for libertarians.

But could they argue that essentially the ambiguous Spanish regulations must be read in the least possible, burdensome way, as in using that precedent as a doctrinal effect for thinking about how to go about using indirect tools in procedure rules from the EU in this member state, Spain, but other member states. And then to submit a bit larger question, what do you think are the key procedural tools that people who are more interested in liberalization should actually think about using or deploying litigation or otherwise?

Adrián Rubio: The first case, when you mentioned it, sounds a lot like Simmenthal.

Rasheed: Yes.

Adrián Rubio: Simmenthal, when I was teaching it at the beginning, when I learned it as a student, I never made the connection with liberty.

Last time I taught it, which was a couple of months ago, actually, I realized that Simmenthal can become a true liberty tool.

In other words, this idea that national courts, any national court, not those at the top, can reassess bureaucracy and cut bureaucracy at the domestic level without waiting for Parliament or waiting for the legislature or the executive, is a powerful tool. In other words, EU law sometimes is on our side, and having this idea of what I can say, cutting the tendency of some member states to just add more burdens or more layers of bureaucracy and restrictions beyond those EU directives.

Simmenthal allows us to go before the courts and redirect the conversation. In other words, limiting additional steps that would just denature, in fact, the directive's purpose or the purpose of the directive. Of course, we also have to bear in mind that procedural autonomy of member states is there, and so usually in those areas with shared competencies, the EU directive will tell us this is what the EU as a whole wants, and that's our secondary law, meaning this is what must be present.

And of course, there are always some students who try to go above and beyond. Usually, when that happens in, for example, environmental law, which is a shared competence, it tends to go against freedom. It tends to go in favor of further restrictions. However, let's keep in mind that Simmenthal, when invoked adequately, could also become a shield of liberty.

It could allow us to force the court to review. Is Spain going way too far? Is Spain adding bureaucracy and further restrictions that actually weren't there at the beginning of EU law, per se?

Rasheed: That is where the irony comes in, where it seems like EU jurisprudence doctrine to review the transposition member states of EU law that can say, Oh, that was actually a bit too much. I guess this is maybe the psychological answer you have. Why don't lawyers or groups of interesting parties, very pro-freedom, try to enact review or transportation review or preliminary reference via, for example, invoking doctrinal issues like in Simmenthal? Seems to be a very obvious thing to do.

Adrián Rubio: In fact, in Spain at least, what I would say is that I think we lack some sort of group of people who have the capacity of being parties in those legal procedures.

Just think about it. If you're a lawyer representing a firm with a direct interest, it's the involved party in the decision, or the restriction will be directly imposed on them, it's tough to persuade them. That litigation could be seen as something strategic that goes beyond the specific case. I cannot easily sell to a client, "let's go to core. Let's wait for the time, because we might be able to actually reduce the ambition of this transposition of the directive."

So maybe what that points to is that we actually need a group of people that are capable of taking those cases, maybe even defining a pro bono system. That's the entire idea of legal mobilization. In other words, lawyers or jurists together, trying to use the legal mechanisms lawfully, in a law-abiding way, to push the law.

Not to push in a political sense, but actually to filter. Abuses of law that come through even legislation, but especially as you said, transposition of directives, because it also disrupts very much the other goals of European integration, such as the internal market, and you see this with pesticides, for example, all the time.

Mutual authorizations are not as easy as you might expect in a single market, for example. So a product, of course, active substances would always come from the approval to enter the market at the EU level, per se, through a regulation, actually, which is a decision of course. Administrative law at the EU level is peculiar because we use a legislative decision or quasi-legislative decision to actually approve a substance, which is strange.

From a normative technique point of view, it's unique, strange. So once you have that substance accepted, then you need to approve actual products, having those active substances. And this is cross-sectoral, in other words, this could be in plant protection products, but it could be in biocides.

It could be in human medicine products or cosmetics, or anything chemical, which is what I work on. My examples come from my actual practice. Then you see that what happens, for example, in Estonia might not be echoed as easily as you expect from Spain. So there's a product that in Estonia has no problem whatsoever to be approved.

And then in Spain, it's not approved, and then it takes time. And of course, if you are a producer who has a European mindset, in other words, a European integrated market point of view, then you don't have legal mechanisms to force Spain to take into consideration what Estonia is doing.

And so, some pre-litigation, it would be at the administrative procedure review, in other words, before getting into Spanish administrative courtrooms. So, reviewing administrative decisions within the administrative procedures and the mechanisms that we've got.

I faced this situation a couple of times, and I had to try to persuade the ministry in this case of health, agriculture, and environment altogether that the situation would be detrimental to the interests of Spanish agriculture vis-à-vis Italian agriculture and Portuguese agriculture.

This kind of argument shouldn't even exist. In other words, if we truly believe in the internal market and we've got some mutual recognition schemes, why aren't they always working almost in an automated manner?

So of course, there's room for us.

Rasheed: This was one of the main critiques in the Draghi report, I believe, about the problem of harmonization rules or lack thereof, and then the lack of market enforcement by the commission. The current commission has done 80% fewer enforcement actions than previous commissions.

So the main thing the commission should be doing, policing the internal market, they have stopped doing that and decided to do other things. Are there actual legal mechanisms to force the commission or other parties to actually come back to the table to do the things that they should be doing?

Adrián Rubio: That's a great question, and I think in fact that the higher levels of democratization of the European Parliament are here, are allies. We can, through parliament, require or urge the commission to start doing those procedures to take their job adequately and seriously. And indeed, what you said is so true. In other words, the European Commission now, if you check even the legislative agenda when a new commission is appointed, the College of Commissioners seems to be a different animal than it used to be. In other words, it's not about the members, it's also about the portfolios, the political priorities at the European commission level set by at least partially the European Council, this new institution after Lisbon. And I think it's politicizing the European Commission, but not in the right way.

In other words, politicizing in and of itself, again, is neutral. I'm always very functionalist when it comes to making normative or value judgments about what works and what doesn't work. Let's check. Let's see. Give me the evidence, and then I'll make my judgment. A political European Commission could work better if accountability, transparency, and participation are enhanced, adequately secured.

But if you don't touch the mechanistic or how, what can I say? The bureaucratic rules for their operating systems, and you make it political, then you are empowering a college of commissioners, in this case, with some competencies that weren't even foreseen by the treaties. And this is what we see now with Ursula von der Leyen and all the parties of the great coalition supporting her and her commission, trying to force ideas, pushing an agenda. First of all, it's not that it doesn't come directly from citizens because, of course, you can argue that, yeah, we did Spitzenkandidat.

Of course, Ursula von der Leyen wasn't the Spitzenkandidat back then. So it works whenever it has to work. So again, politics, high-level politics, if I may, you might think, "okay, they’re indirectly legitimate." Let's assume that for the sake of argument. So we are not gonna contest their legitimacy. But when you see the legislative agenda of what kind of proposals the commission will take and will present to the council in the European Parliament, almost 70% have nothing to do with the internal market or its defense.

It's all about expanding more and more regulation, and I wouldn't even say technocratic regulation; it's just regulation. Let's regulate. Regulate, as in let's limit and precondition what the European Union will be doing, what it will be able to do, et cetera. In other words, it's redirecting the entire European Union with a political vision. "These are our priorities. These are not our priorities." However, the European Parliament now has tools, including written questions, oral questions. It works almost with a very limited amount of capability in this case, but it can make some noise.

In other words, what happens at the European Parliament makes noise. MEPs know this, and in fact, with the right ideas to defend freedom, they're capable of doing great things, at least making that noise. What happens then with lawyers and jurists who do not want to play the politics game?

Let's say it this way. The law in the courtrooms, in other words, judicial procedures, could also be a good locus or a good forum for us to enhance and advance freedom.

I don't think it's a problem of will, I think it's a problem of a lack of network.

In other words, I don't think we know one another enough, so maybe this is a, to be honest, piece of homework for think tanks, associations. We're not good at keeping in contact. Or maybe it's just dominated by economists. I don't have a problem with it, but I'm saying maybe the legal voices have a place, and their expertise might be of help to the cause of freedom.

So I think there's room for some innovative bottom-up associative or association kind initiative that would lead us to explore at least the possibilities of EU law, seen by the judiciary, to actually advance freedom. Just with the same EU law, in other words, with the same pieces of legislation and the same case law that have been used politically against freedom.

Rasheed: So let me ask one final question. If you were advising a libertarian, classical liberal, or progressive think tank in Madrid, Dublin, in Brussels, what kind of cases would you tell them to start with? What do you think are the low-hanging fruit for market liberalization using procedural tools of EU law?

Adrián Rubio: So first, the last one that we just mentioned, it would be close to what I'm trying to do, I mean, at a lower level, but anything using access to justice. In other words, using procedural rights to fight disproportionate environmental regulation, or I wouldn't even call it environmental, I would just call it against innovation, or extremely precautionary principle-based.

I'm writing a paper on that, by the way. So that's why it comes naturally to me to argue for this. So that the starting point of environmental regulation and lawmaking isn't necessarily prohibition by nature, by default. So getting access and getting our voices respected or protecting economic liberties as part of the dilemma of the proportionality test at the end of the day, I think we just don't show up. That's the point. So I think that's the first thing, at least a team of a couple of lawyers, public law-inclined lawyers should focus on. Let's explore, let's see what the procedural rules could allow us to enter the courtroom with and make some arguments that haven't been made before or that usually don't come up.

It's not that we don't think about them, it's just that we use different fora. We're somehow scared of going to court. And I understand because if the funding is not from an association per se, but rather we are working with clients, we cannot, and we should not in good conscience be using the company's expectations, trust and name to advance these cases.

So that's one thing. Anything related to flipping a bit, the dominance of the anti-free AARHUS Convention, if you might put it this way. The second kind of cases, anything that fosters market unity. In other words, enhancing the single market. The pathology here is again, the European Commission, by treaty and by definition, should be the one who initiates all these procedures.

They're not doing it all the time. So maybe we actually should also put some political pressure to make sure that this happens by the commission, and alternatively, simultaneously using or challenging barriers at the domestic level, applying the treaty of the function of the European Union. Articles

I think it's 35, 34, 35, 36, they are powerful articles that would allow us to bring up cases just in defense of the market, union market unity, if you might.

So the last one, just so that we echo a bit of what we discussed together. Why shouldn't we try to explore where Simmenthal takes us from a liberty point of view? In other words, any case related to permits, licenses, or deadlines. Anything that is very explicit in EU law that is not respected by the national administration. And this is not uncommon. First of all, the transposition of directives sometimes works well, sometimes does not work well. Maybe we need a team in a new initiative association, think tank, whatever you call it, in Dublin, Brussels, or Madrid, to monitor how those transpositions go. And this is also an important thing that I usually repeat a lot in class. Directives are the most preferable piece of legislation that the EU can produce out of regulations, in other words, binding with EU law, text directly from Brussels.

Vis-à-vis directives, meaning with a task of having to reinterpret or accommodate the directive into the letter of domestic law. Those who love freedom, we would in general almost always prefer the latter. And why am I saying this?

Because then there are other places that you can persuade people that those decisions, that favor liberty, that favor autonomy, and other sorts of freedoms, are preferable. Once the decision is made in Brussels and it's part of our regulation, good luck. You are out of the game, and you have to go through litigation, through case law, through the court.

The process of the transposition of those directives, you can take part in it through the domestic organizations. Of course, it involves a little bit of lobbying, but yeah, why not? A think tank should also produce reports, position papers. I would definitely think that lawyers are well-suited to do this in an articulate, convincing, and persuasive manner.

And then once it goes wrong, which might go many times before the courts, we should invoke Simmenthal and try to see if the doctrines of direct and indirect effect could allow us to request or force national administrations to act in efficient liberty-defending manners. So again, my takeaway here is there's room for us jurists and lawyers, who know about EU law, to try to see how far it takes us to defend freedom using the tools of EU law, not just withdrawing from the entire game. I think we did this a bit, I myself included. In other words, I just added the label of EU law as part of an almost globalist project, and so I don't wanna have anything to do with it.

But then I needed to work with it because that's what I'm decent at. That's what I know best. And I realized that we have some powerful tools that, when used in the defense of freedom, could be beneficial and, most importantly, successful. So why shouldn't we explore or concentrate our energies into two or three of the ones that we mentioned during our conversation today?

And we start checking out what works, what doesn't work. And again, keeping an open mind in a functionalist way, in a pragmatist way. This is, at the end of the day, what being a Euro realist looks like. I'm not per se, a Euro skeptic. I do believe in an idea of Europe, perhaps not so much about the European Union federalist, supernational thing that, of course, I do not share.

But that's my position on this. But I'm not a Euro skeptic by nature either. In other words, I know that EU law allowed modernization in a liberalizing way of the economy. And I think priorities for the EU should remain mostly economic, not political. So why shouldn't we go back to it and try to see what's left?

Rasheed: Adrian, thank you so much for coming on today. I believe this episode will be very helpful to many people.

Adrián Rubio: Thank you so much, Rasheed. It's a pleasure.

Or listen on Spotify

Show notes

Spain’s fiscal architecture is more than a ledger‑sheet debate; it is, as economist Jesús Fernández‑Villaverde, the Howard Marks Presidential Professor of Economics at the University of Pennsylvania, reminds us, the very skeleton of the modern state. Drawing on Schumpeter’s maxim that “the state is taxation and taxation is the state,” Fernández‑Villaverde opens the conversation by weaving the American and French revolutions into a wider argument: when you refashion a nation’s tax machinery, you refashion the nation itself. That lens frames Catalonia’s renewed demand for a new financing model, not as a routine budget negotiation but as an existential redesign of the Spanish state.

Jesús details how Spain already operates one of the most decentralized fiscal systems in the world, “more latitude than most U.S. states,” he notes, yet Catalonia now seeks the bespoke privileges long enjoyed by the Basque Country and Navarra. The Regional Authority Index rates how much self‑rule and shared rule each country’s sub‑national governments actually wield. In its last update the index places Spain as the most decentralized unitary state in the sample and fourth overall among 96 countries.

Those northern provinces collect every euro on their own soil and forward a modest remittance to the central treasury, a setup that Fernández‑Villaverde brands “a Confederate relic.” Extending it to Catalonia, he argues, would hollow out Spain’s common‑pool finances, deepen inter‑regional resentment and erode the principle of equal citizenship, while turning the national revenue service into little more than a mailbox for provincial checks.

Politics, of course, is the solvent in which these principles dissolve. Prime Minister Pedro Sánchez’s coalition leans heavily on Catalan and Basque votes; hence, the Jesús says, the Socialist leader flirts with a reform that his own party barons fear will be “the kiss of death”. Layer onto that an opaque, labyrinthine funding formula, ripe for local demagogues to blame Madrid or the neighbors, and Spain’s fiscal question becomes not merely who pays, but what kind of country the Spanish want to be.

Recommended

• La factura del cupo catalán: Privilegios territoriales frente a ciudadanía - Jesús Fernandez-Villaverde and Francisco De la Torre

• El desafío secesionista catalán: El pasado de una ilusión - Alberto Reig Tapia

• El guionista de la Transición: Torcuato Fernández-Miranda, el profesor del Rey - Juan Fernández-Miranda

• Website about the economic agreement with Basque Country

• Las elecciones generales de 2030 - Jesús Fernandez-Villaverde

• A Millennial View of Spain's Development: Essays in Economic History - Leandro Prados de la Escosura

• El dilema de España - Luis Garicano

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This transcript was automatically generated by AI and lightly edited. We don’t catch every error, so if you spot one, send a message/email via progress@cpsi.org.

Rasheed: Hi Jesús, thank you so much for coming on the podcast.

Jesús: Thank you for having me here.

Rasheed: So I'm looking forward to talking about your new book. [Shows book]

Jesús: Yes.

Rasheed: It has been making quite a stir in the last couple weeks in Spain because of the recent legal adjustments, to put it mildly, that are being pushed by Catalonia.

We'll come to that but I want to start off very broadly. Something you mentioned. I'm gonna ask it in a question. What did Schumpeter understand about the concept of states that political pundits tend to not understand?

Jesús: Okay, so the the point that we highlight at the beginning of the book, which is recalling a very famous talk that Joseph Schumpeter, gave right after World War I in Austria is that a modern state is basically a fiscal state. By that he meant that the fiscal structure of a state determines all the other political economic structures of the state.

And therefore, if you change the fiscal structure of a state, you are changing the state in itself and the examples that we give in the book are very straightforward. And two that come to mind well, while the United States. The United States is born from a fiscal dispute. So the British Empire was organized around the idea that the colonies in North America had their own responsibility for taxation, for fiscal policy. And then in some moment the government in London, the decided that should not be the case, that they want to move to a different system. And that initiates a constitutional conflict that ends up with independence of the United States. But many people forget that the constitution that we have now in the United States is actually the second constitution that the United States had, the 1787 Constitution.

There was a previous one, the articles of Confederation on Perpetual Union. And what happened with that constitution is that it set up a fiscal system that was not sustainable. And it's very clear by around 1786, early 17 87; that the system is not working. And that's why James Madison convinces many other people to call for the Constitutional convention in Philadelphia to create a completely different fiscal system and with it a complete different federal system. And the interesting thing is, if you actually read the pamphlets and the articles of the time, it was very clear to everyone involved that we were talking here about fiscal systems. So that's the first example that we have in mind.

And the second example is the French Revolution. The French Revolution comes because Louis XVI needs to call the State Council, because the the French fiscal system was in complete bankruptcy and he wants to change it. And that unleashes a series of forces that leads to the French Revolution. So at the very core of the origin of this modernity, you have the American Revolution and the French Revolution. Both revolutions are fundamentally about fiscal structures. So when you are talking about fiscal structures, it's not, that boring class you took in public finance in your senior year where they were telling you about debt, loss. Taxation is actually the very essence of a modern state.

So taxation is the state, and the state is taxation.

Rasheed: Now we're gonna be talking a lot about Catalonia. Basque Country also, but Catalonia in particular. And of course coming from the outside, people tend to think the Catalan tendency towards separation is a fairly recent phenomenon. As you highlight in the book, it is not given that the sentiment of Catalan separatism far predates the modern state of Spain.

Is there a future where you think this sentiment goes away?

Jesús: So there is a low frequency movement that is happening right now in Cataluña, which is the enormous demographic change. Okay?

And I have made this point many times. Right now around only 55% of births in Catalonia are born from a mother that was born, actually not even Catalan, that was born in Spain. That basically tells you that only 40, 45%, perhaps even a little bit less of mothers that were born in Spain speak Catalan at home. At this moment, I will say that less than 30, 28% of kids born in Cataluña, perhaps even less, will speak Catalan at home. And that basically means that as we fast forward over the next 40, 50 years the use of Catalan as a language will suffer a lot. And usually this type of nationalist movement are very directly linked with the language. Not always. You have the case of Ireland as maybe as an exception. But in that sense, my reading of the situation is that Catalan nationalism will be much less prevalent in 2060, than it is today. Again, all this depends on a lot of demographic factors, and of course forecasting the future is difficult.

Rasheed: In 2017 when there was the illegal referendum in Cataluña. There was, following that, a situation where the Court of Auditors and Supreme Court wanted to give some massive fines to people involved in using public money to push forward the referendum. One of them was a very well known economist - Andreu Mas‑Colell. And at the time, many international economists, including 33 Nobel Laureates, wrote a famous letter where they unequivocally supported Mas-Colell. It was pre purported to use public funds to also promote separatism.

Why do you think that a lot of international (often mostly American) econ professionals tend to be a bit more lenient when it comes to separatism in Cataluña, but not, let's say, revolting in DC.

Jesus: Yeah I think that there is a combination of factors. Academics tend to always look sympathetically to what appears to be the underdog. Poor economies which are trying to fight for freedom or whatever you want to call it. And the aggressor's been fined by the legal authorities to be forced to pay some money.

So that always looks good. You stop randomly an academic in any university and you tell a story like that without entering into many details. And people will always be sympathetic. The second point, which I think is more important, is, he was a very well known academic, very well respected.

I don't have anything negative to say about his academic accomplishments and that makes him looked very favorable towards the rest of the profession. But it was my experience at the time. Several people asked me, and when I outlined the legal structure of the case, everyone was like, "wow, this is not exactly what I thought it was." So let me give you a very complete example. You probably know, in the United States, organizing a referendum of independence for a state is unconstitutional. The Supreme Court has decided that. So imagine that the secretary of let's say Pennsylvania, decides to sign a piece of paper saying that he's going to use money from the government budget from the state, from the Commonwealth of Pennsylvania budget, to pay for that referendum and to organize the steps for that referendum. And in addition to it, he has a report from the legal office of his Secretary of the Treasury telling him that this is illegal. And yet you still sign it. How will you react if I tell you that case? Has this person incured any type of legal liability? Of course he has. And when I explain it in that way, a lot of people said "I didn't know it." Some people say "oh, he does microeconomics. He doesn't really know about the law." And I said "no, but remember. The legal counselor, the senior legal counselor of his department, sat with him down and explained to him that what he was going to do was illegal." And yet he signed. So what do you want me to say?

At the end of the day, he's not going to pay that money back. But I think that we should not confuse one thing with the other.

Rasheed: Was there any economic logic behind the autonomous community design following the transition, and the new Spanish constitution in 1978?

Jesus: Yes. Okay. You need to think about the history of Spain and the economic history of Spain more concretely in a little bit of a wider framework. Spain didn't do a very good job during the 19th century. So Spain doesn't transition successfully to what many political scientists have called the modern state or the modern liberal state .It's in a process of construction of a modern state that remains uncompleted up to today, in fact. And one of the consequences of that in complete transition is that Spain has only weakened after the industrial revolution. Now modern historiography tends to be a little bit more positive that the traditional view that was always very negative. And I agree with that modern view. But nonetheless, at the end of the day, think about the big picture in the process of the construction of a modern state and a modern economy during the 19th century, Spain got a B- or a C+. Now in particular that incomplete construction of the state means that in the late 1870s, Spain has or undertakes something that is called “Restauración borbónica” after the first republic, the Bourbon family comes back to be the new kings of Spain again, I Alfonso XII, Alfonse XII. And in particular the party in the government at that moment, the Conservative party, with Cánovas del Castillo as prime minister is a very strong defender of autarchy, very high protectionism and a lot of state intervention. Maybe now this is a little bit easier to understand after the new administration in the United States , but people often forget that the conservatives have traditionally been the party of tariffs, of protection and the state government intervention.

Rasheed: That's right.

Jesus: It was liberals who were against that. But to make a long story short, from around 1878 to around 1959, Spain embarks on a process of autarchy, import substitution And various state and a lot of government intervention. That changes dramatically in 1959 with the Plan de Estabilización, the Stabilization Plan where basically Spain opens to international trade makes the peseta convertible, the currency that we used at that time. And first and foremost the consequences were that for around 17 years, Spain grew very fast. So when you want to think about why Spain is a modern country, why you go to Madrid, you go to Barcelona, it looks a lot, like many other European cities those are the big years where Spain goes from being a very poor and underdeveloped country to being a modern economy.

Rasheed: And all of that was during the Franco period, just to make that point clear.

Jesus: But remember, it's from 59. The first Franco was against it. This is the second Franco. I can tell you exactly why the Franco regime completely changes its economic policy in 1959. Think about it as very standard and classical catchup. It's also based on a lot of very energy intensive models of growth and it comes to an end around 1973 or 1975. First of all, because the oil shocks mean that energy is much more expensive.

Spain doesn't produce any oil or any natural gas, of any importance. And just because I was saying before, just the pure process of convergence kind of reaches an end. So, the Spanish economy is in a very difficult situation. And in particular, you need to reorganize the public finances. And for that you need a complete new framework of government.

And that's a little bit of the economic background behind the Spanish Constitution of 1978.

Rasheed: On that point - before we move on, why exactly did Franco II change the policy so quickly? Some Spanish historians claim, all these Opus Dei “progress-pilled”technocrats really got into the brain of Franco. But what was it in your view?

Jesus: I agree with the conventional historiographical view. Franco never believed in the market. And he was really forced into that in 1959. So the persons to keep in mind over here were basically Alberto Ullastres and Mariano Navarro Rubio. So the situation and to some extent, maybe a little bit less, Laureano López Rodó. So let me give you basically what happens and a little bit of historical background.

Contrary to what many people believe, Franco regime was not monolithic, okay. It was really a coalition between different groups. It's what political scientists sometimes have called "limited pluralism." And what they mean by that is, of course you are not a democracy. I don't want to confuse any listener into believing that this was a democracy, but it's not a monolithic structure like the monolithic structure of the Communist Party of China today, for instance. And there were different groups within that coalition of government. In Spain we refer to them as familias, families.

So one very important family, for instance, were the Fascists, the Fascistas. They were also called sometimes the Blues, los Azules, because the shirt of the Spanish Fascist party, is a blue shirt. And these guys werea along the lines of Mussolini, maybe Hitler, except that in Spain, antisemitism was never a big deal because of course at that time the Jewish population in Spain was very small. And these guys believe in a standard fascist economic, industrial policy, et cetera. The main representative was a guy called Wanis. And very strong defense of workers' rights. People tend to forget that fascists were very much into the defense of workers rights in a very peculiar way.

But anyway, then you had the army. The army was another family. And then you have the monarchist, the old monarchist who believe in a very traditional view of the monarchy. they came in two flavors: the ones who defend what is the current branch of the monarchy of the dynasty in Spain Felipe VI. Not his, not Felipe VI, but his grandfather Juan De Bourbon. There was the flavor that defended what was called the Carlista branch, which was a branch that broke off in the early 19th century. And then there was a group as you were saying that were called the Technocrats.

So who were the Technocrats? The Technocrats were basically people who as you say, many of them were linked with Opus Dei, Catholic. I'm forgetting another group, the Propagandistas. But don't worry about those. And basically these guys had a lot of background in education.

They tended to be either professors at the university of very top civil servants. Something for people who are from outside of Spain, that perhaps is sometimes difficult to understand, is that the examinations to get into the top civil service are extremely competitive and really they are the top. They are the top of the crop.

The cream of the cream in at the university. It's a little bit different from the United States or other countries. Anyway, so you have all these types of people who are very prepared, much more professional, and have much better knowledge of of the international developments. And they think that the Spain needs to develop and needs to grow. Now, they were not Democrats in any meaningful sense of the world, but on the other hand, they thought that a very old style dictatorship didn't look that good in the context of 1959. And what they wanted maybe was to move towards a little bit of a soft authoritarian regime, something like that. Now they are minority in the government and they cannot really impose their views, but they have three enormous advantages. The first enormous advantage is that they can get things done. So Franco realizes the first Technocrat that comes to power is ano. Rado, who is basically running the day-to-day of the Spanish civil service. I don't know how many listeners may remember a wonderful British TV series called "Yes Minister." And yes,

Rasheed: Yes, I know it very well…

Jesus: So then they may remember Sir Humphrey Appleby, like the top civil servant - Laureano López Rodó, Sir Humphrey Appleby. He has the advantage that he gets things done. So when Franco or his kind of second in command, Carrero Blanco says, "I want to do this. I want to prepare this project, I want to accomplish this thing", Laureano López Rodó shows up one month later and says, "look, this is the draft legislation. This is. The organization that we need." And, both Franco and Carrero Blanco start to realize if we want to survive and have an effective government with high capability, these guys are very good. The second thing that these guys have in favor is that both the United States and all the international organizations like the IMF and the World Bank, that indirectly depend on the United States as well, really supported. The last the United States, of course, wants a reliable ally in the Cold War against the Soviet Union.

And it was a prosperous ally, and it wants an ally that is not going to fall to the Soviet subversion and having a crazy, semi fascist structure with an underdeveloped economy, that doesn't look very good. So the United States and the IMF really like  López Rodó, Navarro Rubio and  Ullastres because these are the guys that can get things done, that can get Spain modernized, and that helps in the big context of the Cold War.

And of course that means that not only do you have the the pressure of the United States, but you also have the money of the loans that the IMF for the World Bank can give. And this makes a huge difference. The third fundamental. Issue is that Spain has run out of foreign currency. We are in a situation where this import substitution scheme, this import substitution model of of economic growth has completely run out of steam.

And there is no money. Navarro Rubio wrote memoirs that are very interesting and I always recommend to those who want to read them, you probably need to get them in some type of library because it's impossible to get a copy. But Navarro Rubio explains that there is a meeting of the cabinet and Franco is against this Plan de Estabilización. Because I remember Franco never liked the Plan de Estabilización. He did it against his best judgment. And the meeting ends and Franco gets out and Navarro Rubio follows him and don't know how many readers know this or how many listeners know this. It's a little bit of insight, but Franco was very short he has this very, high pitched voice.

And  Navarro Rubio was very tall, a very big guy, and with a very deep voice. Navarro Rubio follows Franco and says, "Mi General", "My General" in Spanish. You don't call sir to the military officers, okay? That's only in American movies. You need to call them general. He says, "we are running really out of foreign currency. This is serious. We need to do something about this." And Franco, who understood as much about economics as I understand about the production of mussels in the Black Sea asks "but what about the crop of oranges?" Because of course, even at the time, the export of oranges from Valencia and Murcia were a big part of the export of Spain, but even in 1959 it was not that much.

Navarro Rubio replies right away. "But what if there is a frost? We lose the crop. So we don't have that inflow of foreign currency." And basically Franco replies, " do whatever you want, but don't get me involved into it." Which to me is the ultimate example of a state with a complete lack of capability when the dictator that is running the country says " do whatever you want, but don't get me involved."

So this is basically, I think, Franco recognizing that he doesn't really have any real alternative. He never like it. And even until the end of his life, even if he had to rely a lot on the technocrats, he always had a little bit of a love hate relationship with them precisely because on one hand he admired that they could get things done, but on the other hand he was very suspicious of what their ultimate goal was with respect to his regime.

Rasheed: Okay, so there's one thing that you highlight and stress a lot in the book that I was very surprised by. In practical terms the Spanish state is even more fiscally decentralized than the US. Could you explain how this is possible?

Jesus: So this is very interesting. When the Spanish Constitution was being drafted basically the idea is we have very different views. There are different parties. There is a committee. They put together a committee to draft the Constitution. And the problem over there is that there is many different views. The different drafters of the Constitution decide to write a constitutional text that is extremely ambiguous. So the Spanish constitution allows both a tremendously centralized state structure and an extremely decentralized tax structure. And the same with all the other type of rules . That was probably a good idea. That was a good idea because all the previous constitutions that the Spain had, so Spain had a constitution in 1812, in 1934, the Statutory Real 1837, 1845, 1854, 1867, 68, 1873, 1879, and 1931. All these constitutions had always been constitutions of one political party. There had never been an effort to draft a constitution where different political parties with different programs could all use that constitution. The Constitution of 1978 in comparison, is a constitution that allows for a high degree of indeterminacy in how we are going to structure the country.

It turns out that for a number of reasons of political economy that we try to describe in the book briefly, if I may say, the book is 93,000 words, but it could have perfectly been 200,000. But for a number of reasons basically we end up in a situation where we really push the Constitution to its max in terms of the decentralization. So at this moment I will say that Cataluña or some other regions have certainly more fiscal autonomy than most states in the United States and more power. At the same time, it's a system that is very obscure and poorly designed and it does not provide the right incentives.

So the good thing about the US is that you have the federal revenue service and that generates the taxes for the federal government, and then you have the state taxes. Now, the system is not as clearly delineated as some people claim because there are a lot of transfers from the federal government to the states. What you have in Spain, in Cataluña is that there is roughly only one fiscal agency, only one revenue service. Then the money that comes from that revenue service is allocated between the central government and the region. This is different though from the system in the Basque country and Navarra. The system of Basque Country and Navarra is truly the system of a Confederacy. So if you live in the Basque Country or Navarra, you don't pay Spanish income taxes. This is something that most people will find shocking. But that's the fact. Okay, so if you are in Biscay, there is a specific Biscay income tax. Now people need to be very careful about this.

This is not like in the US where if I live in California, I pay my federal income tax and my California income tax. No. This will be a system where if you live in California, there is no federal tax. So California will be getting all the money, absolutely all the taxes in its territory, taxes on income, on profits, corporate taxes, VAT, absolutely everything.

And then it takes a little bit of that money and transfers to the central government. And that's in some sense the system that the US, as I was mentioning before, had under the Articles of Confederation. So the fiscal system in Delaware was completely independent of all the other 12 states.

And then Delaware will give a little bit of money to the continental Congress, that's the system that you have right now in the Basque Country and Navarra. What happens is that, of course, the system gives enormous power to those two regions. It means that they are not contributing that much to the common pool to pay for services like national defense public debt, et cetera. And Catalan nationalists have said, "me too. I also want to be in that situation." So they want to move from a situation where they already have an incredible amount of power. And as I mentioned, and we mentioned, and I think we document very well in the book, for instance, certainly much more self-government than states in the United States. They will basically be a confederate state within a confederation. And that's what we think will be a terrible outcome. And we don't think it's a good idea. And that's why we wrote a whole book about that.

Rasheed: I'm not sure if I wanna go down this particular side quest rabbit hole, but something you mentioned about the constitution, that I hear often. Contrary to your point about the 1978 Constitution being the most pluralistic, some legal scholars tend to think the 1812 “la Pepa" constitution was a lot more broad with all encompassing, different viewpoints, different hemispheres in Spain, Hispanic world and so on than any other later Constitution, technically in Spain.

Jesus: That's true. The 1812 Constitution was relatively open to different views of the world, and the problem is, it was a little bit utopian. It was a constitution done in the middle of the Napoleonic Wars, and I think that Constitution fails not as much for being a very narrow minded constitution, as I will say. On the side of the Right, for instance, the 1834 Constitution or on the side of the Left, the 1931 Constitution. But I think it was just utopian in the way it was structured. That was not the constitution for a country in 1812. So for instance the idea of the system of representation as was set up, I don't think it would have ever worked in practice.

Now, having said that it is true that if, for instance, after the independence of the Americas, we had, let's say in 1834 or 1837, a constitution inspired by the principles of the Constitution of 1812, but with a much more realistic framework. I think that the modern history of Spain will have been much better off. What is really remarkable about the Constitution of 1787 in the United States, and I'm a big admirer and I actually teach this to undergrads for many years. It's this wonderful balance between these ideas of creating a modern union and a modern republic, but also with a hard nose pragmatism of "we need something that will work day to day."

Madison and everyone else who was involved in the design of the Constitution need to be immensely praised for being able to balance ideals with the practical wisdom. And unfortunately, I think that in the Spanish political tradition, this concept that you need to balance ideals with practical wisdom has always been absent. I think it's has a little bit to do with our Catholic cultural background of the Martyr that dies in the pile of fire or against the lions in the circus of Rome instead of trying to think for something that is practical and is possible. And even the Constitution of 1787 had a few things that didn't quite work out and had to be amended right away, but that shows that constitutional design is very complex because it's very difficult to forecast all the situations that may arise and how to address them.

Rasheed: You mention in the book that you thought the Spanish Constitution of the Secondary Republic was a lot more clear when it comes to competencies of the State and regional powers.

Jesus: Actually that's true. So as much as I was a critic of the Constitution of 1931, in some aspects it actually designed political structures in terms of the centralization that was much more transparent. It was much shorter, it was less ambiguous. So in that sense, yes. So that part of the 1931 Constitution I like a lot. Now, on the other hand someone could criticize me for the following thing.

The 1931 Constitution really only was in operation for five years until the war started, even in the area, still controlled by the Republicans after the coup d'état in July, oh by the way, today is July 18th. Even after the beginning of the coup d'état in the areas still controlled by the republic it was not really operative in any meaningful sense of the war. So you only have five years, and that means that we don't really know how the system will have ended up 10 years later, 20 years later, 25 years later. And it may be in the case that it would have end up with even a worse outcome. But having said that, I think that the reading of the sections of the articles related to the home rule by regions in 1931 was actually quite a sensible one.

Rasheed: One of the common critiques of your critique of the new financing plan for Catalonia is just idea that, "but shouldn't there be different models of financing for regions? Won’t competition actually end up being good for the State in general?"

Jesus: So we need to be very careful about distinguishing two different things. Number one is, should we have fiscal competition among different regions or territories. Yes, I'm happy with that. The second argument is, should we have asymmetries in the legislation that allows different territories to do that?

And that's what I'm against. Okay. So look, Texans can lower taxes and offer a more attractive environment to businesses than California, but federal legislation applies in the same way to Texas, and to California. What I'm against is the idea that you're going to have some rules applying to Cataluña, to the Basque country and to Navarra, but not to the rest. What I want to emphasize, and I think this is a point that many of my critics don't get, is that the fact that I want to treat everyone symmetrically, does not imply that I want to impose uniformity, which is a very different thing. But if we are going to let Cataluña make decisions about this income tax, we need to let everyone else make exactly the same decisions.

So if you ask me when I walk into your office, "will you sign onto the Swiss fiscal system?" Probably yes. "Will you sign onto the US fiscal system?" Probably, yes. The point is, that is not what is being proposed on the table. And I think in a very disingenious way, who defend what is being proposed on the table right now are saying, "oh, but this looks like Switzerland, the United States, and that's a lie." They are using the prestige of Germany or Switzerland or the United States to defend something that is not the system in Germany, in Switzerland, or in the United States.

Rasheed: Could you make it more concrete? Why isn't this financing plan for Catalonia just like the Swiss model? Because on the surface it really seems very close to this model.

Jesus: In the Swiss model, you have the following. You have a federal revenue service, and you have the Cantonal revenues revenue services. Okay, so the Federal Revenue Service is a federal agency that runs the VAT and the federal income tax. And the federal income tax and the VAT is the same for everyone in Switzerland, and that's the money that the federation uses to run the federation. And then every Canton has a Canton income tax. I'm skipping some minor details. But I'm aware of them. I'm just trying to simplify. So this doesn't look like a lecture in college. They have their own state, their own local income tax, and you pay to your Canton for that amount of money.

The Canton uses that money for running their businesses. This is most emphatically NOT what is being proposed right now. What is proposed is that there will be no National Spanish Revenue Service in Cataluña. In fact, 100% of the taxes will be raised solely by the Catalan Revenue Agency, VAT, all income tax, and then Cataluña will keep all those tax revenue and just use a little bit of that tax revenue to transfer to the central government as a contribution. You see how it doesn't look at all like the Swiss system?

In the Swiss system there is a federal system run by a federal agency and there is a local tax system run by a local tax agency. These guys say "no, in Cataluña, there will be no national tax agency. We will raise 100% of the revenue and then we will just pass a little bit of a cheque at the end of the year to the central government." The best way to think about it, this is how the European Union works. Portugal or France, they raise all their revenue and at the end of the year they send a cheque to Brussels. That's basically what they want.

Rasheed: This is one very unique thing about Spain. As you wrote in the book, Pedro Luis Uriarte remarked that the Basque Country “es único en el mundo”- the way of doing financing there is the only place in the world that this is happening. In Basque Country how does the collection work - they collect the money, as you mentioned, and then they remit around 6% percent to the central government?

Which is obviously now very small. Why was it that this amount was, fixed back in, I think, 1981 or so? It has never been adjusted since then.

Jesus: So this is simply politics. It turns out to be the case that the two main parties in Spain, the Socialist and People's Party (PSOE), the conservative Party (PP), often do not get a majority in Congress. They only get a plurality and they need extra votes, and the nationalist Basque Country party (PNV) is always ready to chip in for those extra votes in exchange for keeping the system the way it is now.

And in relation to it, we made a mistake in the original design in 1981 that says that the system can only be approved by agreement of both sides, of the central government and the Basque government. So you are in the following situation. I'm let's say the socialist party. I run for election. I get a majority, and you are the nationalist.

I don't need your votes. You just say "I don't agree with any change."

The system gets us to stop. Four years later, I don't get a majority. I only get a plurality and now I need your five MPs (from PNV). You see how the system is absolutely perverse.

You always have a veto to use against any change that is against your interest. But you have a lot of power when I need your MPs to get the system to go in my direction. And that's in fact why the system actually has become more and more unjust because something that has happened is the social security in Spain right now runs a gigantic deficit.

And that deficit is being paid by the central government. But in the computation of the contribution that the Basque Country pays to the central government, that deficit of the social security is not included. Which means that they benefit because the pensions, the retirement benefits are still being paid in. But the Basque Country - they don't pay anything whatsoever. That's why in the book we demonstrate that at this moment, the Baqsue country is receiving net transfers from Spain, net fiscal transfer, which is absolutely ridiculous. This will be the equivalent in the United States, of Connecticut receiving transfers from Mississippi. That goes against any basic principle of fairness.

Even if you were a hardcore libertarian who believes that, everyone should run their own affairs, this is even worse than that. The Basque Country is not chipping in for the running of the countries but they are receiving transfers from the rest of the country. Look, if the PNV wants, [Prime Minister] Sánchez will fall tomorrow.

According to the Spanish legislation, you need 55 days between the fall of the government and the election. But if PNV wants - today is July 18th too late in Spain now.

It will need to be done on Monday. So Monday plus 55 days, Spain will have elections. That's an enormous power that other small regional parties across the world do not really have.

Rasheed: So on that point. So the reason why that's possible is that currently in Spain there is a Frankenstein Coalition that Sánchez had to put together after last election because PSOE couldn't get seats on their own. But that's going to my question: why is it that the central government even considering this new Catalan law?

Of course, we hinted at it but could you be more concrete on that?

Jesus: So the situation is as follows at this moment in Spain. Every time we have a general election, there are really two general elections going on. There is a general election in 15 regions, and then there is a general election in Cataluña, and the Basque Country. And we are in a situation where these two elections give very different outcomes. If you take out Cataluña and the Basque Country, the right wing parties have won the election in Spain every single time, I think since 1996, except I think in in 2005. And even then they lost by one MP. Both Cataluña and the Basque Country vote so overwhelmingly on the side of nationalist and left wing parties, that completely shifts the situation.

So this is particularly important for Partido Socialista, for the Socialist Party (PSOE). The Socialist party now depends crucially on the MPs that they can elect from from Cataluña. This is not very different, for instance, from the liberal party in Canada that depends crucially on the MPs that they can elect in Quebec. Or even labor in England in the United Kingdom in most of the elections, not in the last one, but in most of the elections labor doesn't have any way towards power that does not pass through getting enormous numbers of MPs from Scotland.

Which means that at this moment you don't really want to think about PSC - the Socialist party in Cataluña. So people miss one point is that PSC is literally a different party from PSOE in the rest of Spain. It's a federated party. And the joke I often make now is that it's not that PSC is federated with PSOE, it is that PSOE is federated with PSC. Which is very different.

And that means that the MPs of Cataluña have become so immensely important for Pedro Sánchez and for the future of PSOE that they are willing to give this legislation. Now, the problem, of course, is that the Socialist Party, for instance, in Asturias, in Andalucia, and in Extremadura understands that this will be the kiss of death. And that's why I think that what is really going on right now behind closed doors is a civil war within the Socialist Party.

What happens for those listeners who are not following day to day Spanish politics is last Monday, which I think it was the 14th, there was supposed to be an announcement between the Socialist and Esquerra Republicana​, the left wing nationalists in Cataluña, of the new financial agreement. And what they published, a statement of three or four pages is absolutely ambiguous and empty. The reason for that is because I think that even within the Socialist Party, it's not clear that Pedro Sánchez commands enough majority to support this change of the system. But the Socialist Party is really in a terrible situation for the long run.

It's basically becoming the party that only exists because it has electoral power in Cataluña and in the Basque Country. And it's not very clear to me once Pedro Sánchez is gone how they are going to be able to recover their electoral foothold in the rest of Spain.

Rasheed: You also mentioned in the book, summed up in this line that I will repeat: all the people in Asturias believe that Galicia is better financed than Asturias, but all people in Galicia believe Asturias is better financed than Galicia.

Why exactly do people have this weird dichotomy of views.

Jesus: So it is very simple. The system right now is extremely obscure. It's very difficult to understand what is going on, and in fact, I will argue it was designed in an obscure way on purpose. And this basically means that it's very easy for politicians to blame all your problems on the system not giving you what you want.

You could not imagine how many times I had discussions with people who say, "no, the problem of the system is X." And I say, look, "X is not true." And I will actually show them the piece of law, the legislation showing them that the X is not true and they will not believe it. And I will ask: what do you want me to say? So I think it is this, you're in Asturias and I want to run for president of Asturias. So for me to go and say, "Rasheed, you are not doing that well. It's not my problem. I don't get enough money because of the system."

But then I'm doing the same in Galicia. And then you have a twin brother Rasheed Prime in Galicia.

And now I'm saying "Rasheed Prime, you are not doing very well." "It's because, these Asturians are getting a lot of money." So it's a very easy political spin to give. And because the system is so extremely complicated. Look, if I really wanted to explain the system with you in all this detail you would need to give me at least 10 hours. And you have a background in economics. Good luck trying to explain this to someone who doesn't have a background in economics and, doesn't have 10 hours for me to explain this. And that means that politicians like obscure systems - politicians, do not like transparency. If there is transparency, it's very clear that you are the one who has screwed up.

If there is obscurity then it's someone else's fault. Everyone loves that. And that's the main problem in Spain right now, that we have designed a system that is so darn complicated. In the book we say we are not going to name names, but there is this very, very famous journalist who actually recently got a prize for the best journalist in economics in Spain. He wrote in December, this article. It was full of inaccuracies. Now, do I think he was lying? No, I just think he didn't understand the system. So even a well-respected senior journalist writing for a very large Spanish media corporation cannot get this right. How is the average voter going to get it right?

You are never going to be the one saying, "no, it was my fault." You are always going to blame the other person. I have been in this profession for what, like 25 years. I have never seen a case of a paper co-authored by two co-authors, and the paper didn't quite work out and either co-author said "It was all my fault." I think that in every single case, the answer I got was "of my coauthor didn't do what he was supposed to do."

Rasheed: Do you think that the financing system of Basque Country and Navarra should be removed?

Jesus: Oh, totally. I don't know if you saw my X post this morning on July 18th. It needs to be abolished! Destroyed! Exterminated! And once we have finished with that, we are going to bring a Catholic bishop who is going to do an exorcism. Find every single code book that ever had any memory of that system, and throw holy water.

And then we are going to go to Wikipedia and eliminate all the references in Wikipedia of system ever existing. And go to every textbook and eliminate every reference in the textbook. Am I clear?

What Stalin did to Trotsky's memory in the Soviet Union is little in comparison with what I want to do with the cupo .

Rasheed: Wouldn't it be just politically so infeasible to get rid of that system, given the requirements to reform the Constitution and things like that. This is a tough thing to remove.

Jesus: That's true and I'm realistic. I know this is not going to happen on Monday.

I learned something from Milton Friedman. You put ideas on the table.

Once you put ideas on the table, they have their own dynamics and sometimes life surprises you. If we never put those ideas on the table, nothing will ever happen. So just between you and me and everyone else listening to us. Even if yes, the proposal of removing the cupo means that the next negotiation of the cupo is not as unbiased as before, that will already be a good outcome.

Rasheed: Why did the Spanish government remove and then re-implement a wealth tax within three years?

Jesus: So two reasons. First of course, the wealth tax is a distortionary tax and is probably not a good way to tax. But the wealth tax has two advantages. One that is good and one that is bad. The good one is that the wealth tax- and this is something that very few people have in our models in economics, it's a good way to control and audit income. So in the US, if I get $10 million, five years ago and I use it to buy some property after five years, when you know any type of legal liability for those $10 million not paid in income tax will disappear, I don't need to justify anything. If you have a system of wealth tax, it's much easier to keep track of quick changes in wealth that hide changes in unreported income. So I'm actually relatively favorable to the idea of a very small wealth tax.

Only 0.001% to be able to keep track of sudden change in wealth that represents hidden income. Now, of course, I know what a lot of people is going to say. You start with a 0.001% and you end up with a 10% tax.

The second argument is that in Spain there is a lot of suspicion. You can check that in any type of survey about values, about wealth. And most people think that wealth is a sign that you have done something nefarious and that you have stolen, that you have exploited someone. So politically speaking, Spaniards are very favorable to a wealth tax.

And even if you try to explain to them that this is, first of all not a very important source of revenue, and secondly, it is a highly distortionary, that's a loss pattern.

Rasheed: What hidden effects does an aging population have on territorial distribution of public spending in Spain?

Jesus: The North is aging much more than the South. It means that the North needs many more resources than the South for things like both health and social security retirement. And that basically means that the system needs to be adjusted to control these things. And look, I hear a lot of people saying things like, "oh, we should have less transfers and they need to figure it out, what to do."

And my answer is, look, Galicia cannot figure out what to do. They have already an enormous amount of old people. And you need to provide services to them. So you need to consider that. And as Spain ages more and more, this is going to be very important and needs to be a fundamental factor.

You need to pay social security, you need to pay health services, and they are not uniformly distributed within the country.

Rasheed: You mentioned, I think in an article that elections in Spain are won by pensioners.

And given that's the case where do you see this idea of doing real reform for long term planning that might have perceived short term bad effects for pensioners.

How does the opposition actually get things done?

Jesus: Oh, I wish I knew the answer to that. I'm actually quite pessimistic on this. In some sense I feel like Saint John, a voice that chimes in the desert. I think that nothing is going to happen with the whole government. And I think that basically no reform of substance is going to happen over the next four to five years, even under a PP government.

What I think is going to happen with let's say 60% probability, who knows? Life is so complicated. The country is going to be in such a terrible fiscal situation that all doors are going to be open and then who knows how we are going to end up.

And I think it's going to be a moment like in 1959 where literally there is no money left. And then even if you don't like to do reforms, you need to do them. So that's my forecast. We are going to kick the ball down to road for five more years.

Rasheed: There are a lot of surveys that show that the Vox has a plurality of voters under 25. So unlike the US, in Spain the younger people simply are pushing a bit more right wing, what does that indicate to you?

Jesus: In fact, I will push that line a little bit further. I think that at this moment there's a plurality in voters under 55.

Rasheed: Right.

Jesus: Yeah. In Spain wages have been stagnant since 2008, and so if you are under 55 and you look at your life cycle in comparison with the life cycle of your parents or even your grandparents, you have been doing worse. The price of housing has completely skyrocketed, the economy is not doing very well and in a well-defined sense, we can come back to that later on and we are accumulating a lot of public debt.

So I think that a lot of people are basically saying, "look, the current system, and in that sense, both the People's Party (PP) and the Socialist Party (PSOE) are offering basically slightly different versions of the same recipe, it's not working for us. So we need to look for something different."

And at this moment, the only one who is offering something different, for good or bad, I'm not judging that, is Vox. And I think that the People's Party (PP) has made a strategic mistake. They thought that Vox was just a flavor of the month that it will disappear.

And I think they have made a fundamental mistake and they are going to stay there forever or for the middle run. And it's only going to keep growing. And of course let's remember there are two Voxes in Spain. There is Vox and there's another one that we call Aliança Catalana. They have a slightly different view about what the nation is.

But for all practical purposes, Aliança Catalana and Vox are the same party. I will not be surprised if Aliança Catalana becomes the largest nationalist party in Cataluña in the next five years.

Rasheed: So final question.

What do you hope for the general public - no, let's say the pundit class in Spain: What do you think they should really grasp from the book?

Jesus: Look at numbers.

Spain doesn't believe in numbers. Spain is one of the few countries in the world where a minister under the People's Party criticized the reforms proposed by a friend of mine, Luis Garicano, because he had done them with an Excel file.

An argument, which I think is absolutely ….you know. Cospedal was her name.

You know one of those nefarious politicians that we have had in Spain. She actually said that. She actually says, "we don't believe in doing policies with an Excel file." We don't believe in numbers in Spain.

You have been here for a while and you will realize that Spain is one of the few countries where you can actually brag about the fact that director means "I studied humanities, that means that numbers are irrelevant for me." Spain is a country that doesn't believe in numbers. And if I just could get people to say, "look, these are the basic numbers of the system, let's talk about numbers”. I will be happy.

Rasheed: Jesús, thank you so much for joining me on the podcast.

Jesus: Thank you. Thank you for having me.

Or listen on Spotify

Show notes

Rasheed and economist John Cochrane discuss the structural complexities of the Eurozone’s monetary system, focusing particularly on TARGET2 balances. Trade imbalances within the Eurozone are no longer offset through private financial claims, but have instead created a vast network of public-sector IOUs among national and central banks.

The transformation of the Euro into a fiscal conduit has introduced new risks, especially in the case a country exiting the Eurozone, leaving its massive debts unpaid. Cochrane emphasizes that monetary and fiscal policies are inseparable, particularly in a high-debt environment, and suggests that the architecture of the Eurozone should reflect this integrated reality.

Join us for this informative episode as we also tackle contemporary banking mechanics, including CBDCs and the Fed aversion to narrow banking, alongside growing pains like ballooning US debt and a regulation-encumbered banking system.

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Recommended

Crisis Cycle: Challenges, Evolution, and Future of the Euro - John Cochrane, Luis Garicano, Klaus Masuch

The Fiscal Theory of the Price Level - John Cochrane

Stabilizing the Future with John Cochrane - The Rasheed Griffith Show

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This transcript was automatically generated by AI and lightly edited by our team. We don’t catch every error, so if you spot one, send us a message/email via shem@cpsi.org.

Rasheed: Hi John, and thank you so much for coming on the podcast once again today.

John: Hi. It's always a pleasure, Rasheed.

Rasheed: And for this episode, I'm going to emphasize a “Tyler disclaimer.” This is the conversation I want to have and not what other people want to have, because it might get a bit technical, but that's just how it is.

Okay. So my first question is on TARGET2, especially on TARGET2 balances inside the Eurozone that look a lot like IOUs between central banks, which I think is a view you share, but some people would argue that no, it's just accounting data and therefore risk-free. So what are the hidden assumptions that those people are missing?

John: Risk-free or not risk-free is a- those are separate question. Let's unpack this. Suppose someone in Italy or Spain buys a Porsche from Germany. They gotta send money to Germany, right? And the way this normally works with trade is if you have a trade deficit, there's a corresponding capital account surplus.

What does that mean? That means that one, the money goes to Germany, but Germans don't wanna sit on money. They end up having to hold Spanish or Italian securities, loans, stocks, bonds, something like that. So you're gonna have imports of goods. You trade a claim, some financial claim, in the other direction.

That's how it's supposed to work, but that's not how it ended up working in the Eurozone. Through a combination of unintended effects of the ample reserves regime, the way it works now is that a large fraction of the trade deficit, the money simply goes and sits there, and it sits there on the central bank's books.

So what ends up happening is. The Spanish person buying a Porsche commands his bank to give the Central Bank of Spain some money. The Central Bank of Spain gives that money to the European Central Bank. The European Central Bank gives that money to the bank in Germany, and it just sits there so that rather than Germany accumulating claims on the Spanish economy, the German Central Bank ends up accumulating claims on the ECB, which accumulates debts from Spain.

So this is transferred through central banks rather than through private securities. Okay I hope you don't mind, when we were writing this book, it took me a long time to understand TARGET2. I hope I do understand it now. Now, what's weird about this is now we have trillions of euros.

The ECB owes the German Central Bank trillions of Euros. And the Spanish Central Bank owes the ECB trillions of Euros, all of it paying low, supposedly risk-free interest rates. Rather than this going through, Germany holding, say, bank debt in Spain that then finances Spanish investment.

Now, is that good, bad, or dangerous? There are trillions of overhangs. Were Spain to leave the Euro, Spain might well say, tough luck. We're not paying that. Where are we supposed to get a trillion Euros?" And I think that is the that's the sense of risk, and to the larger question, this is not money.

This is fiscal, these are assets, this is wealth. So the Euro system, which was supposed to just be the common currency for Europe, has ended up managing a trillion Euros. I forget, but that's the size of the numbers. A trillion euro promise of debt of Spain to the ECB and debt of the ECB to Germany to the German Central Bank.

And that was not the intention of the Euro system to channel these fiscal transfers and tri-fiscal promises and lending, and so forth. Sorry about the long answer, but the minute you say TARGET2, it's like a bowl of spaghetti.

Rasheed: There is a, even today, people even, I would say professional monetary economists, they always conflate or, probably don't conflict enough, fiscal and monetary when they're having their models or even their intuition pumps.

And every time I have a conversation with someone, they say, "Oh, but this particular bond portfolio, but okay, fine". But still, when you think about your totality of things, you can't do that clean separation.

John: Yes. Hallelujah! No, of course. I'm pedaling two books, "The Fiscal Theory of the Price Level" and "The Crisis Cycle" with Luis Garicano and Klaus Masuch, which are fundamentally dedicated-

Rasheed: I have that book here.

John: Ah, thank you. I gotta sell some books. They're dedicated to the proposition that fiscal and monetary policy are always integrated. They're always part of the same thing. Now, in some circumstances, the fiscal part is less important. As the Euro is set up and has evolved, and as our governments are more and more indebted, the fiscal and monetary linkages are stronger, so always and everywhere, inflation, especially, is a combination of fiscal and monetary policy.

Rasheed: Okay. And the next question. Euro skeptics often say that the Euro straitjackets a country that needs its exchange rate. It's a very common comment. If Finland, for example, could float tomorrow, how much would they buy?

Maybe 5% growth? Or would they just crash out?

John: I'm sorry, who could leave tomorrow?

Rasheed: Finland. If Finland were to leave the zone, for example.

John: Finland. Oh boy. It was hard enough to know about the economy of Spain. And now you want me to know the economy of Finland. Now, Finland, it strikes me, as an ignorant American, it strikes me a fairly well-run country.

Norway's doing fine with its currency and Denmark, and it is doing fine with its currency. The UK is doing okay. But should Greece and Spain have their own currency, I think it is a harder question. So this is a… I'll try to be honest, rather than just give my opinion.

There's this question of the "optimal currency area" in economics. Who should share a currency, and who should have their own currency? I think my lovely house in Palo Alto should have its currency, and anytime there's a negative shock, I should get to just print money and offset the negative shock to the Cochrane family balances.

Maybe not. That's too small. So clearly you want some scale. And in Europe, of course, having a common currency helps have a common market and economic integration. The counterargument is first for the smaller. So one, the argument for bigger is we shall be using the meter, sorry, fellow Americans, why should we?

In Europe, every town used to have different units of measurement. That's crazy. We should all use the same units of measurement. We should use the meter and the degree Celsius, and, sorry, America. Okay, we're down to two. America goes its way, and everyone else uses the meter, but the standard of value, why should we use a different standard of value?

So the argument goes. Prices do vary across countries. I just drove from New Mexico to California. The price of gas is like $2 and 50 cents in New Mexico and $6 in California. It's like living in a different country. It's not clear why we have the same currency.

But the big argument is that sometimes it's hard for prices to change. So, if you let the currency change instead, it's easier on the economy to have the currency change rather than the price change. If the economic fundamentals require wages to go down in Spain relative to Germany, it would be easier to simply bring back the peseta.

I hope I got that right. And I'm used to doing Italian examples. Bring back the peseta and devalue the peseta rather than let the wages go down.

So the argument is that Central Banks and their infinite wisdom can artfully devalue the currency just enough to offset various shocks.

Now, when you look at the history of that, I don't know Spain enough, but I certainly know Italy and Greece. How much did Italy and Greece grow because of their Central Bank's artful ability to just slightly devalue shocks? How well has Argentina done by its Central Bankers, artfully devaluing shocks? Or was having your currency in a small country simply a piggy bank for the government to inflate its way out of trouble periodically?

And as a result, nobody would lend money to the government, and it inhibited private markets, 'cause interest rates are always high. After all, we're waiting for the next devaluation or inflation to come along. So, having a joint currency is a fiscal pre-commitment. It says we will not, we may not inflate away the debt this time, and if we default on the debt, it's gonna cause big pain.

You're tying yourself to the mast. As it did to Greece and Spain, they made that pre-commitment. They joined the euro inflation ended. They were able to borrow at incredibly low rates. And they overused the capacity to borrow. So then those pre-commitments all came through, you tied yourself to the mast, and then the ships started sinking.

But tying yourself to the mast was a good thing and should have been exploited more wisely. So those are the thoughts that lead me to conclude that larger currency areas are better. Economic integration, easier trade, and the fiscal pre-commitment that especially countries with weak fiscal institutions, weak central banks will not inflate.

They put that whole decision off to somebody else. I think those benefits are greater than the supposed ability of a small country's central bankers to offset some shock somewhere. And if it's difficult to have prices fall, which is this, that, that is the standard economic thing, oh, prices falling or terrible.

Why then do we have so many laws making it hard to lower prices and wages, right? All of macroeconomics is right, now there is one problem. Recessions are costly because of one thing and one thing only that prices are somewhat sticky. Instead of having central bankers exploit this. Why don't we get rid of all the laws that force prices to be sticky, and then we get rid of the problem?

Now, maybe there's other, you, macro, we don't know what recessions are, but at least intellectual coherence demands that we think about what's called, structural problems, internal devaluation, rather than just counting on every time the Cochrane family finances are in trouble we'll just devalue the "Cochrane dollar" a little bit.

Rasheed: It sounds like, I'm not sure how familiar you are with the Charles Kindleberger key currency argument where he's very, I guess maybe not influential, known in some parts for a particular idea he had where he used currency or money as a metaphor language where it's good to have one world language.

It's good to have a very few sets of languages that people can communicate with. It's better for world peace, for world trade, and for world commerce. Why not have one world currency or at least go towards one in the trend? And it is always a bit confusing to me why the intuition is always the opposite direction because it's not like you're, like, economics training has models.

Even the normal person, the intuition is let's have more currencies. I'm from the Caribbean. The Caribbean proper has a lower population than London yet has 13 currencies.

John: Yeah. And one of the genius things that's genius to the United States is we have one currency, right? Even though economic conditions between New Mexico and California are so different.

So I agree. That's why I started with the example of common weights and measures. I think that it's perfectly clear that there's just no useful purpose and just having countries have separate ones and we don't set, we don't have the Bureau of Weights and Measures say, oh, there's a recession on.

Why don't you cut the yard down a couple of inches? 'Cause that'll help the tailors to move more suits at a lower cost. Yeah, that would be crazy.

Now, what it does mean is, that, is that you have to allow economic adjustments. So the whole argument is that instead of having an economic adjustment in the country, what you have is you devalue the currency to offset the law and demand to try and goose the economy a little bit with inflation to make up for the economic adjustment.

For example, people say it's harder in Europe because it's harder for people to move, and you don't have as much fiscal union as the US has, and so forth. But maybe people moving is a good thing, right? And maybe businesses adjusting is a good thing, and maybe prices adjusting to what they should be, prices having their Hayek signal of things rather than having those signals be obscured by trying to do it via the currency, is a good thing.

Because if Spain leaves the Euro and starts devaluing, all businesses have to devalue the same amount. Maybe not all businesses want to change prices by the same amount. Maybe the tourism industry is booming and that should be raising prices, and maybe, I don't know- what do you make?

You must have silly things that you make in Spain. Those things should have lower prices, the overall currencies, the sum of thousands of prices, half of which are going up and half of which are going down. I tend to favor, yes, this is as much philosophical as it is economic.

Rasheed: There's a central banker I know, he's the former governor of the Central Bank of Barbados. His name is Delisle Worrell. He's very well known for this particular view that you have, which is that Barbados has had the same exchange rate for 40-some years. One US dollar is two Barbados dollars.

It has not changed at all. That's a policy he was well-defined to help create, 'cause he was there when they started the bank in the 1970s. And his stance is this: you never change the exchange rate. You always do fiscal adjustments, even if you think it's more painful, you always do fiscal adjustments.

John: Yeah. So you can see that's a pre-commitment. He's playing a nice game of chicken with the fiscal authorities. "I am not going to bail you out. So you had better mind your manners here." And I think especially for small countries, that makes abundant sense. So, partly, however, I am skeptical for historical reasons of the wisdom of central bankers.

Not because they're bad people. I couldn't do any better.

It's just an impossible task to try to micromanage the response to shocks. And if that were better done, then perhaps there'd be an argument. But you look around the world, and very few central bankers can pull this off.

Rasheed: There's one line from the book that I liked quite a lot.

It was "the treaty's flaw", the treaty for the EU, "is being silent on the issue, allowing an expedient ambiguity, but that ambiguity proved costly." This is, of course, about having a monetary union without a fiscal union. But the book also makes the argument that a monetary union is feasible without a fiscal union.

This is pretty much contrary to the prevailing opinion.

John: Oh, thank you. Yeah. Let me pound my fist on the table! Monetary union without fiscal union is feasible. Now, Europe may want a fiscal union. In some sense, I'm American, so I like my country, and I think moving from the Articles of Confederation to the Constitution was a good thing in the US. Hamilton was a good guy. But you don't have to do it. So, a common currency, like a common set of weights and measures. We don't have to have a fiscal union to all use the meter, and we can certainly define a common currency that we all use, the euro or, for a thousand years in Europe, gold coins.

We all used gold coins, and we didn't have, God knows, we didn't have fiscal union, 'cause Europe was busy butchering each other with various wars for a thousand years. So it's perfectly possible. Now, what it means is that a common currency without fiscal union means that governments that can't pay their debts must go bankrupt.

They must be able to default on their debts. And that was the point where the architects of the Euro, who, as we look back, did a fabulous job, especially when you think about the 1990s, when nobody was thinking about debt crises and financial crises and all the other things that happened.

They thought through a lot of the details, but they were iffy on, "look, if this is a monetary union without fiscal union, countries have got to be able to default, just like companies." If a company can't pay its bills, it doesn't have to exit the Eurozone and start its currency. No! It defaults, and its bondholders don't make money.

They don't get, they get a restructuring, they get 80 cents on the Euro or whatever back. So countries have to be the same way. And they didn't quite wanna say that. Now that's understandable too. We're getting together. This is politically difficult. We're all gonna throw our lot in together.

You, especially I'm not gonna try to do a German accent, but you don't wanna start doing, "Hey you Italy, now if you can't pay back your bills, we're gonna set up the mechanism where you default." That's our example in the book, how hard do you wanna argue about the prenup on wedding night?

We're all gonna be good. Nobody's gonna cause trouble. And there are some debt and deficit rules. If you obey those, nobody will have any trouble. But that was left hanging. Now, of course, the people who put this together did what everybody does on the wedding night.

We don't need a prenup, we'll hash it out later, right? And rules would happen and that kind of never happened. So we pretend that sovereign debt is risk free. Banks are allowed to hold sovereign debt as risk-free assets on their bank balance sheets, even now after the sovereign debt crisis.

So we pretend it's risk-free. We pretend that the ECB won't come and bail everybody out. But of course, the ECB ended up bailing out governments. So that is, I think, the fundamental issue that never got resolved. Yes, you can have a- I'm gonna repeat it, sorry, 'cause it's so important.

You can have a monetary union without a fiscal union, but it means that countries must be able to default. And if they're not able to default, that means the central banks will always come and print money to bail them out, and then they have no incentive to actually control their debt and deficits. And you don't want to have that.

Rasheed: So there is a related argument when it comes to the Euro bond, essentially. So Washington has a deep treasury market. Brussels doesn't have a single safe bond collectively. But is there a real need to have a collective EU bond? It seems to me that the EU should be doing less stuff, and the permanent bond system would encourage it to do more stuff.

John: Yeah, no, we're into the politics of the European Union. But certainly, the next gen EU issue of Euro bonds, I would rate as not an enormous success in terms of debt being issued. With a very clear statement of how that debt is going to be repaid. And then the proceeds are being used widely, wisely on very important investments.

And here, the poster child is Italy's super bonus.

So the Italian government took this money and decided they would give a 110% tax credit for energy efficiency upgrades. 110%.

Rasheed: Yeah.

John: So that means Italians are very creative and entrepreneurial. "Luigi, the bill on that energy efficiency upgrade isn't high enough. Do you think we could maybe gold plate those new windows?" And so, just money went down the rabbit hole.

Rasheed: And Spain, the next gen got just pushed anywhere.

John: Yes, exactly. Now we're into the political economy of debts. The other problem with the NextGen EU is not very clear how it's gonna get repaid.

Let me again, make my ad for Alexander Hamilton. We had a federal government, which assumed the state debts and therefore had US debt to be repaid. But as a result that federal government needed the ability to tax , to tax directly. Not to just have contributions from the member states to pay this off someday, somehow. The federal government had the ability to tax.

Now it was via tariffs, but you wanted a federal government that could raise its own money to repay its debts. And if you're gonna have a Euro-wide bond, you need to have Euro-level taxing authority. And then you need a more functional European-level democracy.

'Cause you don't want the kind of technocrats in Brussels who are there to decide what kind of ham gets to call itself prosciutto and Spanish ham can't call itself prosciutto. Those people can't be in charge of setting your taxes.

Taxation needs representation. Another lesson, sorry. It's the 250th anniversary of the US. So taxation representation is really important, guys. And effective. So now there's this big enthusiasm for the Euro bonds. Maybe we're gonna drive out of the US as a safe asset after the US has a debt crisis.

Only if Europe has a way of paying back the Euro bonds that's more reliable than the US debt crisis. And so much public policy is an answer in search of a question, and you just did that. Euro bond, that's an answer. What's the question? If we define the question, then maybe we can create a safe asset that's useful for repo markets?

Is it creating something that banks can hold instead of holding sovereign debt? There are other ways to do all of those. The one we talk about in the book is, you could take the current sovereign debts and put them in a money market fund or a mutual fund, or an ETF structure, and then you have a diversified portfolio of European sovereign debt.

And one of the big problems is that Spanish banks hold Spanish government debt. Greek banks hold Greek government debt. Italian banks hold Italian government debt. So if any country gets into trouble, its banks get into trouble. Why aren't the banks holding diversified portfolios of European debt so that if Spain goes down, the Spanish banks say, "Okay, we lost 5%, big deal."

Spanish regulators love Spanish banks to hold Spanish debt. And so that's one of the purposes of a Euro bond. But it can also be a diversified portfolio of existing debts. You don't have to create a new instrument for that. For that question, there are other answers.

And if we're gonna go deeper into Eurobonds, let's define what we want? And then how do you structure a Eurobond to be that thing?

Rasheed: I find, I guess, depending on which level of conversation this narrative pops up in. But least on the- call it politics, which is where it mostly comes up in public. On a political level, usually, when, for example, the commission says we should have a Euro bond, it's so they have more money. That just feels like the only contemplation they're making when it comes to this. "We want to spend more on random things; therefore, we should have more money." It's only recently, at least, much more frequently,

recently you will see, for example Christine Lagarde, ECB, trying to use the lesbians be a haven for us money rationale for the Euro bond in this case. But then, here's the other question, then. Even if you somehow have a Euro bond, there's no actual capital market if you want to put the money into it anyway.

So again, your point is like, what's the actual thing you have to optimize? And not even the basic bare bones of the system to have a counterweight to the US reserve currency status aren't even there at all.

John: That's funny. Of course, the Trump administration now thinks reserve currency status was a terrible thing.

'Cause us printing up money and sending it abroad, and they give us stuff for free, that was off. Maybe you could take over that. China sends you stuff for free. There are just so many things in what you said there. So one purpose of a Euro bond- I'm surprised, Lagarde ought to think hard about this.

The ECB has all these national bonds. And is intervening very much to keep afloat , all the national bonds. So one of our proposals is if there is a Euro bond, the ECB may only buy Euro bonds and may not buy, and therefore prop up national bonds which the ECBC's, fragmentation and market dysfunction anytime yields go up.

So be careful what you wish for. You might just get it.

Rasheed: So I want to pick up on that a bit, but I wanna move away a bit from the ECB first. So the Fed has essentially flooded the system with more reserve floors currently, and the ECB still uses a corridor, but it's creeping lower all the time.

Does this difference matter for the inflation fight, or is it just a plumbing detail?

John: So both the ECB and the US Fed are now, I think, the ECB is still a floor in the sense that the deposit rate is the rate that moves interest rates. Okay, let's, lemme try to define things here.

There's the interest rate at which a bank can deposit money at the ECB, and there's a higher interest rate at which a bank can borrow money from the ECB. So market rates are gonna be in between those things, right? If the market rate is above the borrowing rate, then banks borrow from the ECB instead, and that brings it back.

And historically, the ECB started mostly at the borrowing limit. Banks were borrowing reserves from the ECB, and that was the crucial rate. And there weren't many deposits. With the huge QE, there were so many reserves that were on deposits that mattered. Now, plus or minus, I don't care.

The fed is still at the deposit rate because our lending facilities don't work as well as the European lending facilities. But if the Fed ever really wants to lower interest rates, push 'em down, it may find it has to start lending more accurately. So I would rate that as mostly a plumbing issue.

Neither Central Bank is having trouble right now, moving short-term market interest rates to where it wants them to go. The larger question is how much Central Banks can fight inflation by moving short-term market interest rates with abundant reserves?

That's a deep theoretical question. I'm not sure that's where you were going, so I'll let you ask that if you want to go with it.

Rasheed: No, yeah!

John: I would rate that as a plumbing question to first order.

Rasheed: Okay. So in a similar area, generally speaking, you rather a price level, not an inflation target. But now, in the EU, 2021 now finance is administered in the Euro area, how could the ECB sell the idea without really setting off a political earthquake to change how that system is targeted?

John: Firstly, they'd have to want to. Now this is an important question. Let me unpack it for your listeners. The ECB's mandate is price stability. That's what's written in the trade treaty, and the US Feds' mandate is price stability and maximum employment. But the first one is price stability. Oh yeah, that seems pretty clear, right?

Price stability. Both the ECB and the Fed decided to interpret that mandate as 2% inflation forever. Now wait a minute. The meter was designed for length stability, and nobody said you'd cut two centimeters off the meter every year, right? What do you mean by Bureau of Weights and Measures? So, first, they interpret that as 2% inflation.

And second, the ECB is particularly clear about this. But any mistakes are forgiven. So suppose you have a 10% inflation history, you say, "Oh, too bad we're targeting 2% going forward in the medium term." So you might think, for example, as many inflation targeting countries did, that there would be a, it's like five years, and we tied up what was average inflation in the last five years?

How'd you do? Was it 2% or was it 8%? We do not try to get that backward-looking average to 2%. We want our forecasts for the medium term to be 2%. And if we screw up one way or the other, "oh forget it." So now, we have a bunch of issues. If you wanna think about what mandates we want Central Banks to follow.

Do you want them to follow inflation, 2% per year forever, or do you want them to aim for 0% inflation, meaning the price levels stay? If there's a mistake, if there's a spout of inflation, do you want them to have future inflation a little bit lower so that the long-term average inflation is 2%? Or do you want them to just forget about mistakes and try to get back to 2%?

And so what about what happened? Or even a more price level target, suppose the level of prices went up? So this is what happened: the level of prices went up, and then you go back to prices not rising, meaning zero inflation. Was that good enough? Or if the level of prices goes up, do you want them to slowly bring the level of prices back to where they used to be?

Which is, over centuries, the way things were in Europe. Under the gold standard, there would be inflation and deflation. But after a period of inflation, prices would come back. So the level of prices was constant over long periods. Okay, so I keep redefining things.

I hope this helps you, listeners. So, among this plethora of possibilities, I prefer a price level interpretation of what price stability means. And if you have a bout of inflation over a period of 10 years, you will slowly bring the price level back to where it was if you have the capacity to. Why? The meter is what it is. Prices should be informative over long periods. I don't see any need for steady 2% inflation. There are 10 arguments on the other side, which I will not go through unless you ask me. But I don't think those arguments hold water. But the biggest one is that periods of low inflation or deflation are somehow bad for the economy.

And if you look back at those periods they seem to be just fine for the economy. There's a theory that by having low inflation, you're in danger of a deflation spiral breaking out. That never happened, 30 years in Japan with a steady price level. There was never a deflation spiral that uncontrollably broke out.

So I think that's a fantasy. So, that's the main reason not to want it. So that's why I always like the cleanest, simplest answer and price level; that's what I think they meant when they said price stability. And fundamentally, inflation is a set of units.

Do we measure things? Do you measure paintings in dollars, Euros, or Lira? It doesn't matter. You can measure 'em in inches and centimeters or furlongs if you want. The real thing is the real thing. So that's why I like the clarity of units, of measurement.

Rasheed: So the Euro crisis toolkit kept growing: SMP, OMT, PEPP, PSPP, TLTRO, you name it.

If you were to design a pre-approved rescue fund that still keeps markets honest, what guardrails would you put on it?

John: Yeah, I am impressed by the ECB’s ability to create an alphabet soup of acronyms. I thought only the US was the world leader in this, but my hat's off to the ECB.

What each of these was, let's go back to try to unpack these. The ECB started with almost a law, but certainly a tradition, we do not buy government bonds. Because we're not in the business of financing government deficits. But of course, starting with the financial crisis and then certainly in the sovereign debt crisis, and then in crisis after crisis ever since.

And then in the ECBs desire to deliberately inflate during COVID pandemic, they bought sovereign bonds like crazy. But we all understand the danger of unlimited sovereign bond buying in a common currency without fiscal union. It's already a problem for a government like the US that the central bank buys government debt monetizes it, that causes inflation and leads to more deficits.

It's even worse in a currency union because an individual country, if it knows the ECB will bail it out, just borrows like crazy. You mentioned euro bonds. They put in euro bonds because they wanted to spend more.

That's a fundamental misunderstanding of what government debt is about. Spending is always paid for by taxes. It's either taxes now or taxes later. So that if you're issuing government debt, you're issuing promises to tax later. And if you want Euro bonds, you don't want Euro bonds 'cause you want to spend more, you want it 'cause you want to spend now and tax later. But without the tax, later you just get inflation anyway.

There was this tradition, we didn't buy government bonds, but then one by one, they did. And since it was questionably legal, there were several court cases about whether the ECB could even do this. And to their credit, to try to contain the moral hazard, to try to say, if they just say "we buy government bonds, just, call us and say crisis, and yeah, we'll buy whatever it takes."

They didn't want to do that for obvious reasons. They don't want countries to feel that no matter what happens, we'll always come in. So there are always limits, and so on. But one by one, the limits have gone away. Currently, we need a diagnosis of market fragmentation or dysfunction, but since no central banker ever trusted a market, the market's always fragmented, dysfunctional. And the current ones are unlimited. I know I've talked to ECB officials who say, "No, we have all sorts of rules." Markets certainly think there are no rules. But any blip up in, in Italian or Spanish spreads will be met by, "Oh, this is market dysfunction."

Now, in the book, my co-authors persuaded me that some ECB bond buying was useful with limits. And here's the case. And my hat's off here to my co-author, Klaus Masuch, who was basically in charge of Greece at the ECB and put together a lot of these programs.

It came kinda late. But if you have a currency union without a fiscal union and you have sovereign debt, I'm the hard ass. That means you've got default. But there's no default mechanism. So default in corporate debt, there's a bankruptcy court and order of precedence, and there are rules on how you default.

At least you need those rules on how to make these defaultable securities. And what are the rights of creditors? Can they seize assets? How do you get some, and their bankruptcy, like IMF programs, you try to avoid a chaotic default. You try to avoid situations that a current country can't pay back now, but might be able to put affairs in order.

A mechanism that comes in and says, look, we, the collective, the rest of Europe. We were not gonna print money to help your debt, but if you're getting in trouble, we will have a mechanism that lends you money in the short run. In return, you will finally get around to those microeconomic reforms that you've been putting off for 20 years.

You'll free up your labor markets and get rid of a bunch of protections and get rid of a bunch of subsidies, and we'll have a program that credibly gets your fiscal things back in order, in return for support. And so that's the useful sort of institutions involving some limited amount of government bond buying that I think would be important.

First of all, there's always the backstop. A country can default, and it won't be chaotic. If you don't have that backstop threat, then the second step doesn't work at all. Because if we're in negotiations about a rescue plan, but default is impossible, you just sit back. A default is impossible.

Bring it on, right? No. So that has to be there, and it has to be functional. You cannot have a default bring down all the banks. It has to become defaultable debt that is risky on the bank balance, and banks have to account for it and diversify that debt. And so then the second step, you need an institution that can step in and forestall default by providing coordinated fiscal help subject to conditionality; the country will work out a plan where you start growing and you're able to pay back at least some of this debt. Depositors will take haircuts, as in all these things. You're all getting 80 cents, you're getting a rescheduling of the debt, putting off some interest.

Yes. And the depositors, debt holders can't be banks that will instantly fail. You need that sovereign debt to be held by people who can take those risks and earn a premium for it. But those kinds of mechanisms are necessary.

And you asked when you can buy sovereign debts? And in the context of those mechanisms, I think now you have mechanisms that allow you to get through problems without destroying the incentives for countries to issue debt wisely.

Rasheed: So I seem to be the only person in my circle of libertarian people in Madrid who tend to like the idea of a digital Euro, the central bank to the currency project of the ECB. I'm in the very, very small minority in that camp.

I don't know how much you've looked into the actual project of the digital Euro at the ECB. It's a lot more advanced than people think it is, and a lot more sophisticated than people think it is, in my view. But generally speaking, what's your view on a European digital currency, or if you have looked into this particular project, the current architecture they're trying to push for? Especially given that we did discuss TARGET2 earlier. One of the important things people forget when talking about the digital Euro is that the ECB already has a TARGET2 instant payment settlement, so the TIPS system. Which is perfectly suited to run any CBDC project, and it's already technically used pseudo-CBDC by some institutions.

John: Ah, I hope you weren't hoping for a small answer here. You're a libertarian circle in Spain, and there are three of you. Bring the other two on. And I also travel in libertarian circles, and we all get along fine until the question of money comes up.

Why should the government provide money? Scottish free banking! And I am a practical, empirical libertarian. There are a few things that the government can do pretty darn well. And one of them is to provide a currency. Why? Because a currency is fundamentally backed by something.

And so, in the absence of a government, paper money is backed by loans, but loans sometimes go bankrupt. And so there are runs on banks, whereas government money is backed by the present value of future taxes. And that's a darn good backing for money if the government is at all responsible.

Now, true libertarian, so the government's never responsible, but it's a problem of being a libertarian. You get involved in the "should the government issue pilot’s licenses" and go, maybe not. Of the catastrophes lying in front of us, there's 999 in front of privatizing pilot licenses.

And so money is, I think, one of those. Preamble, the digital euro. There's this fascination in the U.S., too, in part, with the blockchain question. So we should separate by digital Euro, do you mean a blockchain, or do you mean a central ledger? And as you pointed out, we have a digital Euro.

We have a digital dollar. It's called reserves. We have completely digital currency that is maintained in a central ledger at Central Bank and is transferable back and forth between banks using 1970s technology that could be updated. Why do you need something else? Now we do need digital money, it's very useful.

I don't carry cash anymore. Most black people don't carry cash anymore, but we kinda have digital money. We have you own an account at a bank, which has an account at, which has euro deposits or reserves at the Fed, and you can digitally transfer that money to someone else. So you got digital Euros, they're private, digital Euros backed by, and ideally in my world, we would have narrow banks that are a hundred percent backed by reserves.

If I were in charge, that's where I'd go. Our plan for a digital currency is narrow banks. A hundred percent backed by reserves cannot fail. Zero financial crisis, zero run ever. And then they transfer money back and forth rather than the Central Bank doing it. Why? 'Cause I'm appealing to your libertarian sympathies.

I like private markets wherever possible. The government is good at providing this asset, a nominally risk-free security. But the government is not great at providing efficient consumer-facing websites. " Oh. I lost my password. Hey, JD Powell, could you reset my password?" When have you seen an efficient government?

If you wanna run a payment system in our countries, you need a massive consumer protection regulation, anti-money laundering scam protection. Private companies are much, much better at actually enforcing government regulation. Could you see the ECB or the Fed trying to implement a website that is compliant with all of its regulations?

It's no way they could do it, let alone implementing the quite effective anti-fraud, anti-money laundering things without bringing the whole thing. So privately run with the government backing i is my answer to the question also because of the privacy problem.

Rasheed: Okay. I was gonna say this project, as you might know, the digital Euro is done via the commercial banks and not via the Central bank, correct?

John: Yes.

If the government watches every single transaction you make, the implications are staggering. We had the Canadian truckers who had a protest against COVID and were shut out of their bank accounts. You wanna run for office, and somebody can leak every purchase you ever made.

Maybe you stopped, maybe you had a receipt for a parking ticket for parking in front of a cancer center. What were you doing there? So that by having it private and then backed by the government, then at least the government needs a subpoena in order to be able to access your financial records.

Now, the digital Euro seems to be deliberately hobbled. So you're allowed to have a digital euro as a person, but it's only 3000 Euros.

Rasheed: 3000, correct.

John: 3000 euros. What's the point of that? And now I have asked an ECB official. And it has to be linked to a bank account.

Because they said, we want this to be a means of payment, not a store of value. What's wrong with it being a store of value? Central Banks fundamentally love banks, and they subsidize the banking system, and they're fairly straightforward about it.

If we put in a digital euro, that is a very low-cost, seamless way of making all of your transactions, you will just store your money in the digital Euro, not in the local bank. And the local bank won't go on and buy government debt or invest in that local supermarket or all the things we love the local bank to do.

So it's trying to maintain the profitability of the existing banks and the structure of the current banking system. And so I asked, "Well, okay. So the way it works is if you spend 1500 Euros, then it automatically refills from your bank account.

What if you want to buy a car? How do you buy a car with a 3000 euro limit? Does it do, six times, and then refill it?" How does a business how does a business make business-to-business transactions with a digital Euro if it's limited to 3000? So it seems deliberately hobbled not to work. And I think the emergent thing is stablecoins, which amount to the stablecoins or narrow banks. If you have a stable coin that is a hundred percent backed by short-term government debt- you understand our Central Banks are just money market funds.

They issue euros or dollars interest interest-paying and they buy government debt. So, a stablecoin, and money market fund, and a Central bank are all the same things. They issue one Euro interest-paying deposit, and they hold government debt. So I think stablecoins are gonna be the big challenge.

Not for any real technological reason. They just allow an end run to the regulatory structure that has been there to defend the profits of the existing banks. And our Fed has rather scandalously not allowed narrow banks to come into being.

Rasheed: Why is that?

John: I have read the document issued by the New York Fed about why they did it, and it is a fantasy of various things that could go wrong. Now, why is that? I have a principle: don't assign motives to people without evidence.

But boy, does it look like they want to keep intact, if not the profits that cross subsidies implied by the local banks. But eventually, as we libertarians know, such efforts fall apart, and stablecoins, I think, are the way to go. The digital Euro, as it currently is, seems designed to assuage a political crowd that wants a digital Euro without creating something that will actually work.

And then there's the question of why we are doing this? Rather than having a central ledger-based, efficient payments system run through private intermediaries that are a hundred percent backed by reserves.

And that was the short answer.

Rasheed: But, so on that the narrow banking idea, stablecoin, CBDC meta idea is sometimes a bit confusing to people. More so because of the profit. Obviously, I know how stablecoins make money, but the intuition, so how then does a company make a profit if they're just doing narrow banking or such a money market fund?

I don't know if the ECB restricts narrow banking. I don't know if they have any here. But what is the basic intuition why people generally, you know, not just ECB or Fed staff, generally do not see why narrow banking is good?

John: There are a hundred fallacies out there.

So the main one is that somehow allowing narrow banks will reduce the supply of credit. The pizza is what it is, and how you slice it up makes no difference. So then it's about a cross-subsidy. The hope is that by allowing banks to have access to very low interest deposits that they will pass along those lower interest rates to lenders out of the goodness of their hearts.

When was the last time a monopolist lowered prices? If you had a monopoly on your inputs, you would lower the price of your outputs rather than just raise your profits. Things go back hundreds of years in a 19th-century economy with a very small federal debt; there was a need for money, and there was a need for lending. So it might've been fairly natural that banks issued notes, money-like liabilities that they used to, and those were, went into the safest kinds of assets they had, which were real estate loans. But that was the 19th century.

So we have enough government debt to back any possible amount of transactions, balances you could need, and much safer. And then that same money, it's just the form of the investment. The same money that is now being invested in banks via government-insured deposits could be invested in banks via equity and long-term debt.

And you would get a better return out of it, and the banks would pass on at the market rate of interest. Now, perhaps they would have to charge higher interest on their loans, but where is the low interest coming from now? It's coming from the taxpayer. Right now, we have a system where the banks issue deposits that are insured by the government, and every time there's a crisis are bailed out by the government.

And that's why the banks can pay such a low amount on deposits and turn them into risky loans. If you wanna subsidize risky loans from the taxpayer, why don't we just do it directly, rather than every 10 years, have a financial crisis and bail everybody out, rather than having a deposit insurance system that is undercharged?

And every time there's a crisis, they ensure something else, like they did in SBB. If you want taxpayer subsidies for lending rates, pass 'em. And, rather than hide it under granting banks this monopoly privilege and these implicit taxpayer subsidies.

Rasheed: So I have two more questions. So around the year 2000 thousand one, the US federal budget was about 4 trillion, and now it's over 7 trillion. And of course, that's not sustainable, that's gonna have a lot of debt pressure. But how do you think the US feasibly gets to a more sustainable budget point?

John: Economically feasible is easy, politically feasible, that's not my job. Economically feasible: reform the insane tax code. Just look at the news coverage of the Big, Beautiful Bill. Oh my god, what a mistake. Horrendous. We can have a tax code that raises revenue for the government at minimal economic distortion, and that would be great. I would just have a value-added tax. If you throw out the income tax, you throw out all the deductions and exclusions with it. You don't have to fight for 'em one by one.

The deduction for mortgage interest, the deduction for employer-provided healthcare, the deduction for my neighbor's Tesla, the Swiss cheese of our tax code.

Just throw the whole business out, the consumption tax is easy. Now you've raised 20% of GDP for the government with almost no economic damage. And there's a whole bunch of tax lawyers and accountants, and lobbyists who can drive for Uber, and it's wonderful. We can stop spending like a drunken sailor.

You look at what the US spends money on. And get outta the way for microeconomic growth. The best way for tax revenue is not higher tax rate, but higher income. Tax revenues is tax rate times income, raise income. And America we're only half as bad as Europe in regulatory sclerosis.

Right now, Europe has stopped its growth. The US growth is half what it should be. So that's the Cochrane program, which will grow the economy like crazy. And also make that easier. What are we gonna do? Both Europe and the US are wonderful places that we've had spectacular economies for hundreds of years now.

Surely we are not gonna go through a debt crisis simply because we can't do the obvious things. Surely we're not going to kill our economies with taxes. Tax austerity doesn't work. It just kills the economy. It does not engender a stable fiscal policy.

And surely we're gonna reform our spending. I use the word reform rather than cut. 'Cause we don't have any external problems. Nobody is invading us. Yeah, we have military problems, but compared to World War II, this is just nothing.

From an economic perspective, it's easy. From a political perspective, that's harder.

Rasheed: Last question. I've always been curious about this weird thing in the US, where it feels to me like the payment system in the US is very antiquated, especially relative to the weight dominance importance. The advanced financial instruments in the US are beyond par, but just the basic payments infrastructure is so old. I can send money to my friend here in, in Finland from Spain instantly. It takes days to send anything from Florida to California sometimes. Is there some reason for that?

John: Yeah. Our banking system is not particularly competitive, and I'm just gonna presume there are regulatory problems. It is so frustrating. I had to make a big payment recently, and my mutual fund no longer has check-writing privileges. So it took two days to get it from a federal money market fund into a bank.

And then I had to wire transfer from the bank, and I could, I had a $50,000 a day limit. So it took a while and 25 bucks a shot , 4% to use Visa and MasterCard. I haven't really looked into it, but my libertarian prejudices say there's regulations that are having the politically powerful feet at the trough, but absolutely, yes, this needs cleaning up.

Rasheed: So, John, thank you so much for joining me on the podcast. It's been a delightful conversation.

John: Thank you, and thanks for putting up with my lectures as answers. Your questions are fantastic, and I hope this has been useful for our listeners.

Rasheed: Thank you.

Watch the full episode on YouTube or follow the transcript below.

Show notes

This episode celebrates Classical Liberalism and Cosmopolitanism: a real-world demonstration that open markets and open minds can deliver prosperity.

• In 1990, less than 1% of the Spanish population were foreign residents. The foreign-born population was even smaller, with immigrants accounting for about 0.5% of residents.

• In 2023, Spain alone accounted for 23% of all naturalizations in the European Union

As of 2025…

• 14% of residents in Spain are foreign nationals.

• Nearly 20% of Spain’s population was born outside the country.

• 1 in 7 residents of Madrid were born in Latin America.

Spain flipped from near-zero immigration in 1990 to one of Europe’s most cosmopolitan melting pots today. We discuss how free-market reforms, EU membership, strong historical links and a now-legendary liberal social scene in the core cities delivered the greatest success story of integration in recent history.

Follow the co-hosts on X Diego: diegodelacruz | Rasheed: rasheedguo

Recommended

• Madrid: The Capital of Capitalism - The Rasheed Griffith Show

• Blueprint for Development: Housing in Madrid - The Rasheed Griffith Show

• Liberalismo a la madrileña: Cómo y por qué Madrid se ha convertido en la comunidad que más crece, más empleo genera, mejores servicios públicos ofrece, más recauda y más baja los impuestos - Diego Sánchez de la Cruz

• La Constitución de Cádiz - Antonio Fernández García

• La tradición liberal y el Estado (Nueva biblioteca de la libertad) - Dalmacio Negro Pavón

• Me gusta la fruta: La historia de cómo Isabel Díaz Ayuso se erigió en bastión del antisanchismo y cambió a la derecha española para siempre - Cristian Campos

• La nación imperial - Josep M. Fradera

• Madrid - A New Biography - Luke Stegemann

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Full Transcript

This transcript was automatically generated by AI and lightly edited by our team. We don’t catch every error, so if you spot one, send us a message/email via shem@cpsi.org.

Rasheed: Hi everyone, and welcome back to the podcast. Today, we are going to be touching on one of the most important topics in Spain and perhaps one of the most controversial topics: immigration. And Spain is one of the strangest outlier examples of rapid immigration and integration of people into the country.

In 1990 less than 1%, less than 1% of the span population were foreign-born. And in 2025, almost 19% of the population here in Spain is foreign-born. This is an increase. And of course, I'm joined by my cohost, Diego, to discuss this topic.

Diego: It's great to be here. As always, I want to thank everyone who's following the podcast, commenting on the podcast, and even asking for suggestions on how to translate it into Spanish.

We've gotten some requests, but it's great to know that people are following and listening, and watching. And yeah, you bring up a great topic for today because indeed most of this growth that essentially, as you said, like a foreign-born population, went from less than 1% to almost 20%, it happened in the 21st century because the growth in the nineties was very limited.

So we're talking about how in 25 years, in just one generation, Spain has gone from having little to no migration. It was a country of migrants. Spaniards were leaving the country on a net basis. To a country where you see one out of five of its citizens being foreign-born.

Let me give you another amazing stat. In the last five years, 80 to 90% of new workers, of new active workers, were not born in Spain. So 80 to 90% of job creation has actually gone for migrants, not for the local population. Those figures are remarkable. And immigration is a contentious topic sometimes in Spain.

But not all sorts of immigration are problematic in the eyes of most Spaniards. All of the Latin American migration has been welcomed with open arms, and that represents the bulk of the people coming into the country. We'll talk about that, and there are some interesting facts.

Rasheed: We'll get to that for sure.

I wanna start on this, before the rise. Back in the 1980s, early 1990s, there were essentially no immigrants in Spain. The first immigration law in Spain was only passed in 1985 under PM González, I believe. What was the context for starting the immigration boom in Spain?

Diego: The context is that you didn't even have a law because you had no migrants, right?

Spaniards have left the country in waves at different points in our history because our industrialization was quite late. There were some waves of migration in the 19th century. Many of them were Gallegos. Galicians, like me. Galicia is a region in the northwest of Spain. And that is why in some territories in Latin America, Spaniards are called Gallegos.

Okay. And then in the 20th century, following the Civil War and after the first years of the Franco regime, which were a time of poverty in Spain because of archaic economic policies, the economy was essentially closed off to the rest of the world. Something that may sound familiar to those who are following the tariff debates these days.

People left en masse this time, mostly to Europe. So, come the 1980s, Spain essentially had to pass immigration laws because it was acquiring what is known as the acquis communautaire, which is essentially the laws of the European Union. If you want to join the European Union, you need to enact a series of laws and regulations.

This was part of it because there was no need to regulate immigration if you had no immigration whatsoever. And for most of the eighties, and at least the first half of the nineties still the case remained that less than 1% of the population was foreign born. So that's the context and the backdrop before all of this happened.

Rasheed: So then what happened?

So immigration ticks up. Very mild in the mid-1990s, and then just boom right after that. So what happened early in the mid-1990s for immigration to start the, creep up?

Diego: If you notice and we'll talk about it in more detail later on. Latin Americans, who represent the bulk of the migration coming to Spain, speak the same language, pray to the same God, and dance to the same music.

That's something I like to say when explaining this bluntly and easily to people who are new to this topic. And that in principle was the same in the eighties or the early nineties, right? So, it is not like there was any change in that sense. The cultural appeal of the country certainly was the same as it is today.

The historical ties between these nations were also similar. So that's not what can explain this, because if it were about culture, then these migration waves should have been coming in for a long time before they did. But Spain first acquired membership in the European Union, then began transforming its economy.

But a significant improvement took place in the second half of the 1990s under President or Prime Minister José María Aznar. Okay. Aznar came into a country where unemployment was higher than 20%. And the currency was often devalued four times in the previous term of his presidency, between 93 and 96. And essentially, there was no economic appeal in coming to Spain.

That's why most Latin Americans were making their plans to go essentially to the US. That was the de facto destination. And that started to change after Aznar came to power and decided that Spain had to join the Euro and had to enact sweeping reforms to get the economy growing and to pay off the debt and reduce it, and to increase the disposable income of Spaniards. Also, the labor market had performed so poorly under González that when he came to office, the socialist prime minister and president who joined in 1982 as president; when he came to office, there were 12 million people employed in Spain.

He left office in 1996. There were 12 million people employed in Spain. So, not a single job was created under his watch, which is 14 years without any net job creation. Four terms. Yeah, four terms. So he was immensely popular at the beginning, immensely unpopular at the end.

He's popular these days again. So, like he's been able to, reposition himself as a statesman. But certainly, what was not encouraged was a mess. And he enacted a lot of supply-side reforms. There was massive privatization, liberalization of industries such as telecommunications, air travel, energy, and essentially labor market flexibility that came with it.

And as a result of all of this, Spain started to create jobs, and unemployment when he was leaving office was closer to 10% after it had been as high as more than 20% when he came into office in 1996. So in those eight years, the economy was transformed fully. Spain was able to join the Euro from the get-go, so did Italy, which was incentivized by Aznar to follow suit and do the same, and migration started to pour in, and it certainly did.

Rasheed: So, just to make sure people are following, Aznar was from PP.

Diego: Oh yeah.

We have two big parties. It's PP and PSOE. And PP is the popular party, which is a conservative party, if you will. And the socialist party is the one that had been in power from 82 to 96. So, 14 years of socialist rule, no job creation, and quite a rigid economy, currency devaluation.

So, on with Aznar 1996 to 2004, there were supply-side reforms, and there was job creation. There is accession to the Eurozone, and therefore, there is no longer a devaluation. That's essentially proven to be a dramatic shift in the economic conditions that Spain could offer to migrants.

Rasheed: One of the dramatic shifts in terms of employment, I thought, under Aznar, was the construction boom.

So from 1997 until around 2006, there were some years where Spain built more homes than Germany, France, and the UK combined. That is just shocking

Diego: Yes. And, however, if you notice the period, most of the housing units that were started were because more family units needed housing. In his first term and most of his second term, that was not an issue. The numbers were staggering. But after all, a lot of migrants were coming into the country. The first million came in just a couple of years under his watch. And so that called for a lot of home development, construction development, and so on.

In later years, when Zapatero, a socialist prime minister, took over as president... We call them the president here in Spain. That's why I keep referring to them both as PMs and presidents. From 2004 to 2007, that's when that reasonable increase in construction just went completely wild, and a real estate bubble was inflated and eventually left Spain in very dire condition.

But that was later on. It did hurt many of these migrants, those who were employed in construction, but we'll come to that later.

Rasheed: So, under the Aznar boom, was there a concurrent policy of trying to promote migration into Spain, or was it like so many things are happening, the migrants just started coming themselves?

Was there also a push factor, or, sorry, a pull factor, to getting migrants in explicitly by the Aznar administration?

Diego: It wasn't so explicit. I guess it was just implicit. We could just argue that if your economic conditions get better and you have labor shortages in some industries, and if the cultural conditions were always there, it just seems like a natural thing. If we just pick someone randomly around Europe today and we tell them, "Hey, did you know that one out of five people living in Spain are migrants and that most of them come from Latin America?"

I don't think that they would be shocked. It sounds natural, right? But the thing is that it wasn't coming in naturally before these economic reforms were put in place. The Euro gives you a lot more purchasing power than the peseta. So it also makes sense because most of these families, one of the things they do when they come from humble beginnings, in many cases, they need to send remittances back home, send money back to their families. It's not the same to send euros as to send pesetas. So all of these factors were changing and evolving, and it just became a natural situation. But most of the push factors in Latin America were also self-inflicted policy mistakes, and we'll touch upon some examples.

The Ecuadorian case is very evident. They went through a hyperinflation in the early 2000s. They also suffered some natural disasters or complications with climate, such as the El Niño phenomenon, which led to massive flooding, very bad crops, and so on.

And essentially overnight, you had half a million Ecuadorians living in Spain, and three years later, there was essentially just a symbolic number of them. They opened the door, and then came the Colombians. More recently, it's been Venezuelans, so it's been ongoing for other nationalities.

Peruvians have never come en masse in one particular period because their country is doing better. But Argentinians have come in greater numbers when the worst times of Peronist rule. So it's been ongoing for 25 years, but it was never an explicit call of " guys, come over". And it was never an explicit push factor on the Latin American countries, saying, "there are no jobs, you need to leave."

It was more of a natural reaction of people just voting with their feet and finding solutions and finding a country that suited them better than others. The US is still the main destination, but Spain has become a strong second.

Rasheed: When you mentioned that if you ask some normal European outside of Spain, "Hey, do you know that Spain is more than one in five foreign?

They're like, "yeah, that seems right." But now that's a thing that just seems so natural because you come to Madrid, go to Barcelona, go to Valencia. Of course, they're gonna think, "yeah, this is what Spain looks like." But 25 years ago, nothing like this was the case in Spain. Oftentimes, when a foreign person comes to Spain, or my friends when they come to Madrid, they would come here, we'd go to a restaurant, and they were like, "Oh, it's so Spanish." I'm like, not a single person here has a Spanish accent.

Diego: I'm Galician. So my experience in my earlier youth with diversity in terms of ethnicity, or like even foreign-born population, was very limited.

I would travel abroad for exchange programs with school, and that's how I would get a sense of the world. But I don't think I ever saw a black person in my first 12, 14 years of life in my city of Santiago de Compostela, not even a tourist. Same for other ethnicities. So that experience has certainly changed, but still today, you see how migration is starting to grow in other territories of the country. Venezuelans, many of them have also gone to my home region, Galicia. Some of them have gone to the Canary Islands, which has great weather, and also even more similar culture in the same laid back and enjoy life sort of approach.

But the Venezuelan population wasn't that large until one decade ago. So yeah. It's certainly been a big shift that happened rather quickly.

Rasheed: It's a very dramatic transformation. I think the last statistics from the European Union relative to Spain are that, within the context of European naturalization, 23% of all European naturalizations in the given year happen in Spain.

Diego: Yeah. And yeah, we represent around 7-8% of its output population. So that shows you that, like we are doing three times more than in principle, you would think. Another great statistic is that in some years we've done 50% of them.

So, one out of two at the peak of the migration flows into Spain. Not all of these flows are from outside the EU. Those that come from outside the EU are mainly from Latin America. There are also many cases of Moroccans coming into Spain, which is a very large nationality in the country.

Diego: And within Europeans, there was a big influx of Romanians. However, these Romanians have now been in Spain for 30 years. They're growing older, and most of them go home. So the Romanian population came here to live their life and work, but they are retiring back home with their Spanish pension that lasts longer in the Romanian economy. That's interesting. But yes, today, certainly a country of migrants. And then in Spain, Madrid is a great example. We're both based in Madrid. Right now, one out of seven people living here is from Madrid. One out of two people working in Madrid was born either in another region in Spain or another country. So this is an open city. It always has been. And it was originally a place where, you know, after all the free market reforms, people from other parts of Spain were coming. Now people from all over the world are coming as well,

Rasheed: And Madrid is a particularly strange scenario. I believe you mentioned in your book that there is this idea of the lack of accent in Madrid, which is a good thing in some respect. " Hey, Madrid has no accent, therefore you're from Madrid." Since when have you realized this, let's say almost extreme, but a good way, extreme Cosmopolitanism of Madrid happening?

Diego: That was an explicit policy pursued under Javier Fernández-Lasquetty, who was the key mind behind the liberal reforms, the classical liberal pro-market capitalist reforms that Madrid has enacted for the last 25 years.

He was a member of the government of Governor Aguirre. He was also a key regional minister under Governor Ayuso. And he was also the Secretary General of a very influential think tank. And he always pushed this idea of the "Nuevos Madrileños", the New Madridian. The concept here is that it doesn't matter where you come from, Panama, China, Morocco, or Ecuador.

You're welcome here. You're just one Madrileño more. And that was the explicit pull factor that was trying to lure in this population, recognizing its value and giving tax incentives and other sorts of advantages to people who were coming into work to invest or to just live in the region.

There was also a natural drive to increase tourism in Madrid because Madrid was underperforming. If you walk around the city, it has an obvious appeal as a tourist destination, but it has traditionally underperformed compared to Barcelona. So with so much economic growth and cultural development, Madrid has outshone Barcelona as a tourist destination these days, and that results in a lot of people getting a taste for it, and then just deciding to live here.

Rasheed: So let's be more explicit on the push factors of Latin America. Because it wasn't always the case that there was such a big need to leave Latin America, but in the last 25 years, 30 years, it's more intense now in some countries, especially the collapse via socialism in Latin America. At the same time, this growth of free market classical liberalism in Spain, especially Madrid, has a big shift in immigration numbers.

Diego: Safety is a significant element when you consider coming to Spain because Spain is a very secure country, and Madrid is a very secure capital. This may sound normal to those who have been born with it, to use the term that the woke universities use.

Those of us who were privileged in that sense, but, so I acknowledge that privilege, but many Latin Americans do not have it. Just ask a Salvadorian, all of the extremes that Bukele has gone to, to have some sense of security and safety in the streets and all around the country.

That's always been an issue. So that was a big decision why people also considered leaving. Considering these other push factors, you have insecurity, which I just brought up. You have socialist experiments that have failed miserably. The greatest example is Venezuela, which right now has more than 8 million people living abroad, which represents 20 to 25% of its population.

They've essentially driven out one out of four Venezuelans with massive inflation, expropriation of private assets and goods, rampant violence on the streets, sometimes higher homicide rates than Afghanistan during the war years. So that's a big driver.

The failed socialist policies in Ecuador, Venezuela, and other Latin American countries have driven people out. And then, just structural poverty is also an issue in Latin America compared to the us and it is also compared to Spain, like actual poverty. Not risk of poverty numbers, but actual poverty in Spain is at around three, 4%.

Coherent with a developed nation. Not, 40, 30, 20% like you'll see in some Latin American countries, even 80, 90% in the socialist countries of Cuba and Venezuela.

Rasheed: So we have now this massive inflow of Latin Americans, Moroccans also, we'll get to that at some point in another episode. But what about the integration?

So from my perspective, I think the integration in, at least Madrid, is shockingly good. But we can maybe push back to see if that's true. But how, from your perspective, growing up in Spain, think about its number in more dramatic ways now?

How has the integration happened? Good. Is it contentious?

Diego: Immigration was never a relevant topic until recently. When it became a hot topic, almost. Everywhere in Europe.

Rasheed: How recent is that?

Diego: The last six years, I would argue. Okay. A bit before the pandemic and these days and there's been a lot of pushback against the sort of migration that does not integrate or assimilate with some of the basic elements of your society, of your economy, of your culture, et cetera.

Because people see someone acting differently, behaving differently, and sometimes there are also some problems involved with it, such as insecurity or crime and or lack of economic integration. So that's become an issue, a huge issue, mostly speaking about Europe, so it's a big topic in Germany, in France. It was a big topic in the election in Italy.

And the UK has also been discussing these topics a lot. Although they're no longer in the EU. As for Spain, I don't think there was any contestation to this migration coming in from Latin America for a very long time because they're essentially filling in for jobs that Spaniards do not take up initially.

Their second generation may be competing in the labor market, but we have more people employed today than we did when all of these waves started coming in. So, essentially, there has been labor integration in that sense. So I don't think that's been a big issue. However, the same is not necessarily true with the Northern African and Middle Eastern migrants.

There is contestation against that sort of migration, and that has become a bit more problematic because there is this sense that these migrants do not always integrate. These migrants take in public subsidies and money, and there is some truth. There is some propaganda behind that discourse.

But I think it is mostly on point when you do see the numbers that crime rates are higher for those groups. Economic integration is lower for those groups, and subsidies are also disproportionately given out to the population coming in from those nations. So that conversation should be had, but it should be had openly and honestly, because if you just target immigration completely, then you're leaving out the fact that maybe there is something that should be done about some of the shortcomings on that end. But all the other incoming migration has been so positive to Spain, and especially the Latin Americans. That would be a big mistake. So it's become more of an issue these days.

Vox, which is the populist right in Spain, has spoken about this extensively, and it has caught on as one of its key or core messages. But I don't think they're targeting Latin Americans either in their discourses, it's mostly focused on the Northern African and Middle East countries, which essentially ties down to Moroccans.

Because the vast majority of them come from Morocco.

Rasheed: So that's a key point. So Vox talks a lot. Talk is perhaps even a nice word to use in this context. They propagate a lot of information about migration to Spain. But even when you check the AI images of the different quotations that they show on Twitter or Instagram, you will never see an image of a Latino.

Never. It's always some person who looks very Arabic or specifically Moroccan in the propaganda imagery. Or for example, it'll go further and have ladies in full veil and so on. They don't ever point out any kind of issues with Latin Americans in Spain, which is a very key distinction when it comes to the immigration conversation in Spain.

It's almost not even implicit. When people have arguments against immigration or migration into Spain, they usually have one kind of group in mind.. We're in other countries. That might be the case also, but it's so explicit, I think, in Spain. And just to give a quick number when it comes to this conversation globally. So people outside of Europe tend to, when they think migration issues, they often think the UK, or I think Germany, for example, now, especially with the AFD rise in particular. So Germany's population between 2000 and 2003 increased by 3%. During the same period, 2000 - 2003, Spain's population increased by 19%.

And yet, when you think of immigration problems, you don't think of Spain? You think Germany or you think the UK.

Diego: And that kind of shows you what I was going for before, when I was saying that most of these migrants that come from Latin America, pray to the same God, speak the same language, and dance to the same music, probably reggaeton these days. Spaniards love it, and it comes from Latin America. So that creates a more homogeneous interaction with the local population. I think on the cultural side, the language has never proven that much of an issue for Moroccans, but they do learn it, but of course it's not the same as it being your mother tongue, as is the case with Latin Americans. And culturally, we are quite separate. For instance, the way you position women in society, and other ways of understanding life. And these cultures are meeting this increasing resistance. And a very interesting case here is the comparison between Madrid and Barcelona.

Because Madrid has a lot of foreign-born population, most of them are Latin Americans. And Moroccans represent quite a large share of the migrant population in Barcelona. The perception of immigration in Madrid is that it has created jobs. It has created businesses. It has created a more plural and lively culture.

If you talk about migration in Barcelona, suddenly the conversation becomes about crime, lack of integration, that sort of ordeal. So that represents a clear example of these differences in the way your migration population is spread. It shows you that the outcomes may be different.

And that case can certainly be made with the numbers in front of you. But I think that it's always important to remain committed to the basic idea that if you make Spain a country where one can work honestly and progress, and make a living, if you don't hurt your neighbor in any way, shape or form and just pursue your own life, everyone should be welcome.

And it's more of defunding the sort of programs that may incentivize non-working type of migrants coming into Spain. And also culturally, I think a greater degree of tolerance should also be in the mix than we see these days with this heightened rhetoric around migration.

And then on crime, you need to be tougher because that's the only way people don't see a perception of injustice. Because if there is more crime coming in from a migrant or a local group, that's not really what should matter. What should matter is the actions of that individual and how they should be treated before the law.

Rasheed: So the point you mentioned just now about culture and affinity in particular, I think that is us sitting here in Madrid, we get what that means. But to spell it out a bit... So, for example, you go to a bar in Madrid and you hear Carol G, who's Colombian or here, or Bad Bunny, from Puerto Rico.

Shakira will come to Madrid and perform 10 concerts in the Real Madrid stadium, and sell out all 10 concerts back to back.

At the same time, you would have Rosalía, a famous Spanish singer would go to Bogotá, sell out concerts every single time she's there.

Diego: And Latin Americans probably support Real Madrid, if they have good taste in football, if they don't, they probably support Barcelona.

Rasheed: On both sides, the Spanish norm-

Diego: The soft power is completely interlocked.

Rasheed: Spanish-born people listen to Latino music. Latino-born people listen to Spanish music.

Diego: The most popular show on Netflix that was ever produced in Spanish was called "Money Heist" in Spanish, "La Casa de Papel"; it was produced in Spain, where it was not a hit. Latin Americans made it a hit, and then Spaniards started watching.

"Elite" is a teen drama, a high school drama. Highly sexualized, though, for high school. But my high school wasn't like. But the Latin American population that watches this on Netflix made it such a hit that it became a bigger hit here. Reggaeton singers reference the Spanish actresses on the show. So that's how much the cultures overlap. It's as if you're speaking of the same conversation. I have students in my university coming from both sides of the ocean, and it's like teaching the same group.

Rasheed: It's a very important thing to explicate to listeners because it's such a close tie. Another point is this idea of naturalization, which we mentioned a couple of times already. So, Spain has a very strange rule in the Civil Code, Article 22.1.

A citizen of the former Spanish colonies, so essentially all Latin America, except Brazil and so on, plus the Philippines, Equatorial Guinea, after two years of legal residence in Spain, they can qualify for citizenship, if you're from one of these countries. Two years is a very quick time. So that's why oftentimes, when you see the data about the population groups that live in Spain, if you're not careful, you miscount. Because after two years, Venezuelans become Spanish. So people in Spain know how to count properly, but oftentimes when you see data from America, for example, I realize no.

That data cannot be correct because they miss this two-year thing. But also this two-year rule that comes to acquiring Spanish citizenship has, I would think, a very strong view when it comes to integration. Because you're not just a person who has a cultural affinity to Spain.

You are now a Spanish citizen, you have citizenship after two years of living in Spain. So that has a very big impact as well. And I think people don't realize how much Spain has put into the legal workings. Again, there wasn't like an implicit call to come, but since you're here and you're already so like us, why don't you become Spanish very quickly?

And you'll see also in the political parties where the political parties in Spain, from PSOE to Vox, even to PP, they have these programs where they know when Latinos come, they join the party because in two years you're gonna vote. So let's just start now. So, even the cultural element of politics is geared towards newcomers as well.

Diego: If you're not a citizen, but you're a resident, you can vote in the local election. That's right. That's interesting. So first off, you can travel visa-free in many cases if you're doing this for travel. So many people actually got their first taste of Spain under the sort of scheme that you just get on a plane, land, and you're here, and you just see it.

Okay, so that's interesting because it gives them immediate access to not just Spain, but Europe. They can travel around. And this is already a tourist visa, but the fact that it's completely free of bureaucracy helps a lot of nationalities. Venezuelans had that, and it facilitated a lot of them coming in to just see what the country was like and whether they would entertain moving over.

And many people who moved illegally also used this visa-free situation to just come here and then just stay without papers, like we say in, in Spanish "sin papeles". But then it's easy to get those papers if you've been working in the shadow economy for a couple of years.

Rasheed: See, that's also a very strange thing about Spain. Spain has this tacit liberalization of open borders for Latin Americans, where you come to the immigration border and they know a large chunk, especially Colombians and Venezuelans in particular, will come into Spain on tourist visas, and just stay for a long time.

Diego: You come in legally, but then you stay longer than you should. Which de facto makes you an illegal alien in the country. But like you said, you get a job offer here...

Rasheed: Just get a job. Just get a job.

If you work for a while, there are normal legal procedures to get your papers, and eventually you can become naturalized. Yes, it will take longer, a few more years than if you just come in legally and have a job from the get-go. But there is this acceptance, this is a thing that happens.

And we aren't gonna push back that hard against it. Spain has had these waves of regularization, even from the time of Gonzales. So there was a regular regularization process where you had amnesty for these non-legal immigrants.

But this thing is not irregular. It has happened four or five times. So I think the biggest wave was under Zapatero. It was like 700,000 people regularized.

Diego: And then, when you do apply for a visa in Spain, for Latin American countries, the acceptance rate is normally 80 - 90%.

That's quite high. So that shows you that if you just want to do everything properly, as one probably should, you're essentially going to be granted that residence permit. Then you have that two-year window in which you can live in the country as a resident, and then you could apply to be a Spanish national.

And then there was also a Golden Visa program in place for those of higher income. And it wasn't necessarily like this trump card that he's outing for, like people that are investing $5 million and then get American residents. Immediately. Essentially, you bought a home, a regular home you could get the Golden Visa.

So it wasn't so much of a Golden Visa. You just invest in a home, then you are allowed to come into the country. So a lot of higher-income, but not necessarily rich individuals who were considered in Spain, decided to come to Spain, so that now they're living here, and they have their citizenship.

They are European citizens, not just Spanish. So that gives them more flexibility, whether they may want to change and live in Italy for a while or whatever, that's part of the deal when you're a Spanish citizen, you're also a European citizen. So that's all that happened quite naturally.

And yeah, like you said, if you notice, although there hasn’t been an explicit call to, just bring all of Latin America over to Spain, the laws reflect the fact that we see this fairly naturally and that there's not a lot of tensions around that, for sure.

Rasheed: There's also this cultural affinity. It's security, but it's also the Spanish values, the much more liberal values of Spain compared to most of Latin America. So this to me is very crystallized when you think of, for example, gay rights.

So there's a fairly popular singer in Spain, La Cruz.

He does reggae music, but it's very gay themed instead of your typical heterosexual themes from reggaeton. And he's from Venezuela. He said I could never make this music in Venezuela, but here in Madrid, I'm a popular singer. Then, when you come to, Barrio Chueca (gay district), for example, you will see almost every gay person in Latin America knows Chueca, and they wanna go to Chueca. So it's that kind of liberal policy. It's also the free market economics, but also the very classical strong value of Spain, which also has this benefit. People come in and they're attracted to it and they want to inhabit it.

Diego: Spain is very tolerant in that sense. Also, there's a lot of intermarriage between Spaniards and Latin Americans. There's a joke about it. "Why wouldn't we do this today when we were doing it 500 years ago?" Referencing the fact that the number of children that were born out of Spaniards and indigenous population in Latin America was extremely high, much higher than in other empires in which there wasn't so much quote unquote inbreeding.

So that blend, that mixture, that fusion it's a reality today. You see a lot of inter-racial couples from both sides of the Atlantic. Maybe not interracial, but both of the same ethnicity, but a Spaniard and maybe a white Spaniard with a white Latin American as well.

And I myself have tried that because I'm married to an Ecuadorian, so I certainly know what I'm talking about. But that's quite recurrent these days. There are even numbers. I may pull a number for you before we end the podcast about it. But I think there's an Oxford University study that shows that Spain has the highest intermarriage rates with the foreign-born population of all of Europe.

And that's the number I was thinking of. We blend, we mix up.

Rasheed: There, there's one thing you said before recording about the deep-rootedness of Spain's more cosmopolitan view to the Hispanic world, which you link back to Cádiz, in the 19th century.

Could you discuss that a bit more?

Diego: Yeah. Some of us on the classical liberal end of things and most people on the conservative side of things, we see the experience and the times of the Spanish Empire as a positive era that led to greater integration, greater globalization shared values, shared cultures, and the, there was a lot of things that were not positive at this time.

But when you notice the things that were going on at those very same historical periods in other parts of the world. One cannot say that the situation was very different. In fact. A case could be made that indigenous populations today are much larger in the former Spanish territories than in the territories of other empires, which would suggest that, instead of suppressing them, there was more of a tolerant approach.

Many of the early human rights theories were constructed under the Spanish Empire. Of course, I don't want to go down a rabbit hole. I'm aware of all the negative elements of the Spanish Empire. I'm just saying that most of the positive ones get overlooked. And so coming from this perspective, that is shared by most people on the center right of the political spectrum, maybe some on the center left, definitely not those further on to the left, which are extremely negative about the Spanish identity today and in the past.

But among those who are, one interesting topic is that beyond the rules, the Indian laws that call for the protection of the autonomous populations of the Americans, and so on. There was a very interesting case, a very interesting example. Right before the former Spanish territories left Spain, they were granted be considered of Spanish citizens. Because the 1812 Constitution, which is a classical liberal constitution that's resembles the ideas of the American Revolution recognizes that the values and the rights enshrined in this charter are given to all Spaniards from both hemispheres, referencing the fact that there were Spanish territories in Europe, but also in America even, in Asia.

So that was quite a progressive approach that classical liberals have held onto, still these days, and since classical liberals are hegemonic and libertarians are hegemonic politically in Madrid, and conservatives are also hegemonic politically in many areas of the country, that has remained the case.

One example, former Franco Minister Manuel Fraga, was very good friends with Cuban dictator Fidel Castro because of the many historical ties between his home region of Galicia and the former home region of Fidel Castro's family, which was Galicia.

Rasheed: Yeah, this is a very fair point.

Diego: Franco and Castro. They're both of Spanish origin. Franco is Spanish. And they're both of Galician origin. So watch out for Galicians, we're dangerous.

Rasheed: So this constitution you mentioned, which in Spain is now referred to as "La Pepa".

This was such an important landmark document in just thinking about classical liberalism in general, but it's not well known in the English-speaking world.

Hence, we're gonna discuss it a little bit. So La Pepa was also one of the core documents that motivated a lot of the Latin American revolutionaries, like Bolivar, for example, to fight for freedom. Not necessarily against Spain in some sense, but the idea of Spain was very different at that time.

So there's some nuance involved there. But the idea was that freedom, respect, self-governance, liberty, those ideas that were discussed in Cádiz in 1812.

Diego: With Latin American deputies. In that constitutional assembly, there were representatives from all the Spanish territories in the Americas drafting that constitution.

Rasheed: That's right. There was a very curious period of inspired history when the monarchy had ended. This is essentially it was a non-monarchical period. They were moving to Republicanism, inspired by the French, inspired by the Americans. So they thought, "Hey, we have this large Hispanic world. We don't want the monarchy, we're going away from the old regime into a more classical liberal Republican regime." And they wanted the people from Latin America, from the Philippines, to come and have a say in what the Hispanic world governed from  Cádiz, in this case, would look like. And that's why they have these people come in from Latin America.

And then that mentality filtered back into Latin America. So this idea of a cosmopolitan Hispanic world it's probably a better term to use.

Diego: You say that Hispanidad? Yeah. That's the concept. In fact, in this podcast, we're referring to Latin American populations as Latinos.

Which is not necessarily wrong. But that concept was pushed more by the French in the years of their influence in different Latin American territories, Mexico being one example. The idea here is that our languages and culture derive from the Latin Empire, the Latin language, so we're all Latinos. But I don't think Latin Americans see themselves as culturally equivalent to or similar to the French. But the term has stuck.

But the more appropriate term, if you want to be very specific about these things, I think it's Hispanic. Because the idea of Hispanidad ethnicity is that there is a common culture, a common history, a common language, and a common set of values, sets of values and goals, even if you wish, that are shared by all of these populations living anywhere from Mexico to Argentina.

And of course in Spain. Sometimes that's also discussed as the Hispanosphere or the Iberosphere, if you want to include the Portuguese and the Brazilians. So yeah, that's always been there in historical terms. And it explains why this exodus of Latin Americans coming to Spain has proven to be natural.

Rasheed: Yeah. Deep links.

Diego: We touched upon crime and problems with integration. There were some problems initially. Now that I remember, with some gangs and violent activity in Madrid. Documentaries are even coming out now discussing the Latin Kings or the Dominican Don't Play.

These were gangs that were active here in Madrid. But the police tackled that full on. So that probably could have been an issue back in the day. But today, the crime rates are extremely low in Spain overall. It's true, they're larger for immigrants, but when you circle the numbers, it's not because of the Latin American immigrant, but rather because of other sorts of migration populations.

So that's why the assimilation has been very easy.

Rasheed: So, just before we leave the La Pepa topic, I think at some point we had discussed this, and you had mentioned that when you were younger, one of the core conversations that got like classical liberals going was La Pepa.

But now it's not the case anymore. It's more of different things like Bitcoin, for example.

Diego: Yeah, 'cause classical liberals and libertarians today, I think, they read less. I'm sorry. But that doesn't mean they're not well informed of the issues of the day. A lot of these younger libertarians and classical liberals know more about many topics than I knew at their age.

Okay. But history, I don't think it's their forte, and in 1812, Spain was under French occupation. And many of the Goya paintings...

Rasheed: Napoleon.

Diego: Yes. Under Napoleon. And the Goya paintings of May 2nd, May 3rd, which are so famous, and you can find them online, of course.

And you can see the Prada Museum. Those represent the resistance of the people against the French invasion. And the Constitution was essentially passed in 1812 in Cádiz. It's right in the south of the country. It's a city where boats would depart to go to America.

So it even looks a bit like Havana. They both have the boulevard with the buildings and so on. So that constitution was like a document that a lot of classical liberals and conservatives used to refer to as much as the Americans do, with their constitution as a precedent for what the movement stands for these days.

And if we're talking about Hispanic integration, it's even more so the case because you had Latin American, South American, and Central American deputies present in that assembly. Like, how more modern can you get? You don't see that today in the 21st century anyway.

Rasheed: That's true. It's always funny how, in some ways, now Madrid is getting back to that Hispanic cosmopolitan life it was 200 years ago.

So one of the issues that comes up a lot in Spain now, of course, is the fertility crisis, which is quite poor in Spain, like most other European countries.

Diego: That's an understatement.

Rasheed: But at the same time, we mentioned this dramatic increase in population, a dramatic decrease in Spanish-born fertility. Spain has not been suffering from this issue. Do you think this is probably one of the key pro immigration arguments as well in Spain?

Diego: It is. Even when they talk about the debt of the social security, they even make these crazy protections, so that hundreds and thousands of migrants will come in every year. That's not necessarily sustainable, not necessarily going to be the case. If you have such an aging population, your economy is going to have lower levels of entrepreneurship, risk-taking, and so on.

And you may become an old museum where tourists come, and not so much active production is an output are done. So that is why we should look at that carefully. Fertility it's down the toilet. It's one child per woman. The replacement rate is almost double, right?

So it's extremely low. The fact that so many migrants have come into Spain has rejuvenated and increased the size of the population, but at the same time, these migrants start having fewer children than they do in their home countries once they move to Spain. And the second generation Hispanics or Latinos who come to Spain have children at a very similar rate. So that's not going to be a fix for the fertility crisis. It can be a fix to having a larger population, but it doesn't fix the fact that you need to have more children to boost the fertility rate. And because we're living in a welfare state, either you boost fertility or you cut down on the welfare state, but you can't have your cake and eat it.

Rasheed: So, one of the counterarguments to a lot of the immigration, even Latin American immigration, is that they say that Latin American immigration is primarily on the lower end of the jobs spectrum. So, lower-income jobs, more remedial things, activities like that. And that may also have borne out in some of the data.

So in 2000, 2022, Spain, GDP per capita rose by about 12,000 euros compared to Germany at 20,000, or even the Netherlands at 30,000. So Spain had, rapidly increasing population. But not. A concomitant increase also in GDP, but this again is the last 10 years, primarily the PSOE.

In this case, is this gonna be a problem?

Diego: I think the stagnation of the Spanish economy is evident when you look at the gap that we have with other main European nations. We are where we were in 1999 in terms of our GDP gap with them. But that's just a comparison from 25 years ago.

Now, if you see how that has evolved, you can read it among party lines because GDP per capita under Aznar went up to be almost on par with the European average. Then decreased under Zapatero, then increased under Rajoy, and then decreased under Sanchez. So these socialists, they do have a habit of impoverishing people whenever they govern.

And Spain has been no different from that. So with a lot of migrants, Spanish GDP per capita and incomes were growing under Aznar and Rajoy, and with a lot of migrants, GDP per capita and incomes are stagnating under Zapatero and Sanchez now. So I think it's a question of poor economic policy making here in Spain whenever the left comes to power, and sometimes the right is not doing the best it should.

In terms of economic policy, say the first two years of the highway weren't that good, but you clearly see it in the convergence or divergence ratios that Spain got closer to the EU average under the PP rule, under the right-wing parties, and further away when the left has been in power.

Same with unemployment and other figures.

Rasheed: So, to conclude, now I want to come back to Madrid. Madrid has been very liberalismo-focused, capitalismo-focused, especially in the last few years. And at the same time, there's been a dramatic increase in foreign-born residents of Madrid, primarily from Latin America.

So now one in seven Madrid residents is from Latin America, born in Latin America. I wonder if that has an impact on the level and strong appreciation for capitalism, especially in Madrid, given that Madrid is itself much more liberal in the European sense. So that's a libertarian in America.

Diego: Yeah, but you make a great point.

You suddenly have so many people coming in. Is that going to change the paradigm? Are these people of different political values, and are they just coming for something else? I don't think it's the case because there's a poll by Ipsos MORI that shows that support for capitalism now in Madrid is 70% higher than it is in Barcelona.

And then you have the votes, which are the best way to poll whether this increase in foreign population has led to less or more of these free market policies. And then you notice the recurring topic of every election that has taken place over the last 20 years in Madrid is that the center has won.

And it has always been with a free market platform. Like the PP has in Madrid, PP can be a lot of things nationally. But it's a free market group. A free market political party in Madrid. It was under Governor Aguirre, it is right now under Governor Ayuso, and a poll just came out yesterday saying that essentially she would get, not yesterday, last week, sorry, that she would get 73 MPs in a regional assembly that sits 165 MPs. Plus, more popular Vox has 12 additional seats. So, essentially, the socialists have been out of power for more than 30 years now in Madrid. And I don't see that happening anytime soon because who were they (immigrants) fleeing when they came to Madrid, the sort of dictators and populists and just bad left-wing politicians that many of the citizens were fleeing?

Ask a Venezuelan to vote for a socialist, and I don't think they'll be very supportive of that. Yeah, we'll see about the second generation, but for sure it's not the case right now.

Rasheed: It's a good point, 'cause I remember I saw the video when Ayuso won, the last election in 2021, and came out with the balcony.

And you see flags, you see Cuba flags. You would see Venezuelan flags, you see Spanish flags. See Colombian flags waving. And that's such an interesting thing.

Diego: I can tell you I was inside that campaign, and I can tell you how happy and how proud everyone was that this was going on.

They've even held events specifically for Latin American migrants and so on. But the fact at the end of the day, like what Ayuso said then, is that we are all Madrileños and we all want to live free. Madrileños from Chamberí, which is a district here in Madrid, Madrileños from Chueca, which is the gay district in Madrid, millennials from Chamartín, which is a Northern district in Madrid.  Madrileños from Cuba,  Madrileños from Venezuela,  Madrileños from Ecuador.

She made this comment explicitly. That was her victory lap. In her victory lab. She decided to stress the relevance of openness in the economic sense against the COVID-19 restrictions, which were ongoing at this time. And in terms of just being tolerant of everyone coming over to Madrid to just work. And by the way, it's slowly becoming a hot destination for Anglo-Saxon remote workers.

Well-paid American and British, and other European professionals, startups, and so on. So that is a topic for another day, but that's also become appealing. Because if it's so appealing to Latin Americans, maybe that gives you an example that maybe it's a tolerance society overall, not just for Latin Americans.

Rasheed: So, essentially, then Madrid is probably the shining city on the hill when it comes to radical cosmopolitanism policies, while at the same time maintaining very key pro-free-market liberal values policy at the same time, which people think is impossible to do.

But Madrid has shown it works, and it works well. So Diego, that is this episode, and I am looking forward to our next topic. We're not sure what it is yet, but it will be very good again.

Diego: We're always back and forth. There's so much going on. But yeah, give us your comments, share it, spread the word. We'll be here next week for the Capitalism Podcast.

Rasheed: That's right.

Watch the full episode on YouTube or follow the transcript below.

Show notes

In this no-nonsense conversation, Professor Carlos Rodríguez Braun — author of El Pensamiento de Milei — helps us decipher the often confusing worldview of Argentina’s president, Javier Milei. We go through the philosophical paths that took Milei from admiring Chicago-school thinkers to openly praising Rothbard’s anarcho-capitalism, and we examine the often jarring contradictions revealed by his alliances with figures like Bolsonaro, Abascal, and Meloni.

Key Points

Anarcho-Capitalist or Just Radical?
How Milei’s shifting stances on economic policy blur the lines between classical liberalism, minarchism, and outright anarchism.

Bolsonaro, Abascal, & Trump—Strange Bedfellows?
Why a self-styled free trader cozies up to staunch protectionists and far-right politicians in pursuit of a new global “culture war.”

Social Policy Paradoxes
Milei rails against abortion as murder but leans libertarian on marriage (at least on the surface) —yet his conservative circle often contradicts these freedoms.

Culture War Gamble
Will Milei’s aggressive rhetoric on “gender ideology” undercut Argentina’s hard-won social freedoms and destabilize his own economic reforms?

The Future of Liberalism in Argentina
With the nation’s midterm elections looming, can Milei deliver on taming inflation and sparking growth or risk discrediting liberalism for a generation?

Recommended

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El Pensamiento De Milei - Carlos Rodríguez Braun

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Full Transcript

This transcript was automatically generated by AI and lightly edited by our team. We don’t catch every error, so if you spot one, send us a message/email via shem@cpsi.org.

Rasheed: Hi everyone, and welcome back to the podcast. Today, I am joined by Carlos Rodriguez Braun, a prolific author and professor of economics and history of economic thought at the Complutense University of Madrid. And we will be discussing mostly his recent book, "El Pensamiento de Milei", of course, that is "The Ideology of Milei".

And thank you so much, Carlos, for joining me on the podcast.

Carlos: Thanks to you. Thanks for having me.

Rasheed: I want to discuss many details in your book. but I remember I listened to a podcast you did at some point. If I believe correctly, you were not favoring Milei to win the election. Is that correct?

That is correct. I only knew Milei from his works, his books, and particularly, through his participation on Twitter or YouTube, all the social networks. He didn't seem to be very trustworthy from my point of view. And being that the alternatives were the Populists, the Peronists, or the Kirchnerists, and on the other hand, the center, people from Macri and particularly Patricia Bullrich, I thought that the lesser evil would be the Macri people. And I didn't think that any case had any chances to win.

What do you think was the central reason why he was able to win? Essentially, he didn't win outright in the first round, but in the second round, he won after the Bulrush supporters pushed their supporters towards him. But in general, why do you think he was able to garner the election?

Carlos: What is the reason you succeed in every aim that you have in life? He's a very talented man when we speak of connecting with people and being capable of understanding was the spirit of the Argentine people. They were really tired and fed up. They were fed up with the populists, the Peronists. And they decided to give a chance to a very strange candidate. I mean, he is very, very strange. He is disruptive in his manners, his style, the words he uses, and the message. This idea that "I will break everything and I will close the central bank and I'm going to dollarize and you are all a gang of thieves!" He is not a very polite man. And the Argentine people decided to vote for him, which was something that I did not anticipate, nor anyone else. I mean, the polls in the first round, as you've just said, didn't think that Milei would be the winner. Argentinians were simply fed up with the government, and with the alternative of Macri, they decided to give a chance to this, this extremely strange man.

Rasheed: So his most characteristic feature that people latch onto the ideology now is this idea of anarcho capitalism. And, of course, this is not the most popular term in social zeitgeist outside academia, for example. How would you characterize what he means by this term relative to someone who would just say, "Oh, he's libertarian or he's liberal in the classical sense."

Carlos: You know, I wrote a book to try to answer that question. I think I have it here. This is the book. And precisely because the answer to your question, Rasheed, it's difficult. Let us put it very simply. If you have the classical liberals, let's say the people who believe in the constitution, that believe in the state and the rule of law. Classical liberals or the minarchists, the people who believe in the state, but it must be a minimum state. Or in the third place, the radical libertarians or anarcho-capitalists. Which would you say, and everyone say that fits better with Milei? Most people say, "Oh, he's, he's anarcho, he's anarcho." Well, the truth is that he could be classified in any of the three groups. And when he won the election, I started to study more, more seriously his works, all his books in to publish this book on his ideas. And I found it rather complicated because he switches from one field to another. He did so, for instance, in monetary policy. He was a Chicago boy. He was an admirer of Friedman and of Robert Lucas, and then switched to the Austrian school. But as you know, there are schools among the Austrian schools. And there are more libertarian or less libertarian, let's say, it's not the same thing, Hayek and Rothbard. Milei seemed to move closer to the Rothbard variety of libertarian ideas. So this is the last step he took before getting into the Casa Rosada, the presidential house in Argentina. So the answer to your question is, we actually don't know, but he has been moving towards a radical libertarian stance.

Rasheed: So this radical libertarian stance, the Rothbardian aspect of it, feels like it's very centered on economic policy, but doesn't work when it comes to Milei's view on social policy. And it's not the most explicit, but we can get some details. But do you think that the basic characterization, would this still fit in the social view of Milei's policy?

Carlos: Very interesting. And also it shows the complications of Milei's ideas. The first thing I started to study about Milei was his economic policy. I mean, that is pretty obvious. He's a professional economist. And he has written mainly about economics before he jumped into politics. But then he went into politics, and he started to think and to write and to say a lot of things about many subjects. And then we come to things like social policies. This is interesting because on the one hand, he's very opposed to abortion. Extremely opposite. Has repeatedly said, that abortion is a crime. Well, then you would say he can be classified then among the conservative, more religious.

He is a religious man, by the way, he was a Christian. Now he has converted to Judaism. So you would say very easily, he's a conservative. But then go into marriage. And he not only approves the marriage of people of the same sex. He has said- I sympathize with this position. That politics and the state should have had nothing to do with marriage.

That, after all, it's a contract between free people. So you want to be married through your religion, you can do it. If you wish to sign a contract, you can do it. So on the one hand, he can be very conservative. On the other hand, he can be very libertarian, as in the example of marriage that I have just mentioned.

Rasheed: So he's a complicated man.

In your book, you discuss how he would go to the extreme and say, "Oh, the state shouldn't be involved in determining who should get married." But that somehow doesn't ever convince me of anything. Because the rationale for why the state isn't involved in marriage is not the religious aspect, of course. It's because it is the rights attributed to you. The reason why you want to do it in a really real way is because of the state aspect of the contract.

Rasheed: You can get married in church and not have it solidified by the state anytime you want. But the real reason why it's a debate is because of the rights, the taxes, all the other state instruments that you get with marriage.

Carlos: That is very true. The involvement of the state in marriage is relatively a recent phenomenon. It's from the 19th century. And of course, marriage is much older than that. In the Christian tradition, we cherish the first miracle made by our Lord Jesus, and that is in the wedding of Cana where he turned water into wine. I like that miracle very much. I think it is a very politically incorrect miracle. I think we would be put in jail if we did it today. So, of course, marriage is an institution with thousands of years in age and the state involvement is very recent. Let me tell you a little bit of a story of Argentina. In many countries, the state and the church fought when the state started to try to monopolize the institution of marriage. And in Argentina, the fight was so rude that Argentina and the Vatican broke diplomatic relations. And there was a time when there were no diplomatic relations between a Catholic country like Argentina and the state of the Vatican, because precisely of this. So, coming back to Milei. I think that Milei would sympathize with the idea that marriage is an institution between three people of thousands of years of age. You can be religious or not, but he would favor the state not being involved in this institution.

Rasheed: There's always something I find, when you ask people who are libertarian, or say they're libertarian, especially indeed these days, around the melee aspect of this term. When it comes to gay marriage, for example, I find it a very interesting coherence test for thinking about libertarian social philosophy, in the sense that Milei, to my knowledge, has never explicitly said, Yes, I am in support of gay marriage.

He would usually say, as a disclaimer in my view, "Well, I am in support of any free people doing this and doing that, because marriage should be a contract between people." In the world we live in, it is not the actual reality. It is a very specific state-granted idea. And also, many people around Milei do not favor gay marriage, explicitly.

And these are people whom he had a lot of intellectual salience, like Agustin Laje, for example, Nicolás Márquez, for example. They're explicitly anti gay marriage. Even people in his government, for example. I'm sure you know that very famous quote with Mondino, the former minister of foreign relations, where she likened gay marriage to having lice in your hair.

It's like, "Well, if you want to do it, that's you, that's your thing. I don't like it." But that metaphor is so strong in her worldview. So I do wonder how salient those kinds of things are to Milei.

Carlos: Indeed, he has not been explicit. We are always speaking about Milei before. Okay, because Milei in power, that's a different story. Milei hasn't been very explicit in the sense of saying, "I am in favor of free gay marriage." But I wonder if it is strictly necessary to clarify that. As far as you say, I don't want the state to regulate this. But I think you're right. He should stress the idea that a contract between adults, free people, he didn't mention explicitly, as far as I can remember, the gay marriage.

Rasheed: So, because I always contrast that reality with, for example, someone like Isabel Díaz Ayuso, here in Madrid, where she's very explicitly in favor of those. No disclaimer, no additional commentary behind it, she'll very explicitly say, yes, we're here, very Spanish, it's a thing, let's do it. I always find that contrast quite stark.

Carlos: I think that is true now we are, we are moving on. People they ask me, with what figure of Spanish politics could you compare Javier Milei? And of course, the answer, you've just said it is Isabel Díaz Ayuso, perhaps more than any other Spanish politician. Now you have to keep in mind that, specifically in the case of gay marriage, Spain, I believe, is much ahead of Argentina in terms of legislation. So I think we have to take that matter into consideration.

Rasheed: Okay, so something I glossed over a bit just now, which I want to focus on in this, this is one of the, I find often criticized aspects of Milei, this aspect of his alliances, where he is saying, I am an anarcho capitalist. I am a big supporter of Rothbard. I believe that many times he said Rothbard is his greatest intellectual influence on his political philosophy, at least currently. But at the same time, he has the strong support of like Bolsonaro in Brazil, for example, Kast in Chile, Abascal in Spain, and Meloni in Italy.

It would not seem logically consistent for him to be such a big supporter of these people.

Carlos: Of course, it is not logically consistent if we, minds in the Milei, before politics. Now, once in politics, and once you participate in an election, you win, you have your forces, and there are two extreme positions. One is I don't want to negotiate anything. So I have to leave politics and return to my university chair or my professional activities as an economist. Or I would negotiate everything. So Milei as any other politician, by the way, is in the middle of these two extremes. You keep your principles and you sacrifice your political life.

Or you do everything for your political life, sacrificing all your principles. No. As a matter of fact Milei has done precisely that. He's in the middle. He comes to Spain and he comes hand in hand with Jose Abascal, the extreme right-wing politician, by the way, a friend of Donald Trump, as we've seen recently. And so, what to make about that? When, when Milei came in last summer, there was a meeting in Diario La Razón, and my friend and co-author, Juan Ramón Rallo, whom you know, asked Milei precisely this question. What are you doing with people,  Jose Abascal?

Rasheed: What are you doing with like Jose Abascal or Donald Trump? People who aren't liberal? Why are you meeting with this kind of politician?

Carlos: He gave a double, and I think a very wise answer. The first, he said, "he's my friend. When I was alone in the political world. No one paid any attention to me. Abascal was the only politician in Spain who treated me kindly, invited me to Spain, and respected me. He has always treated me as a friend, and I help friends." That's one answer. I think it's a nice answer. The other, the second answer, is a political answer. And he says, he said, he said to Juan Ramon Rallo, listen, " Abascal and me, we do not share many things because I am a more, I'm a free trader, libertarian if you wish, classical liberal, whatever. I believe in liberal ideas. And Abascal does not." But, he added, "we share the same enemy. And he said, our enemy is the left, the socialists, the communists, the populists. We share those friends, those enemies." And so, that was the explanation. He said to Juan Ramon Rallo, you must not, you should not demand from me an extreme identification with all the ideas of the politicians that surround me.

That would be ridiculous, would be absurd. In politics, remember that wonderful book by Max Weber, " The Politician and the Scientist", in which he divides these two kinds of people. The politician negotiates and makes compromises. The scientist never does that, because the objective of the scientist is the truth.

You don't negotiate the truth, okay? But in politics, it's not the same world.

Rasheed: So that would be Milei’s attempt to rationalize the libertarian populist strategy of Rothbard and the so-called paleo libertarian approach to governance. I share a sympathy where I think, sure, this does make some sense, you do have trade-offs in politics, nothing's ideal.

However, again, from my perspective, why I'm asking this question, it doesn't seem merely as a strategic alliance. It genuinely feels like he goes the extra mile to outright support these kinds of people. For example, Abascal is not in power. It's a very unlikely scenario where he becomes Prime Minister of Spain.

Bolsonaro, for example, is not in power. There are many reasons to question why you even want him to be in power, Even given the reality of Lula. It's somewhat questionable why, you want Bolsnaro in him as a person to be in power. Meloni is in power, which is fair, but he's not simply doing economic policy with Meloni, who is the prime minister of Italy.

It goes to a different extreme in my view. I do question. Why does he go to so much effort into being so close to people that goes, to me, beyond strategic alliances against left-wing media?

Carlos: The short answer always is I don't know. But trying to elaborate a little bit, perhaps his point of view is that the great lines in politics may be changing. The orthodox ideas may be changing. The support by the people of the old, left, or right ideas is diminishing. If you have this long view of a change in the waves of ideas, perhaps it is rational, formulae, to say " if this world is changing, if ideas are changing, perhaps my position should be, try to navigate this, this current, whatever, My possible allies can be and, and whatever the great differences I may have with them, but perhaps, I mean, I should I should follow Trump." Trump is a protectionist. I mean, this idea is as far as Malia's idea of anything anybody could imagine. I mean, he has never backed any other position, but full unilateral free trade. And now you see him in hand with Donald Trump, who is a protectionist and boasts of being a protectionist. So how can we understand this movement? I think. This is the long answer, as I told you. All these people, even Meloni and Bolsonaro, believe that something is going on in the world of ideas. And if they are right and something is moving or is going on in the world of ideas, perhaps the movement is not irrational, though it is very strange, I must admit it.

Rasheed: So in his book that he co authored, "Libertad, Libertad, Libertad", in the introduction, which I think Milei wrote himself, was a reference to Michel Foucault that I was surprised by, where he mentioned that fundamentally, In terms of economic long term policy, political long term policy, the thing you have to do is first you change the people.

That's the Michel Foucault line. And this idea, essentially now of the culture war was kind of embedded in that. But now, post-presidency, his approach to constantly referring to la batalla cultural, the culture war, is just so dominant in his discourse of everything he does. Why do you think Milei has such a strong, strong interest agenda, if you want to call it that way, on the culture war and trying to adjust it in a particular direction?

Carlos: I think that this is because he believes that ideas matter. He believed in that. And I remember many years ago, I interviewed. Hayek in Madrid, he was finishing his last book, The Fatal Conceit. And I mentioned this phrase that Keynes wrote at the end. He said that ideas matter more than interests. And I remember that light illuminated Hayek's face and he said, "Yes, yes, Maynard was right!" Well, I think that that Milei goes along with Hayek and Keynes in this, and he believes that ideas really matter. Now, one thing is to say that ideas matter, another thing is to say that you can shape the world according to your ideas.

That's a very different thing, and that puts us in the field of social engineering. Or as Adam Smith put it, the man of system, who thinks that he can play with the people like they were chess pieces.

I think that he believes the battle of ideas, in the cultural war, if you see. But that puts us in an interesting problem. Milei is not a man of ideas any longer.

He sits in the Pink House in Buenos Aires. And when you are in politics and you make compromises, then you have problems. Because people who were convinced and who share your ideas can now raise their hands and say, "Listen, what about the ideas that you had two years ago?" "What about, what about dollarizing the economy?"

"What about closing the central bank? What about, what about, what about?" This is a very delicate point. We are going to see the political result of that this year. In October, we're going to have the midterm elections in Argentina. The polls say that the people are keeping the support for Milei, but I don't know. In any case, you have problems.

You are a politician, then you say "Yes, the battle of ideas", and you keep changing ideas or you keep making mistakes. The last one, of course, is Milei's support of this crypto token, the Libra, which I think is terrible, terrible. Even in the best possible scenario, that is, that he made a mistake, there's nothing more than that, which is very serious.

You and I can discuss Bitcoin or Libra or whatever. But if we are presidents, heads of state, you know what we have to say about cryptocurrencies? Not a word.

a single word. Not a single word. So that is the list of political costs that Milei, of course, will have to bear.

Rasheed: So, again, sticking to this idea point, if Milei is interested in ideas, then you have to take seriously when he starts discussing ideas, or when he shifts his, call it, set of ideas to different dimensions. So, for example, again, when you read your book, when you listen to Milei from three years ago, four years ago, you know you see a lot more influence of ideas. For example, like your ideas are liberal, liberalism, you have Alberto Benítez Lynch, you have  Jesús Huerta de Soto, you see those kinds of people really kind of flowing through the thoughts of Milei. But now, ,post-presidency even explicitly, for example, you have him quoting, citing, sharing stages with, for example, like Agustin Laje, who calls himself somehow libertarian.

I don't think in a very sophisticated way you can think of him as a libertarian thinker. Milei always, for example, pushed him on Twitter. His books, for example, Milei, give endorsements on the book jacket. For example, the book La Batalla Cultural by Laje. The four people who endorsed the book are Milei, Bolsonaro's son, and Ben Shapiro.

That's an instant combination itself. When you read people like Laje, there is very little strong libertarian philosophy in it. But it feels like Milei is just pushing that substantially more than   Huerta de Soto, for example, these days.

Carlos: That is because you're right. I think that is because Laje is influential among the right-wingers in Argentina in a way that my good friends Jesús Huerta de Soto or Alberto Benegas Lynch are not. They are influential in the world of the intellect of ideas, university, whatever. But when you, when you speak of fighting the battle of ideas in Argentina, I think that is much more influential again. You have a problem. You have a problem. People will raise their hands and say, “Listen, what are you doing with people who are not libertarians?” By the way, in the libertarian family, not everyone agrees with Milei. I have to tell you a story. You know, the story of this book. Friends of Milei, they haven't liked it because I don't speak well of him. But the enemies of Milei don't like it either because they think I don't criticize him enough. And among the liberals, there are discussions about Milei. I mention in my book, to give you just one name, economist and journalist named Roberto Cachanosky, a very well-known figure in economics in Argentina and a very old liberal. He criticizes Milei's ideas and politics as well, but in any case, in what you said about Laje, you're right.

Rasheed: Do you think, from your perspective, on average, or let's say, on net, the discourse on liberalism has shifted in a good way in Argentina now that Milei is president?

Carlos: You know something? This is the only thing that matters to me. I don't care. I don't care who the president of Argentina is. I don't care about politics. There exists a shift in the ideas of the Argentinians towards a more liberal standpoint. I think, I hope, but perhaps it's just wishful thinking. I think that is a real phenomenon. Perhaps it's wishful thinking because just imagine if Milei fails.

He can, I mean, things can go wrong. In Argentina, they have been going wrong for a century, so they can keep on going wrong.

If things go wrong, people will say it's not only Milei's fault, it's also liberalism's fault.

It's a very serious point you've touched. I think it's the point. The point is not Milei, it's the liberal ideas. Let me tell you why I think the shift is a reality. Milei has taken some measures, some liberal measures with very good results. For instance, he has freed the housing market, the rent market. Argentina has like many other countries, has a long tradition of rent controls with the usual consequences. There are no rooms for rent. No flats, no houses for rent.

There are all these kinds of negative consequences. And he freed the market just like the Germans did after the Second World War, overnight. Overnight, he said, "This market is free and anyone can make any kind of contract with any conditions you wish." And it worked, and people saw that it worked. I think that is a very positive measure and really thinking of the long term prospects of the ideas of liberty. This is the thing that people can see that liberty works, that it is good for them, not for the great companies or the banks or whatever, for them, for the ordinary people. Another thing. Imagine that inflation could be controlled. That would be an extraordinary sign. It's very difficult, and that puts us in another technical, difficult question of the exchange rate and the use of the overvalued peso to control inflation or whatever. If inflation comes into control, microeconomic freedoms with good results and extremely important, growth.

If Argentina started with these three blessings, then you could solve even the public finance problem, even the debt problem. But you have these three things, micro reforms in the liberal sense, control of inflation, and economic growth. You're not having the three in a full sense, but I think we are moving in the right direction.

Rasheed: So, my final question before I ask that again, I recommend people to read Carlos' book, it's very, very important to read. Final question, there is some discussion in Argentina, in the politics and society and journalist circles right now that given Milei's very hard focus, or at least intellectual focus on the culture war in Argentina, but also globally and coming off the heels of his, call it controversial, to put it mildly, controversial speech in Davos last month.

It had a really strong social backlash in Argentina. There are many people now saying, but is it the state of Argentina, in terms of social libertarianism, social liberal policy, liberal social policy, that is actually what you do want to have? You do want to have these people with their, you know, different sexualities, different female things, all these different concepts that Argentina already has, at least in Buenos Aires. There is this risk of Milei trying to push so much into the, call it, counter direction of what he calls the virus of woke, or gender ideology. That there is a risk of even trying to unsettle the liberalism of Argentina that came, that come to a point after years and years and decades of social struggle and so on, and that then would kind of make his economic policy at risk because, as I said, if people go backlash against, Milei, particularly, ironically, this is unexpected, ironically for the social things that he says, it could unseat the economic progress that his government could have made or probably, definitely is making. How risky do you think this gambit is of Milei to be pushing so hard?

It's kind of like what the philosopher René Girard, he says: “Be careful what enemies you choose because you will become them.” And how risky do you think this gambit of Milei is that his social policies or social ideas, in you know, the world of my days that we talk about many times, can unseat his economic progress in government?

Carlos: Rasheed, my friend, I think you have to ask me questions that I'm able to answer.

Again, the short answer is, I don't know. But yes, we have to admit the risk is there. Of course, of course it is risky and as I told you, things can go wrong. Allow me to end this very nice discussion, with a view of the past. We old people tend to look at the past, not like you, these insolent youngsters. But

Rasheed: Mm-hmm

Carlos: Argentina has a recent liberal, prosperous past. Not many countries have that. Of course, the Egyptians were rich 4000 years ago, but they have forgotten that.

Or Italians or Greeks, or of course the Spaniards. But Argentina was a very rich and prosperous country about a century ago. That is when my grandparents were born, and I spoke with them, and the images of the rich past are present. You can walk in Argentinian cities, particularly Buenos Aires. People are amazed by what they see, and they believe that there's something wrong with the extraordinary beauties of the of the buildings that you have, and you go to the Teatro Colón, one of the first opera theatres in the world. That is where Enrico Caruso wanted to go to sing, there, there! And Arturo Toscanini, the great, the great artist. And you can see that. And of course, that is a contrast with what happened since the time of my grandparents to our times. Which is a continual decline. The decline and fall decade after decade and generation after generation. And if you look at the ideas that Milei was pushing when he presented in the election and he won, he continually was repeating this idea of the past. And I think that is a very good point to try to make the Argentinians believe that if they were able to build that, those buildings, that wonderful country which attracted millions of immigrants from all around the world, which had one of the greatest income per capita in the world. If they were able to do that, not very long ago, just a century ago, perhaps they can do it again.

Rasheed: Thank you, Carlos. This has been a very insightful conversation, and thank you again. Thank you so much for coming on the podcast.

Carlos: Thanks to you.

Episodes 1 & 2 are now available on YouTube, Apple Podcasts and Spotify.

Check out episode one on Spain’s transition to a democracy below:

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Check out our other releases this week:

Disgruntled Musings, Episode 12:

Red Flag Republic, Episode 4:

The Rasheed Griffith Show: “The Barbados Dollar Should Die”

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Show notes

Nostalgia can be a powerful force. This is extremely evident in the musings of our discussion on Jamaican Dancehall. Join us for a tea-time chat on Reggae’s vulgar, and culturally rebellious cousin.

Dancehall is a rather vibrant and colorful subgenre of Reggae rooted deeply in Caribbean culture, but the similarities are surface-level at best. The genre is criticized for its overt vulgarity, hypersexualization, and at times, problematic lyrics which have exported varying levels of lawlessness from Jamaica to its neighbors and beyond.

Besides its lasting impact on language through the introduction of crude and derogatory terms like “Chi Chi Man” to the greater Caribbean, Dancehall has also been a potent vector for homophobia and other forms of discrimination throughout the region.

Are we bashing it? Yes. Will we stop singing it? No. Herein lies the great contradiction. Despite the criticisms leveled above, dancehall is recognized as an enduring and significant part of Caribbean identity and is firmly entrenched in contemporary depictions of “Caribbeana.” In this episode, we explore if it is possible to reconcile these attributes, and the genre’s ironic transition from a tool of oppression, to a tool of protest against itself.

This episode features strong sexual themes. Listener discretion is advised.

Recommended

• Why is the Caribbean so Homphobic? - Alice Evans

• Imported Stupidity - Disgruntled Musings with Shem Best

Full Transcript

This transcript was automatically generated by AI and lightly edited by our team. We don’t catch every error, so if you spot one, send us a message/email via shem@cpsi.org.

Rasheed: I want it to be known that I didn't want to do this episode.

Shem: I want it to be placed on the record that despite what we are about to do, What we are about to say I love dance hall. I mean, it's one of my guilty pleasures, you know? Um, I, for one, will be licking up the side of the van whenever, you know, Dutty Wine comes on. Did you ever hear about the girl who injured herself dancing to this song?

Rasheed: Neck, right?

Shem: The neck, when she just fainted because the neck spin was a bit too much.

That is my relationship with dancehall. You know, it's brain rot. You know, it's not good for you. But you just can't, you know? Like we have all been shouting "World Boss!" That man's a murderer.

Rasheed: Yes, he's a murderer. Saint Kartel and...

Shem: We canonized him.

Rasheed: Sometimes in the Philippines or Spain or somewhere else, I go sometimes I just play some Popcaan because I guess have Stockholm syndrome, perhaps.

Shem: We had a discussion on this earlier this year about intellectuals descending now and then to tell the public, "Hey guys, I listen to this too." Ladies and gentlemen, Rashid Griffith listens to Popcaan.

Rasheed: Busy Signal, Movado Kartel, Lady Saw.

Shem: When you're standing on the subway, and people think that you have a pensive look on your face, you're standing, you're well dressed and everything, and you got your AirPods in. What you're listening to...

Rasheed: It's not that often. It's not that often. No, let’s not get carried away. I am surprised we're even gonna say this, but we should give a trigger warning for the episode.

Shem: It speaks for itself. We are about to do a music episode on Dancehall. Viewer discretion is advised.

Rasheed: Highly, highly advised.

Shem: If hearing very vulgar language is not your thing, just put this... If you have kids nearby, put the headphones further onto their ears. I'm just kidding. Just no no kids. This episode is fully mature so you have been warned.

Rasheed: And We're gonna have to repeat a lot of the lyrics because many people are not gonna understand.

Shem: It's in Jamaican patois and we'll try our best to bring the concepts up. We can't bring them down. They are in the basement. There will be times when we're going to be reaching because we are not sure where this metaphor is going. We'll be reaching. We'll be trying to give context.

Rasheed: No, no, no, no, no, no, no. We know where it's going. It's going nowhere. There's no metaphor.

There's no lyricism.

Shem: We are spoiling it right here, right now, guys.

Dancehall, I love it. But at the same time, this is cultural ash at its finest. Something has burned here. This is the remnant and there's nothing to be gained from the existence of this genre per se.

Rasheed: And on that point, our first song.

Rasheed: Shem, do you wish to explain?

Shem: Siddung pon it (English: sit down on it), siddung pon it, siddung pon it. Sorry.

Rasheed: Do you wish to explain what this song's about, Shem?

Shem: This song is about the struggle, I'm kidding. This song is just sex.

Rasheed: It's just sex.

Shem: It's not just sex, you are expected to do this in the club, mind you. When this plays in the dance hall, people will be basically dry-humping each other to this song.

But I do want to give just the only positive we're going to take from this. The notes that he's hitting.

Rasheed: It's called Auto-Tune.

Shem: I was trying to give him some credit. And you just took it away, they're gonna burn you at the stake for this.

Rasheed: So yeah, so this song, 'Pon Di Cocky', by Aidonia, is what you get on the tin.

Shem: It's what you see. There's nothing deeper to this.

Rasheed: Nothing. Before we dive into the lyrics and the song, I do want to emphasize, listeners. This is not some small, element of English Caribbean music. I heard these songs when I was going to school, on the bus, on the van, on the radio, on the TV, on everything.

Shem: This is pretty universally known.

Rasheed: This is fundamental Caribbean cultural music. Again, English Caribbean, of our childhoods, our teens, our early adult years. This is not some side thing. So, we aren't talking about this merely to be crude. Although it's kind of funny, it really is very important to understand a very vibrant but not necessarily great aspect of Caribbean culture and a window into an awkward element of current Caribbean sociology.

So do keep this in mind as we go forward in this episode. This is weird. I have never been so trigger warning on anything I've ever done before.

Shem: We're not apologizing because it's not us. It's not us.

Rasheed: Yeah, I didn't do this.

Shem: Let's take a peek behind the curtain for a moment here.

Rasheed and I recorded this directly after a reggae-themed episode. So we sat there and we researched the history, the historical context, and whatnot. There's none of that here. We are going from one of our most insightful discussions and now we're just listening to a man sing about "Sit down pon di cocky".

So-

Rasheed: Exactly.

Shem: -When I say we are tired... But we must do this. This has to be done.

Rasheed: It's important.

Shem: It is important. This genre of music has proliferated throughout the entire Caribbean. Well, the English-speaking Caribbean, to our knowledge. And it is the first time that, at least in Barbados, the government has gone, "This might be bad for you", and I didn't go, "You sure about that? What are you trying to keep away from me?" This is the first time I went, "They may have had a point." Because Dancehall is blamed, and rightfully so, for a lot of the degeneration of certain facets of Barbadian society. Specifically, we have something now called 'Van Culture'. Context listeners, Barbados’ transportation system is separated into two parts.

You have the public service, which is the government-operated buses, big blue ones. And then you have the private service vehicles, which are basically taxis that ply the same routes. And these taxis, even though it technically is against regulation, play music and the music they choose is not necessarily the radio.

A lot of the time it has been dancehall.

It's primarily dancehall. And to add insult to injury here, school children take the PSVs, the private service vehicles.

Rasheed: We took them.

Shem: We took them as children. So our ears were young. We had green behind the ears and we were going to school with this playing at maximum volume.

So we're deaf. Not only are we deaf, but the last thing we just heard was Idonia telling us that premarital sex is perfectly fine. Let's do this. I don't know.

Rasheed: I mean, I wish that was all he said.

Shem: That's all I'm going to talk about. That's all I'm going to say. What I am flabbergasted about here is how there seems to have been nothing that we could have done to stop this, that wouldn't have been just plain old censorship. This is now an important cornerstone of Caribbean media. It's actually made it out of the Caribbean. Now we have sanitized versions of this in the United States through artists like, Stefflon Don. And I, for one, I don't know. We're not ashamed of this.

We know we are not ashamed of this. The feeling we have is that we don't know how to explain why this is. Because as I've told Rasheed earlier, in its early stages, Dancehall did have some sort of message. It was hot off the heels of reggae. It did take influence from reggae. It could be considered a subgenre of reggae.

So the themes of violence and fighting and whatnot, violence as a way of pushing back against oppression in a very drastic situation. They were there, they were right there for the picking. But Dancehall seems to have just gone, "Okay, what I'm going to take here is the violence." And it didn't take anything else.

It just took the raw vitriol.

Rasheed: Oh, violence, sex, and violent sex.

Violence, sex, drugs.

Shem: It took the, the, the primordial pieces of reggae and did nothing with it except lay it bare.

Rasheed: But what does it say about us that we like it? That's a different... we'll get to that later. Before we go on, I need to play a song. But I also want to point out that this song, is not a male-only genre.

The women have their equal share of perversion and perverted lyrics as well. I will play this song by Lady Saw.

Rasheed: Growing up hearing lady saw it desensitizes you from anything Americans call vulgar.

I mean, not only in this song, of course, but now that you have, like, "Wet Ass Pussy", and all these others, I'm like, "you need some Lady Saw. That's nothing. That is tame."

Shem: Yeah, 'WAP' ain't got nothing on this.

Rasheed: Nothing. Compared to the song Lady Saw goes into, or not even her but Spice, for example. We will get to Spice later.

But, you have such a desensitized view of lyrics and sexual content from a very early age in the Caribbean.

Shem: What I can, again, this is me reaching here, I'm reaching for some positive aspect to give you Rasheed. Please don't shoot this one down like the Hindenburg. The guys in Dancehall objectify the women just out there, flat out, just right there.

But now we have equality here because the women, the women have decided I can do it and I could do it far more raw than you.

Rasheed: Yes, that's right. That's right.

Shem: The female place, women's place in media in the Caribbean just cannot be understated. The power that women hold in the music industry in the Caribbean cannot be understated.

Lady Saw and Spice are prime examples that anything you can do, I can do twice as X-rated. And I, I, I have nothing. My hands are in the air here. I don't know.

Rasheed: So, it's interesting to- (Madrid police sirens in the distance) What did you say, Shem?

Shem: What did Lady Saw say?

Rasheed: So it's, I think, worth it to reflect on the hypersexualization of Caribbean culture and not only via dancehall, although dancehall is by far the most explicit, obvious way that this has happened. But it's not only from Jamaica. Barbados, Trinidad, Via Calypso, via Soca, and Carnival have the same thing.

Shem: You would think we're one of the most sexually repressed people on earth.

Rasheed: Given the extreme homophobia that's normally from some kind of like super puritan Christianity, but we don't live like that.

Shem: Okay, so context gain. Almost every island has a carnival. And I've watched over the years. In the short space of time that I have been on this earth, I have watched the costumes at carnival devolve,

Rasheed: shrink.

Shem: Devolve.

They've gone from a bikini to a thong, a thong-piece swimsuit. One year in Barbados' Crop OverKadooment festival, there was an uproar because one lady wore paint. She took a cue from the Brazilian side of things and she just came in in paint. Everything was laid there to bear.

So in terms of hyper-sexualization, the Caribbean is no stranger. We have sex. We have sex. We're going to put it there. We probably shouldn't bring your kids. But the irony in the people here are worried about kids at a pride parade.

Rasheed: That is a worthwhile thing to bring up. Because if you go to Kadooment, again, some elements of Pride are even more vulgar than this.

But if you do go to a Kadooment parade, Jamaica, well, Jamaica not so much. But like Barbados and Trinidad, and you see what their people are doing on the street, in their roads, publicly, it's not substantially different from a pride parade in New York. Except for literal, actual, full-on sex, you see sometimes at a pride parade.

But, it, it's very similar.

Shem: We've got scantily dressed men, scantily dressed women, scantily dressed men dancing on women. Lots and lots of alcohol use. We promote it. The festival is sponsored by sponsored by rum.

Rasheed: It is and most calypso songs have lyrics about drinking rum. You know, I had I have so many ideas for essays. I feel like in every episode I mention some essay I have an idea for, that I haven't written as yet.

I have an essay titled "Drinking Rum and Caribbean Nationalism". Because sometimes it's so intertwined with it. Your cultural products are rum and calypso and soca, and they intertwine to a point where it's like, "If I start drinking Amethyst from the Caribbean?" It's a complex issue.

But yes, go ahead.

Shem: Now that you bring that up, it is absolutely wild that there was a National Council on Substance Abuse. They were guaranteed a job because one of Barbados' primary exports is just rum. To the point where. I, for one, will be looking out, sorry, for this essay you're going to write.

And if you write anything bad about the rum, it's going to be me and you.

Rasheed: I want to say though, the first time I saw someone throw up from being drunk, I was in London. It's an underlying point to how early we started drinking and developing tolerances.

Shem: Just means that Londoners are a bit weak now.

Rasheed: That's what I think too.

But you know, going back to this dance hall thing here. So we do have this bare metal vulgarity about many elements of Caribbean culture to a point where it kind of complicates the issue of the gay aversion element. We aren't a Puritan-type society.

We are very vulgar, but yet this particular vulgarity, the vulgarity of the body, and the gay aspect of homosexuality are seen as so far away from what could be palatable in the Caribbean. And I think that's just, you know, poor imagination at some points.

Shem: Give me a moment. I'm gathering what little thoughts you could possibly, you know, scrunch up on this. It's a form of hypocrisy on our part, by the way. Just keep in mind that most of these festivals happen on the weekend. You have carnival Monday in Trinidad, which is hot on the heels of Sunday, which is when most people go to church in Barbados.

One of the bands in the Kadoomin parade is the 'Walk Holy Band'.

Rasheed: Yes. I forgot about that.

Shem: A church is literally in the parade. Mind you, there've been, uh, there've been uproars over the years of people dancing on children in Barbados. And you know, that's seen as a taboo.

Rasheed: Van men.

Shem: Oh, boy. So we've doubled right back to van culture.

So continuing the van culture debate. There's a trend in Barbados of the conductors of the vans of the PSVs that collect the money, praying on younger girls, especially those in secondary school.

Rasheed: High school.

Shem: In high school. Believe it or not, conductors make good money.

Rasheed: Good?

Shem: Compared to the rest of the island, conductors make good money.

Rasheed: They make just above living standard.

Shem: They make enough to entice an unassuming and rather naive young person.

Rasheed: Like 14, 13, 15. Yeah, these are actual things.

Shem: To give it all up for a KFC snack box.

Rasheed: Not the best thing to joke about but we are from the Caribbean here.

It's not actually too much of a joke. It's also true.

Shem: We did touch on the desensitization of abuse, and sexual abuse in the context of the Caribbean in the Rihanna episode. Go ahead and check that out guys, one of our better episodes out there. You will love it. The hypersexualization and how we in the Caribbean are numb to it now. We come to expect a certain level of outrage from anyone outside.

I think now we pride ourselves on how people outside perceive Dancehall.

Rasheed: I don't know if we pride ourselves. I think it's more loose if we just don't have the shame. It's not the same thing. I think it's a bit different.

Shem: I'm gonna say we have a bit of pride on that because the first thing I've done sometimes when I meet someone from outside the Caribbean, I'm like, "You should listen to this."

Maybe pride is the wrong word. What I'm saying is we take an avid interest in the reaction of others when they encounter dancehall for the first time.

Rasheed: But they usually can't understand what they're saying though.

Shem: Sometimes.

Rasheed: Oftentimes.

Shem: Oftentimes they can't understand what they're saying but some of them have music videos is what I'm saying.

Rasheed: Ah, yes, the videos. I forgot that too.

Shem: Music videos. A lot of them have music videos. That's why. I don't know if we're gonna play, are we gonna play Ramping Shop?

Rasheed: Um, next.

Shem: You know what? Hit it.

Rasheed: So, yes...

Shem: Let me take a swing at this one. Let's go. Now I think the most telling thing about this song is you can tell the sort of person you're dealing with when you hear the introduction. How do I word this properly? There are two types of people, Rasheed, that will hear this tune and immediately start dancing.

One person will be expecting 'Miss Independent' by Ne-Yo.

Rasheed: Yes.

Shem: And that person will be most confused.

Rasheed: Yeah. Also American.

Shem: Usually American. The rest of us are like, oh, 'Romping Shop' and we are ready. This song features two of the most vulgar dancehall artists on the planet. They have cornered the market on sex.

Rasheed: One woman, one man. Yes.

Shem: And have decided, "You know, the best thing we could do is collide."

Rasheed: We need some lyrics because unfortunately, we need to use English not Creole, because people are not going to understand how extremely vulgar.

Shem: Now, here's the thing. Obviously we're not going to go through all the lyrics, right?

Rasheed: Yeah, for sure.

Shem: But I think we should go through our favorite lines.

Rasheed: Okay. Yes, please. Please.

Shem: And I'm sorry, I'm going to steal this from you out the gate.

"Cah me haffi wine pon di cocky like dis. Kartel spin me like a satellite dish."

Now, besides a listener graphic lyrics warning, I should also advise that, apparently we have athletes in the Caribbean, so you really shouldn't attempt some of these stunts that you're hearing. Spice and Kartel are having a sexual encounter.

Rasheed: So earlier up in the song, just to open it up properly.

Kartel said, and I found this strangely poetic. He said, translated to English proper. "My penis is longer than a knight."

Shem: A nine?

Rasheed: Longer than the night.

Shem: Are you sure?

Rasheed: I'm sure. I am sure.

Shem: No, that's not the official lyrics.

Rasheed: Uh, well, who made the official lyrics? Kartel definitely ain't put out lyrics for this song.

Shem: No, he's not a lyrical genius. He might be. Maybe we just don't understand it. I'm not just saying this because I have the lyrics in front of me.

This was my understanding of this song. The song says, "Me cocky longer than me, nine", and nine is a gun.

Rasheed: I understand that too, but there are some other lyrics that I saw that say else as well. That's why I said more quotes as well. I prefer mine.

Shem: Fine, but no matter what he's humble bragging about the size of his penis.

Rasheed: Yes. In the opening lines of his song.

Shem: We should probably speak about the homophobia immediately in the opening of the song. So "And every gal grab a man. Man to man, gal to gal. That's wrong." That's self-explanatory.

Rasheed: Yes.

Shem: They're setting the stage off the bat, it's Adam and Eve, not Adam and Steve guys.

This song is being played in the club and immediately he's like, "Okay, you know what? Find somewhat of the opposite sex".

Rasheed: It's funny he says "scorn them." Yes, that was also said as well.

Shem: So every time we just reinforce.

Rasheed: Yeah, even in this song. Why would this be even brought in?

These songs are already particularly super hyper-heterosexual but even here, even in this song they said "No, scorn them, batty (gay) men".

Shem: It's like we had to refresh the homophobia. It was getting a little low. So we had to top it up.

So they're having sex. Spice is enjoying it a lot. You know she's saying she's never had any like this. She's enjoying the positions, but the one that goes spin me like a satellite dish? Please don't attempt this, listeners.

Don't do that.

Rasheed: And they said it over and over. There's a part of the song that I can't figure out what they're trying to say. Cause what I can hear them saying feels hilarious. It is "Deal with your breasts like me crushing Irish." I can never figure out what he's trying to say at that particular point in time.

That particular element, I thought was hilarious.

Shem: He's out of prison now, we can ask him.

Rasheed: Oh yeah Kartel, also Movado, different guy. Kartel went to jail for murder. Murder! And while in jail, was still making music, and people were still, supporting is an understatement.

They were like, yo Kartel, "World Boss", Saint Kartel, essentially.

Shem: He's been canonized as Saint Kartel.

Rasheed: Yeah by far the most important dancehall singer ever.

Shem: Yeah. Keep in mind that we've been laughing this whole time. I can relate to this lyric "Til me belly cramp up"

But also it should be noted that the line "man for man", is repeated.

Rasheed: Yes.

Shem: It's at the beginning and the end. So they're like don't be gay and then at the end, it's like, “Okay, we've just done all that. So guys, remember, please don't be gay.” I think this might be one of the most iconic dancehall songs.

Rasheed: Oh, easily every person, our age, and younger and also older, but every person, our age in the Caribbean, that speaks English.

Shem: I'm going to have to take a shower after this.

Rasheed: So I'm going to head to the next song.

Rasheed: So Shem, This is probably the most infamous dance hall song. You meant to say.

Shem: Problematic.

Rasheed: I said what I said.

Shem: You meant to say problematic. And we are part of the problem as well.

Rasheed: Yes, we are.

Shem: I know if this plays in the club, we will be singing it.

Rasheed: And this is the absurd thing about Caribbean culture that it's hard to enunciate sometimes because this song, has to be the most homophobic ever, right? Has to be.

Shem: Literally calls for the killing of the gays.

Rasheed: Yeah, burn them. Burn the gays. This has to be the most homophobic song ever. And yet, I remember very vividly, the very first time I went to a gay party in Barbados. This song started playing, and people started dancing. That says a lot about Caribbean culture.

I mean that scene alone says a lot. But also, I play this song sometimes in my house and unironically enjoy it.

Shem: Same. Same. If you see me making gunshot gestures towards the sky at a bus stop, it's most likely this, that's the only thing that can make me break character as an NPC (video game reference: non-playable character).

Rasheed: To be clear, we're both gay, from the Caribbean, and we are making these comments about this song.

Shem: Don't come for us. Don't come. Oh, my God. I cannot. And this played in Panama.

Rasheed: Oh yes.

Shem: I was at a club. I was at a gay club in Panama. And this played and there was a brief moment when I was like, "Oh, the DJ made a mistake" and I was looking around everybody was going down and I was like, "well, you know when in Rome."

Rasheed: But the thing about Panama is that we both have this experience.

Most people in Panama hear this song and have no idea what's being said. This played on the radio. We have a mutual friend, we were in his car, and we were driving somewhere. I forgot where we were going and this song came on on the radio in Panama. Panama does not have very good English and certainly no Jamaican dialect is very common.

And I was like, “Do you know what this song's about?” He said, “No, he thought it was some party song from the Caribbean.” It's just a whole other thing. And then I explained the song and he was horrified, horrified!

Shem: [redacted] was there?

Rasheed: I'm not calling names. I don't know why you're calling names.

Shem: Redacted, redacted, redacted!

So, you listeners, my Panamanian friend, when I went to that club, as I was dancing and going down, I told her these people in here have no clue what's being said. And then she goes, "But I do. I know what this is, I know."

Rasheed: How does she know? I told him, that's how it happens.

Shem: Those are the ones you gotta give a little side eye to. It's like, so you know what it means. I don't want to know what made it worse, the fact that she knew what it meant or the fact that she was straight.

Rasheed: Look, this song really does underlie a very peculiar thing about Dancehall. It is excessively homophobic.

Shem: It's contradictory.

We kind of just accepted it. We are vehemently push against the intrusion of certain cultures. We see the LGBTQ movement in the United States as an incursion of culture. Conservatives here see it as an incursion of culture, but there has been no successful and significant fight back against how dancehall has essentially spread across the entire Caribbean.

Because it's seen as Caribbean culture now. It is entrenched. It is universal across the Caribbean. And if you ask me, this should have been seen as foreign. This should have been seen as an invading cultural asset that definitely should have been shot down at the border.

It should not have been allowed to get as far as it has gotten. And yet here we are, you and I singing burn the gays in a club to this song.

Rasheed: In Barbados.

Shem: In Barbados of all places. So at the same time, we want to see rights but also burn the gays.

Rasheed: It's the strangest thing. I always say it's very hard to explain properly. Caribbean music is just so entrenched in how our worldviews are formed. Music is so part of our society, our body, essentially, that even when we have very concrete worldviews, we can't get the music out.

Even though we very clearly understand what the music is saying. Because it's almost like this background noise at a point in time. This is a Caribbean element that I am displaying, that I am performing in. But it doesn't actually mean that much to me lyrically. It's more of the actual sensation that I am getting from this song.

Because people don't really know or care what the lyrics of Dancehall mean. You bring up this conversation like, "Oh, that's a weird lyric." And that underlies something very peculiar about Caribbean musical genres.

Dancehall distills Caribbeana into just sensations and it's not really artistic at that point. It's almost just a mechanical thing to do and it's a very weird thing to become so prominent in a culture that really did prize artistic merit.

Shem: You know, I think the most lasting impact of this song is how the word Chi Chi Man is now a permanent part of Caribbean vernacular. It has joined the likes of ‘Fish’, ‘Bulla Man’, and now we have ‘Chi Chi Man’.

Rasheed: Batty Man.

Shem: Batty Boy. Uh, prickle, Barbados.

Rasheed: I forgot that one.

Shem: Prickle is unique for Barbados, cause it also means homeless.

Rasheed: Oh yeah, I haven't heard it in a long time.

Shem: It is the weirdest thing. Now we have this contribution. We have Jamaican slang that is now permanently enshrined. And it's not been modified at all.

Rasheed: We introduced this term to someone very recently in Dublin. Alice Evans, a very, very good gender researcher from the UK, and she wrote a blog post about homophobia in the Caribbean and she references this song. Because I think it was you who actually told her about this song, right?

Shem: Don't implicate me

Rasheed: We will link the blog post in the show notes as well about why the Caribbean is so homophobic. She has a very interesting hypothesis on this which links back to the number of men versus women in the Caribbean from slavery. But you know it's weird and not weird to talk about homophobia and dancehall in the same sentence.

They are explicitly linked because all Dancehall lyrics somehow lead back to anti-gayness. And you can't really separate the two ideas. We try to pretend we can, but we cannot.

Shem: Dancehall's culture is just, in a critical way, juxtaposed to homosexuality. It doesn't feel like they should be able to coexist, but lo and behold, I think this next song might just prove us wrong on that.

Rasheed: So, you introduced this song to me after I was sending you gay reggaeton-themed music from Madrid, because, of course. I think I made a point of, "Wouldn't it be hilarious if there was a gay-themed dancehall song?" And you were like, I got you.

Shem: Why do you keep implicating me?

Yeah, I was like, "Hold on, let me check my shelf." Somehow we've come full circle.

Rasheed: This is the absolute absolute. Yes.

Shem: This is the epitome of everything, reggae, dancehall. So we've somehow we've come right around. Now dancehall is being used as a tool to fight the oppression of dancehall.

Rasheed: Yes!

Shem: You heard the snippet, "Fire bun, this fire on that, but my man is essentially going to get me wet enough to quench all those fires."

Rasheed: Exactly.

Shem: I mean, being homosexual aside, bars, bars. You have turned the oppressive nature of dancehall on its head by using that very tool of oppression.

Rasheed: It's clearly oppressive in very clear ways. But also, it feels like this is the absolute conclusion, not in a bad way, of Caribbean culture.

Given that we actually enjoy dancehall, of course at some point in time, the thing that you are ridiculing, you're going to use that thing to actually say, "No, we can do this too." It's not like it's like a counter dancehall song.

It's a pure dancehall song.

Shem: And on his merits, it is good, it is good. It's good. If you're homophobic, I'm so sorry. Maybe find the instrumental?

Rasheed: Wouldn't it be hilarious if a Jamaican dancehall singer takes this rhythm and sings something else? Oh, that would be just the best.

Shem: With the batty man rhythm. I for one would, because you know, you still have a lot of spin-offs of the same.

Is there a gay reggae?

Rasheed: There's gay reggae? Not that I know of. Reggae is a fairly neutered genre these days, but it's not a problem in that sense.

It was not super sexual. Yeah.

Shem: But the thing about you either live long enough to die, the hero or live long enough to become the villain. Dancehall became its own villain. With that one song to me. Let's be very honest.

It is oppressive. As I said, it is attacking homosexuality, but at the same time, you'd be remiss to find one homosexual that explicitly lists dancehall as an element that makes them feel uncomfortable in the Caribbean.

It's kind of just accepted as that is the Caribbean in much the same way that we've somehow accepted the church and all of its homophobia as a mainstay feature of Caribbean life. It's like, that's a whole different topic. The church gonna church. Dancehall gonna dance hall.

Rasheed: This might, this might start a whole thing because I can see more of this being produced for sure.

Shem: Mind you, they produced this from the safety of the United States.

Rasheed: This is Canada or something like that.

Shem: Yeah. But,

Rasheed: Diaspora music is still Caribbean music Shem.

Shem: You're absolutely right. I, for one, do have a sense of pride.

Rasheed: Yeah.

Shem: Behind this song. It exists. It will join my playlist.

Rasheed: Oh, I did want to reference just that gay reggaeton theme song. It's not a reggaeton episode, but reggaeton comes from dancehall.

So I'll just like, play a little thing here and we'll come back.

Rasheed: Yeah, so gay reggaeton and gay dancehall, kind of come at around the same time. I'm very excited by it in many ways, because, again, reggaeton stems from dancehall rhythms. So, having La Cruz, who's singing this song called Easy Boy, he's from Madrid. He really pushes the gay themes in the music.

And it's a very innovative use of these genres. I don't want to push that word too hard because I have my thoughts on the artistry of the genre itself.

But having these themes that are usually attacking and reggaeton is also being hyper-sexualized, just not as vulgar as Dancehall, but these two super hyper-sexualized genres being then used by gay themes. That's the kind of evolution one would theoretically expect, but not practically receive. But now we're getting it.

And I find that a very interesting thing. We would have never imagined gay reggaeton or gay dancehall when we were in high school.

Shem: At least on the dancehall side. Dancehall traces its roots back to reggae, which is a tool of protest, and it's only fitting. Now Dancehall itself is being used as a tool of protest in a region that is known, and renowned for using music as a method of voicing pressing issues.

You couldn't have done it better. I say, well done.

Rasheed: I am here for the batty man party.

Shem: Here.

Rasheed: On that note, we will end this shorter episode because I thought it was very important to discuss that song in the Caribbean and I'm sure we'll be revisiting these themes going forward in the next few Caribbean culture episodes.

Shem: God, I'm gonna need a stiff drink.

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Full Transcript Below

Show notes

In this episode, Rasheed is joined by Lord Sewell of the British House of Lords, for an insightful discussion on education, race, and the socio-political dynamics in the UK and the Caribbean. They explore the myths of systemic discrimination, and the evolving narratives surrounding immigration, colonialism, and identity.

Mind the Gap
Lord Sewell highlights the challenges Afro-Caribbean students face in the UK, emphasizing the impact of family structure and socioeconomic conditions on academic performance. His program, Generating Genius, seeks to address gaps in STEM education by providing long-term mentorship to nurture talent.

It’s Complicated
We critique broad racial generalizations, emphasizing intra-group differences. Lord Sewell draws comparisons between Caribbean and African diasporas in the UK and the U.S., attributing disparities in performance to cultural and structural factors rather than race alone.

Legacy
Here we examine the persistence of colonial narratives in the Caribbean and the UK. Lord Sewell surmises most anti-colonial movements and discussions are performative, and calls for embracing the positive aspects of British influence while addressing present challenges more pragmatically.

Lord Sewell - UK.Gov

Lord Sewell - UK Parliament

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Britain's Misguided Shame - Alexander Chula - The Rasheed Griffith Show

Colonialism: A Moral Reckoning - Nigel Biggar - The Rasheed Griffith Show

Colonialism and Progress - Rasheed Griffith - CPSI Deep Dives

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Full Transcript

This transcript was automatically generated by AI and lightly edited by our team. We don’t catch every error, so if you spot one, send us a message/email via shem@cpsi.org.

Rasheed: Thank you so much, Lord Sewell, for joining me on the podcast today.

Lord Sewell: Thank you. Thank you for having me.

Rasheed: I'd love to talk first about your program, Generating Genius, because there is actually a similarity between us in that sense. So, I run a program at the Mercatus Center, called Emergent Ventures, Africa and the Caribbean, where we provide grants to persons primarily in Africa and the Caribbean doing different innovative projects, mostly science, and policy. It could also be artistic works and so on. So we have a very particular interest in essentially generating genius or finding talent, funding talent.

And I was very curious about what led you to start this particular organization in the UK.

Lord Sewell: There were two things that drove this really. One was programs that maybe were kind of targeting for example black young people in particular who tended to avoid the sciences or that didn't really come up in their thinking.

Most of the programs are in sports, a lot of art stuff, and development of leadership, but not science itself and technology, and how that works and how you can link to science industries and STEM careers and develop yourself as a scientist.

So that was one strand. I saw there was a gap. The second was, that the existing programs out there in the UK tended to be one-off things. So they tended to be things that were just done in the summer with a group and then that was it, it's done or a week or whatever. What I was interested in doing was doing a program that was about nurturing the same individuals over a long period of time.

And for me, a long period of time would have been six or seven years. I'm just staying with those same students and actually watching them grow. These programs seem to be called pipeline programs. And I saw these operating in America. What happened was the same group would keep coming back to the university or to the college every year.

And that cohort then grew in the program. And I thought that was a very attractive way of working because you could then monitor change and really be effective. It had issues in terms of scale, but I thought I would do that. So that was the key motivator for doing that program.

And in the background to that, I'll tell you why Generating Genius has changed. Now at the time, and we're talking about back now, 2002, something like that, the numbers were still quite significant around African Caribbean boys being the key issue in the country in terms of achievement.

So that was again, another reason to respond to that group specifically, the numbers showed that. So those are the key reasons for the program.

Rasheed: I hear frequently from UK commentators that Afro-Caribbean males tend to underperform in the UK, but I remember a similar statistic in the U. S. where Afro Caribbean as a group tends to outperform other groups in the U. S. Why do you think there's that disparity?

Lord Sewell: Yes, it's really strange. I mean, when you start trying to unravel this whole thing with these labels to say an American audience, particularly a black American audience, you have to do a lot of explaining and unpicking as to the complexity of the issue.

I would say the easiest way to look at this is to look at the situation of those children who are of Caribbean origin. i. e. those children whose parents came here in the 1950s or whose grandparents came here in the 1950s to Britain and a persistence of that group doing poorly in school. That seems to be comparable with African Americans, in the sense, not all African Americans, but a cohort, that sort of similar kind of framework.

What tends to happen then is that the Caribbean group that migrates to America, tends to be not always middle class, and maybe in that sense that helps. But they've had a history really of outperforming the African Americans in America. Yeah.

Rasheed: Mhm.

Lord Sewell: What I would say is that the group then in England becomes a kind of poorer group from the Caribbean, and they link into that poverty strata that's in Britain, and never really break out from that.

And so In a sense, they have more allegiance really with the white working class in terms of what happens here. And so you then have the two kinds of groups coming out of the Caribbean but with different trajectories. One is almost a model black group migrant mentality, and another more indigenous group, if you like, doing poorly in society. I do think there are, there's a sort of strange issue there where it does seem that the more indigenized you are in the society, the worse you are really. And it's the ones that actually have what I call this distant migrant kind of aspirational drive that do well.

So for example, the Nigerian group, the African group would be the parallel of the Caribbean group in America. Whereas the Caribbean group in Britain would be the parallel of your poor achieving African American group, you see? So what this all shows us is that we can't use these very simple generalizations about black or whatever we want to call it. Because black groups in many cases are operating at different levels.

Some are at an elite level, some are low level. So the inter-groupings are much more kind of interesting in a sense than the idea of say, black versus white, which probably is a generalization that doesn't make any sense.

Rasheed: So, on that point of the, let's say, the indigenization of underperformance... In the U.S. for example, again, you have different groups. You have also the Asian Americans, who were there for a pretty long time, third, fourth, and fifth generation, and they still tend to outperform in terms of education in this particular case. Why do you think especially in the UK still, you have this persistent underperformance of the black population, even, especially Afro-Caribbean as a kind of inculcation of culture in the UK?

Lord Sewell: Remember, the group that we're talking about is specifically Caribbean. We know it by the data. It's very easy to show. It's illuminated better once you see the African group, particularly the West African group, Nigerian, and Ghanaian groups, doing so well. They're on the parallels with the Indian and Chinese groups in Britain.

And what it does is it exposes, I think, a number of things. You look at the family patterns of that Caribbean group. And I'll give you some numbers here. The Caribbean parent, single parenthood frameworks, and family structure are running at around 67, 68, and 69 percent of the population. Compare that to the Nigerian, Ghanaian group that's running about 30 percent.

And then the white group somewhere in the middle. And then the Indian group, something like kind of about 10 percent and Chinese 8%.

So there are clear parallels between strong two-parent family structures and educational achievement. And I would say for me, that is the key driver of this disparity.

Rasheed: That is not a very widely held view, I assume. I know there's a similar argument often made in the U. S. as well, with the family structure comment. Why do you think people tend to try to disregard that particular view of performance?

Lord Sewell: Because politically, there's almost like an ideological drive to look at the school. I'm not saying that this isn't important, schools are important. But to look at the school, to look at wider racism, to look at systems.

And what that political ideology then does, that's probably of the left, is that it sees any kind of analysis that looks either at the family or the culture as blaming the victim.

They don't really then see the more important issue that your family nurturing is going to be the determinant.

The other thing that interests me is that it also links to wider issues like crime, and mental health. These are all key. So when health practitioners are trying to outstrip, why disproportionate groups are in their systems? They keep going back to levels of structural or systemic racism.

Now, to me, I do think people experience racism, of course. You have this problem of the African group experiencing that as well and the Indian group to a certain extent. And yet they're the ones who are flying off the charts in terms of achievement.

So I do think that argument is only put out because people don't want to go down or, or ask the harder question for whatever reasons, of really an agency that is needed in terms of people and their families and groups and their families. And until you deal with that I think these things will persist.

Rasheed: So, expanding that now to the wider conversations you've raised of racism, structural or perceived structural in different societies. When you were Chair of the Commission in the UK, trying to examine these issues, the resulting report caused quite a big stir, to put it mildly, in the UK. Which, to me as an outsider, of course, I was very surprised by.

I figured, okay, this is actually a very good result. Why are people so angry at this result? Where it made the point that the idea of structural racism really isn't valid as the critique of modern UK society. Could you walk us through what the report really went into detail on, and why was there such a very harsh reaction to it? I would think this would be a good result.

Lord Sewell: I think somebody said to me that it was all about the timing. Probably had we done the report a lot further away from the George Floyd thing, which was really running around the world in terms of what is now really, I think, a completely disproportionate and ridiculous reaction, you know, that people had to this incident.

But because people were in their passion, and then of course the other thing was we had structures of, say, institutions in Britain reacting from BBC to everybody just said, "Find me something black." The performative thing was just going crazy. It was almost like a witch hunt.

Everybody was saying, "What black thing are you doing?" And a performative theme of Black Lives Matter came along. So here then arrives on the scene for the first time in Britain, a report on racial disparity that was headed by a black man. And also the team was predominantly black and Asian in terms of representation. And so immediately just the optics of that was important because usually in England for a long time, a lot of our government reports were not really written or shared by black people, Asian people.

So it, it's really interesting. So you imagine now that comes out, and in the heat of the moment taking the elixir of all that kind of passion, and then we come along with an antidote that says, wait a minute, this is more complex. It is more complex because the disparities are driven more by geography, family structure, socioeconomic situations, or these other multiples than it is by race and racism. And also we included the white group in our analysis as well. So a lot of time people would look at these things, and exclude the white group. And then, of course, it was very positive because it emphasized agency in there and saying here are the enabling factors or disabling factors. Particularly in health, these were linked to your own behavior, rather than somebody who was the subject of racism.

Rasheed: Given the results of that, people would obviously say, "Okay, well if the point to make of this is there's no overall meta point of racism, then how do you get the underperforming groups, which are minority groups to perform better?" What kind of specific policies would need to be enacted for those people?

Lord Sewell: I think you're asking the wrong question here, because could it be that in fact, and if we look at the numbers, that Caribbean group is so small now, tiny, that really the achievement issues are basically around the white poor majority.

First of all, the starting point isn't even about race anymore. The starting point should be about this big group that's underachieving. That's where you want to pick your resources and your emphasis. And that in fact, their underachievement has to do primarily with aspiration. Yes, family structure as well, but also, a kind of attention and a kind of resource that London children have, and those children who live in the north of England and the south coast just do not have that access. That's really where the problem lies. England's a funny place because London is a small country and yet London dominates everything. So you imagine now as a magnet, all the best teachers across the country, particularly young teachers get qualified and they don't want to go into a small town or the North or to the South.

They're all piled into London. London is where the action is. Best restaurants, that kind of thing. And so we have a problem in the sense of attracting, enough teachers into these needy areas.

Rasheed: And what's the corrective mechanism for that?

Lord Sewell: Well, I think... what's got to happen is we've got to do what we did because London wasn't always as good as it is now.

And I think what you've got to do is ruthlessly go into these schools and put together a program of high achievement, aspiration. It's not complicated, but then you've got to also look at the leadership of these schools and come up with a framework that gets rid of them and puts in teachers that can do the job.

And so there's got to be a movement, county by county, area, town by town, where you go in, you look at the results, and you say, "Right, okay, we're gonna do a transformation here, via looking at your leadership, looking at your action plans to make your school better."

And I think that so far, both parties have been reluctant to undertake that. And my sense is that one of the reasons why they don't want to do it is that, those areas in themselves. Haven't got the kind of social capital and people who could lobby for them. So for example, what's ironic is that in London, why things went well, why our resources came to London was that politicians lived there, and parliament was there. So in effect, there was enough will and drive in those areas. Now, what I find is that those poorer areas outside, predominantly white, of course, outside the backbone, don't have any of those sorts of things going for them. And so they're left to wither on the vine. And I think there's got to be a different way of working with those communities, those schools, those academy chains that are in that area to up their game and really follow a model of saying, "You know, these poor children, even though they're poor, they can get to Oxford or Cambridge or whatever job they need, skill base they need to have."

And I don't know. I just don't think that those areas have the ambassadors to be able to go in and really help those communities. So that would be my plan. My program Generating Genius is something that almost lays on the side of those schools because it's a kind of career advice and aspiration program. And funny enough, we now target predominantly white schools. We've shifted the whole thing. So my sense is that it's almost like doing a missionary kind of job. London is coming out to those equivalent of your Rust Belt areas.

Not just the kids, but the modeling of the schools and how they work. And twinning and or sharing best practices with those schools, predominantly white to help them. So this is a world away from when I went to school, where we had all the hardship, the schools were really difficult, and predominantly black kids failed. I think we've reached a point now where it's almost the other way around where we've got a lot of high-achieving Black and Asian children and then their parents.

And I always wonder, one of the things that could be done is just almost as it were that cohort, those schools now saying, "Well, we've got to save the rest of the country" and going out to the country. It puts a completely different dynamic or power dynamic on race. Because in the end, what you've got is predominantly Indian and African, parents, groups and teachers and great schools going in and helping and supporting predominantly poor white schools. It almost is as if we've come to a counterintuitive way of looking at social justice. The power brokers in education for social justice are Black groups. They're not the victims.

The country needs to call on them to go and help the rest of the nation because the discourse in the past has always been that the Black group is in need, the Asian group is in need of the rest of the country to come to it. They do well. But this is saying, no, the numbers, the data show that particularly, as I said, in the African corner of the space and the Indian corner, there is this sense of high achievement and success.

The calling is then, and it's quite a, I think it's quite exciting to say, this school with these children and these teachers need to go and help these children in predominantly white areas.

Rasheed: Wow. Yes, very counterintuitive indeed. When it comes to broader politics in the UK, so shifting a bit away from education, there is now a very fervent race-based discussion yet again in the UK surrounding reparation policy between the UK and the Caribbean.

And honestly, to me, this is not a surprise, based on what I read and write on the Caribbean side of reparation policy. But I am honestly very surprised the traction it has gotten in the UK itself, again, as an outsider. Before we get to the core reparations policy in the UK, why do you think this topic has now become so widely discussed in the UK?

I understand why the Caribbean discusses it, but why in the UK?

Lord Sewell: It comes out of a lot of that stuff that happened after the Black Lives Matter movement. Where there was a sense now that institutions, individuals, were looking inwardly and particularly the Church of England, the BBC, even the Guardian newspaper itself, and finding these, problems that were hidden or not, in their own institutions.

And that problem for them was the notion of slavery and how to then deal with that. So I think that that's been the examination that the reason why it's now driving upwards as an issue for me is, I think, to do with the fact that, we have had for a long time, a narrative in Britain that's about self-hate and the fact that you don't like your country. Britain is a place where you don't sing a national anthem. You don't have any pride in it because it's done wrong. It is associated with that inside England. And so it's almost like this kind of strange kind of contract people have with the nation and it's similar with the royal family.

It can be seen that it's very attractive to the wider world and to individuals, people who come here. At the same time, it indulges itself, but especially by the media, into some self-loathing, that says it's not really that great. And I think that's part of the Trojan horse, the way in really for this kind of idea.

It's weakened and then it comes in. And I think the third thing is to do with the lobby groups themselves that perpetuate this. Many of them are desperately trying to find some reason for their existence. And I think that's probably been the major reason why the reparations thing has taken off.

There's been a popular kind of movement amongst academics, not about the real people, at UWI, the University of West Indies. And again these people are new, born back in the seventies and eighties. And now waving the flag.

So I do think that's part of the reason why.

Rasheed: And now that it is a popular, generally popular conversation in the UK, do you think there's a way to essentially step back from it? Or do you think the only way to dissipate the conversation is some kind of symbolic or some kind of active policy from the current government?

Because oftentimes in these situations, stepping back is quite difficult.

Lord Sewell: I think that to step back is hard in the sense that if you take the Commonwealth, for example, Britain is still linked to institutions that if they step back, they step back at their peril because it's all driven by the monarchy and things British.

And if suddenly you decide that you don't wanna do it anymore, then the whole thing collapses.

In my view, I think that there should be a sense of focus on schools, universities, those two big issues, those big spaces, and allowing a more polarity of voices in there than the single one we've got at the moment.

Rasheed: How realistic is that? Because, at least from what I've been told, especially from friends who are in these particularly more influential universities, there doesn't seem to be much space for even a plurality of views at this point.

Lord Sewell: You know, it's quite interesting. I was thinking about this the other day that the left talk about post-modernism and intersectionality, and uses these terms. Obviously what they're trying to do is say that, the world is driven by white privilege, but essentially that's no different than what we're saying. Because they're saying that what you should not do is hold on to analysis of the world and say, it's a fixed immutable kind of way of looking at life.

And that what you need to do is to take on different perspectives, except in their case, taking on the different perspectives means for them their own, and not anyone else's. So even though it's got a sense of fairness and it's quite attractive., I'm talking about, some of the postmodern progressive stuff, it doesn't take us anywhere because they refuse to see how it's relevant when it comes to disrupting completely reparations or any other argument. They're not going to turn up to class that day. I think that's what you've got. I think the other thing is, I do think that Britain itself needs to build back its confidence that it can go in and speak to people and not worry about saying the wrong thing or whatever.

I do think that that's slowly happening, but I wish it happened at a greater pace.

Rasheed: Do you think there's something that needs to be somehow transformed in a similar way to the Caribbean? It was Caribbean academics, Caribbean politicians, and the Caribbean different groups that really ignited this conversation over many, many years.

It didn't start functionally in the UK itself, it's really of Caribbean origin. Now, you are currently in the Caribbean, but do you think there's something that has to fundamentally change on the Caribbean side in parallel to changes on the UK side?

Lord Sewell: You're talking about reparations here, are you?

Rasheed: Yes, but also in general, yes.

Lord Sewell: I do think that often the reparations argument when it's run inside the Caribbean and especially in Jamaica, it's run as a decoy so that people can't focus on the real problem of roads and water, which is the backbone of your life here. I do think that a conversation or an image or a post that keeps you focused on this idea that you like the children of Israel, will go to this Zion. I think that's great as an image, but it's not going to work in the Caribbean. We need more pragmatic leadership.

Rasheed: And in terms of leadership in the UK...

There's a lot of excitement around Kemi Badenoch as the new leader of the Conservative Party, from her own idea of renewal and progress. Are you optimistic?

Lord Sewell: I'll declare my colors here. Kemi and I are friends and she was very supportive of us when we did the report, came out as almost like a one-woman army, and fought all the kind of nasty things that was said and how it got personalized and things like that.

She went in, stamped the authority, and created the government response Inclusive Britain. I wish, and I hope that Kemi doesn't get bogged down in race anymore. She needs to meet the needs of everybody, and believe it or not, everybody isn't necessarily interested no matter what about race.

And so I'm hoping that she does lay a vision about how government can effectively do things because what was clear about previous governments was that they were hampered by their environment or by land or land choices, things like that. So what I think she could do, which would be great is to, allegedly say throw them in jail.

Now, I don't think you get in trouble with doing that, but certainly pruned back heavily, some of the wastage already in the home offices. And I think she'll be able to do it. She's got time to do it and she'll be able to do it.

Rasheed: Okay. Sounds quite good. So final question.

Why is it important to you to frequently travel to Jamaica?

Lord Sewell: For me, there's a connectivity here. And what I first thought was great about Jamaica, and it's very interesting, that once we had the trauma in the 60s and 70s, of being the first generation of Black kids born there and having the racism, Jamaica almost became an outlet, a kind of a place of refuge and I feel that you could look towards it.

It's really funny. People even became fake Jamaicans, in order to survive the hostility. I wasn't a fake person, but I did look to Jamaica as a place that had that strength. Mainly, of course, driven by its music and its culture, which is very attractive. I think I came here then and it's interesting cause I'm writing a film at the moment called "Britain, the Making of the Jamaican Mind"

What it does is assert this notion that black people in Jamaica, as it were, are really black British. They're goldfish in a British pond. And they're surrounded. And so when I came here it wasn't necessarily, "Oh, I'm going to discover all my African roots and all that." What happened, and I look back now as an older person, found the positive elements of Britain inside the region; the education system, the parliamentary system, the legal system, keep going, the football teams that they support, the side of the road that they drive on, just keep going.

Even the language. It wasn't necessarily, here was a country now that in a sense was hating England. They had redefined who they are, who they were, but via a British and you could say an African, but essentially the British thread was there. They were just redefining it so that it makes sense for them.

But the only thing they had really to use., the structural big tools, the the water in the goldfish tank, was British. In a sense, I may have escaped home only to return home again. I'm now sitting talking to you, looking at Golden Eye on the North Coast of America.

And that was the place where Ian Fleming wrote all the Bond novels. I suppose Chris Blackwell takes it up and does similar. He would come here six months of the year and get inspired by Jamaica to create those things.

So the place couldn't be that alien, that he could find it to be a nurturing environment. So he settles in here and finds another home. And even though the Bond films, there's only a couple of them, are really about Jamaica itself, it doesn't matter. What matters is that it provides the creative kind of seeds and context and nurture for him to go on and write those stories. For me the surprising truth about Jamaica it's not its contrast to Britain, but just how similar it is, how it's taken the best of Britain, rather than something that it has to escape from. Barbados is another interesting thing. I don't want to talk about Barbados. I know it didn't like the tag "Little England", and it tried to fight against and some of this stuff that's going on now is really a fight against that label in a way, trying to become now, I don't know, an Africanist sort of thing. And a lot of that stuff's performative because essentially Barbados did its best on the world stage when it was Little England.

It had a fantastic education system. I'll be honest, people won't like this, but really that West Indies cricket team, you could put a Barbados one in and it would still win. For a country so small, and of course, on the economy, they did really well and everything was framed around Britain.

The lie about that Little England thing was that Bajans weren't doing this because they felt like they were sort of submissive, or they weren't as aggressive as the Jamaicans were, it wasn't, I don't think it was about that. I think the Bajans I've known over the years are very proud. What they found was that they could be proud of the best that the British left.

And that's the key to this. And so that reparations, that anti-colonial thing that goes on tends to miss that point that what we're finding here and what we should preserve is the best. I mean, there's some real ironies. All of those big Caribbean anti-colonial figures, CLR James, Marcus Garvey, Michael Manley, and Forbes Burnham, are Englishmen to the core. And they have a great affection for things British. This is the irony of it all. They appear on the one level to believe this, "Oh, we're going to give the colonial master a big kick-in". At the same time, they're lovers. of that culture that makes them who they are. You see, the problem with the anti-colonial project is it doesn't share that part of it. It's around the corner, it's hidden around the corner. But I can. As a Black British, I could see through that. So when I read Garvey, when I listen to Michael Manley, when I look at Forbes Burnham, I have a special insight because I can see the two things operate at the same time as only a Black Brit really who's up for it can see that contradiction going on.

It's all laid out then. So what is this thing about? What are we fighting in the end? So the battle then becomes, I think, performative. It's all about, well today we're going to look like " We're anti-monarchy, we're anti this. But yet we're so British". And I think that story needs to be told.

And for me, I think what people are frightened of is that they think that by opening up themselves to their British half, as it were, that somehow they're going to be swamped by an anti-colonial British kind of thing. But in fact, far from it, it's actually the seeds of your creativity.

I'll give you one example. I did some great projects in Jamaica about Shakespeare. I did plays and we had a Shakespeare competition. And the kids loved the plays because of what Shakespeare is particularly if you look at those plays, they resonate straight into the Jamaican context. And the kids relate to that.

Chaucer is a similar thing. The wife of Bath to me, she's like a dance hall queen. The medieval stuff that's going on is similar to what you would see in downtown Kingston. The raw openness of that culture is very similar. So once you start stacking it up, people have got stereotypes of what is British, which is stiff upper lip, racist, I don't know, kind of aloof elite, yeah?

And that isn't Britain. That's just a kind of a stereotype of Britain. The Britain of Chaucer, of Shakespeare, is I think, closer to the real Britain that you get, you know. And that is even closer to what you see in the Caribbean. And Derek Walcott and CLR James will tell you about this.

Walcott has a lovely phrase where he says "In the morning I've got a heartbeat of a shanty and Warwickshire at the same time". I'm up for a kind of completely new, evaluation from Britain to stop running itself down by telling itself and also the Caribbean that somehow it either owes them something or it should be ashamed of its culture. The opposite should be happening. And I think that that's the radical step that we need from intellectuals.

And that is going to enhance the Caribbean and also make people in Britain from all cultures feel that not that they're going to forget the negative things that happened, but see the complexities of that interaction.

Rasheed: I'm from Barbados, and that reminds me of a point that Errol Barrow, the father of Barbadian independence, frequently argued when he was pushing for independence. Strangely, they wanted independence because they were British. He used the point that the Parliament of Barbados is the third oldest continuous Parliament in the Western Hemisphere.

This Parliament in the 1500s, pushed against Cromwell. And became a lot more independent from the Cromwellian court, and that was a continuous thing. So he said, we are the heirs of that parliament. So he used this idea of being anti-Cromwell, to say that because we have that inculcation of that particular element of British culture, of politics, and of astute global relations, we should actually be pushing ourselves forward.

And that is not nearly what the current sentiment is as you discussed quite clearly, when you think about the relation between Caribbean and British culture. It's something like anti-Napoleon sentiment, where we don't, we no longer need the universal civilization.

Lord Sewell: It's quite interesting. When I listen to Mia Mottley speak, I look at her through my Black British lens.

And I'm listening and though she's coming up with all the rhetoric around what small states need to be, she sounds like a hustler trying to get money out, and I don't mind that. But what she is essentially is and, the product of what she is, her schooling, her education, the language in particular, the rhetoric, the whole thing comes out of an English private school.

Rasheed: Right from LSE, exactly.

Lord Sewell: That's what she is. She can actually come in here now and say, "Yes, I do agree that I have a will of that, but I now want to do something politically around climate change and things like that." But you see, I actually think that's the decoy because what she doesn't do, Is tell us about that stuff that's made her, is her identity, as it were. Because you can wrap yourself up in whatever.

She's a British woman.

Rasheed: Yes.

Lord Sewell: She would hate that if you said so. All I can see is that you are British, just face that. You're nothing else but British. Don't give me all that performative stuff because that's all well and good. But all I can see in front of you is a very articulate British woman.

Rasheed: I made the same remark about Hilary Beckles as well, even when I write about him. Just his posture, his speech, his way of looking at the world, its upper-middle-class aristocratic British conversation.

And they never point that out.

Lord Sewell: And she would never be able to relate. She would argue that she perhaps could relate to the poorer Bajan in Barbados, well to a certain extent. But she's certainly not gonna be chums with the poorer class in Britain.

She's at home with that British middle-class upper class, Beckles himself, that's where they fit.

Rasheed: That's right.

Lord Sewell: And you see, I think what happened with Barbados was that it's this thing about what happens is-, and it comes back to Kemi as well- is a term that Cygnetia Fordham, the American anthropologist used called "kinship culture". Yeah. And what happens in kinship culture is that it's the family. Me and you are black men, so we've got to stick together, come what may. We put all our differences together.

I see you in the street, as far as I'm concerned, you're kin. I've got the completely wrong term. So it's not kinship culture. It's "fictive kinship". But it is kinship culture. It's called fictive kinship.

Fictive kinship is what it is. The fiction bit of it, that's the beauty of it, the fact that it's all made up. It's a fiction. I haven't got really anything in common with you, but the color of our skin. But we, but we pretend that we've got this kinship together. So what Mia Mottley has to do in a sense is find a Pan-African kind of fictive kinship around blackness around the world or whatever it is.

And it doesn't make any sense. In the end, the only thing she can do is back to a kind of power relationship thing between the horrible colonial and the anti-colonial.

And here's where the contradictions keep accumulating. That fictive kinship is not real. So it's made up and she buys into something that's made up. But also there's a sort of sense of agency. So here is an incredibly independent woman, probably the most independent woman on the planet.

But when she starts talking about race and all these other things, she might as well be on the plantation because she assumes this victimhood that gives her no agency at all. She is the most powerful thing and yet she's nothing, what's going on here? So it's all performative, it's all staged, and not real because she doesn't believe that, because she's not that. Hilary himself, is a very proud man. He goes around as if he's the king of the universe, but then when he's trying to hustle his reparations, he has to do this almost sort of barefoot boy on the plantation. So what are you then? So I think people need to be more courageous in exposing the deep contradictions inside. But they're not. They're only contradictions because they make them contradictions and the lack of acceptance that basically Barbados and Jamaica are really Black Britain.

Rasheed: I like that phrase, yes, I like that phrase.

So thank you so much, Lord Sewell. This has been a delightful and entertaining conversation.

Lord Sewell: Thank you. Thanks a lot. All right. Bye bye.

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Show notes

Francisco Zalles, Ecuadorian Economist and Professor gives us an in-depth account of Ecuador’s journey to dollarization.

A series of unfortunate events
The economic crisis of the late 1990s, marked by a banking collapse due to external shocks (El Niño triggered the underperformance of the banana industry), poor fiscal policies, and mismanagement by the Central Bank, paved the way for drastic monetary reform in Ecuador.

A good policy is a good policy
President Jamil Mahuad's sudden decision to dollarize in 2000, at a time of extreme political and economic instability, was a last-ditch effort to save his administration. Despite limited planning, and many efforts to undermine sound monetary governance, the policy gained immediate popularity and stabilized the economy by halting inflation and restoring confidence.

Dollarization means development
Francisco sees dollarization not only as a stabilization mechanism but as a tool for institutional reform. It anchors private property rights over money, minimizes political interference, and enhances productivity by reducing inflationary uncertainty.

There is no more democratic private property than money. And building institutions is a long-term process. Dollarization is a very fast and efficient way to introduce an inclusive institution. - Fancisco Zalles

The future
Francisco’s dream? The closure of the Central Bank of Ecuador. This would solidify the benefits of dollarization. He underscores its potential as a safeguard against populism and a driver of sustainable economic growth.

Francisco Zalles via X

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• How to Dollarize Argentina, Exactly - Nicolás Cachanosky - The Rasheed Griffith Show

• Dollarization: A Solution For Argentina with Emilio Ocampo - The Rasheed Griffith Show

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Full Transcript

This transcript was automatically generated by AI and lightly edited by our team. We don’t catch every error, so if you spot one, send us a message/email via shem@cpsi.org.

Rasheed: So Francisco, thank you so much for joining me on the podcast live in Madrid.

Francisco: You're welcome. Well, thank you very much, Rasheed I'm very happy to be here, yes, in Madrid. I just got back from the Canary Islands where I filmed my courses for Universidad de las Hespérides and I gave the inaugural lecture this year. It was a huge honor. So thank you for having me. I've always been a big fan of your podcast and I'm very happy to be here.

Rasheed: So we are going to do a deep dive into dollarization in Ecuador and this comes up constantly when you bring up Dollarization anywhere in the world.

There are so few countries that have done it. So the models that have done it, people tend to even not know that much about it in any really sophisticated way. And that's why I want to fill in this episode. Even though there are lots of details about the dollarization process that I'm not aware of in Ecuador; I am happy to finally get a chance to ask someone who was there and part of the plan.

So that's where I want to start. How did you get involved with the idea and process and just the essential idea promoting dollarization in Ecuador?

Francisco: So I was a very young economist. But there was only one liberal think tank, and I was associated with it. It's called the Instituto Ecuatoriano de Economía Política, still run by Dora de Ampuero.

When I showed up there as a young economist Dora put Mises and Hayek in my hands for the first time and really changed my life because I'd come from a very formal economics background and was very not happy with it. There was something lacking. So I'd been working with the  Instituto Ecuatoriano de Economía Política and there was a major banking crisis.

I was also working for a bank and it was a member of the economic committee of the private banking association. So I was looking for solutions and we were looking for solutions out of the  Instituto Ecuatoriano de Economía Política and Franklin Lopez and I were working on a variation of Simmon's Banking, Fractional Reserve, etc, etc.

Which was, I thought, the way to sterilize the excess money that was coming into the system. Then, Jose Luis Cordeiro, a friend and also a liberal, came to Ecuador and he wanted to re-issue his book on currency boards for Venezuela in Ecuador. So he asked me to revise and actualize it. But at the time, we're talking about 1998, there was already a lot of noise on the Argentine convertibility, which was not a currency board, but most people absolutely have no idea how different they were.

So Ecuador was already in dire straits going into a banking holiday basically. We ended up in a banking holiday. And and I just thought it was a really bad idea to try to sell currency boards at the time. Ecuador had already looked at the currency boards in 1995. That was my first exposure to them really.

So I just thought, look, there's got to be a better way. And someone at the table and I think it was most likely Dora, said, "Well, why are we using a currency board? Why are we proposing a currency board that actually gives power to the central bank still, when we could just take the reserves and give them to the people?"

And a sort of light bulb went off and everybody said, and he said, yes. And as a result, I was the coauthor of the first book that came out of dollarization, with Jose Luis Cordero. And then I was, my research was also used in Franklin Lopez's book, which came out a few months later, which is "How to Dollarize Ecuador."

How did I get involved? Through liberal ideas, through finding ways to make sure that the people had the power and not the government.

Rasheed: So the banking crisis in Ecuador that essentially accelerated the push towards dollarization is pretty infamous now but we were talking earlier, why did this crisis come to a head at this time?

Francisco: It's incredibly important. Thank you Rasheed for that question because unfortunately the narrative has been completely overtaken by, I'm going to say, Correa. That's the narrative out there because they have insisted forever and they still do. They bang the table on the corrupt bankers.

Correa's expenditures and money proficiency, profligacy, whatever the word is, it's actually magnitudes larger than the banking bailout if you consider it a banking bailout, cause banks actually lost. But anyway, getting to your point in 1998 Ecuador suffered a very strong El Niño. Banks had a major concentration of loans in the commodity sector because Ecuador is a major commodity exporter.

However, here's an interesting point. Ecuador has a price control on bananas. So the government, through price control on bananas, actually created an incentive for an excess of banana production, which the banking sector loaned into. So there's a huge concentration of loans in the banana sector and bananas and shrimp collapsed during the Niño because of an external shock.

This created a liquidity pressure on the banks. Simultaneously, Ecuadorian banks were streamlining into the Basel Accords. It was the only time that Ecuadorian banks had ever been under international norms of banking. In order to take banks that had normally been running wild and putting them into real courts, also puts pressure on the balance sheet.

So as pressures on the balance sheet were taking place because bad banks or weak banks were having to fess up on a whole bunch of stuff that they were free to do before, the Niño falls. And various banks have started asking for emergency loans from the central bank.

So the central bank during 1998 actually loaned up to a significant amount of the GDP. I forgot the exact number, but there were emergency loans out in 1998. So it was a lot of liquidity that had been printed and sent. So the central bank wanted to soak up that liquidity somehow. The existing banks had a lot of pressure because interbank rates had gone through the roof.

The government wanted to finance itself at the same time because it was experiencing a lot of fiscal pressure. So the government decided and passed a law to change taxation they actually got rid of income tax and substituted the income tax with a tax on financial transactions; 1% tax on financial transactions.

So if you went and you deposited money, 1% was taken off. If you took your money out, even through an ATM, 1% was debited from your balance. Now how does that work? As you as an economist understand, for money to multiply itself, for M one to turn into M2, we need loans and deposits.

So if you put a tax on transactions, on loaning and depositing, you're contracting the money supply, you're de-multiplying the money supply. So this law came into effect in early December but would be applicable 1st of January. What the central bank did was increase reserve requirements. It doubled reserve requirements on dollar deposits on December 18th.

And on January 18th, it increased reserve requirements in Sucres by 33%. Keep in mind that interbank rates were already in triple digits. So the central bank basically, caught a small smoldering fire and threw three gallons of gasoline on it. So by March, by 8th March, there was a banking holiday.

Rasheed: What was the rationale for the central bank to increase the reserve requirements?

Francisco: To this day, we don't know. I've had conversations with friends of mine who were working in the central bank. I almost lost a lot of friendships because of this. Once I heard about that, I picked up the phone and I got very upset at them and I raised my voice at them. And I told them very clearly, "You will be responsible for the downfall of the Ecuadorian banking system."

And they were like, "Well, you can't raise your voice at me like that." And we're still friends. We've become friends. And they've said that I was right, but of course, that's not any consolation because 100% of the banking sector was frozen.

Deposits were frozen for over a year. And this created a very serious condition for Mahuad who became highly unpopular. So they started unfreezing deposits as quickly as they could, but every single time that they unfroze deposits, the Sucre's at the time would pressure the exchange rate.

So the exchange rate started creeping up and they could not control it. Central Bank had zero credibility, and couldn't control the interest rates or the FX rates. So the economy was really in a tailspin.

The only thing that was keeping the economy, if you want to call it keeping the economy, was the fact that the whole economy was frozen for nine months. But that's essentially the genesis of the Ecuadorian financial crisis. It was caused by poor coordination and very bad policies from the government and from the Central Bank.

Case in point, the superintendent of banks at the time, Jorge Egas was impeached. And I'd already floated this theory. I'd already written about the fact that it was the central bank's fault. So he asked me to write the defense for his impeachment, and he was exonerated.

So to this day, if you think about the Ecuadorian banking crisis historically, there is no responsible party. The narrative is that the bankers were at fault. But if the bankers were at fault where is the evidence? Where are the supervisory authorities that should have been on top of it? Why are they not at fault? Now I'm not trying to excuse the banks. There were bad apples. There was especially one really bad apple in the Ecuadorian financial system. And this is called Banco del Progreso and the owner was Fernando Aspiazu. And what he tried to do, is to use and exacerbate regional tensions between the highlands and the lowlands. And the government was from the highlands, Quito. And Guayaquil is where most of the banks were affected by the external shock and the commodities. They were the most affected.

So there was this tension that was historical in Ecuador between the capital and was used as well by this bank. As a matter of fact that bank, which was the largest bank in Ecuador at the time was not intervened directly. He shut his doors.

He placed himself into a receivership of his own. It was only later that the government actually took over the accounts. And sure enough, his bank had concentrated loans into his own companies that exceeded the permitted amounts by five times.

So the rest of the Ecuadorian financial system had been complying with the Basel Accords and had been reducing their exposure to related companies significantly. They had better capital adequacy ratios than Peru, Panama, Colombia, and most of their peers. So the Ecuadorian banking system was complying and was getting better. But was hit by an external shock. Then of course you can't compete against the Central Bank and the fiscal authorities just throwing a dumpster fire on you.

So that is the genesis of the Ecuadorian Banking holiday. It's Central Banker irresponsibility combined with fiscal irresponsibility

Rasheed: The crisis continued And the president at the time, Jamil Mahuad, wasn't particularly responsive to dollarization at the beginning, and then it was a shock.

He came to TV to announce dollarization quite suddenly. Why do you think he decided to Hail Mary his presidency by dollarization? If that's a fair categorization.

Francisco: Absolutely. His popularity when he announced dollarization was 7%.

The whole country and this is in the memoirs of the central bank, bureaucrats that actually worked with him after dollarization, et cetera. Everybody expected him to resign. So why did he hail Mary? Because that was his only option. And that was because we'd done a significant amount of legwork convincing people.

There was also Joyce de Ginatta who recently passed away. She had this political platform that we were able to capitalize on in order to convince the population that this was a solution. And how we did that was very methodical. Both Franklin Lopez and I would go to every single university, and every single opinion maker, and instead of having a one-on-one publicly, we'd have one-on-ones privately.

And we'd say, "Look, we're not here to confront you. We're here to say, this is our idea. What is yours?" It was a Socratic method that basically convinced people. We created this coalition of left, right, and center that eventually would publish and we'd put press releases saying this is what Ecuador needs to do to get back on track. So his Hail Mary was because fundamentally he was up against the wall. He had absolutely no other options. And this was already popular. This was already ingrained in the people. People were telling him, "dollarize, why don't you dollarize?"

We had sent him various proposals to dollarize. So he was hearing it from the people. He was hearing it from inside his cabinet. But he'd been very not favorable to it. As a matter of fact, I think I showed you, that there's a famous Telex sent to the financial system of Ecuador on the 5th of January saying dollarization is completely off the table. Well, dollarization took place four days later. So why did he Hail Mary? Well because he wanted to survive politically. A president with 7% popularity announced the intention to dollarize the economy. There was absolutely nothing but an intention. The spontaneous order worked so fast, and this is in all the memoirs. It caught everybody off guard how fast it worked. By the next morning when banks opened, there was absolutely not a single call to the Central Bank to buy dollars.

Lines on the banks were over. Interest rates started dropping. Jamil Mahuad was kicked out of office 12 days later. There was a coup 12 days later. By then his popularity had risen to 17%. That's how fast dollarization worked in his favor. But what I want to illustrate here is that 12 days later, Ecuador was still dollarized even though all that was sustaining it was the announcement by a president with 7% popularity.

That's not the government working, that's the spontaneous order working. And that's the strength of dollarization. It returns the power of money and the value of savings back to the individual. It takes it away from the politicians

Rasheed: When you were discussing and promoting the idea of dollarization what kind of group of person was most opposed to it?

And who was more receptive to it?

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Francisco: Oh, obviously the central bank. The central bank was opposed to it. The IMF was opposed to it publicly. There were two economic think tanks that were very opposed to it. And of course, there were extreme left-wing political organizations that were opposed to it.

However, I had public debates with them. I still respect these people a lot because I don't respect Correa. I don't respect his people because they're a different breed, but the true Marxists, the true believers, some of them are very academically honest. And when people are academically honest, you can hold a conversation and we would literally go to auditoriums and have a one-on-one debate and they were against it and we were for it. So they were clearly against it, but their arguments were weak. Why? Because there was a massive financial crisis. So the obvious question was, "This is a solution. What's yours?"

And there was no answer on the other side except more of the same and more of the same is just not acceptable. I don't say it's easy. We went to each university and talked to opinion makers and talked to professors and we got published manifestos in the Ecuadorian paper where you look at the names and it's funny because it's a complete coalition of people left, right, and center saying "This is a solution. The government should consider it." So it's the only time in Ecuador that really leftist economists have actually proposed market-friendly measures. It was the fact that there was this banking holiday, this major crisis, and there was this void of ideas to get us out of it.

Rasheed: So you mentioned just now that the only thing that really sustained the dollarization early on was just an announcement. There was no law, there was no regulation, and there was nothing besides this statement by a very unpopular president. But how then did it stabilize?

Francisco: So he did issue a decree. But he was out of the office 12 days later.

How did it stay in place? It was because it was so popular. There was a poll the day after he dollarized. It was already 52 percent popular. So it already had a majority. Although most people were uncertain about what this was. Within one week, interbank interest rates went from 151% to 25%. Within a week.

The remunerated deposits in the central bank, and liabilities in the Central Bank went from 91% to 9%. The equivalent of T-bills we would say. So deposit rates, which were high, started to come down. Loan rates went from 73 percent to 16 percent in a month. So this is what maintained it.

What maintained it was that it was just working, that it was just fantastically popular because everybody could breathe a sigh of relief finally. And there was another additional I think factor. The banking holiday had frozen deposits in Sucres and every time that the FX rate went up those deposits in Sucres lost value. So if you dollarize the economy those frozen deposits were dollars by then so everybody was it was in favor of it. The indigenous population of Ecuador had already risen up in arms against Jamil Mahuad because even before the banking holiday, or when he declared the banking holiday, he took away some subsidies in gas and fuel because he really wanted to have an accord with the IMF.

He was begging the IMF to give him money. This was the way for him to get out, to tie himself to the IMF, which we didn't do. We went through dollarization and they were very much against dollarization. But if you read Stanley Fischer's speech six months after dollarization, he says, we were shocked and surprised at how well it has worked. But had they asked us, we would have said no." And informally, we know that they asked them and we know for a fact that they said no, because the representative in Ecuador, his name was Jeffrey Franks, whom I actually had lunch with afterward. And as Jeffrey Franks was leaving the country, I asked him, "Well, what are you going to do next?"

And he says, "Well, I'm going to go dollarize countries." Why did it stay? Simply because it worked 12 days afterward. So who really throws Mahuad out of power is this indigenous coalition that marches in Quito. But of course, they were against the gas subsidies being lowered, against Mahuad. Then my watt decides the dollarize 9th January.

So the whole manifestation turned into, "We're also against dollarization." So 12 days later when he's thrown out of office, one of the cries is, "Down with dollarization." So of course there's a president with zero credibility who's just been thrown out of office by a coup and the coup promoters are saying no against dollarization.

Still, interest rates stayed stable. Still, there was no pressure on the central bank. So the incoming vice president who had already seen 12 days of stability understood that everything was okay and was getting calls from everybody saying "Don't move this, don't move this."

The only people that are against this are the indigenous uprising. He said, no, we're keeping it. And the uprising left. They fizzled out as they normally do, and dollarization stayed. Now, dollarization's popularity has increased significantly every single year. By 2015, it was 85%. The latest polls put it at 88.9% popularity.

Rasheed: So I'm going to fast-forward a bit, you might come back also, but I'm going to fast-forward a bit because I want to spend some time talking about Rafael Correa.

Francisco: Oh, gosh.

Rasheed: So, Rafael Correa, former president of Ecuador, he's a trained economist. He was an economics professor, and he was the minister of finance before he was president, and from the beginning, he was anti-dollarization.

Francisco: Yes, quite strongly.

Rasheed: I was recently preparing for the interview when I saw a paper he wrote in 2004. He was, I think he was just still a professor at that time, not in government at all. And he was talking about how it's very bad for Ecuador, how we need to get past it. And Rafael Correa, he was I guess one could say the most popular politician in Ecuador, in recent memory.

And he wanted to get rid of the dollarization, but he couldn't do it either. So, I want to spend some time on this. Why is Correa so anti-dollarization? And then, later, why couldn't he get rid of it?

Francisco: Well, I met Correa when he was a professor. I was dollarizing and he was already an anti-dollarizer and as I said, I'd already had various open auditorium debates with anti-dollarizers.

So I asked him to have a debate. Now that he's been ex-president he's very insulting, but he comes after me on Twitter. And I keep on saying, and if he's listening, let's have a debate, Correa. Why is he anti-dollarization? Because he's a strong believer that monetary policy can be used to increase social spending.

He believes that dollarization only benefits the richest in the economy. He's an anti-capitalist. He does not believe in the market. And he did absolutely everything to undermine dollarization. For dollarization to work optimally, you would have an open economy.

You would let dollars flow in and out without trying to trap them. This is the Panamanian model. What he did was the opposite. He tried to close the economy and close capital flows in Ecuador. He installed capital controls and he also very wildly, immediately after he assumed office, declared a default, even though he had significant petroleum income.

So, Ecuador's default under Correa was merely to shut Ecuador out of capital markets. Then he installed a whole bunch of mercantilist policies. He changed the constitution. The Constitution is a blueprint for the socialism of the 21st century. It's not a constitution. It's 444 articles that give the president and a whole bunch of power.

The government basically runs all of Ecuador. There is no possibility. For instance, Ecuador is under blackouts right now. But the only investor in electricity generation in Ecuador, by law, is the government. This was put in, in the 2008 constitution. So Correa is, is, is a believer, or I think he's more politically expediently believes that he could maintain his political, clientalist you know, populist, Political agenda if he had money to spend and he did.

He had the petroleum and he spent all of the petroleum. As a matter of fact, for the first eight years of dollarization, Ecuador had surpluses. As soon as Correa gets into power, he turns those surpluses into chronic deficits. Why did we have surpluses amongst other things? Because we passed, a fiscal responsibility law.

I think it's absolutely necessary. It's definitely a great idea that if you're going to have a monetary anchor, you should have a fiscal anchor with it. So we passed 2002, the first fiscal anchor law, and actually I wrote it. The fiscal anchor law provided for a stabilization fund.

So surplus petroleum above what the petroleum price was budgeted at would go to this sovereign fund and that sovereign fund would help fund whatever. First of all, it would bring down debt up to a level of 40%, and then it would help with deficit volatility and what was left over would help social spending in the economy. But of course, if you can maintain a 40% debt level, then there's a tremendous amount of availability for social spending, once you've stabilized the patient. Correa immediately, when he was in 2005 when he was finance minister, first thing he said that that was ridiculous because what needed to be emphasized and prioritized was social spending and social spending and social spending. And nobody's against social spending, but you need to be, you need to be able to pay for it. So Korea got immediately into trouble with the World Bank in 2005, when he was shortly lived as a minister of finance because, amongst other things, he went around this fiscal responsibility law and the World Bank withheld payments on their next loan. That got him chopped off. That cost him the Ministry of Finance. And two years later, he was a candidate, and by 2008 he took away the fiscal responsibility law and Ecuador went from surpluses to chronic deficits, to the largest deficits in Ecuadorian history. The deficits are caused in order to promote his populist agenda and to leave and saddle the next generations and the next politicians with such a burden of debt that Ecuador is not able to crawl out of it.

So, first of all, he installs a default to close off the country from foreign financing. Then he installs capital controls. He starts a capital control tax for foreign transactions. He says it's temporary. It's going to be a spot 5%.

It's at 5 percent now. So Correa did absolutely everything. As a matter of fact, once he ran out of petroleum revenue, once petroleum was corrected in 2014, he actually found a way to take reserves out of the central bank. There's a study by the IMF that says that the amount of money that he took out of the central bank was equivalent to 10 percent of the GDP of Ecuador.

The guy did absolutely everything in his power to destroy dollarization. But dollarization is so, so popular that he knows. He'd come out and say, dollarization is the worst thing in the world, but we're not going to get rid of it. Because he couldn't, because it would cost him political votes.

And it has. None of his candidates after his presidency, after, it came to light that he had been dipping into the Central Bank which made him more unpopular, have actually won the presidency.

So there is evidence that people are rejecting his model more and more because the dollarization put guardrails on him.

Rasheed: So, I'm going to tap into that. But, before I do that, Mahuad, would you consider him a liberal or a free market person in some way?

Francisco: That's a hard question to answer. I would say he's a social democrat and a weak social democrat at that, which is probably the worst combination that you can have in a politician in Ecuador. Because it's yes some market reforms, but not really. And therefore when they fail, they get completely identified as free marketers when they're not really.

I do think that he has, that he's smart enough to know that you can't go against the market and that there are prices that have to be. And he did do some very pro-market friendly measures like, for instance, attempting to get rid of the gas subsidies that have saddled Ecuador with an incredible burden for many years.

And by the way, a lot of the subsidies, a lot of the subsidized gas actually gets sold in Peru. It goes over the border to subsidize Peruvian consumption. So I think he does have a market-friendly attitude, but he's your typical social Democrat. Let me put, give a more recent example- Macri in Argentina.

They're trying to balance way too many variables by trying to stay popular. At the end of the day, you need to make some serious decisions and you need to ideologically align yourself with one or the other. You're either going to go full market or you're going to go full Marxism.

The reason why political parties in Latin America, and Marxist political parties in Latin America have been so successful is because they're so clear with their ideologies. Most social democrat parties like Mahuad's are wishy-washy. They're not fully committed to a path and therefore they end up failing and when they fail, they get wrongly associated with Truly market- they're market-oriented, if you will, but they're not really market convinced.

Rasheed: And Correa, obviously, who is a socialist, it is interesting because, you know, the Ecuadorian population voted for Correa. They really liked him. He was so popular they were able to change the constitution. But that same population was always also very pro-dollarization. So usually people always tend to think, oh, it's a very free market ideology dollarization, but you can't really say Ecuador is a free market ideology.

Francisco: Not at all. Not at all. And it's historical. Dollarization is an exception to Ecuador's history. However, it has lasted longer than any constitution in Ecuador's history. Ecuador is a very volatile and completely adolescent politically. Dollarization is liked, but it's not understood at all.

Ecuador has been a highly mercantilist economy since the fifties. The government, it's fundamentally a socialist economy. It's socially planned. It's centrally planned. It's mercantilist. It's protectionist. What Correa did was just exacerbate that, add populism, add authoritarianism, and deepen the protectionism and the closing of the borders.

His argument was very deceiving. What he told the people was an economy needs money to run. Which is correct. In his case, it was Ecuador needs dollars to run, but the true argument is any economy needs money to run, right? So that's a tautological statement and people bought that, of course they bought. But then he built that into a logical fallacy and said therefore we need to lock the dollars in We can't let the dollars out.

And so people were like, okay, the one thing makes sense. The other thing makes sense too. Instead of saying we need to open the economy so more dollars can flow into it. This is what he did. So he convinced people that we had to close the economy in order to save dollarization. He really convinced them that what he was doing was the best thing for dollarization.

And unfortunately, he drowned out many, and all of us, everybody. By then every single economist understood that dollarization was a good thing, except Correa and his followers. So absolutely, Rasheed, Ecuador is not, by any stretch of the imagination, a market-friendly economy or a population that is steeped in the fundamentals of the market because they've not ever been exposed to it.

And what they've been sold consistently is that capitalism is an exploitation theory. They still believe in the expectation theory of the capitalist. And one of the reasons that that has been so ingrained is precisely because of the banking crisis that you just mentioned. For over 20 years, they've been talking about the financial crisis, how the bankers were corrupt, and how the bankers took everybody's money.

When really the bankers went broke and all the money was put back in the depositors’ pockets. So they've managed to take over the narrative. We've seen this in many other places. This is crony politics that takes place everywhere. But as a population, the average Ecuadorian citizen is not aware, has never been aware that Ecuador has never privatized a single institution.

Not a single one. It's never experienced the true openness of an economy. So they don't even know what they're against. They're just accustomed to this. And therefore they're extremely socialist in their organizational thought structure. And it's a hard thing to get through.

Rasheed: One of the strong arguments usually used for pro-dollarization is that dollarization creates a fiscal straight jacket on the government so they can't overspend in the economy. But you had mentioned that Correa found a way to still spend in dollarization.

Could you explain how that happens? Okay.

Francisco: So we call dollarization a pre-commitment strategy, right?

This is why it's so strong because it prevents the current politicians and the future politicians from being able to spend. And the reason I bring this up is because of IEEP's current strategy. Not a strategy, but we're starting a campaign to close the central bank of Ecuador.

What we did in Ecuador was we took away the capacity to print money, but we didn't close the institution where you can create money. Central banks can still create money, even though they don't print money when they expand their balance sheet. And this is what Correa did. You can even think of it as a modified quantitative easing. By telling the government-owned banks to say, "Well, why don't you issue a promissory note and I'll just buy it from you?"

And so he kept on pumping money into the government-owned banks, based on his social spending agenda, and this expanded the bank. And then of course you deposited in the central bank. So the central bank increases its assets and increases liability simultaneously. So accounting-wise, it looks, it looks balanced, but the truth is that once people start using that money, the balances of the reserves in the central bank start dropping. So he consumed the reserves of the central bank. By 2014 he dropped the whole "I'm doing this through government banks" facade, and he passed a new monetary law by which the central bank started financing the Ministry of Finance directly, starting financing the deficit directly. Where does the central bank get the money from? From the reserves. Where are the reserves coming from? Amongst other things, they're coming from the bank's deposits. Because he closed the economy, he forced the banks to bring any deposits that they were holding abroad back into the country.

So he tapped into the money of the depositors indirectly in order to keep financing his political agenda. So Central Banks are a very pernicious institution. They are run by a few privileged individuals who have the capacity to destroy your life. We saw that in the banking crisis.

The banking crisis was created or exacerbated by a few very wrongly taken decisions by a few people, they created a banking holiday. They destroyed the Ecuadorian banking system. Then you have the Central Bank under dollarization. A very, very, very dangerous institution to have. As a matter of fact, the only institution that can de-dollarize an economy is the Central Bank.

We have a history in Ecuador where Correa was already able to abuse the central bank. We know that this is the weakest link within any dollarized economy. We've started a campaign saying, "Look, if you really like dollarization, which you do the best way to strengthen it, It's to get rid of the central bank." And getting rid of the central bank, once again, going to pre-commitments just strengthens the pre-commitment. It strengthens the pre-commitment and gives the individuals more certainty that it will never go away.

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Rasheed: How, how would you close a Central Bank in Ecuador?

Francisco: It'd be rather easy. John Greenwood, Steve Hanke and I published a paper in November, proposing the closing of the Central Bank of Argentina.

It's an issuing bank. It's harder than closing the Central Bank of Ecuador, which is a dollarized bank. Once the bank is dollarized, it fundamentally acts like any other depository institution. And you can just wrap it up.

There are two quirks that I would say, or three quirks that I've already dealt with in the book that's going to be published by March I deal with a very detailed account of how to close and why we should close the central bank of Ecuador. But there are three things and getting into the weeds with it a little bit, Ecuador still issues coins. So you'd have to take the coins out. Liability would have to be passed on to the private sector.

This can be done in the same way that Hong Kong issues currency through banks. So that little quirk has to be taken care of. It's a minor quirk in Ecuador. And there are various ways that historically something like that has been taken care of. The Hong Kong Monetary Authority doesn't issue coins.

It's a standard charter bank that issues coins. So we could easily pass that liability onto the private sector. Then there's the fact that the Central Bank is the major depository institution for the Ecuadorian government. It's called the treasury account.

It receives all the deposits from petroleum exports. It's the one that pays off the local governments, et cetera. So we just have to pass all those activities to the private sector. If it's politically unviable to give it to the true private sector, you could even use a coalition of private sector and government-run banks.

But the idea would be that there wouldn't be one bank where all of these activities are centralized. And then the last part of it would be the relationships with multinationals, like the IMF, the IDB, and the BISD, et cetera. So those could be easily passed onto other entities within the Ministry of Finance, et cetera.

As a matter of fact, what we are suggesting in our proposal is that Ecuador needs to beef up its financial supervision. So all of the talent that exists in the Central Bank, they're not all bureaucrats. There are people. There are, there are public servants there that are talented, which are being wasted completely today.

Their talent is being wasted on an entity that has no real value, adds no value, and doesn't reduce transaction costs in the economy of Ecuador. So if we could take that talent and also coalesce a lot of the very poor institutions that Correa left over in terms of banking supervision we should be able to set up a much stronger banking supervision authority to prevent crises, not to be reactive to crises. Now, the other curious thing about dollarization is that one of the things that we predicted as well is that the banks would self-police themselves. Ecuadorian banks have much larger liquidity ratios than their peers all over South America because they know that there is no lender of last resort.

However, the population has been sold the idea that there is a lender of last resort. This is one of the reasons we need to get rid of the Central Bank.

Rasheed: The Panama comparisons are quite useful here in that it is one of the other things where the information on how Panama works it's so hard to find. People don't discuss Panama that much because it's over a hundred years dollarized very open market but yet people don't know the integrity of how things work. But in Panama, they never had a central bank But the Banco Nacional, the national bank, essentially does some of the essential banking functions like managing coins and things like that.

They also manage in conjunction with the private sector, like Bano General in particular, the RTGS, and so on in Panama. So clearly this can work in reality like in Hong Kong the example that you mentioned. So one of the other things that I want to ask about is the brief Correa policy of the CBDC, the central bank digital currency, that Correa had tried to implement, was it 2008 or oh 09, a while ago by now? What was his intention behind that?

Francisco: The intention was to de-dollarize. The man behind that is Andrés Arauz. He was his vice presidential candidate at one point. He was the presidential candidate for Correa.

He is deeply left and his theories are very, very flawed. He was behind the Central Bank digital currency. The whole idea was that they could issue currency in a dollarized economy and that this currency would trade at equal value to the dollar and therefore they could maintain government spending. By that time the law allowed the Central Bank to finance the month, the Ministry of Finance directly. So they could just create a digital currency, pass this digital currency to the Ministry of Finance and then the Ministry of Finance could pass the digital currency on to social spending and to local governments and things like that.

And then those local governments would use that digital currency to be able to purchase real goods and services. It was an absolute flop. There was no issuance whatsoever. Nobody accepted it amongst other things because it was immediately aware. The population was immediately aware that this was not a real currency.

There was immediate backlash to them. And this was across the board. So it died. It was stillborn. There was no acceptance of the digital currency. This is a society that has very low internet penetration. That is not technologically very advanced. So for you to try to install a Central Bank digitalized currency in a country that does not have, internet penetration... Although we've seen in Africa, people can use phones. So that was part of the idea. We could use phone money, right? The fundamental reason why it flopped immediately was because it was flagged as a currency that would compete against the dollar and nobody wants anything but the dollar. It died within a year.

Rasheed: So dollarization, usually again, in the common ways discussed, it's taught as a stabilization tool, it's taught as a fiscal commitment tool, but it's not usually discussed as a developmental tool. And in Ecuador, there's some data that you were explaining to me earlier. But could you get into how we should think about dollarization as a developmental tool and apply it to some of the situations in Ecuador, a real-world example?

Francisco: Rasheed, thank you for that question. That's exactly where I've been. I've been writing and developing most of my research in dollarization for the last few years. It has transcended a monetary anchor. It is an institutional anchor. It institutionalizes the private property of money.

Money is an important institution in any economy and it should be held by the individuals. Its value should not be manipulated by a third party. This really transmits power to the individual and takes it away from the politician. That's why it's a development tool because it truly transmits the running of who is the boss of the economy, the citizen, and not the government. And that changes the dynamic significantly.

What we've seen in Ecuador is that, for instance politically, any candidate that speaks out against dollarization, like Arauz, will lose an election. The power of institutionalizing or reinstitutionalizing money is extremely important. And the reason why dollarization should be considered a significant tool for development is because it's easy to implement.

You can't change institutions overnight. You can't make courts less corrupt overnight. But you can change money overnight. And when you change money overnight and you absolutely give the private property its proper place in society, then the dynamic changes significantly. And that's what's been happening in Ecuador.

The citizen knows. Even though there are deeply committed Correa followers in Ecuador, they like the dollar. They don't want to get rid of the dollar. So we think that it's going to be easier to convince those people that what we've actually done is privatized currency. So if we privatize currency and you like it, then why can't we privatize other parts of the economy and you can also get good results for them?

There is no more democratic private property than money. And building institutions is a long-term process. Dollarization is a very fast and efficient way to introduce an inclusive institution.

What institutional drift tells us is that if there is a sufficiently strong, inclusive institution there can only be two results. Either the political extractive institutions will corrupt it or they will have to adapt to it. Dollarization in my belief is incorruptible for various reasons. I've studied how to de-dollarize countries, obviously, very deeply.

And the conclusion that I've reached is that it's almost impossible to de-dollarize. I say almost because Zimbabwe did it. But it's almost impossible to de-dollarize, not because of ideological, or political reasons, but because simply it is logistically impossible. Once the currency in circulation in people's pockets is the dollar, if you were to announce a de-dollarization, what would happen to daily transactions?

They would collapse completely. Like dollars would disappear. And unless you have a stock of money to replace the stock of money that exists then all of the economy would collapse rapidly. After First World War Germany, cities had to issue script in order to be able to function.

First World War Germany was a much different economy than today's economies. So the mere impossibility of substituting whatever papers are in circulation rapidly, overnight, makes de-dollarization impossible.

So I would say dollarization is a cure for populism. Dollarization is truly a recipe for development. Amongst other things, it installs a highly inclusive institution that cannot be corrupted by political extractive institutions. And Ecuador is a great example of this.

You can throw anything at it. But eventually, the politically extractive institutions will have to adapt to it.

Rasheed: I think that's probably the most powerful analysis one could think about dollarization in Ecuador. Because the constitution changed, and yet they couldn't change dollarization.

Francisco: You've got to understand that the constitutional change in Ecuador changed all of the institutionality of Ecuador.

Every single institution is subordinated to central planning. The whole economy is centrally planned. The private sector is subordinated to the public sector. The regulations are just stifling. Taxes are stifling. If you could think of all the conditions that would make dollarization really hard, you have Ecuador. That's why Ecuador is such an interesting example. Because you have to study it from the point of view of "how tough is dollarization where there's Ecuador?" Ecuador has every single institution and the whole political and economic landscape of Venezuela.

It shares exactly the same constitutional basis. It has petroleum revenue, et cetera. But you compare Ecuador to Venezuela and Ecuador is a thousand times better. Its GDP has grown at 150 percent of Venezuela's annually over the last 20 years. Of course, you then compare Ecuador, a dollarized economy, to Panama, where Panama doesn't share the same institutionality of the socialism of the 21st century, but it also has the dollar.

And Panama does a lot better than any other Latin American institution. So you can say that Panama Dollarization will save you from Venezuela but it won't save you from the socialism of the 21st century. It will stop it. It will help you maintain certain amounts of economic calculus.

What ended up happening in Ecuador, for instance, and I showed you some statistics before we started, is that dollarization helps decouple the private sector from the private sector. When you have a devaluation inflationary economy, you spend a lot of your time worrying about what a politician is going to do to affect your pocket. I ask this of the Argentines all the time. I just say "What percentage of your time are you spending worrying about the interest rate?"

And they're like, "Oh my god, 10%, 20%." Imagine if you could spend time on being more productive. We're talking about GDP and potential GDP going up overnight. So the deterioration of, or the elimination of this exogenous risk allows for economic calculation. And that's the basis of the economy.

That's productivity. That's how you get unemployment down. It's through productivity. And so the other thing that they throw against dollarization is the rigidity of the currency will make you not competitive. So let's take the private sector of Ecuador, which has been castigated by poor institutions, by corrupt courts, and by crowding out from the government. Anything you can think of has been thrown at the private sector of Ecuador. But shrimp exports have grown so rapidly, so well that now in today's world, one out of every four shrimp you consume comes out of Ecuador.

However non-traditional exports and non-petroleum exports in Ecuador are significantly larger than petroleum exports are. All of Ecuador's balance of payments historically was based on petroleum. Now petroleum is less important than private-sector exports. All of that is possible because economic calculation can take place by the private sector.

This is what stability gives you, and you need stability to be long-lasting. Dollarization is long-lasting. It's a pre-commitment that is so strong that eventually, all institutions will have to submit themselves to the openness that it requires. Even though Ecuador has been closed and shut off from foreign exchanges.

Anybody that has money in Ecuador will take it out, pay the tax, and don't want to bring it back in.

Rasheed: Right.

Francisco: Why? Why would you pay a tax to bring money back in? Why would you put it at risk of all these regulations and crony capitalism, all these things that unfortunately a bad government and a socialist and planned economy bring with it?

So dollarization is truly a recipe for development. If Ecuador has been able to grow under the conditions, the really, bad conditions that have been set in place, imagine how well Ecuador will grow once they give it the right and proper fertile conditions for the private sector to thrive.

And that's what we're hoping for in Argentina.

Rasheed: Earlier you mentioned that there was a team of experts, or a particular expert that Correa had brought in to design some new fiscal laws in Ecuador, or monetary laws.

Francisco: No, no. What I think you're referring to once Mahuad announced dollarization, they needed some sort of way of justifying that the spontaneous order had worked so well, but they were perplexed. They were like, "Oh, but we need a law. We need a law to make this work." This is interesting because one of the lessons of Ecuador is that it works so well and so rapidly that they've not done the rest of the homework. And this goes to the Central Bank, to getting rid of the Central Bank, to make sure that there are fiscal anchors, to making sure that money can freely float in and out; that you have a well-regulated banking system so that there's no real risk.

Like Panama, you should integrate with the rest of the world. Once you dollarize, it's the private sector that dictates how much money is in the economy and therefore you should just let the market decide. You should not start messing with the monetary mass, cause you're going to get into trouble.

And this is what the Ecuadorian government has done. It's created this hybrid of dollarization on the one hand, but still a discretionary monetary policy on the other hand, through fiscal means. So what ended up happening was that dollarization worked within hours. But since there's this legacy of having to legislate, of having to create government around things, they called in these, all these, experts, so-called, I'm going to put them on quotes because they never called Kurt Schuller, they never called Steve Hanke, they never called Larry White, they never even consulted with us, the locals that had been promoting and writing laws. And they never even called us to help with what's called the Dollarization Law.

Now the Dollarization Law only has about 12 articles that really deal with dollarization. It was a law that had been cooked before as a potentially modernizing law. But it didn't do anything. It didn't do anything, it was ridiculous. One of the experts that was called in, and was paid for by the IDB, was a Frenchman. And one of the things that they had to do, and this is typical of bureaucracies, they just have to justify themselves. The largest part of the articles and clauses in the new law that was passed in March had nothing to do with dollarization.

The largest part of the dollarization clauses has to do with installing a new accounting system for the central bank, which is fundamentally an accounting system that is used in all colonial currency boards. So there's nothing new to it, but the bureaucracy that came in justified themselves by saying, "Oh, we have this thing that will really help."

And all it really does is create a new type of accounting. But if you know how to read a balance sheet sort of gobbledygook that was also violated by Correa.

Rasheed: So I have this book here. Published by

Mahuad, in 2001 or 2002 I believe.

Francisco: 2020. Cause the whole premise is that 20 years later...

20 years after dollarization, he comes out to finally say, this is how we did dollarization.

Rasheed: Okay. I would say I bought it in 21, so that's the real issue. He attempts to describe what he says is the process where he dollarized Ecuador.

The title is essentially, this is how we dollarized Ecuador. You're a bit critical of this interpretation.

Francisco: I'm not a bit critical. I'm a hundred percent critical. I was an actor. I was part of it. I saw it. I lived it day to day. And if you read the book, it's absolutely sad in the sense that 20 years later, it's completely demonstrable that he still doesn't understand how dollarization works. So he chose the exchange rate.

He arbitrarily decided that Ecuador would dollarize at 25,000 and that's been highly criticized. We criticized it the day after. The day after he announced we said "Look we're happy you did it But you could have done it a lot better and you should have followed what we told you months ago." There is a market-friendly way to dollarize and it is to tell the country that you are going to dollarize within a certain number of days.

And of course, you freeze any monetary expansion during that time. Hanke did it in Montenegro. This is nothing that we're making up. That's the way to do it. Because you need to establish the most informed rate, the most informed market rate in terms of supply and demand. Because once you get the rate wrong, you're causing friction, you're causing problems.

So what the Mahuad did was establish a rate that was extremely high, which resulted in 91 percent inflation under dollarization. And just a little side note, this is precisely the concern we have in Argentina now, that the rate is so revalued that if it were to dollarize at these rates, like if they were to say a la Mahuad this is the rate, it would create a problem on the other end of the spectrum.

You need the market to establish exactly what the demand and supply is and what is the proper rate. I'm just using this as an example, because 20 years later, Mahuad writes in his book and he says, "I can justify I can absolutely, with all certainty, tell you that I made the right decision based on the studies that we had, which have never surfaced. The 25,000 sucrase to the dollar, which is the rate we dollarized was the correct rate. And the reason is. We were able to substitute, we were able to take out of circulation all the dollars."

Well, yeah, you had an excess of reserves! That's the whole purpose of dollarization, to buy every single Sucre in existence. What he's attempting to say is that there was not a single dollar left in the Central Bank before after he dollarized. That would have been a perfect calculation that would have been like, "Wow you really got it down to the cent. That there was not a single dollar left in the Central Bank. When you bought out your existing money in circulation."

Every single Sucre in circulation was taken out by dollars and in the Central Bank, and there was not a single dollar left in the Central Bank, then you got that calculation absolutely correct. But that's totally what did not happen.

There were over 300, 400 million left in the Central Bank. And we're talking about a monetary base of only 800 million. So he really screwed the pooch. And in his announcement, "he said, our studies indicate that 25, 000 is the correct rate, and inflation next year will be 10%."

Inflation next year was 91%. So the studies that he mentions in his book, which he never publishes, even though it's like a thousand-page book. Where is the link to this study? Nobody has ever seen this famous study. We did studies. In the private sector, we had all the studies.

We drafted laws that we sent to them. They never took us into consideration. And so these studies that he says 20 years after the fact that they had are bunk, they didn't exist. Why did he choose 25,000? Let me explain this quickly. Dollarization took place on a Sunday, the 9th of January.

31st of December, when all fiscal accounts close, is when we take stock of what happened. And the exchange rate was at 18,400, more or less. In five days, between then and the 5th of January, the exchange rate went to 25,000. So it lost 7,000 out of 18,000 basically in value very rapidly.

We were going into a hyperinflation. The rate that he chose was the spot rate after a massive spike. Instead of even thinking the market has overreacted here, which is normal he took the spot rate. That's it. That's what he did. And he has no justification for it. And it was a mistake. That mistake cost Ecuador dearly because inflation did not come back down to single digits after, until two years after dollarization.

But here he comes 20 years later with the most important institution in Ecuador's history, and of course, he wants to jump on the bandwagon. As a matter of fact, if you talk to a lot of Ecuadorian economists today, they keep on saying, "Well, I was part of dollarization" Well, no, you weren't. It is such an important institution in Ecuador's history, of course, everybody wants a piece of it. I can demonstrate just how many fallacies are in this book. And it's upsetting, quite frankly, that, even the title, he says, "This is how WE dollarize Ecuador." Well, you didn't. Thank you though. You took the decision. I mean, he could have gone the other way.

He could have created another banking holiday and could have taken away people's deposits. So in that sense, I think we should give him due praise for the fact that he made the right decision. But he didn't take it because he had this study and he knew exactly what he was doing.

No, he took it because it was a political lifesaver for him. He was kicked out 12 days later. He's been declared a pariah. He's been sued. He can't go back to Ecuador. This is very sad because I think he should be allowed to go back to Ecuador and face the court of public opinion and defend his position. But this is his defense for dollarization.

It is the weakest defense I've ever seen. It proves beyond a shadow of a doubt that even 20 years later, he doesn't understand how dollarization works or that his exchange rate, his choice of exchange rate was wrong. And that's pretty telltale.

Rasheed: You mentioned that you're working on a book yourself about a proper interpretation of the dollarization process in Ecuador.

Francisco: So, the IEEP, the Instituto de Economía Política, has not, over the last 25 years, published our version of the history of dollarization. We've been cautious about reading other people's interpretations and waiting for the right time. So dollarization turns 25 on the 9th of January.

The longest-lasting constitution in all of Ecuador's history did not turn 23. It lasted from 1906 to 1929. So it is absolutely clear now that dollarization is the most important institution in Ecuador's history. So it is important that other countries understand this and see this because, with that evidence, it cannot be underestimated as a tool for development, as an institutional anchor that can truly change a country.

And this is what we're going to publish. We wanted to publish it earlier, but we think it's going to come out in March. Steve Hanke has a chapter, Kurt Schuller has a chapter, Larry White has a chapter. And of course, all the important economists who helped with dollarization in Ecuador; Dora, Pablo Lucio Paredes, Franklin Lopez, myself. We have chapters in the book. And of course, I've written the historical part. We look at dollarization as an event study, too. We try to make it, we try to make it as, as objective as possible in terms of the data that we present as to how dollarization took place.

We give a lot of references. We inject our analysis. We show what the Central Bank of Ecuador did, this hasn't been published before. We believe it's a very important tool for students of dollarization and I have a chapter there where I propose the closing of the central bank and I put a very detailed plan on how to do that. Because we think that if dollarization has been the most important institution of Ecuador's history and you want to strengthen it Then this is the single most important thing to strengthen the pre-commitment of dollarization.

So look out for that book coming out. We don't have a title yet, but I think we're gonna call it something like "Dollarization a Vaccine Against Populism" or my favorite which is a book that I had when I've been writing for a long time, I've incorporated into this: "Dollarization: A Recipe For Development."

The strength of what's happened in Ecuador, the evidence of what's happened in Ecuador just cannot be overlooked. And unfortunately, it has been. Most people don't know about Ecuador and have never heard of Ecuador, but it is the first country in the world that voluntarily gave up its currency that had been in circulation for over a hundred years and said, "We're done with you, Central Bank.

You have not provided us with a service that has brought down transaction costs. You have only increased transaction costs in this economy. And you have created winners and losers. And you've made a lot of people rich, not by productivity, but by inflating currency, by creating devaluation. So we're done with you, Central Bank. Give the power to the people."

This is an important step. This had not taken place before in monetary history. So what we're missing now is to close the central bank. And I hope to have the next podcast with you as the liquidator of the Central Bank of Ecuador.

Rasheed: Francisco, thank you so much for joining me on the podcast today.

Francisco: It's been my pleasure, Rasheed. I mean, honestly, thank you very much for all your work on dollarization. I think that there are a lot of things that we still have left to talk about. Maybe we can have another one sometime soon. But dollarization and money are the most important institutions in society, and we need to pay more attention to them.

And especially in countries that have low institutionality, we need to get rid of the Central Bank, which is basically a factory for misery. Right?

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Show notes

While Barcelona scapegoats tourism for its housing shortage, Madrid is setting the standard for development with initiatives to improve its housing stock. The “capital of capitalism” is once again employing sound liberal governance techniques to position itself as a premier city in Europe. Diego Sanchez de la Cruz returns to the show to discuss policies being enacted to expand living options for the fastest-growing city in Spain.

By abolishing oppressive rent controls, improving mortgage accessibility, and unlocking new zoning for construction, Madrid is acknowledging the challenges that come with being the city of choice for many new residents and nomads, seeking new opportunities that also strengthen the city’s workforce and future-proof it for growth.
Spain’s dynamic political landscape provides fascinating insight into juxtaposed methods of administration and poignant lessons for Latin America and the Caribbean.

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Full Transcript

This transcript was automatically generated by AI and lightly edited by our team. We don’t catch every error, so if you spot one, send us a message/email via shem@cpsi.org.

Rasheed: Hi, Diego. Once again, thank you so much for joining me on the podcast.

Diego: Thank you very much for having me. I'm very happy to be here with you again. We got some good reviews the last time we got together. So thanks to everyone who dropped those by and yeah, excited to have this conversation.

Rasheed: And we will be talking about housing policy in Spain. And housing policy in general, as all of us know, is a very hotly debated topic across Europe, North America, and essentially everywhere in the world now, and it'll be interesting to see or learn about how Spain is doing good at housing policy and also where it's failing at housing policy. And we can see some of the comparatives between some other countries as well. And just to dive right into it, we were discussing earlier, some of the remnants of the Franco regime that have permeated still in the housing policy or general policy in Spain to this day.

And one of the things you mentioned was the idea of the ownership culture but also rent control. So could we start there? What was the impact the Franco regime had on housing policy in Spain?

Diego: It was pretty deep because it transformed how housing was structured in most of our larger cities, right?

Spain today is one of the developed countries with the highest degree of home ownership. We're talking of rates that are at around 80%, right? Which means that four out of five people in Spain are not really that concerned with rent prices because they actually own their home. They may be concerned with, interest rate hikes if they're paying a mortgage, but they're not concerned with rent prices.

And I'm about to refer to Franco, but this is important because sometimes people that come to Spain they wonder how is it that people do not take to the streets, or that the high rent prices do not become more of an issue. Part of the issue is, or the reason why this is not As big a deal as it could be, although it is indeed a hot topic of conversation, is because at the end of the day, if four out of five households are in an ownership status, then it's only around 10 percent of people that are actually renting their homes.

That kind of explains why, although it is indeed a hot topic in Spain these days, it's not as big as some would initially think. So especially those that come from abroad and see that there are some things that are broken in the system. So going back to Franco, like you, as you mentioned this home ownership society that Spain is was essentially built under the Franco regime, which did two things.

On the one hand it encouraged the development of of housing and the accessibility to housing. So that facilitated home ownership period, that is pretty straightforward. On the other hand, on the rent side of the housing market de facto rent controls were placed because a system called 'Renta Antigua', which we could translate as 'old rent', was designed.

Under this scheme, most people who were renting not just residential but also commercial real estate were guaranteed that the price they paid would essentially stay fixed as long as they lived. So if you were 35 years old and you were signing a rental contract, you could expect to pay the same price until your eventual death at perhaps 75, or 85 years of age.

So this equates to rent control and not just rent control, but but the rent freeze that was left in place for a very long time. So long that decades after Franco's death, a lot of people were still paying these artificially low prices. You would find some ridiculous cases in which two neighbors in the same apartment building were paying prices that, that were just astronomically different one from another.

So I'm thinking that maybe someone was paying a thousand euros a month for the rent and then their neighbor was paying 50 euros because the neighbor was someone who's still very old that had signed this contract under the Franco regime and therefore benefited from that through the years. Now of course this made the investments in home to rent projects almost disappeared.

Why would you invest in housing for rent if you're going to get essentially no profit out of it? So that was a big reason why most of home developments in Spain since the mid 20th century all the way up till very recently, were focused on the sell side of the real estate, not on the rent side of real estate.

And that's definitely shaped the way in which Spaniards think of home ownership. They prefer it to rent and they consider it to be more affordable because in fact, in many cases it is because for that very small rent market, the prices are high because there's a lot of competition for very limited units.

Rasheed: So there's one assumption I just realized I made where I assume people understand clearly what the Franco regime is, but that's not a very good assumption. Before we continue, could you give some more details when you say Franco regime, what exactly are you referring to?

Diego: We could go into a rabbit hole here, but that's not the main purpose of the podcast.

But essentially it was an authoritarian regime led by a military man called Francisco Franco that followed up the Spanish Civil War from 1936 and 1939. So essentially after his troops prevailed on the so called national side prevailed over a more of the Republican side, which was more on the left wing side of the spectrum.

This this regime was in place from 1939 all the way until Franco's death in 1975, which then kickstarted a process of transition and Spain has been a democracy since then. Your point is very well made. And although Franco was in power from 1939 to 1975, these changes in the real estate market, which became apparent in the 1950s, still permeate the way in which housing is structured in Spain.

Rasheed: So rent control, we had discussed before, is an autonomous community level policy. So even today there are still some autonomous communities that have rent control. Is that correct?

Diego: Yes. And in fact, it has been reintroduced lately because there had been no rent control policies in Spain for the last several decades.

But following the COVID pandemic, our national government, which is a coalition of a socialist party and a communist party, PSOE and SUMAR, and it's led by Prime Minister Pedro Sánchez, decided to just essentially introduce several price controls in many areas of the economy which may be surprising to some of our international audience, but maybe not to all of them, because indeed there's been a significant power grab in some areas of the economy.

And then some areas of regulation have clearly overreached their normal powers and authority in the last several years with a pandemic as the starting point for these interventions, right? So for housing it began first with the mandate to not extend any rental contracts throughout the year 2020 and 2021.

Rasheed: To don't terminate.

Diego: Yeah, essentially. And then the rent control was enacted as well. In addition to these, Spain has quite the problem with squatters, people that just break into your home and stay in it by force and essentially kick you out of your own home. There's approximately 100, 000 housing units that are affected by this.

And although there is more than 20 million households in Spain, and you could say that number is not that big, it definitely sends a very weak signal in terms of adequate safeguards for private property rights. So that's also playing a factor in creating a lot of uncertainty in the real estate market for investors and for players in it overall. It should be noted, by the way, that 95 percent of Spain's housing stock is owned by individuals. Big companies owning real estate, big firms developing real estate for rent, whatever, that's not very common in Spain, because like I said, you get 100 units, 95 of them are just owned by mom and pop.

They're just individuals who own real estate. So for many of them, rents are like part of their income or they have that unit. That's something that you need to take into account as well. Rent control prices were therefore introduced and they have been picked up by some regions.

The clearest example is Catalonia sometimes. Which did enact these rent controls, but has not been able to get the resources it wanted out of them. Because rent controls at the end of the day are the old idea that never goes out. But it just doesn't work. So if you want me to, I can elaborate a little bit.

Essentially what they've seen is an increase in prices and a significant fall in housing supply. The falling housing supply, everyone can understand, right? If you're going to freeze rents and I cannot set the market price for it, why should I just put my real estate asset in that part of the market?

So some people have just put it out of the market for now. Some people have put it on sale instead of for rent, et cetera. But the beat of the prices, sometimes people do not understand, right? Some people wonder how is it that prices increase if there is a rent control in place. Is it a black market thing?

There are some black market dynamics there. Some people are charging you and it's not even illegal. What they're doing is they're charging you an extra fee for maybe your garage, whereas before they wouldn't. So the rent that they cannot introduce formally in the price, they introduce it with these side deals that for instance, may do with your garage for your car.

But most of the problem is not there. The increase comes from the fact that, okay, you're telling me that I cannot modify the price on this rent for the next three years, right? So what I'll do is I'll just, whenever the contracts that are existing run out, I'll just bump up the initial cost of rent. And then I'll just leave it frozen as the law asks me to do.

So for example, I'm renting this apartment for a thousand euros. The contract is up, three years have run past and I have not been able to bring it up, but now that this rent control has been phased out and I have the opportunity to do a new contract, I'll bump the pay up by 10 percent and then yes, I'll have to stick with that 10 percent rise for the next three years.

So instead of a gradual increase. You just automatically bring it up with new contracts that are being signed. So it's been a disaster for Catalonia because that's one of the regions where people want to live in Spain. And it doesn't affect most regions. Some regions may enact it, but if there's not a lot of demand anyway, it doesn't have a lot of real-world consequences. But for markets like Catalonia, which do have demand, that's a problem and a big mistake by the regional and local authorities.

Rasheed: Why does Spain have such a big issue with squatters? Because this is a thing that I think people find very surprising where literally if someone goes into your house, it's legally very difficult to get them out. Why is that?

Diego: They became a pet for the far left and the far left had a big surge in Spain throughout the financial crisis of the 2010s. Spain was one of the European countries that was hit the hardest by the real estate bubble that burst and that will be part of our conversation today. And that led to an economic crisis and then there was also a debt crisis ongoing in the eurozone and Spain was very poorly positioned there as well. So the far left was able to capitalize on that and increase its support level significantly.

It had been residual for a long time but right now, as I said, there is a communist party in a coalition government in place. Spain is the only country in the EU which has a communist party in government. So that's quite telling. And these squatters, which in Spain we call them "okupas", but with a K which signifies a more like anti system type way of, typing the word.

These okupas, these squatters, became a pet project for them. They became the symbol of oppression. An example of how the system and the market economy were excluding individuals to the point that they just had to break into other people's homes. Of course, that twisted narrative is full of holes.

Most of them are people who work or belong in mafias and just pass along these squatting activities from one building to another. So they're organized. Only a very small number, around 20 percent of them are vulnerable. And what's more important, even if they're vulnerable, that doesn't give you the right to just enter someone else's property and just start living in it as if it were yours.

Now, Spain has enough state capacity to get rid of any squatter's case in 24, or 48 hours time, right? Because it's quite easy to just double-check who owns a property. There's a perfectly well-functioning register for that. And that just takes you a couple of hours. And if anyone that is in a home is not able to show that they actually do own any sort of contract that allows them to be there, then the police forces could just with authority from a judge, put an end to the situation.

And that has been proposed in parliament. But so far the resistance has come from the far-left group that is in government. The socialist party did not want to alienate their partners and may have sided with the center and right wing forces on this. So they tiptoe on this issue. And so far it's remained in place.

If you follow the legal conduit, you take around a year and a half to get these people out of your home. But as I said, there is no state capacity issue. You could just change the law, change the protocol and you could get this done in 24, 48 hours tops. But if there's no political willingness, that will remain an issue.

Some people have even resorted to extra legal or paralegal ways of dealing with this, which is essentially, there is a law that allows you, if you're the owner of any real estate asset to install security control at the door, right? So essentially that's the permit or the law that allows you, for example, if you have a nightclub to have a bouncer at the door. Or if you own a, you're a football club and you have security guards at the door, that's essentially the permit, it's a normal law. So some people are using it to hire security companies, put a security guard on their door, and essentially make sure that whenever the squatters come out, which at some point they do because they, come in and out of the property, they will not be allowed entry once back in.

So it's it's a gray area with a law and it's enough to get these people out. But the owners that have to go to these methods, they have to pay 5, 000 euros to get the service done. So that's an issue. And then there's also some companies that are offering homeowners to take care of the rent and take care of any potential issues with security in exchange for 10, 15%.

So essentially they have those security services. You don't have to go through any issues and you get guaranteed that you'll get paid 85, 90 cents on the dollar of your rent and they deal with whichever issues may come up during your contract. So that's some of the ways in which people are dealing with this.

But if you. If you put up a Spanish TV station any morning and you watch the typical news show, you will find a lot of very sad examples of this going on.

Rasheed: Yes, I can confirm that.

Diego: You've seen it, definitely.

Rasheed: Spain has this system where the autonomous communities do have decent variation in political views and policies and ideas.

How different is the view towards housing policy across Spain?

Diego: The most remarkable contrast right now is the one that exists between Catalonia and Madrid. Because in Catalonia, which is of course the region where Barcelona is located, the forces currently in power are a combination of a left-wing government that is essentially formed by the Socialist Party, the same to which Prime Minister Pedro Sánchez belongs, and a series of separatist parties that have mostly moved to the left on economic policy in the last several years.

Now I make a small comment here about this like traditionally separatist forces in Catalonia were more skewed to the center-right, but this has shifted through the years, and both the ones that used to sit on the center-right of the spectrum have moved more to the left, and the ones that were on the left have become more powerful within Catalonia the separatist movement. So this results in a quite dysfunctional parliament in Catalonia, in which you have a Maoist party, for as crazy as it may sound, called CUP, and you also have far-left groups such as ERC that form part of the coalition in parliament that supports the government by the socialists, right?

They are enacting this sort of policy. Another example of what's been going on in Catalonia is that they wanted to force any development of new housing by private builders to automatically and by law include at least one-quarter of the new housing units to be given for cheap rent subsidized by these homeowners.

So think about how crazy that is. You're building a residential building project, right? And you want to have 10 housing units in it. So that means that automatically, at least two or three of them, I think it was a 25 percent reserve, so between two and five and three of them would automatically have to be given out to renters and rented at an artificially low price.

So essentially that froze a lot of construction projects, because if you are not able to control, roughly one-third of your own housing project why start it anyway? So that's been a big issue for them. Madrid, on the other hand, and we've discussed this previously in the podcast has a laissez-faire movement in power and has had it for at least 25 years now. It's run by the popular party which is the party with the highest number of votes nationally, although it's not currently in government. But it should be noted that the popular party of Spain is a broader coalition where not necessarily everyone is on board with free-market ideas.

Most of them roughly are in a moderate way, but the Madrid Popular Party is quite radical in its support for free markets. And it has definitely taken the other route in the past few years. And although the planning system is essentially broken and needs fixing, what Madrid is starting to do is to change its land laws and to also unlock a lot of housing projects and developments that are currently in the pipeline.

And we've finally gotten some construction works started in areas in which they had been, essentially stopped and put into a drawer. Still the political conversation is relevant because for instance, although the region of Madrid is run by the Popular Party, which is like I said, here originally a very pro-market friendly movement.

The city of Madrid was in the hands of a communist party between 2015 and 2019. It's been run by the Popular Party for most of the last 35 years, but it was in the hands of a communist party between 2015 and 2019. During that period 160, 000 housing units that were being developed by the private sector were essentially stopped because of Concerns of this communist party, that they just simply did not like the idea, you know of private companies developing housing Just something about that made them really, uneasy and they just did not believe that.

Rasheed: Can you go into that a bit more?

This is Podemos you're talking about. Could you try to explain if you can why they were so against the idea of new housing projects?

Diego: At the end of the day there are approach has always been that the city should remain as is. So there are very conservative in the way they think about cities.

They don't believe that buildings should be taller because they think that goes into the aesthetics of the city and they do not strike a balance between aesthetic concern, which is legitimate on the one hand, but of course the needs of the population. On the other hand, they are also very concerned when private initiatives take over and when the city follows a trajectory that is not centrally planned if you wish, but rather following the demand that is carried out by private developers. So there was also that inherent feeling that if this is coming from a bank that is developing this big housing project for 10, 000 people in the north of Spain, of Madrid, sorry, it feels like it's the market taking over the state and it's the private enterprise doing things that should be done by the public sector.

And then we want more green areas in these developments. So we will not authorize it unless there are more green areas and less housing. So it's just a degrowth feeling behind it. And it unfortunately did prevail for these four years. And it did stall progress on significant big urban transformation initiatives that were all privately led and were essentially put into a drawer and stopped.

But mind you, the housing system in itself, it's so bureaucratic that even if you're on board with these changes, it does take you a lot of time to enact them and to just allow housing to be developed privately. You have the worst of both worlds. You have a slow, urban planning system and a political majority that just doesn't want any new housing done anyway.

So we had it rough for these four years. And then the pandemic came. So 2020 was a lost year for construction. So it's been picking up since 2021.

Rasheed: Why is the planning system in Madrid also, and just Spain in more general terms, so bureaucratic?

Diego: The planning law was essentially a carbon copy for all regions. And it had this approach that you sometimes see with innovation in which you need a permit to innovate. So that's why so many people have argued for permission-less innovation. In this case, any new housing needs to go through the permit cycle which is very bureaucratic and that has several flaws.

On the one hand, if you're looking to do a big overhaul of how a particular district looks, say I want to completely redo a series of buildings in a particular quarter. That requires a whole transformation of the whole way in which the urban planning for that district is done.

So then you get put into a queue with all the other projects that may be. And then that will eventually get done every five or ten years whenever the big projects are taken care of. So that de facto means that if you want to go large and there is this area in which say there is this former factory that is abandoned or this former shopping mall that no one goes to anyway, these days, or just an empty piece of land where I want to develop something. If it's a matter of size, which does matter for actually bringing a lot of new housing into the city you get put into these big queues. So that's an issue. The permit cycle in itself is hurt by two things. On the one hand, it's slow. It's very bureaucratic, so it takes one year or two years to, to get it done.

And on the other hand, because there is a lot of buildings in Spain that just because they're like more than 50 or 60 years old, they get a special recognition and they get some sort of protection. And they get considered or labeled as really special buildings where any change should be supervised by architects that are named by the government. Then you need additional permits. And to top it all, not only do you have this lowness of the regular permits, but then the added layer of these special permits that affect many buildings, especially those in the center areas of the city, which are subject to this special protection.

You add another third layer of complexity because you go from one queue to another. You cannot just put the file in, register the project, and get it processed at the same time on the one hand and the other hand, no. The regular permit, you need that first, and then you go into another queue and you queue for the special permit.

And then it can get even more crazy if there are some added complexities. So if, for example, God forbid the project is close to a river because then there is another body that may want to give you a permit. God forbid there are any ancient ruins, like one mile close to your home, because then you may need to bring archaeologists into the project. So the whole thing is very bureaucratic. There are a lot of things here and controls that make sense from the perspective of guaranteeing some areas, but the problem is that there it's so many of them, they're so slow to be enacted and you go from one to another. So when you combine these things, that system is clearly broken. This was essentially the case for all of Spain. And no one had actually thought of getting rid of this. In fact, the land laws were changed every, 10, or 20 years since our democracy was born in different regions but no real improvements were made.

Only Madrid has started that conversation recently. And some other regions have followed suit, like Andalucía, which probably many of our listeners know for its beautiful cities like Sevilla, Córdoba, and Granada. Andalucía has also been doing some deregulation in that area. The idea in the end is that if we keep the existing system in place, for 40 of our provinces, it really doesn't matter because they're not so populated.

Spain is not a very highly populated country in terms of the population density of its cities. But of course, Spain has some really big cities and some really important economic powerhouses like Madrid, Barcelona, Zaragoza, Malaga, and Valencia, and of course, for those areas, this planning system is broken and it's a problem if you want to develop new housing.

Rasheed: So we're going to come back to some of these smaller points on the planning system and how especially Madrid is getting over it, but I want to go back a bit. You mentioned there's a very high rate of home ownership in Spain, but especially in the last few years, there's been constant discussion, particularly by young people, about the inability to rent houses, of course, and you see one big manifestation of that recently was in Barcelona with the anti-tourist protest, for example. Where one of the very oft-stated grievances is that tourists are making it too expensive for us to live in our own city and so on.

Of course, their response is that we need to actually limit tourism and not that we need to actually build more houses. But that kind of wraps into this one big idea, one big political feeling. When do you think it became such a larger conversation, even when we read newspapers, El País, and El Mundo, almost every edition near to the front page is a housing price chart in Spain.

When do you think this became a big salient point? Was this related to the 2008 financial crisis?

Diego: To go back a bit, when Spain entered the Eurozone suddenly interest rates were significant lower for Spaniards and this was the result of being pulled into the same economic area as Germany or France.

Immediately the markets reacted to this as if, okay now Spain is under the same currency as Germany. That de facto makes it a country in which credit can be given out more loosely because of their risk profile, the factor goes down just because of Eurozone membership, and not all of that reduction was sustainable, as we found out later when the credit crunch claim came and a lot of malinvestment had been done in the real estate industry. This led to a banking crisis. We used to have 50 savings banks and 10, 15 large private banks. And these days only 10, 15 of these savings banks remain. Most of them were like de facto public institutions, so it was more of a failure on the state side.

So after that, the big shock was essentially the fact that after such a huge bubble had burst the housing sector collapsed and had no activity for the last 15 years. And that correction maybe made sense, five years after the real estate bust, but not since then, because the Spanish economy has grown for the last 10 years.

It grew more before the pandemic with a previous government under Mariano Rajoy, then after the pandemic under the current PM Pedro Sanchez. However Spain has recovered from that crisis and has done so for 10 years. But housing development never did. So there was no new supply of homes, although the demand for it had slowly begun to recuperate.

On the other hand, there is a lot of people that have moved to Spain in the last several years, mostly last three years or so. Let me give you one number that is astonishing. 90% of the new members of the active population in Spain, many of them are employed of course, 90 percent of the people that have joined Spain's working population in the last few years are of foreign origin.

That's an amazing number. Many of them come from Latin American countries that have been ravaged by socialism. And of course, you see a lot of Venezuelan accents in Madrid as a result of that. Then there's many people that have essentially taken advantage of the opportunities that come with remote work; expats, and digital nomads who just want to, be located in Spain for a while.

And then also, although our public universities are not very known outside of Spain and therefore cannot really bring in that many students, there are some elite private universities in Madrid that have been able to seduce a lot of international crowds. Some of the most known are Esade.

And that has also brought up a lot of foreign population. Also, there is an overarching movement of people living in villages and moving to cities. That's a century trend now. And that has accelerated a bit also in the last few years. So you get a combination of, a lot of expat growth that has not been met with additional supply in housing units.

Also, people move from villages to cities and all of these, obviously compound. And then the thing with the tourists, I should start by saying that tourism is like oil for Spain. Only that it doesn't have as many environmental concerns as oil does. We make more than 10% of our GDP through tourism.

We're ranked as one of the countries with the highest tourist competitiveness by the World Economic Forum. And when you check the stats, we are regularly one of the countries with the highest number of tourist visitors in the world.

Rasheed: Yeah I believe last year, Spain had more tourists than the entire USA.

Diego: That's been that's been the case a few times in the past several years. I don’t think it’s necessarily a bad thing, but some people are tying this into housing through the discussion about Airbnb and other platforms and how they impact the supply of housing.

So I've looked at the numbers, and quite frankly the narrative could be seductive and it's mostly pushed out there by far left, but okay, it makes sense to pay attention to what they're saying because they did bring people to the streets and that has become a topic of conversation.

But the numbers show that the number of apartments that are controlled by these platforms that rent just for tourist visitors and therefore the homes that are not available for rent for normal residents of the city, make up a very small stock of housing across Spain.

And even in the main cities where this is being discussed like Madrid or Barcelona, they make up less than 5 percent of the housing stock of the most populated areas where the tourists want to go. Think about it the way I see it this is a substitute for hotels.

We can accommodate these demands thanks to these apartments. And if they are 5 percent of the market, it means that still 95 percent of it is in the hands of regular homeowners or companies that own, but it's mostly regular mom-and-pop ownership. And so I don't see it translated or permeating into the housing prices.

Some research has been done on the matter on and it all comes out to the same conclusion. We are dealing with increased demand and we're not generating enough supply of homes and that's the end of it. I think we waste some time discussing these topics and fair enough they should be discussed, but then little of the focus gets put into the broader, more overarching issue of how housing planning has created a general problem that is perhaps not so sexy to explain.

We're doing this in a podcast that maybe will not appeal to a general audience and a huge audience that maybe doesn't want to, get lost in a discussion about pyramids and bureaucracy. But at the end of the day, that is what is making cities just become frozen and not be able to grow and to adapt.

Rasheed: So let's talk about some of the ways that Madrid is now trying to adapt to the planning reform under the Ayuso government. One thing that you have mentioned to me before was the recent change in land use for military land. It took 30 years or so to get re-classified for private development.

So that's one good example I think to get into the new changes.

Diego: Yeah. I think that project in itself is a very good example of what's been wrong with housing policy for a long time. Because say you are in the center of Madrid, Gran Vía, Plaza España, you get in a car and you just drive down south.

We've got an amazing underground series of tunnels that connect via a series of highways to different points of the city very easily. This has helped us reduce CO2 emissions and traffic and mobility and has cut down traffic jams immensely. But the interesting thing is, once you come out of these tunnels if you're driving down south there's really nothing.

There are empty fields to the left and to the right. Then, after you're done doing this 5, 10 minute drive, you start to see buildings popping up again. And it's no longer the city of Madrid. It's the city right next to Madrid. So why is there all of that land? Is it for natural conservation purposes?

No, it's actually land that is owned by the Ministry of Defense, the Department of Defense. These lands were used to host small homes for military people. These military bases essentially are abandoned and have been so for three decades now, so essentially no one lives there, but these lands are still there.

So the idea is to turn this into new quarters of the city, new areas of the city where housing can be developed and not just housing, commercial real estate, parks and schools and hospitals and whatever uses you want.

So this project had been, on the table since at least three decades ago, but it only dealt with obstacles. On the one hand, the public sector wanted to do it.

So private investors who routinely would come up and offer to develop it would lead with this, interventionist attitude that just prioritizes public development of homes, period. I guess that politically it's more attractive to say that we build these homes and we're just giving them out for subsidized prices, either for rent or for sale.

Just let the market do its work in this area. So that was part of the mentality there for sure. The problem was also that some of the land belonged to the Department of Defense but some of it was then later transferred to a company within the Ministry of Defense. So then you needed two different authorizations and then the permits had to be given out by the local and the regional government.

So then whenever you had maybe a conservative majority locally, then you'd have a socialist majority nationally and then when everyone seemed to be on board, someone in this department would not agree with a company within the department. Then the prices had to be set in order to first transfer all the lots of land into one particular entity so that then they could be bought by another entity. And then the role of the private sector was crowded out the whole time. So who is going to put up the investment? So all of these became an issue and quite frankly housing wasn't a big topic until a few years ago. So as a combination of both factors, you ended up with these.

Why did buildings suddenly pop up? Why do buildings suddenly pop up when you're driving down the highway through the South? Because now suddenly you're in a different city, a different municipality. There, there are no restrictions on this part. But because of this land being owned by the Department of Defense, you get into all of this craziness of having to deal with three different administrations with their own permit cycles and whatever.

So now it's been finally unlocked and it's going to lead to 10, 000 new units. This is called Operation Campamento because that's the the area in which it's being developed. There is an old prison in the south of Madrid as well. That took a lot of space and that has been abandoned for a long time because no longer is this the outskirts of the city.

Now it's part of the center south area of Madrid. It also took a long time to transform that, but it will finally lead to around a thousand new housing units. I just learned as we're recording today that another area in which there's some abandoned factories that is close to a hospital and to the university campus, will also get transformed and develop 2000 new housing units. On the north of the city, you also have a railway station that connects the high-speed train that Spain is very famous for with different areas of the country, but because the railway of the station essentially splits that part of the city in two no housing could be developed there, although it's quite a centric location. So another project has been authorized there that will essentially bring this underground and allow for the development of roughly 15, 000 housing units, plus some skyscrapers for commercial use, a new hospital, a new university, et cetera. So when you add all of these at the local level in the city of Madrid and at the regional level of Madrid, and when you talk about the region and the city of Madrid, they overlap because it's essentially the city and its surroundings.

It all sums up to 260, 000 new homes that are being developed right now and have been authorized. So that's a big number. It's 260, 000 new housing units that have been authorized. Some of these developments are in essentially empty lots of land that are right near some really famous areas of the country, of the city. For example, the stadium where Atletico Madrid plays, it's a very famous soccer team here. It's not as good as my Real Madrid, but let's not get into that, okay? But in that area, there's also going to be like 15, 000 housing developments being done close to the stadium.

And then in the southeast, a hundred thousand new housing units will be produced. So Madrid has been very effective in turning this around. But because of so much bureaucracy, they first needed to change their law. So now their law allows you to convert a factory into a project for housing, convert offices into housing, or housing into offices if you wish to do it like that. It reduces waiting times for the permits. It even causes you to be able to process different permits at the same time. So a lot of these improvements have been made and also these long waits for the big projects have been cut short so that whenever the project is at least a few hundred units, then you can get fast-tracked into approval. So it's remarkable that Madrid is doing this because it should facilitate containment of the rising prices for rent and for home ownership.

And we should see the results in, 5, 10 years from now, because that's the time that housing takes. So essentially five years from now the result should be apparent.

Rasheed: And all of this was done under the Ayuso government, currently?

Diego: Yes.

Rasheed: Why is it that Ayuso is so adamant about pushing for housing?

Diego: We've talked about her in our previous podcast and for anyone that did not listen and I strongly suggest you do, she's a pro-free market governor in Madrid, a relatively young politician who led Madrid very well through the pandemic and made Madrid one of the most open cities in these times in which most authorities to just shut everything down.

Played with adaptation strategies and did very well. And I just noticed that a lot of things are going well in Madrid Madrid is, generating, two-thirds of foreign investment that comes into Madrid. Madrid has long for long surpassed Catalonia in output and GDP per capita, even though we have 1 million fewer inhabitants than Catalonia does.

People no longer take Barcelona as the premium destination when they come to Madrid. They come to Spain. They come to Madrid, not to Barcelona, which also signals that shift in perceptions, and Madrid as a whole with low taxes and low regulation has become a success story.

My book about Madrid will be available in English hopefully in 2025. So a lot more depth about these reforms will be available for the English-speaking audience in a few months. But with housing, it was just a natural coalition for her to take on because if your voters, younger voters are concerned about this, and if you are of the opinion that Madrid should be an open hub that welcomes talent with open arms, then you cannot make housing become a problem that derails all of that progress.

Let me just reinstate two facts. Four out of ten citizens and five out of ten workers in Madrid were not born in Madrid. So 40 percent of the population and 50 percent of the workforce come from either other regions in Madrid or other countries. So that shows you why we need to take housing seriously, because of course these people need homes to live and if these homes take up so much of their income, then part of the beauty of higher salaries and lower tax cuts gets lost in the way. I must also say that Madrid has always had a great public transportation system. Also, some people need to, shift their mentalities sometimes. Yes, it's true. Prices are too high in some cases because of this lack of supply. The city has been dealing with this, but the city has also created a very large network of bus and metro transportation.

And plus we have these underground highways that really connect different extremes of the city very quickly. So that should also be taken into the equation. And it's true that should limit the degree to which some people are willing to offer one or another price for their apartment. Of course, fair enough.

We all like, the center of the city and what's but there are some policies in place that do mitigate that.

Rasheed: I think that some of the government of the Madrid municipality is also left-wing, correct?

Diego: Not right now, but the municipality was indeed for four years.

Rasheed: But not right now.

Diego: No, not right now. That was actually only four years of the last 35. But it was very negative for housing because, indeed 160, 000 units could have been developed and were not developed because of all of these concerns. They would not stop the project.

They would just start cherry-picking every single aspect around it.

Rasheed: So right now, Madrid at the mayoral level is PP, at the city level is PP, and the community level is also PP.

Diego: Yeah we have two levels, so it's region and city, and both are in the hands of PP, as you just said, which is the Popular Party.

But like I said before, the Popular Party in Europe is one thing, popular party in Spain is another thing. In Madrid, the Popular Party is clearly a free market party and has a clearly a free market agenda in place in other areas of Spain and in other countries in Europe, that doesn't necessarily have to be the case. But sometimes people joke about this, they should be renamed the libertarian party in Madrid, but just in Madrid. The rest of the country is starting to take note of the good results that Madrid is enjoying and they have followed up on some of these reforms, namely Andalucía, like I said.

But yeah, that's the power mix right now. It's PP at the region and the city and then nationally a socialist and communist government in place in Spain right now.

Rasheed: So this might be a weird side party politics question, but in Spain, let's say if you're in PP, in Popular Party. The Popular Party of one region need not coordinate with the popular part of another region, right?

Diego: They try to speak with one voice, and very often they do. But Madrid had this very disruptive governor back in the day, two decades ago, Esperanza Aguirre. She was a leader who truly believed that Spain had become a country in which it was very difficult to do business, and very difficult to invest.

The taxes were too high and regulation was too complex. And she was sometimes compared to Margaret Thatcher cause she was she had a British education. She admired Thatcher. And I think the comparison was well put together because it made sense. Because she was, in fact, like the Iron Lady of Madrid.

She did enact all of these reforms, and the Ayuso government right now has essentially picked up where she left and she was in power for a decade. And after some years in which different governors had more or less kept the system in place the Ayuso government has doubled down. And become even more radical in passing with these reforms.

So that's why although you get more or less the PP speaking with a single voice and doing more or less the same things across Spain you have the PP in Madrid staying away from consensus and just doing things their way. At the same time, what happens in Madrid ends up happening in other regions because it does have good results, and other regions take notice.

So sometimes we joke that PP in Madrid is PP in Spain with a 10-year advantage, right? Or to put it another way, PP in Spain is PP Madrid with a 10-year delay. So for instance, when Aguirre got rid of the wealth tax that was considered to be a very radical idea at this point, Sweden still had it in place.

Right now no country in Europe has it, but Spain and all the regions in the PP with a PP government, we're getting ready to get rid of it when the national government decides to take over authority for the wealth tax and force them into keeping it.

Same with the inheritance tax, which was abolished in Madrid. And then the other regions ended up following suit or the same with deregulation. As we're talking, even in housing other regions slowly picking up on what Madrid was doing 10, or 15 years ago already.

Rasheed: Okay. So there is a very exciting project in Madrid called New Madrid in English.

How did that come about, because this is, when people hear about it, they get very excited, but people don't really hear about it that much outside of Madrid. What's the background to that? And I think that's a really good encapsulation of the forward-looking ness of the current Ayuso government.

Diego: We touched upon it briefly before, and you'll recall I mentioned how in the northern area of Madrid the railway, that leaves the city and has great high-speed train connection with other areas of the country physically does split the north of the city in half.

Because of the railway, it's there. So you build on top of the railway or you cannot just move from one side to the city so easily. There are some bridges to go across it or whatever, but of course, it does split the city in half in the northern area. So three decades ago around the Chamartin station where this happens, the conversation began to take place among neighbors who just did not want to see the train split their districts in two and some banking institutions and some real estate institutions decided to come up with a proposal that included on the financial side of it, the funding and on the real estate of things, the know-how and the willingness to just press ahead with this project. And the project began to be discussed in the mid-nineties although it had originally been proposed in the late eighties, but then it dealt with the same situation as we discussed with the military land that was owned in the south of Spain.

You had land that belonged to the train station. You had land that belonged to the transportation department. You had private land that was not being developed because it had no permits to be developed anyway. Then you have different levels that had to be in agreement, the regional and the local government.

Once all of that had been cleared, before the pandemic, this urban transformation project was given the green light. It's been in the pipeline there for three decades, and it finally has been unlocked just to put it in transformation. It is often described as Europe's largest urban transformation project because it encompasses 20 billion in overall investment.

It will bring the railways underground. Beyond doing that, it will develop a central business district in the area with different skyscrapers. It will allow for a series of new university campuses and a new elite hospital to be built in the area. And it will allow for new housing that is around 15, 000 new units.

But potentially there could be some more developed because a lot of space has been allotted to green areas which is something that politicians love to do here. And sometimes quite frankly, it does come at the expense of more density. And sometimes I do think we should be, creating even more density and less green areas in these new developments.

But anyway, the overall net is a huge positive and a huge win for Madrid. So much so that now they're thinking of doing the same in the South of Madrid. And just like they will have the new Madrid of the North, they want to have the new Madrid of the South, essentially in Atocha.

It's the train station of the south, the one where the high-speed trains leave for the southern areas of the country. The city is also split in half. So there are some projects ongoing now to bring that under the surface, bring the railway under the surface, and start developing those lands for residential use.

So that could soon be another exciting project for the development of housing in Madrid.

Rasheed: There is a policy. I'm not sure how old it is. I think it's very recent. It could probably be a useful policy. You could correct me. Where they offer a program for mortgages, for young people, I think it's under 35, which may have increased it to 40, up to a 100 percent mortgage in Madrid, as in only for Madrid residents after two years or so, you qualify for it.

Why was this done? And do you think this was a useful policy to enact? It can be critiqued as some sudden demand, and not really pushing the idea of just more and more supply.

Diego: The one thing they're doing with that is called Plan VIVE. It's doing two things right. On the one hand, they have partnered with private developers to put out what I believe will be 25,000 housing units that will be available for rent.

The prices for these rents will be lower than the market price, but this has been agreed to by the promoters, and the builders have agreed to it. So that's an interesting scheme they have done. And as for the mortgage deal, which is also part of that scheme the thinking behind that and this was also promoted by Vox, which is the alt-right party in Spain and did play a role in the parliamentary debates around housing policy back in the day in Madrid, back a few years ago, when all of this was designed.

The idea here was that, okay youngsters have an issue when putting up the upfront payments that mortgages require. They can clearly pay the monthly rent, but they cannot make the initial payment so easily. Essentially this has come down to a program in which the regional government will allow you for collateral, somewhat act as collateral, and just give faith to the bank that you are able to pay the mortgage payments every month.

And this was a lot, this will be done in order to facilitate access to younger segments of the population. Now there's some good and bad in that policy if you ask me. But at the end of the day, the scale is still limited. So we will see what the outcomes of these projects are, but in the larger scheme of things, it's what really is transforming the market right now, which is just a lot more supply in order to meet a lot more demand like Madrid has now.

The other nuances like this deal with the mortgages. We'll see how it turns out before we see that whenever the public sector entered the mortgage credit markets it did create a mess. I do not have to remind US listeners of what happened with Fannie Mae and Freddie Mac. But here in Spain, as I said, we used to have 50 de facto public lending and savings banks.

And because they went so deep into giving cheap credit to families throughout the real estate bubble, most of them went bust. We have a dozen of these entities left and we used to have half a hundred. We'll see what happens with that.

But I'm initially not too much of a fan of that. And there's been a lot of research in the U. S. about how a lot of the real estate bubble had to deal with restrictions on land and restrictions in planning. And you can almost pinpoint where the bubble was bigger, and to what degree there were home restrictions in there.

There's been some amazing research being done there recently. And then you also have all the research by authors like Calomiris on how, when you put the public sector into lending out mortgages, you often end up with a lot of bad credit. So I'm just hoping that these programs stay in simply helping with the collaterals and facilitating maybe that early start but then stay out of anything else.

Rasheed: In general, I'm not against the idea. Panama has a pretty high level of homeownership rates, even for younger people, but one of the strategies they have in Panama, of course, is they have actually a very good supply, maybe too much supply as some would say in Panama these days. However, the private builders would offer loans to the buyers for the bank collateral for the mortgage.

So you end up paying essentially two loans at the same time. You pay the private lender for the collateral loan and then you pay the bank mortgage also. But what happens is the private lender makes the choice themselves if they want to lend you the money to buy their house back from the bank. It's all a big coordinated system.

So in that way, the young people can get the collateral easier and they can also get a very good rate of mortgage because obviously, Panama has very good mortgage rates, because of dollarization and good banking. So that's a policy I don't really see anywhere else in the world.

Diego: That's what I was going to tell you. Sounds pretty unique. And it sounds interesting. I think that it should be worth a look here in Spain. Look, there's this book that came out recently by Daniel Waldenström that is called "Richer and More Equal". It's a history of wealth in mostly Western countries and Spain is one of the ones that are highlighted in the research it does point out the fact that regardless of what authors like Thomas Piketty had originally thought and even written when you take a careful look at how wealth is distributed in Western countries, we stand today with the lowest levels of wealth inequality that our societies have seen historically and not only is that inequality lower, but the levels of wealth have exploded and homeownership is a key element there.

Homeownership and pension savings are the two conduits to wealth for most regular people. Of course, 1 percent will always have more sophisticated ways of accumulating and creating their wealth. But for most people, homes are not just where they live, but also a wealth asset in itself. So what you bring up is interesting, not just because it can facilitate asset access, but because it's the type of access that we need more of because we create a wealthier society when we do that.

One of the big problems for the youth in Spain is that with a poor-performing labor market, a very socialist economy, as we've had for the last several years, and issues in accessing an asset like housing, which is pivotal to someone's life, we have created a lack of opportunity for Spain's youth.

And therefore I'll be researching that. You'll have to you'll have to record a podcast on the Panamanian scheme because it really sounds useful for cases like Spain and many other countries.

Rasheed: When you are thinking about good examples of housing policy and other places that you think Madrid or Spain in general should adopt, where do you look?

Diego: I'm going to start looking at Panama now, but beyond that, I've been looking I've found a lot of discussion of what's wrong with housing policy, Sweden and its rent-controlled prices with waiting times of 20 years to get into the subsidized public apartments list in Stockholm.

That just sounds crazy to me. A shallow economy is so big as it is in the rental market in Sweden. Being Sweden, one of the countries with the lowest shadow economies, in Europe. That also shows you how these schemes do not work. Berlin, with all of the damage they have done to their system, has a completely different ownership structure than Spain does because there are a lot of companies that own real estate there and rent it.

Here, like I said, it's mostly mom and pops, right? There's no, and sometimes I say, look at how Zara has been very successful in fashion. Sometimes I wish we had Zara for housing, just cheap effective, good housing for everyone. But like that would require a lot of transformation in our market. But Berlin does.

Berlin does have a lot of private companies that have hundreds or thousands of units, but they've been essentially targeted by far-left groups that have enacted all sorts of restrictions on the housing market and the prices and the stock. The prices have gone up and the stock has gone down in terms of supply there.

So that's been a mess. And I don't think Paris is an example to look at very fondly because of the poor results they have had. You go to the UK and everyone is complaining these days about how NIMBYs make it impossible to build. So that's an issue as well. And in the U.S., you start to see some territories within the country, some states that are getting it right. And I think it's important to focus on those because they do provide good case studies. As for me, I've looked into three case studies lately that have caught my eye for one or another reason. Japan, for instance, is a country that dealt with a huge real estate bubble and had to deal with a lot of debt restructuring, and the housing industry had to adjust to that essentially.

And it was a tough process. But in the last several years, Japan's property prices, and rent prices have been, moderately moving with the economy and not rising so much as we've seen in other areas of the world. Vienna in Austria is sometimes quoted as an example, but they have built a very big public housing stock. And I do not know if you can just get there overnight like some people would want to. And I don't think it necessarily has to be through the state. You can get a lot of new housing units done by the market, and it should probably be done so that we reflect the proper prices and dynamics in a market economy.

So I'm not really sold on that model. But for instance, you have New Zealand where cities like Auckland have essentially loosened up on the bureaucracy and loosened up on the planning and they've enjoyed a much better performance in terms of the rent prices and and also sale prices for properties.

And what's even more interesting these days is the huge boom in supply and the huge drop in prices. For rental apartments in Argentina because everyone is starting to, pay attention to what Javier Milei is doing over there. The results have been fantastic for this particular regulation, Javier Milei has a minister for deregulation, he's called Federico Sturzenegger.

He's getting rid of literally hundreds and hundreds of dated regulations or obstructive regulations and just, the type of norms that need to go, cause they are making it impossible to grow the Argentinian economy. And a very simple one to get rid of was rent control.

Almost immediately overnight, you saw this drop in prices that has been of around 20 percent in the Buenos Aires market and this huge increase in the housing supply. It also has other side effects that are positive. For instance, Some of these apartments were sold in the black market before.

So you bring down the shadow economy and you create a more transparent real economy in the official economy, which also leads to maybe tax revenues that can be put to use further lowering the tax burden that Argentinians deal with. That has kickstarted a very positive cycle and it's a very good example of someone that is being very radical with his reforms and so far has been getting some good results in areas like this one.

Rasheed: So looking forward, what do you think should be improved in terms of the housing policy in Madrid in the next few years?

Diego: Madrid's economic policy was, very radical in pushing forward with liberalization and openness because there was the right people came together at the right place and the right time.

And there was a huge movement that pushed forward with these reforms and they have been successful. The problem when you have success in policy is that you may often fall into what is sometimes described as reform fatigue and statecraft is the art of, being able to continuously improve the way in which you conduct policy.

And I would argue that right now complacency could be an issue. We've logged 260, 000 new housing units. Because Madrid is a successful model, more people will keep on coming to Madrid, so the supply will still need to be growing at a very fast rate. In fact, what we've done up until this point is essentially deal with the deficit that was created artificially by the communist mayor between 2015 and 2019, and also by the deficit that was dealt with as a consequence of not having acted on this before.

So I think we're just catching up. We think that we've won this battle. We're only starting to rectify it. People will, in fact, need at least five years, more or less to see the results of these projects and see all of this floating of new apartments into the market. That's why you need to keep on looking for new ways to facilitate and deregulate the housing industry.

When I look at the land laws, they have not been changed. They have been modified. They have been amended. I dream of essentially a land law for Madrid that at the end of the day is one sentence long that says if this land is not protected then you may build in it according to the existing codes of building in the country. Some lands are protected for good reason. Our mountains have such high natural value that the environmental value of these lands is fantastic. We have some ski resorts in there and those are carefully regulated. But there's a lot of empty land with no environmental value whatsoever, where conscious, properly done efficient building should be done in order to provide us with more housing.

I'm not advocating for, destroying the forests that we have in the center of the city, like the Parque del Retiro or the Casa Campo, that would be a monstrosity of course. But there are many areas empty, lots of land where new buildings should be done and could be done. I say we get rid of a lot of the zoning laws, a lot of the density laws, a lot of the height laws for the buildings.

Most of this is completely outdated. And at the end of the day the overall philosophy, of course, we're never going to narrow it down to one sentence, but the overall philosophy needs to be, if this is not a protected area, then go ahead and build. If you need to start the permit cycle and wait for 10 years, it's going to be a nightmare.

Also, the permit cycle, if it's to stay in place, needs to be reformed. There needs to be a system by which permits can be addressed in proper time. In some cities in the South of Spain, like Marbella, which is famous for its lavish lifestyle, no other people live there in the summer. Marbella has subcontracted the management of the permit to the engineering and construction associations.

So that when the file comes to the public servant that is supposed to give the green light, it's basically been dealt with by private bodies that essentially do the building and know which laws they have to comply with. So of course the green light will still be given by the public sector. But the file they have is so prepared and has been quote-unquote cooked by the experts that essentially they all get passed and there's no back and forth in the file.

So that's something that could be looked into. Also, another thing that I think is important is that you should never do one queue after another queue. You should be able to queue in all different queues in case you're asked to get different permits without having to go from one queue to another. This just artificially multiplies the amount of waiting time that you deal with.

If you do this, I think good times are ahead. If not, I think what we've been doing so far is what I would describe as getting things right, but in an emergency mode and policy shouldn't be done in an emergency mode, or not just in an emergency mode. The emergencies have now been dealt with. Now let's get good, proper 21st-century-looking planning and land regulation in place, which in many cases just, means no regulation or very simple regulation.

Because for example, just changing a few sentences in some articles has changed everything. Like for example we were able to get a few changes in the part of the law that deals with the uses of land. So that, okay, the land may be, for example, allowed for a factory. But if I just want to turn the factory into a residential unit, or if I want to turn the residential unit into a hotel, or I just want to take the hotel into a hospital, I don't need authorization for that. I will need to comply with the existing regulations for that sort of construction and that sort of operation. But I don't need authorization for that. So if that was done with a few amendments. Think of what we could do with a 21st-century land law and construction law in Spain.

There's been some movement. There are some drafts in, in a few drawers right now that I'm aware of but you need the political will to just put them on the table and pass it forward. And by the way, the builders are dying to get this done.

The engineers are hoping they can get this, and the architects are like really on board. So the whole sector is really behind this sort of reform. We just need to, keep on advancing them.

Rasheed: But what is the slowdown then? If the government is PP at both levels and the president of the community is essentially for this idea, why isn't there much more acceleration in building?

Diego: Because there has been an acceleration in building through this unlocking of these projects, but now they are dealing with this more complex process in which they, internally, the party needs to change the way in which they think about housing.

And it's not just about, okay, let's unlock that big project and that big project. They've picked the low-hanging fruit. Now they need to go higher up the tree and it gets more complicated. That gets more complex. It's more challenging if you think that, okay, we've allowed this to happen. It's not the same as to start thinking, okay, we shouldn't be asking things to be allowed by us.

We should just allow them to happen and only veto what is really not supposed to be done in a city. So making that change in mindset is complex because you're talking about ex-ante and ex-post controls, and that is a change that is still being made at the political level. And I'm hoping they can get there because these conversations are taking place.

These ideas are floating around. There's a draft ready to go in some of the drawers of the key politicians for this to take place. But sometimes the reform is a combination of reform fatigue and complacency that could be an issue too. And it shouldn't because right now it’s the only real threat to Madrid's success.

Like I said if you cancel out some of the benefits of deregulation on tax cuts. With very high housing prices, then you're undercutting your own ability to keep on growing. So I'm just hoping they, they get it right. And I'm quite optimistic they will because today I just got this news that I just brought up how this new project will be done in an old factory land. This last week the old prison was announced to be about to be transformed into, I think, 400 new units.

That's the sort of approach we need, a never-ending cycle of looking to build more and better housing.

Rasheed: Okay, I don't have any more questions. Is there anything you would like to have said?

Diego: I wish I had known more about the Panamanian example, that you brought up, definitely, because it's really attractive.

On, on the other hand, I just think that for anyone that is considering Madrid as a case study, or considering Madrid as a destination, I think they should also take into account that one of the big selling propositions of the city is that it's very lively. Yeah, it has a lot of people.

Business here is done more efficiently than in all of Spain. But then there's also a cultural side to it, a social side to it that I think is very appealing to a lot of people. Madrid is a very open city. People are open-minded. That's why half of the population wasn't even born here. They came here.

I myself, am from the Northwest of Spain, from Santiago Compostela. And I changed my life. Like many people did. Come here and be a part of it. So I'm just think that it's interesting to talk about how housing is a foreign that has stopped some of that growth. I think it's promising to see that some of these obstacles have been removed, but I just want to say that even though some of them remain in place, there are plenty of good things going on in Madrid now so much so that in spite of this, how High housing prices, the economy keeps growing and the policies keep getting better in many areas.

And that's why people are coming. So I'm just hoping that a podcast like this can get people's attention. But not just outside, but inside here, let's keep on circulating these ideas because I want these improvements that we've made to be just the tip of the iceberg and hopefully, five years from now, recording our podcast about housing in Madrid and say, look, it was 260, 000 new units by then. By now it's maybe twice, three, four times that figure because that's what we need. We're going to need more housing to accommodate for more people because they're moving to Madrid. That's definitely, that's happening. That's the safest projection ever.

Madrid will continue growing. People will continue coming. So let's accommodate for that growth.

Rasheed: Diego, I agree and I think I make this point all the time that Madrid is definitely the best city in Europe to live in right now. And also it's one of the few places in Europe where I can say I'm optimistic.

Thank you, Diego, for coming on the podcast, it's been a very fun conversation.

Diego: Thank you. My pleasure.

Listen on Spotify or Apple Podcasts

Show notes

It's not all love, peace, and brotherhood and if you're looking for Bob Marley, you're out of luck there too. Join CPSI director Rasheed Griffith and podcast producer Shem Best for an unfiltered foray into reggae, its historical starting point, political ramifications, and cultural proliferation throughout the region and the world. 

Reggae is first and foremost a vehicle of protest. We explore the societal context that forced the hands of the Rastafarians, producing anthems of anti-establishment sentiment that resonated with a growing movement that was finding itself increasingly at odds with a post-colonial government.

What is "Babylon" and why are so many of these songs calling for us to burn it down? A greater understanding of rasta ideologies is required and we've got an informative crash course right here. 

Japanese Rastas may appear to be an improbable cultural anomaly, but it's a much more fitting match than you think. Reggae has become a global phenomenon, thus bringing the fight to seemingly unlikely locales. How has its message evolved and how effective is it today in a much more culturally mature and homogenous world?

Recommended

• Babylon East: Performing Dancehall, Roots Reggae, and Rastafari in Japan - Marvin D. Sterling

• Colonialism and Progress - Rasheed Griffith

• Jamaica Is Not Doing Ok - Rasheed Griffith

• Real Reggae - Curated Playlist from CPSI [Apple Music]

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Full Transcript

This transcript was automatically generated by AI and lightly edited by our team. We don’t catch every error, so if you spot one, send us a message/email via shem@cpsi.org.

Rasheed: Hi everyone, and welcome back to the Rasheed Griffith Show. Today I am once again joined by Shem Best, also of CPSI, and we are going to be discussing I think perhaps our most requested topic, which is Jamaican Reggae.

Shem: First of all, it is an honor to be on this episode, especially since we finally get to hear the original CPSI podcast opening theme, where it came from, mystery solved.

This episode is kind of near and dear to you because this is based on one of your more prolific essays, "Jamaica is not doing okay", where you highlighted the manifestation of that unrest that is deeply a part of the country's ethos, to be stemming from its culture, a cultural aspect, its music.

Rasheed: Not stemming from, but the music is a very clear representation of underlying social problems. That's how I used it.

Shem: Right. So we've got a really heavy lineup today. Me, myself, I'm not a huge fan of reggae.

Rasheed: Blasphemy.

Shem: I know. I know. We're hoping to change that by the end. So by the end of this episode, if the studio is in flames, you will have accomplished your goal of truly, you know, explaining the violence, the deep violence that is manifested through the music, which is reggae, and kind of brush away that weird kumbaya and peaceful vibe that people seem to think that reggae is supposed to be pushing today.

Rasheed: Yeah. The baseline people have for reggae, at least outside of the Caribbean. I say at least, but even in the Caribbean, I think these days people think of reggae more of a rock steady type, slow, easygoing, humble type genre. And outside of the Caribbean, North America, and Europe, people think of it primarily via Bob Marley as peace and love, hold hands, as you said, kumbaya.

So on and so on, where in reality it's more at the core of violent protest music against not only superficial ideas of actual policies, but it's almost like a meta philosophic or a metaphysical view of how the world should be and how it's not currently. And we're gonna get into that. So it's a bit, it's a bit of a mouthful to even start off a reggae episode about metaphysics. But, we do what we must to get to the core of these concepts. And we're going to do that through me essentially discussing some of these themes with some of what I think are good representative songs of reggae through Jamaican history.

And we will also link a playlist I have called Real Reggae where you can listen to about 50 reggae songs that I think are a good introduction to reggae. Honestly, only one Bar Marley song is on the list. I think by the end of the episode, you'll understand why that is. To start off our conversation, let's go to our first song.

Rasheed: That's our first song called Burn Babylon by Sylford Walker. Are you familiar with this song, Shem?

Shem: Absolutely not. Let's begin our descent into violence.

Rasheed: So the first thing I need to get into here is the title, Babylon, Burn Babylon, but more to the point Babylon, because anytime you hear reggae, especially 1970s, 60s reggae, you hear it also now, but more so then, the theme of Babylon is dominant, completely dominant, and people tend to not understand what the Rasta and reggae artists who are often Rasta, mean by that term Babylon.

What do you think the term 'Babylon' means? You live in the Caribbean, so you have an innate exposure to it, but could you explain what that term means to you?

Shem: Well, even though I am not a part of the reggae crew as Rasheed would like, I do, as you say, have some exposure being that I'm based in the Caribbean with the Rastafarian culture. We've seen these very easygoing, mostly vegetarian because we have some jokes in Barbados, but mostly vegetarian, long-haired individuals who have a fairly different philosophy, but also refer to this almost nebulous entity called Babylon that they're fighting against, some great struggle against Babylon. And our understanding at least my understanding is that Babylon is a representation of structural oppression through the government, any form of resistance against freedom, individual freedoms, any sort of taking away of individual freedoms, be it through policing or government policies, et cetera, that would impede the day to day freedoms of a Rastafarian individual, be it through like education, the ability to homeschool or in a more common case in the Caribbean, access to marijuana.

So that's what we understand Babylon to be. I mean, today we're a bit more desensitized. Anything you don't like you say "Fiya bun Babylon" or, if there's something that's impeding even the most minute things we tend to superfluously use the term Babylon to refer to that.

So did I hit the nail on the head? Am I on my way to becoming a militant?

Rasheed: Yeah, that's mostly right. The Rasta uses the term Babylon as a symbolic representation of everything immoral in the human world. Humans, not only is it physical, but they also think of humans as spiritual as well.

And often it's usually used towards the Western world in particular, so America, Europe, anything that we consider the West. And they often frame that in terms of some kind of capitalist, imperial dominance of these countries and these cultures over primarily a place like Africa or African countries.

So Babylon is that representation. So everything immoral and lacking spiritual awakeness, if we can use that term, in human society. And to fight Babylon, or burn Babylon, is a very deeply Christian idea. You need to fight or struggle against the evils in this world to have a better world.

Now, there is something deeply materialistic because they don't often think you have to ascend to a higher world; it's a more modern Christian idea. It's like an older Christian view which is, this is the world we have, and we have to make this world better. Getting rid of Babylon isn't, say, burning the actual world and getting towards some mystical heaven.

It's trying to get rid of or struggle against, protest against, our burn, burn is a very active metaphor here. To get rid of the current problems, so the current world can be better. And also in their view, better in a very particular pan-Africanist philosophy way. And that's where Babylon comes from. So Jamaica, for example, is Babylon.

The U. S. is Babylon. Europe, as it is, is Babylon. So you have to have that mentality from the beginning. If not, you're not going to get what they're often singing about. So fundamentally, in metaphysics, you have to fight the world we live in to move forward. It's a fundamentally violent thing

Shem: It seems to be a very wide definition.

I mean in one case these people live in Jamaica so you're saying that Jamaica is Babylon?

Rasheed: There's a phrase, what's the word to use, idiom, that Rastafari- so we normally say Rasta or Rastafarian, but I'm just going to resolve to Rasta in this episode because that's what we normally say in the Caribbean.

Rastas have an idiom that goes, Jamaica is an island, but it's not "I land" or my land. So Jamaica is an island, but it's not my island, in the sense that there is universalism, or you could also say cosmopolitanism. It's a very odd term to use in this case, of the notion of what you have to do as a Rasta to struggle against Babylon.

You don't have to resort to only thinking about your own country, but you have to think about the world around you and the people far away from you who might not understand the struggle, but they're often, they're also going to be burned by Babylon if you don't fight against it. So Jamaica is hell,

and, the route to peace or a route to better, more fruitful land is somewhere in Africa.

Shem: I'm going to be very honest with you, that seems like a rather stressful way to exist, if there are so many vague things around you that can be classified as Babylon. It reminds me of how in Islam you have Haram. This is Haram. I can look at anything I don't like or that I think is impeding my perception of heaven, of a heavenly state, and go, this is Babylon. As a result, I feel like that would be room for an eternal struggle per se. Jamaica has changed, but it hasn't changed that much.

So if police are Babylon and certain parts of the government system are Babylon and those things are standard institutions that are pretty much ever-present and never changing, Babylon is always going to be there. Listeners, right now the smile has faded from my face, so my training in violence is now progressing. Back to you, Rasheed.

Rasheed: It's an incurably vague term, I grant that, but in many ways, it's not that different from a lot of the older views of Christian theology in Protestant America, 19th-century type thing where you always have in many ways some new struggle. You always have some new evil in the world and your job is to always hunt it out, get rid of it, burn it clear.

It's a pursuit. There's always a continuous struggle. A lot of the initial struggle from early Rasta was this vague, another vague view of anti-imperialism and how the Western world is supposedly trampling Africa by colonialism and those concepts we are very familiar with now these days.

In theory, you can see how that could evolve into some kind of different struggle, right? Maybe it's like climate change. Climate change is part of Babylon. So, these things are very fluid, but not necessarily in a super, super, super illogical way. If you have faith, well, faith works, I think, in this context also.

One of the other main aspects of Rastafari or Rasta culture that comes up a lot in reggae which is a super dominant theme that does have a very important role in thinking about the context for going forward in conversation is the primacy of marijuana. This is one of the stereotypes that everyone knows. Again, mostly because of Bob Marley and so on, but everyone knows this stereotype. Rootedly they don't know why it is and we won't go into the super philosophical origins of herb theology, but it is a key tenet of part of the actual struggle that needs to be emphasized.

So before we get into a deeper conversation there, let's do a couple of songs that talk about the prominence of herb.

Rasheed: So that was 'Police in Helicopter' by the famous John Holt. Another song on a similar theme, we're gonna play more than one at the same time, is 'Equal Rights' by the infamous Peter Tosh.

Rasheed: And you know, Shem, because I like our listeners so much. I would do three songs. Let me also tag in 'Ganja Smuggling' by Eek-a-Mouse before we get back to our conversation.

Rasheed: so Shem, that was a lot, that was a lot, but here we are.

Shem: Oh, let me get my general interpretation of what I've just heard for the culturally inept among us here. That first song sounds like things are getting drastic. He says if you continue to burn my herb...

He's gonna destroy the cane fields. Some listener context. Of course, this was Jamaica at the time it would have been a cane-producing economy, sugar. Sugar was the gold crop of the time. And you essentially have a man here telling the government that if they continue to confiscate and destroy his ganja fields, he is going to destroy the literal cash crop, the source, a primary source of revenue.

Rasheed: Yeah, that was the metaphor. It wasn't the fact that it was cane per se, but essentially "I will, I will attack the government."

Shem: In case anyone was wondering, the scowl on my face is now holding consistently and a cutlass has appeared on the desk next to me, back to you, Rasheed.

Rasheed: Yeah that's the interpretation.

The police in helicopter is, I think it's very explicit, right? He was saying that you can't do this to me. These are my things. You might not like it, but if you keep doing this, I will be forced to destroy the economy. I will burn this down. I will burn Jamaica down. Just because you don't want to allow me to have my marijuana.

Shem: It sounded a little domestic terrorist-y innit?

Rasheed: Yes, it does. But this is a very popular song.

Shem: There are so many jokes I can make here, none of which are appropriate to various events going on around the world, but I just want people to know this. This is starting to sound very extremist. This is a fringe group now.

Rasheed: But it's not a fringe group. It's so Rastafari.

Shem: It's grown. It's not fringe anymore.

Rasheed: Correct. Here we go. It's grown.

Shem: So now it's got a sizable, following. It means that government oversight is now increasing as well. It's no longer just, you know, they're finding the weed and burning it.

Now they're actively searching out this sacred plant to the Rastafarian community and the Rastas ain't pleased. They're not pleased.

Rasheed: Yeah, that's right. And people emphasize this thing. The government was not a fan of Rastafari culture or groups. This was an anti-government type movement.

In some ways, it was libertarian. The deep irony never ends. But in some ways, early Rasta was a very libertarian type movement. Where they emphasize personal autonomy over state control. That was a very core element of it. And they didn't have that much economic philosophy per se.

This is my, I guess, biased view on this point. But they did emphasize that personal autonomy libertarian view of themselves and their people. And, around this time, because of this, the government has this and, you know, other more explicit statements. The government was very anti-Rasta, anti reggae.

People don't remember this. There were actual groups of the government control trying to attack, the Rastas, trying to get them to to yield and stop singing about all these things. Try to not be so subversive in Jamaica. This was an active government policy. And it was a big deal for example, Bob Marley had a big concert in Jamaica where he got the two opposition politicians in Jamaica to come on stage with him to kind of settle the heat of the country.

It was that bad. It was that, actually that inflamed in Jamaica during this time. Now, the second song I played From Peter Tosh was, in some ways, not too subtle either. It was, you know, "We don't want peace." You want equal rights and justice, but you know equal rights and justice sounds very peaceful, but you say we don't want peace.

Shem: "I don't want peace. I want problems always."

Rasheed: What was that? Wrong country!

Shem: Similar sentiment though.

Rasheed: Similar sentiment in some ways. If you have peace via essentially giving up. That's not the option they have. You will struggle until we have equal rights. And of course, in their view, equal rights meant essentially having marijuana, having other things that the government refused to give them.

And they were vehement about this problem. This was on a side topic. They viewed the marijuana or the ganja, as we, they call it, well we call it Caribbean still, as a core spiritual component of how they as Rasta need to filter Babylon via their brains. It's a very weird way of putting that, but without marijuana, we can't properly meditate.

If we don't meditate, Babylon will kill us all even faster. So it's a very core tenet of the metaphysics of Rasta. So when these things start coming up in government, governments actively pursuing counter-Rasta intelligence and counter-Rasta policy, this was a very active thing. So I also want to point out that you know, this, but Peter Tosh was assassinated.

Shem: Yep. He bit the bullet with not very mysterious circumstances. Can I just say that in this song as well they don't want peace, but they're also asking for justice, which seems to have an almost vengeful element to it. Again, they've suffered unfairness in their accounts of the situation and they're no longer on compromising terms with the government. They're now interested in full-on maybe attacking back and inflicting as much pain as possible on the government as they have seen the government inflicted on them. And I almost, almost Rasheed, I feel for the Jamaican government. Because you've inherited by no fault of your own, mind you. It's just a series of cultural and historical circumstances that have created this subset of the Jamaican population, which is so anti-establishment. And now you're watching your Caribbean neighbors rein in their populations and, you know, kind of get to the whole nation-building part of the decolonization process.

And you are now trying to swat at rebel groups that your predecessor, the British government was like, "Well, you know, we're out."

Rasheed: Yeah, well, they didn't have the Rastas to deal with at that point when they left, but yes.

Shem: They didn't have the Rastas, to that point, they were fighting. They fought the Maroons.

Rasheed: But they had a truce with the Maroons. People forget that.

Shem: There was no truce with the Rastas, though.

Rasheed: Well, eventually, they did have a truce, but later on in the different We'll get to that perhaps later.

Shem: Listeners, in the time that has passed, I have actually successfully taken over a government office.

It is now in flames with my cutlass and several of my other violent friends. Back to you, Rasheed.

Rasheed: Peter Tosh was- How you want to frame this he was actually assassinated on September 11th, 1987

Shem: That was the first 9/11

Rasheed: The first 9/11. Oh my goodness, that's gonna cause some issues for some people. This is the thing. Also, Bob Marley people forget this as well.

There was an assassination attempt on his life too.

Shem: Several times.

Rasheed: Several times. These are not your Teletubby lullaby singers, right? These are soldiers in the war against Babylon.

Shem: And they knew. They knew that their lives were in danger from just pushing this particular media, this particular art, and they still did it anyway. Which kind of shows you how embattled and how passionate they were about this particular form of protest against the government.

Rasheed: That's right. It's hard to grasp, sometimes, for people, I think, how anti-drug liberalization the Caribbean was at this time. And the Rasta did make a lot of strides, obviously, in the following decades, to get this topic into just boring conversation now. No one thinks of marijuana legalization as a terrorist activity.

They think of it as, at best, some health thing. At worst, it's some silly thing the kids want these days. But before, it was about terrorism. It was about terrorism, anti-government struggle, and essentially, not counter Christianity, but almost a subversive, element of Christianity that the church also didn't like either.

It was a big deal

Shem: Now we in Barbados were not too far removed from this. We do have our own community of Orthodox Rastafarian, Orthodox Rastas?

Rasheed: That's why I would say yes.

Shem: Orthodox rastas.

You have this small clump, I can't call it a forest, Barbados just doesn't have forests. This small clump of palm trees in a ravine happens to have a spring running through it.

My only run-in with them, by the way, was when I was hiking in that area once and a single Rasta walked up to me and said I should follow him. I didn't, by the way, because my eyes weren't opened to the true violence I was capable of.

Listeners, the building has burned down completely. We are now standing in the ashes of the government. We have succeeded. Back to you, Rasheed.

Rasheed: So I want to go to another song that I think is very popular, but Shem does not seem to know the song for some reason. It is called "Why Am I a Rasta Man?"by Culture. (First half of song played)

Rasheed: So there is a double theme here. You can see what comes out of a song like this. It's not Bob Marley. I'm not picking on Bob Marley, but love comes in here as well. This is where it gets a bit complicated because I am saying "You know Shem, reggae is fundamentally violent at the core, at the core." But clearly it can't be only violence, because Bob Marley is not a fake reggae singer.

He is a core reggae singer, and you have other people who are also core reggae singers, too. Culture, again, is a core fundamentalist rasta. Weird term I know. And yet, he is also talking about one of the reasons why he is a rasta besides Babylon, he did say that. But he also mentions the love element, there's like kindness he was shown when he was younger and things like that.

So there is this dual complexity with the Rasta ideology in many ways that I think causes people to be very confused as to what fundamentally underlies it.

Shem: First of all, can we swear on this episode?

Rasheed: Yeah, why not?

Shem: At this point, while the main thing that's being pushed right now is violence, this violence is the result of something.

Let's be very honest. This violence did not just spring up overnight. To me, they're the original champions of fuck around and find out. And the government fucked around and very swiftly found out. So, at the heart of it all even though reggae is being used as a vehicle to incite violence, we have to get to the root, we don't have to, we're not getting to the root of that, we know, we know why, but the root of this is the Rastafarians are not, inherently violent people.

I mean these guys are off doing their own thing in little communes and whatnot. No one's threatened by hippies.

Rasheed: Right?

Shem: No one's threatened by hippies. These are just Jamaican hippies out doing their own thing, living off the earth, smoking their weed, and whatnot. And you go out there and you burn their shit.

What did you expect to happen? Without government interference, this is what the Rastafarian community is. You have one or two, almost shaman-like people hanging around and they tell stories, they have lessons.

They have art. Rastafarian communities have art. And you and I, we probably know at least one Rasta guy in our old neighborhoods and everyone calls them 'Ras'. You were taught by one of them at the University of West Indies.

Rasheed: A lecturer at the University of West Indies in Barbados who did Introduction to Economics was a rasta and we would say, "Yo, Ras. "

Shem: Everyone said Ras. I don't know this guy's name to this day. I've never called him, even at university, by his name. He's Ras and Ras is an icon in the community. He's a very peaceful person. He's chill. He plays road tennis with my dad.

This song is getting to the heart of that. You are destroying an important part of a community when you just go in and rip the Rastafarianism or try to erase it from that part of the community.

Rasheed: And I'm going to continue this song from that point because this song does have that transition you're getting to here.

(second half of the previous song played)

Rasheed: This is what you mentioned. The government comes in to subvert this subversive culture and in so doing creates some radicalism in the subculture.

Shem: They come in and remove the shaman. They're threatened by a single hippie. Be it one or two or even an entire community of them, the fact of the matter is they are instrumental to a part of the culture of many Jamaican communities, I should say.

And the fact that they have that effect, even as far as Barbados, where I know if I want, and this is weird- if I need a chair fixed or a wooden ornament, I know there's a Rasta guy up the road that I can go to to get this done. If I need herbs, if you go into Bridgetown right now, there's a Rasta guy that owns a gemology shop and herb center right by the bus stand where you can get remedies for just about anything; traditional herb remedies.

For anything. No weed, I'm so sorry, he's not gonna sell you any weed. Too bad. But yeah. For the government to just swoop in and remove that and he's seeing this as a little boy, mind you. Now he wants to know, why is the government so threatened by this culture.

So inadvertently, the Jamaican government is proliferating Rastafarianism, whether they like it or not. Because people are now curious as to why they are so threatened by a bunch of commune hippies. Rasheed, we are now in negotiations with the government outside of City Hall. We're waving our cutlasses and banners, back to you.

Rasheed: Yeah, so this is a core thing. I wanted to write an essay at some point, titled, "Why I am not a Rasta." Playing off the famous essay from Bertrand Russell "Why I'm not a Christian". Because there are some fundamental ideas that you think I would like a lot.

It is somehow fundamentally libertarian in some particularly important ways. I'm not against struggle. I think some struggle in life is good. I also think materialism of the world is somehow usually a bit better than thinking of heaven as a place apart from the world in an older Christian view.

So I do think Babylon is a useful concept. So there are some aspects there. But there are some other things that I don't think are logically consistent. That part I mentioned about the politics, really does show though that there is a thing where the government did cause a lot of the increasingly violent lyrics and a violent sentiment of this growing subculture in Jamaica that is spread to the Caribbean. But it also spread to other places too, like Cuba and Japan.

Shem: The least subversive group of people on earth, I believe, are probably the Japanese.

Rasheed: These days.

Shem: These days. We know some history. Let's not go there. Let's not go there. Remember the saying, "The nail that's outside of the wood or something gets hammered down". So Japanese people are not known for starting riots in that sort of way.

Rasheed: These days. Hey, I'm just being an objective historian here.

Shem: I still find the existence of Rastafarianism in Japan to be a reach on the part of those people who have sailed over there and...

Rasheed: So I've been to a Japanese reggae bar in Tokyo. Of course. Of course, I've been to one of these. And I went with a friend of mine, we were in Tokyo a couple of years ago and it was very odd because it was playing reggae music. There were Japanese men and women in the bar with dreadlocks.

They're Japanese. They're wearing dreadlocks and there's smoking marijuana. How they get it in Japan is a different conversation, I'm sure. The themes on all the pictures on the wall, all the themes and the color scheme, it did feel like some… It felt like a performance of reggae culture.

It felt to me like someone was playing a joke on me somehow. But it is a real concept, and there actually is a very good book, on this topic called "Babylon East" by the author, I seem to forget the name, I had the book right next to me a few moments ago.

He discusses the emergence of Rasta culture in Japan. In some ways, it's very surprising, but in some ways also, in a crude way, Japan will be the perfect place to have a Rasta community. Because at the core of it is a fairly quiet culture, Rastas.

They try to be very outside of the main hustle and bustle. So I can see, for example, why there's some subgroup of people who are checked out of Tokyo life. In some ways, we also notice the other outgoings of Japanese culture. Hermits that stay in the house for years and years.

People who have these virtual girlfriends, for example, as a real thing in Japan. And you could go on and on. So having a presence of Rasta culture as a metaphysics of the world, I can easily see how Japan could fit into Babylon.

Shem: I too would like to say there are some parts of Rastafarian culture that I would- I personally, would not be a Rasta, I don't have the hair for it, and I definitely cannot give up chicken.

Rasheed: You know, you used to be a vegan and I always mentioned your lifestyle choices were I think inappropriate. But you have somehow transitioned away from being a vegan and now can't even contemplate giving up.

Shem: Do you not see this violent banner around my head with the cutlass? Again, let me continue before we have to have another demonstration in this studio.

The idea of personal freedoms that they've brought forward really underscores how these matters had not been addressed post-colonialism at all. We hadn't looked into it. We sort of just adopted the basis of our colonial masters, our colonial governments, what their laws were in place, and whatnot.

We weren't looking into the context of what these new Caribbean peoples would expect from a government or what these new Caribbean peoples would consider to be everyday life. We weren't expecting a whole new religion to spring out of nowhere. And I think that was basically a case study.

And how would a government just handle a new religion out of nowhere in the Caribbean? And there it was. And as we can see, the Jamaican government handled it as poorly as they possibly could. There's also more on the superfluous side, just calling anything I don't like or agree with Babylon. I am fully on board with that.

You know what? My flight on Tuesday, Babylon, uh, the prices of things in Barbados, Babylon. Taxes, Babylon. I think we should just go straight ahead with that. When I get back home, I'm going to take this riot and this violence with me back to the

Rasheed: So I'm going to play one more song that goes a bit deeper into the history.

Now, I don't know if you know this song, and I hope you know this song because I'd be very upset if you didn't know it.

Shem: Prepare to be upset.

Rasheed: I'll play it first and we'll come back.

Rasheed: Does that song ring bells for you?

Shem: It does. I do know this one. I've heard it a couple of times.

Rasheed: A couple of times? You must have heard this song every day. Year of your life.

Shem: Well, I live in a metrified country, so 96 degrees.

Rasheed: We live in, we lived in the same country.

Shem: We do. So you should understand that they've already lost points with me for that whole 96 degree thing.

Rasheed: God dammit.

Shem: What's the Celsius?

Rasheed: Okay, so the name of this song is 1865. That's the proper name of the song and it's known as 96 Degrees In The Shade and it's by Third World. Now, it's funny because almost no person I have spoken to actually knows what this song is about.

Shem: I'm not gonna buck that trend.

Rasheed: But when I tell you, you're gonna be like... This song is about the Morant Bay Rebellion.

Shem: Go on.

Rasheed: Do you know about the Morant Bay Rebellion, Shem? We did it in history class.

Shem: You did it in history class, I didn't.

Rasheed: It was the rebellion in 1865 in Jamaica, where hundreds of people led by the preacher Bogle in Morant Bay, Jamaica, hence the name Morant Bay, uh, can rebel against the slave owners. That was one of the main rebellions in the British Empire that forced some quick changes of laws by the UK Parliament and that is when the UK took back control of Jamaica from the planter class which then led to a lot of the political reforms in Jamaica that I discuss in my piece on cpsi.media called Colonialism and Progress. That was the key rebellion. And also one of the key rebellions that pushed the anti-slavery organizations in the UK to push for faster laws to get rid of slavery in the British Empire. So it was a very key rebellion in the British Empire. This song encapsulates that feeling of fight, and violence.

It is entertainment for you, but it's important for me. This is a reggae song that talks about the deep-rootedness, historically, of violence in Jamaica. It's almost too poetic not to laugh about.

Shem: This is how it started. This is what continues to this day.

Rasheed: Yeah. And this song reflects it to you.

Shem: You know, I was going to form a truce with the government, but now I think the violence may continue.

Rasheed: I think we're going to end it there and I just want to summarize to say that it is not simply true to say that reggae is about peace and love, a core element baked into the metaphysics of Rasta culture and therefore Reggae is about violence, is about struggle against the world, is about It's about Babylon, burning Babylon essentially, and you have to understand that this, I think, shows or reflects a very key element of Jamaican culture, deeply rooted in the social fabric, which is not that bad.

Prominent in other Caribbean countries and again to get more information, you can read my piece on CPSI.media on this topic. I do plan to write a part two to that piece where I give some more current analysis of Jamaican economics But I will save that for a later episode

Shem: Well Rasheed, this has been wonderful.

I am now a fully radicalized and violent person. You succeeded. We're going to burn this place down right after we finish. This is Babylon.

Rasheed: What's a good outro song? Ah, this one.

Listen on Spotify or Apple Podcasts

Show notes

At 25 years of age, José Pérez Barboni is the youngest member of Panama’s National Assembly. Join us for a discussion on the state of play in politics and governance on the isthmus and the peculiar system of elections that continues to shape the development of one of Latin America’s most pivotal economies.

Panama, the proverbial (and literal) bridge of the Americas, is not defined simply by the infamous trans-oceanic marvel that is the Panama Canal. The country of just over 4 million sits at the forefront of an immigration crisis brought on by the veritable collapse of its neighbor Venezuela. Barboni, who is intimately familiar with the state of affairs, gives insights on what is being done to alleviate the strain on Panama’s resources, as well as bring regional and international attention to the precarious balance between humanitarian efforts and diplomatic action on the largest exodus in the modern history of the continent.

José gives the rundown on local opposition to a mining deal and the underlying cause of the early 2023 riots that paralyzed Panama. An aversion to repetition to a continued lack of government transparency fueled month-long protests that resulted in the rejection of an environmentally dubious mining contract.

How can we bring younger minds and opinions into governing roles? José shares his thought process and journey to the National Assembly. What can the rest of Latin America and the Caribbean learn from Panama’s prominent independent candidate culture and how has this shaped José’s party, Otro Camino?

José on X

José’s Website

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• Dollarzone Banking in Panama: Intellectual Origins - Rasheed Griffith

• Otro Camino - Otra Camino Panama

• CONFLICTO PANAMÁ: Protestas y Minería - Alex Tienda (Spanish)

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Full Transcript

This transcript was automatically generated by AI and lightly edited by our team. We don’t catch every error, so if you spot one, send us a message/email via shem@cpsi.org.

Rasheed: Hi José. Thank you so much for joining me on the podcast today. I'm very much looking forward to our conversation.

José: No, thank you, Rasheed. I'm very glad to be part of this opportunity. I think it's always good to share our views and thoughts on what I believe is, young people in politics and how we can also shape so many things around our atmospheres and environments here in Panama that need a lot of that young energy that I think we can provide from these opportunities.

Rasheed: Yeah for sure. One of the most common things I often say to my friends and different audiences is, that you need more young people going into government to have a real change within government. It's not enough to stand outside and argue for different policy changes. And Panama is surprisingly very good at this at least recently, where there is a very high proportion of the Congress that is young. Under thirty-five, under thirty even, and that is pretty remarkable. So can you tell us why you decided at 25 years old to join the National Assembly in Panama?

José: Well I used to be more interested in aviation.

That was the career I was pursuing before getting into politics. But since I was very young, I got involved also in debate competitions like Model United Nations. And many other activities that prepare people to be better public speakers, to give better criteria for you to analyze complex situations in your country's economy, your country's politics, aspects, and so many other issues; education and health. And I feel that since I was exposed to the opportunity of being part of a debate club, I was involved in the board of my debate club as well. I had the chance to be the president for one year before graduating. I feel that little experience shaped my political bone. Even though I didn't realize I was looking for it was right there. It was in my organism, in my system. And I started working also in embassies. I first worked in the British embassy here in Panama City. After that, the Qatari embassy and being close to the government and working closely with the government made me realize that we had a lot of things to change and to also pursue as opportunities for Panama.

And I noticed that even though I was in a good organization, like a British embassy or the Qatari embassy if I was not the decision maker, I wouldn't be able to achieve. In these diplomatic missions, I noticed the importance of government and the relations that we need to keep to achieve some stuff, especially for economic and commercial purposes.

Back in the British embassy, I used to work for the economic section. And for the Qatari embassy, I used to work for the commercial one. So both experiences made me realize that I wanted to change a lot of stuff in my country, in Panama, but I was not a decision maker. I was just a connection and a bridge for a foreign government to Panama.

But at the end of the day, Panama is the one that takes a decision that sometimes doesn't really, achieve what you're looking for. So I always had that little let's say crutch in my system, right? I was trying to figure out what I could do to change things, but I then started pursuing my aviation career.

And since I started pursuing my aviation career I thought that I was going to be a pilot as I was always looking for an experience. But then I had this involvement in a political party that I enrolled when I was 18 years old that it's called Otro Camino. And during that presidential campaign back in 2019, I supported the presidential candidate whose name is Ricardo Lombana.

He was the runner-up for the presidential election in 2024. And I supported him in 2019 when he got the third place. I supported him when he got the second place now in 2024. And I will keep supporting him if he wants to run again because I think he's a great leader who has not had the chance to be the president of the country.

But, I think that my involvement in the debate, in the diplomatic missions, and then in the party made me take the decision to step forward and seek a seat in Congress, which is crazy because just to conclude, I decided to run in November 2023, maybe two days before they close the elections list because they wanted you to submit documents and other, relevant things that you had to before enrolling for the campaign.

I did it two days before, but thanks to the effort and to the great team that I had surrounding me, I think that I was able to get the result that made me get to Congress on the 1st of July 2024.

Rasheed: What pushed you to join that list just 2 days before closure?

José: Well in Panama we had a situation, I don't know if you remember, it was with the mining company called First Quantum. We had a big protest, we had a crazy civil unrest situation going on. It lasted almost a month if I recall. And it was from October to November 2023. And I was in Argentina when that was happening.

I was very aware and I was paying close attention. But that was very weird, you know because even though I was pursuing my professional path which was aviation, I wanted to come back to Panama to be part of that historic moment that was the Panamanian people fighting for economic and climate rights. After all, we didn't want the mine for many reasons.

First of all, they were not giving us a fair contract. Secondly, they were not respecting climate and the environment and so many things that the Panamanians are very forceful about. So when that happened, I remember I had a call with Ricardo, who is the president of my political party, and he said, "Hey, you know what? I think people want young leaders. They want new, fresh minds to take over those positions in government, in the Congress." And I said, you know what? That's right. I'll, I'll take the step. I remember that he called me on a Saturday and then on Monday I was on a flight back to Panama and my parents were super mad at me because they didn't want me to, you know, just enroll in politics first of all.

And second, they thought it was very irresponsible for me to leave the career when I was about to finish. But actually, the truth is that even though I landed in Panama on Monday, on Wednesday, I was enrolling my candidacy to the Tribunal Electoral. That is our main authority for us to compete, to be candidates.

And on Friday or Saturday, I was on a plane back to Argentina. And then I finished my career and I launched my campaign from Argentina. I recorded the videos from there. I started building a team from there. And it was a bit weird again because you are not in Panama and you are running for Congress.

But I was very aware and I was never that close to Panama since the moment I decided to enroll. And it made me feel very close to, even though I was in Argentina, to be in touch with so many people, like building a team, recording my videos, launching my campaign. It was just a different way to make politics.

And I think that we need to give credit to technology and to the new tools that we have in this era because I feel that you were not able to do that maybe 15 or 20 years ago now with social media, even though time is crucial. Now you can do it because we have Instagram, Twitter, X, TikTok, and so many ways to reach people without actually knocking on their door and telling them "Well, hey, I'm running for Congress."

Rasheed: So around that same time in Argentina there was a big election happening the one with Milei and that was a very big contentious election cycle and you were trying to campaign in Panama while being mixed up in the election cycle in Argentina so I'm curious how was that experience.

José: Well, I think this is going to open the door for me to show you one of the most amazing and weird moments I had in Argentina when it comes to elections because I was flying from Cordoba where I was studying in Rosario.

And I remember that I decided to go out in Rosario because I landed there and I was like, "Hey, you know what? I'm just going to get to know the city." I was able to stay there for a night. And suddenly when I was leaving the airport, this was maybe, let me see the date. I don't know. It was November.

It was the 14th of November I think. And look who I met. I crossed paths with him at the airport and I was just hopping off the plane and he was leaving Rosario because that day was his, campaign closing. And I, I saw all this convoy of cars getting to the airport and I was like, "Oh my God, this is Messi." It has to be Messi because in a few days, they had a match with Uruguay and of course, Rosario is his hometown. And then suddenly you get Javier Milei coming down from the vehicle and the atmosphere was crazy. And let me tell you something in Cordoba, where I was studying they were supporting a candidate that was not Massa nor Milei.

They were supporting Schiaretti. He used to be the governor of the province of Cordoba. And a lot of people went to the polls and voted for him. But of course right after he lost and we got the second opportunity for the two top candidates to compete again, they were all shifting to Milei. And why was that?

Because I feel that people were tired of Kirchnerism. They were tired of the trigger of Christina Kirchner. And even though Milei presents something that- I'm going to make a variable comparison, but maybe he represents what Trump represents. In the US he's radical. He has very strong views and he is a very strong opposition to the left and all these ideas. He represented a change.

People sometimes, don't vote for the figure, but they vote for a change. And that's exactly what sometimes happens here in Panama, but mainly happens in polarized countries like Argentina or the U.S. And yeah Argentina shifted all its support to the change rather than keep the same status quo. Even though the first opportunity gave the first place to Massa and then Milei second, I've always thought that the second opportunities, or the second laps, as we call them here in Panama, benefit the second candidate because that's the one who can get all the support from the parties that are behind him.

So I'm a strong supporter of the second lap, by the way, here in Panama. I would love to get that as a constitutional change eventually. If we get the opportunity to be part of that reform, Argentina was a very interesting case because I was in a place where neither Massa nor Milei were the favorites, but it was, an outsider. The person who got the fourth or fifth place is Schiaretti.

And I was always paying attention because I felt that was going to be a very historical election and indeed it was as we were able to see.

Rasheed: So it’s funny what you said about second-round voting. If Panama had second-round voting, Lombana would likely have won the election this year.

José: It is very likely and I remember I went to a Congress of the Republican Institute International and they gave us a lecture about the second round as you said. And the person who came was a doctor from the University of Notre Dame in Indiana.

And she said the second round of votes doesn't benefit the first person or the second one. It benefits the third person because that's the one who gets the chance to decide who is going to win because it's the largest force after the two that are competing. And that made me think well that's kind of true. So let's say that Martin Torrijos, who was our candidate who got the third place, decided to support Mulino, who is our president now. Maybe that theory would have been true and it would have also crushed the theory that always the second place gets the victory on the next one.

But it's always about negotiations. I think politics, is always about alliances. And like getting your close allies next to your objectives. But definitely, I feel that Lombana had a great chance to be the next president if we had a second round. And I'm not supporting it because of him, but since 2019, when we had Nito Cortizo proclaimed as president in Panama, he won by a margin of 1.2 or 1.3 compared to Rómulo Roux who was the other runner-up. And I felt that if we had a second opportunity, maybe Rómulo would have been the president as we were assuming with Lombana. But at the same time, I think that it's not guaranteed.

It's always about the alliances and the negotiations that you make. And when I say alliances and negotiations, it doesn't need to be corrupt because, in Panama, we have this theory that when you say alliances or negotiations it has to be under the table and in a very corrupt way. But I feel that if we reshape the idea of what an alliance and a strategy are, maybe the Panamanian people would understand that this is necessary to keep good politicians in political positions. But yeah, I have a strong feeling about the second round because since 2019 we've been seeing presidents winning with 33%, and 34% and I feel that doesn't represent what the people here in Panama want.

You have two-thirds of the population telling you that they don't want that person, but you still have him in power. So it's better to give more credibility. If we at least guaranteed a 50 percent in the first round and then if that person doesn't reach the 50%, then it goes to the second round, and in the second round then you have a more legitimate precedent because he went through two electoral processes that guaranteed him the victory.

Rasheed: Yes, Panama’s presidential elections are very curious, to put it mildly. You’ve got 5-7 people running for the presidency at the same time and it’s not a very large country or population. It’s only around 4 million people so the president usually wins by razor-thin margins. The president could be decided with just 37%, 29% of the vote even, which is a very strange thing.

José: Just think about this. We are 3 million people authorized to vote. Our population is around 4. 4 million people. But let's pretend that many of those are young people who have not reached the electoral age. But it's always around 3 million people who get to vote and you can win by having just 1 million on your side.

So the truth is, and this is something that I didn't mention before, is that a lot of that percentage from those three million people that are allowed to vote they don't, uh, have a very large age. They are young people, they are first voters, they are second voters. They really can shape what happens in the country if we stick together as youth.

But of course, we have divisions. One of the main reasons, and maybe you know this, is that we have too many political parties for a small country. Right now, we have nine political parties. Well, we have eight, because one got disqualified since it didn't get enough votes. But eight political parties for 3 million voters, I think that's too much. It divides the vote. Maybe we need to raise the bar to become a party. Maybe we need to be a little bit more specific on the requisites to join a party, but at the same time, we don't want to create a situation where we are limiting democracy, right? Democracy is about having all the points of view that we can allow. It has all the accessibility for people to enroll in a political movement. But at the same time, I think that we need to be very aware of what we are doing. And if we want to keep creating bodies just for financial purposes or if we want to keep dividing the vote in the country.

Look at the U.S. The U.S. has a two-party political system in many ways. Of course, you still have a few parties floating around, but the ones that impact the elections, it's either the Republican party or the Democratic one. So I'm not saying that's the best-case scenario for us to replicate, but it's a scenario for us to think about.

Rasheed: There’s another feature of Panama’s electoral landscape that I find interesting - the high number of independent candidates in the assembly or congress. Why is this the case?

José: That's a great question. And as you said, for example, I went to Guatemala. And in Guatemala, you don't get too many independent candidates because I think the system doesn't allow you to be independent. In the U. S. We've seen cases, right? We've seen many independent candidates that, yeah, they make some noise, but do they have a chance?

They do not. For example, going back to Ricardo Lombana in 2019, he ran as an independent and got third place. And then you also got a few congresswomen who made their way to Congress by being independent. And I remember Ana Matilde Gómez. She used to be from my electoral zone and you also had Yanibel Abrego who used to be from the countryside, but sadly she got bought by a party and then she didn't want to be independent anymore.

But the truth is that people here in Panama, correlate being independent with being honest, which is not necessarily true, but it's the image that independent candidates have built during these years during this campaign. They were able to demonstrate that if you're running independent, you don't have any political party, you don't have any Godfather, you don't have any agenda that will promote the same corruption that we have been promoting in the different political spaces around Panama's government throughout the years. But the truth is, as I said, that being independent is not a guarantee that you're going to be good, that you're going to be efficient, that you're going to be honest.

I feel that the ones that are in Congress right now are really good. They are my friends and I feel that, yeah, they will demonstrate that they're honest and they are efficient, but we've seen in other positions, in other opportunities. Actually in the last government in the last five years that we had 2019, 2024, you had an independent congressman called Adán Bejerano. Ironically, this used to be his office. Now I am using his office. The thing is that he came to the parliament as an independent, but throughout the five years, he started shifting his policies and his support to the official party ideas and objectives while you were supposed to be opposition.

So again, being independent, even though it's well looked at now here in Panama it's not a guarantee that it's going to be good. But the people outside relate being independent with being good. I feel that's why so many people go through the stress of getting signatures because you need to get a lot of signatures to achieve your candidacy.

For example, my political party, this is the first time we run as a political party. Last time it was Ricardo being independent and he was supporting some independent candidates. This time he realized that if you want to go into the system and change the system, you have to join the system in the same way they have in the past to get access to power and the positions, to make the changes in the country.

So that's why we decided to become a party in Otro Camino. Even though a lot of people see us as independents, technically we are by criteria, by our ideas, by the way, we clash and challenge the status quo from the government. We are a political party that is trying to demonstrate that we can make a difference in the political system.

Rasheed: So let’s talk about Otro Camino a bit, otherwise known as MOCA. The core tenets of MOCA are anti-corruption and transparency. Panama is a strange country. It’s got the same or slightly higher GDP than Chile but on the corruption index, Panama is 101st while Chile is 27th. Chile has very high wealth and high transparency. Panama also has high wealth but high corruption as well. This is not common and is a large part of the reason why Otro Camino’s message “We value integrity”, resonates with the electorate. What other factors do you think contribute to the party’s increased traction?

José: You know, Rasheed, it's crazy that when you look for Otro Camino in Google and you look for the ideology, it says, anti-corruption party. Like, isn't that supposed to be obvious? Like, isn't it supposed to be obvious that parties are not corrupt? But in Panama, you have to shape this product as, "Hey, look, we're going to, we're going to challenge those statistics."

As you mentioned, for example, Panama has one of the most let's say least transparent, Congresses around the world. Because I can talk about the parliament where I am. And as you said the central government is well known for not being as transparent as it should be. We had a few scandals in the past, like the Panama Papers, that Panama is a "paraíso fiscal", as we say in Spanish, that we allow too many transactions and operations that are not necessarily legal in other states.

But the reality is that Panama is very confusing in that sense of ideology because ideologies are supposed to be either you're right, you're left, you're center. What is your idea of a government, of human rights, and many other topics that always pollute the behavior of the people here in the country?

But we have to shape it as an anti-corruption body, because we have a very strong ethics committee, and that ethics committee starts to filter, who are those candidates who will represent the party. And when you get to the position, as it happens to me, to Grace and Ernesto, because we are three Congressmen out of 71 that the Congress has here in Panama.

We received all the courses all the training, all these sessions with different people who were able to give us the tools to, first of all not commit influence traffic, to not commit any corruption; behaviors either by knowing that you were doing them or not knowing that you were doing them.

It doesn't make you not guilty if you are not well prepared. So I feel that MOCA offers the candidates and the people outside the opportunity to be shaped as someone who will not only not be corrupt, but someone who will also fight corruption. That's why our ideology is written as that in Google.

But if you ask me, I think that MOCA is a center, right movement. It embodies what a center-right movement internationally will embody. But I'm not gonna lie about the fact that we also have a lot of people who will claim to be center left, for example. So that's why if you look for the party in Google as well, or in many other platforms, it's going to say that it receives people from all the spectrums and all the ideologies, which I think is very healthy in a political movement because it allows you to analyze situations from different perspectives and not being based on something that you share with most of the people.

You have a clash, you have a debate, and that's why MOCA is very well known for being a different political party. They call the other parties traditional parties, but MOCA, calls it a new play. And that's why we're, I would say, in that gray zone, that we're not independents. But we are not the traditional parties.

We're right in between trying to merge people from traditional parties who want to make a change to a new movement. But we also try to get independents who don't have the chance to clash with the system which is so difficult for independents. And we would love to embody them for them to run for a position, especially when they're prepared and they can give so much to their communities.

So I would say that that's a pretty good wrap-up about MOCA, what we do, and why our ideology tries to lower those statistics that you mentioned at the beginning. We don't love to be in those statistics. We don't love to be on the list from the European Union. We don't love to be on the list from the OECD and the Netherlands.

We will keep reshaping politics in Panama and our international image as well.

Rasheed: On the point of corruption, there was the infamous mining fiasco. Let’s dive into that. The resulting protests brought supply chains across the country to a stall. Everything from food items to even gas became scarce in some provinces. The protesters even blockaded major routes to the downtown and even the airport. International onlookers couldn’t truly grasp what was happening and chalked it up to a climate protest. But it was more than that. Why did a mining contract cause Panama to go up in flames for a month?

José: So there were two types of protesters. There were two types of claims in this situation that we had here in Panama. The first one, as you said, was a climate component. It was the protect the environment, we are not going to allow another Panama Canal zone in our country. People were very patriotic about claiming that they didn't want to allow a different or similar situation as the one that we have with the Panama Canal.

Because people here in Panama, hold great grudges sometimes about what happened with the enclave. They always say " Oh yeah, we don't want to allow another Canadian zone or American zone". The problem is that they were also restricting access to that zone in the mining area that was called Donoso and also in Cocle.

So the people were fighting for the climate component, that it was being very damaging for the environment. Also, they didn't want the repetition or the similarity to what we were having with the Panama Canal, so only a few years ago, in 1999, when we got our independence like fully for the Panama Canal.

And the second type of protesters that you had were the people who were claiming that they were not giving us enough money because I think that the contract by year was giving us around three hundred million dollars or a little bit more. But when you were comparing those numbers with countries like Australia, Chile, Argentina, Zimbabwe, countries in Africa, in Oceania, in South America, we were not getting a good profit out of that contract.

So you have two types of people, the ones who were fighting for the economic benefit that were saying that the mining company was not giving us enough. And then you also have the ones who were claiming that the damage to the environment was too high. When you combine those two factors, you get a lot of people in the streets saying, we're not going to allow another canal zone that doesn't pay enough and destroys the environment.

And that was a perfect, let's say recipe for the people to decide to go out. And it started with a few. It started with maybe 100, 200. Then you had a few situations with a photographer. I don't know if you remember, we had a photographer called Audrey Baxter. He got a very bad injury in his eye and I believe that from that specific moment, a lot of people also decided to go out to the street to claim justice for all the people who were protesting and were being assaulted or there was a lot of police violence, a lot of repression and the police didn't behave the best way.

That's what's also a trigger for people to decide to go out and challenge the police because even though you need to maintain order that's essential in every society, you need to have a public force that is able to protect its citizens and its goods. You also need to do it in a way that respects the integrity of that person. And I feel that so many components where you're just climbing on top of each other. The main reasons that I gave you: the altercation with the photographer who got injured, then the police being extremely abusive.

So it was just so many things. That made the country go as wild as you guys were seeing outside in the international networks and in so many elements. But the main and the most important thing that I haven't told you is that not necessarily was because of the mine. The government that we had, the PRD government, is the party that has been governing for the last five years.

They committed so many corruption cases throughout the five years. During the pandemic, they wanted to buy some ventilators for people to breathe better with 10 times the cost that it used to be on the market. The IFARHU, is an institution that provides scholarships and credits for students and loans for them to study.

They were giving scholarships to people who were close to the government and they were wealthy. So, so many scandals. So that mountain of corruption that the last government decided to execute the mining company and the protest was the perfect cherry on top for everything to collapse. Even though it had legitimate reasons, as I explained to you, the reality behind the chaos that you saw, that was people were tired of a government abusing them for five years.

I applied for a scholarship when I was 18 years old or 17. And what happened? Uh, they said, no, there is no scholarship available for aviation or for you to become a pilot.

But why is that? It was because they were giving those scholarships to people who were wealthy enough or close enough to the government to get that scholarship there. There, there was no such thing as merit. So many different causes made people go out and fight to not allow corruption in the country.

But the mining company was the perfect cherry on top for people to just decide, I'm gonna go out to the street and I'm gonna fight like hell.

Rasheed: Another important issue I know you are involved in, is the Darien gap crisis. According to Panama’s data, 500000 people cross every year, trying to get the the USA. Panama has been acting as a transit point, ferrying people to Costa Rica which is a considerable strain on the country. What are the priorities of the National Assembly with regard to the Darien Gap? Venezuela is not getting better so this problem will intensify.

José: Yeah, Rasheed, that's a great question. And as you said I had the chance to visit the Lajas Blancas reception center for migrants. That's right next to Colombia in the province of Darien, well known for the Darien gap, as you mentioned. And I am a commissioner of the government commission that treats migration, public security, anti-narcotics strategies, and so many other related topics that have to do with government and policies.

So we were invited by the Ministry of Security to visit the Darien Gap. It was a one-day journey. We had to take a plane from Panama City to Meteti, which is in Darien, and then from Meteti, we were transported by bus to the Lajas Blanca Center. So while we were there, we got an explanation from the Minister of Security.

His name is Minister Frank Abrego, and he's the one leading the operation right now with the SENA Front, that is the Servicio Nacional de Fronteras, like the Border Patrol in the U. S., if we have to compare it. So the thing here is that in Darien right now, you get so many nationalities crossing the Darien Gap. Of course, it starts with Venezuelans and Ecuadorians who are the main nationalities that we have right now crossing the Darien Gap.

But you also get, and even though it sounds crazy, you get people from Afghanistan, you get people from Nepal, from India, from China, from Africa, and so many places that you think, "Oh my god, why is it a better idea to come from those far places to Panama and try to cross the Darien Gap", which is a very long and chaotic experience for every single migrant that tries to do it.

We had the chance to talk to the migrants for example, I met this girl from Venezuela and she was telling me that a few hours ago before hopping into the boat, that was taking her four hours up in the river to the Lajas Blanca Center, she was robbed. Her money and all her, uh, clothes and so many things that she was bringing from Venezuela.

And she was bringing around 5, 000 dollars because that's the minimum that a migrant pays from, let's say a South American country. up to the US when they get to the border. And now imagine if you come from further, if you come from China, from Nepal, from India, that's going to be a $10,000 experience or expedition.

And for the Panamanian government, the cost is a hundred million dollars. We are paying that sum to provide for shelter, to provide for food, to provide for transport, to provide for security in the border area. Right now, the route that is very famous from Colombia to Panama is that they start in Acandí, which is on the Atlantic side. Then they go to Necoclí, which is also on the Atlantic side. And from that, they start the cross through the jungle. That is one of the most dangerous ones because I met this girl from Venezuela who got around $5,000 stolen. You also get people that get raped. You also get people that get killed. You get people that get diseases and they also die from trying to cross the rivers. They also drown.

So it's very difficult for you to be there and to listen to all those stories because you know that they are true because they come from the migrants. It's not the Minister of Security telling you a statistic, it's the migrants themselves telling you I went through this. "I lost my father, I lost my mother, I lost my kid."

And you need to be very strong because if you collapse then you are not giving them hope, you know, and then you are not behaving as the authority that you need to be. So what is the parliament doing now? That is one of the main questions that you ask. So for example, we're trying to be very energetic with what's going on in Venezuela because Venezuela is the main nucleus that allows a crisis to keep getting worse. Because if Venezuela doesn't get any better, the Darien Gap is not going to get any better either, because people are trying to flee from a regime.

So a few days ago, alongside my fellow colleague Jorge Bloise, another congressman, and Roberto Zúñiga, we composed a resolution to tell the international court to please proceed with the arrest of Nicolás Maduro. And even though this is only a letter and an action that stays on paper. We're also exploring mechanisms with our chancellor, with the Ministry of Foreign Relations, Javier Martínez Hacha, to please try to get more information about the TIAR.

It's called the TIAR in Spanish. It means Tratado Interamericano de Asistencia Recíproca. It allows the countries in the region of Latin America to do something in Venezuela, not only in diplomatic ways, but I feel that there is no way to get this guy out of power in Venezuela if someone doesn't enter and tries to take him out, even though we are very aware that we need to respect the sovereignty of the country when the person that is running the country is not the sovereign elected president, then I think you're giving the international community the right to explore extrajudicial ways to get you out of power. And allow the actual President according to the many documents that he was able to share in social media and throughout the international media. So we're trying diplomatic ways.

We're trying ways with the Ministry of Foreign Affairs. We're also talking to the embassy of the U.S. I'm the president of the friendship group with the U.S. and I know that they have a very robust strategy about sending migrants with criminal records back to their countries.

For example, they have been authorizing more than 10 flights per month to send Colombians, Venezuelans, and Ecuadorians with criminal records back to their countries so they can go to justice. And at the same time, they're also helping us because they are giving us these machines from Homeland Security where you can scan the face of the person, you can scan the ID, and that gives you a little bit more information about what the person is going through.

And if they have criminal records, then they can process them and send them back in these repatriation flights that the U. S. is also helping. I am the president of that friendship group. I am very close to the ambassador, Mari Carmen Aponte here in Panama. I know that she's giving 230 million to Colombia to fight this situation, but I'm going to be very straightforward with you.

Colombia is not doing anything here. Colombia is very inactive in its fight against migration and Gustavo Petro is very disconnected from the situation. And I already told the ambassador that if she can give those 230 million to Panama for us to keep promoting the repatriation flights and strengthening the security throughout the borders, it would be better used than in Colombia.

So I'm trying to also make her see the light in Panama and not necessarily in Colombia because if Colombia doesn't do anything, it's like throwing $230 million into a gap that isn't gonna be used for the purposes. But that's the general situation in the arena. And we're trying individually and as a parliament to do things to make things better for the migrants, especially for us.

Panamanians to protect our borders as well.

Rasheed: How concrete of an issue is this still in Panama? I haven’t seen many reports on this in Panama over the past few months even though the severity hasn’t decreased.

José: Yeah, that is a great question. I think in the past it was more relevant, but why was that?

They did not have the system that we have now, because back then people were saying that, for example, insecurity was a reason. After all, we did not have control of the migrants, and migrants were just crossing whatever they wanted. And they would be stealing, they would be around committing crimes, and stuff like that.

But now the Ministry of Security, what they are doing is that they are getting buses and every migrant needs to pay $60 to get on that bus. And that bus takes them from Lajas Blancas in Darien to Costa Rica, straightforward. They don't make any stopovers, they don't make any layovers. So that's why I feel that the perception of migrants being around is less because now they have better conduct from Darien to Costa Rica. So it's a matter of efficiency. If you are efficiently fighting the problem, then the problem is getting lower in the priorities of the Panamanians. What is the main priority now of the Panamanian? For example, employment, we have a crisis now that people don't find any employment opportunities.

What is the other aspect? Health? People feel that our security system doesn't work better. And it's going to be a crazy discussion this year. Actually, in one week, we're going to be back in our sessions in parliament discussing what we're going to do with the security system and the pensions and everything.

So as I said, the efficiency of the Ministry, being able to conduct the migrants from one point from point A to point B without letting the migrants float around the country is giving the perception that the Panamanian is not paying too much attention to that issue. And it's not related to the issue with the main problems that I told you, public safety, unemployment, because they know that it's a matter internally we need to fix. But I feel that we can be way more efficient if we have more resources.

And that's why I was telling you before that if we make the U.S. notice that Panama has a better strategy we can keep fighting migrant, illegal migrants. The perception of the problem is going to keep just getting lower, which I think is good.

I think that is good that the perception of the problem is getting lower, even though internationally needs to be one of the main priorities, especially for the U.S. because they don't come to Panama. They want to get to the U.S. So that's why, even though it's not a national concern, it needs to be an international concern.

I don't know if that makes sense. It needs to be an international concern.

Rasheed: So let’s talk about the more prominent questions and issues in Panama today; unemployment, cost of living, and other economic issues. These relate to the recent contentious budget. Why was the vote on this budget so intense and controversial this year?

José: That is a great question. So people started to be very observant about it because my theory was, "Hey guys, let's plan this." For example, if I suggested closing the Women's Ministry because I think is not efficient at all and it doesn't help women or they don't have a lot of policies for them. And that ministry, for example, is $20 million per year. And then you also had a few directions and secretaries that are $9 million, $10 million so I was suggesting, "Hey, let's close here. Let's close there. Let's do this and that and that." But of course, the minister was like, "No, no, no, we cannot do that in five minutes." What we wanted, was to shift some money from payrolls, from salaries, to investment. And the number was great. I think that $26,000 million for a country like Panama which has been historically increasing its budget was a really good move from Minister Chapman, who is our Minister for Economic and Finance.

But after that, I feel that so many internal pressures, especially from ministries or from universities, started twisting his arm to make him increase the budget. And that's what happened because suddenly you had this really nice example of austerity of not wasting money, $26,000 million, but then you have $30,000 million.

It was a big increase. I think it was a 12% increase from one week to another. And then you start realizing that maybe it's because even though he wanted to do a good thing, he got so many hidden powers talking into his ear and also twisting his arm that he was not able to fight back and that's why we also had the document that suffered an increase of 12%.

But the worst case, again the cherry on top was that during the first debate that is the best filter that you have because it's the budget commission talking to the ministers, talking to the directors, talking to the administrators, and asking why are we going to have this amount of money?

Why are we going to have this amount of projects? Where are we going to have this and that? That was suspended and they decided to just keep that part that was the most specific one, the most detailed one, and then decided to take the document without reading it to the second debate. And that's why we had the fight on Monday morning where you had a few congressmen screaming at each other in the budget commission.

That's why we had the crazy session that lasted 18 hours during the second debate. And that's why it was so controversial when you were reading the news.

It was not the process that we deserved. It was not the process that the parliament and the country deserved. They didn't respect the processes that we needed to respect.

That's why I feel that people felt so angry about this budget and about the way that the Ministry of Economics and Finance decided to lead the discussion.

Rasheed: Why was the first round of the more technical debate suspended?

José: So the problem was that they suspended the most technical debate that we call in Spanish and here in the Parliament, Vistas Presupuestarias. They were only able to conduct 10 out of 96 institutions. So that means that instead of, for example, asking the Minister of Education and the Minister of Security and the Minister of Health, well, they were able to interview the minister of health, but so many other important institutions that had so many increases in their budget were not able to come to the technical debate in the first debate because 10 out of 15 commissioners decided to suspend the debate. And look, here's the most interesting thing. Who do you think were the five commissioners who were against advancing without doing this? From which current?

Rasheed: What was their argument for not wanting to go through the first full-round debate? Why suspend it?

José: It was about time, but here's the thing. It's true. If we were to conduct the 96 interviews we were not going to be able to finish by yesterday midnight. That technically is when we are allowed to discuss as a maximum because it's the period for regular sessions for ordinary sessions as we call them. But you have other mechanisms you can call extraordinary sessions as the president is doing now for our pension system for our social security.

But I think that he didn't want to join both topics or he didn't want to include them in the same session because both topics were going to be very controversial. So he gave the order to the budget commission and to those 10 congressmen who said yes to skip the interviews, but that's also a lack of transparency.

And that's exactly the way that you give the excuse to Barclays or to Fitch ratings or too many other financial agencies outside to say Panama is not transparent, Panama is corrupt, Panama approves budgets without actually checking what they're approving. And again, it's taking care of our international image that we don't do.

It's taking care of the image of the minister who comes from those agencies. The Minister, I think had a good experience with Fitch, with Barclays, with so many agencies around the world. And that's why I'm so impressed that he allowed that. But sometimes I think it's not only his fault, but definitely, they had the excuse of time.

The president didn't want to give extraordinary sessions on this topic. And at the same time, I feel that it's a matter of pride, I guess. At the same time, they also had another option which was approving the budget on the 2nd of January next year by the Executive Cabinet of the president.

But that was like the last resort that maybe they didn't want to do. Because we have no precedent about it, I think we have no previous experience that allows the president to say, "Oh, I'm going to do this." So once again, I feel that it's a matter of not being organized, and then trying to push everything regardless of whether it's violating the right process or not.

And listen to me, people started comparing this to the mining debate, to when the mining debate happened, it was something similar. In three days we had three debates and they were all just the same. They were not able to examine things technically, but they were just able to approve and approve and approve.

And we wanted a better debate, but that didn't happen.

Rasheed: What kind of reform priorities do you think the assembly should pursue to accelerate growth in Panama? Priorities that align with Otro Camino’s own and should be implemented as soon as possible.

José: Well, Rasheed, you know, one of the main things that I think will help Panama to get back on track when it comes to economic growth, is taking advantage of our services and logistical hub because Panama is right in the middle of everything. And I know that now, for example, the US Embassy and the Ministry of Commerce are trying to promote the semiconductors industry and why I say semiconductors industry as a way to promote more employment here in Panama, it's one of the main issues. When you think about a semiconductor, it can be anywhere. It can be in a race car that you control remotely for kids, but it can also be in military equipment and military technology. So if we make Panama the hub for distribution as it is a desire, I think we're going to be able to respond to that economic issue that we have not been able to give people employment. Because Panama has a lot of opportunities that we're not exploiting yet.

For example, we have too many airports that are not used properly. We have airports in the Atlantic. We have airports in the center of the country that if we start, for example, giving concessions for these airports, we can attract airlines that will also attract more employment opportunities. So Panama's future is based on logistics for tourism.

As a gambling center, because Panama doesn't have a lot of restrictions on gambling. And I've heard so many colleagues talking about, "Oh yeah, let's eliminate the tax for foreigners who come to Panama to gamble. Because if we do that, we're going to be able to create a different way of tourism."

We've been also listening to many CAF and Banco Mundial (World Bank) initiatives that aim to promote agriculture, they want to promote tourism. So if we really put our efforts in the logistical sector and in tourism, I feel that we're not gonna only help people to get a job, but we're also gonna help people to stay in their hometowns.

Because the problem now is that, yeah, in Panama we have 4.4 million people, but 1.5 of those 4 million people are here in the city, because they don't find opportunities in their countryside or in their hometowns unless they are the owners of, let's say, a parcel or like a farm or something that they inherited from their families.

So it's a matter of promoting logistical and tourism hubs outside of Panama City. I'm going to be very close to that initiative about the semiconductors, about tourism, about gambling and so many things that might need to come through the parliament before being a reality. So it's a matter of making sure people out there see Panama as an opportunity to invest as well, the international community.

But we need to get Panama out of those lists, the European Union list, the OECD list. So many lists that really limit Panama from getting investors. Because people are like in the city, in the street "Oh, but why does it affect Panama to be on a list?"

Like, how do I see the negative of that? I'm telling you, many companies won't come to Panama if they see Panama on a list. So we need to get Panama out of that list and then they will come. So I am trying to help, to fight against those things. And at the same time, to be part of the solution for the efforts.

And hopefully in a few years, in five years, if you get the chance to talk to me again, maybe I can give you some results because we just finished our first four months of work. But I'm pretty sure that we have a good roadmap that if we execute it well, we're going to be able to get Panama better solutions for the different issues that we have.

Rasheed: Would you describe yourself as a libertarian?

José: Well, yeah, I would say that I'm center-right. I believe in a free market. I believe that everyone has a right to a job. That everyone has a right to be an entrepreneur. And that it's a crazy world outside and we need to compete against each other. But I think that the government, instead of being the main employer of the people in our country, needs to be the way to facilitate job opportunities and investment opportunities for every single Panamanian who wants to be better and to grow.

But yeah I consider myself a libertarian in a way, in economic ways. And I feel that no system is perfect. I'm not saying that capitalism is perfect, but I feel that it's one of the better systems to respect merit and give people the chance to make great frog leaps to different levels.

Rasheed: Thank you José, this has been a delightful conversation.

José: It was Rasheed. Thank you very much and I'm so sorry for your technical issues. Hopefully, we can fix them here in Congress very soon. And thank you to all the people that are listening. Hopefully, we can also achieve great stuff together. And I am reachable by Instagram, by my website, perperezbarboni.com. Feel free to reach out if you want more information about anything. Thank you very much again.

Well I think the toughest part of the US election cycle is over. Check in on your Democrat friends, they might not be doing so hot right now. I usually put an interesting fact here so… if you’re really worried about US foreign policy after last night, just keep an eye on the state department appointments. Goodluck. 

This is Disgruntled Musings, a compilation of quick commentary on the latest socio-political news and updates from across the Caribbean region. I’m your host Shem, podcast producer here at the CPSI and it’s great to be back. Let’s get into it.

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Barbados to expect higher electricity bills for the end of year

Nation News

The island’s FTC (Fair Trade Commission) has approved a hike in energy generation price (per kWh) so that the Barbados Light and Power Company can recoup just over 800000 BBD in rental costs for temporary generators being used to shore up the island’s capacity. Okay let’s unpack this one before we grab pitchforks. Or we could unpack it as we storm towards FTC HQ with said pitchforks. I believe in us, we can multitask. So what you’re telling me is that the island’s electricity generation infrastructure is so inadequate at the moment that we have rented generators, which are costing us so dearly that BL&P would rather pinch our cheeks as they pickpocket our pay cheques rather than eat the cost.

I beg your finest of pardons. Who is at the helm here because I am monumentally confused. I feel like I’m living in the damn upside down in Barbados because how could electricity bills get any higher!? It was 150 USD last month just to run my little portable unit during the hottest hours of the day. And that’s me pretending I can afford it, so what about those who can’t even imagine affording it? We’ve got so called green and solar initiatives out the ass, springing up all over this island and yet somehow we still have some of the highest energy costs in the world. Mia, ma’am if even your aid is listening, please consider this. The march to unsustainability is just that, a march. And right now we are stomping with aplomb towards gross unsustainability. 

Why is our grid so wretched that it’s running on spare tyres? Mind you we still have one of the most reliable supplies in the world. Barbadians will talk up a storm about the occasional outage which is so rare for most it feels like armageddon whenever the lights flicker. Those first few price increases at the turn of the decade were inevitable, such service cannot be provided for cheap. But the idea was that we would be taking measures to either wean ourselves off fossil fuels to cheaper alternatives or at least make some kinda deal to bring the cost of the current service down. Neither is happening. Seeing thousands of solar panels on every roof in an industrial park doesn’t bring me joy. Seeing them on the roof of the house of everyone with a retirement plan from Sagicor, also doesn't bring me joy because at the rate we’re going I'll never be able to afford either. It feels like we’ve been sold this grand idea of what energy in Barbados is going to be but it simply isn’t materializing. 

The cost of electricity in Barbados is simply too damn- huh? What’s that? The expected cost to the customer is only about $3 extra on our bills? Oh. Okay we’ll circle back to this I guess. Yea, you can keep the pitchforks at the door.

Tobago’s ANR expansion underway, POS welcomes Air Canada back

News Day, Trinidad Guardian

We’ve got some promising developments in aviation happening on the twin island republic. First up, the expansion to ANR Robinson Airport is “over 70%” complete according to PM Rowley, and estimated to be finished by early 2025. The project, which is being executed by China Railway construction, is expected to ring in at 130 million US and includes a new terminal to increase yearly capacity to 3 million passengers. Tobago is directly served by British Airways twice a week so maybe we’ll see that number go up to something more befitting of a news report. 

More good news, Air Canada returns to Port of Spain with 4 times weekly flights after suspending them over a year ago. The flights are expected to resume next year on May 1st. So much for that Carnival season. Trinidad is a rather odd country tourism wise. It’s got an almost anemic visitor count that only substantially sees any increase during the brief Carnival season. They milk that year round because they have no other events for the rest of the year with risking a bullet for. I do have plans to see the rural Paramin, so wish me luck I guess.

Gang violence escalates beyond capital in Haiti

Guardian UK

So the special police mission went down like a lead balloon and reports are indicating that efforts to regain territory have largely failed. Some outlets are describing it as “like a civil war”. And yet we sent a troupe of traffic cops to try to take down gang members with names like Barbecue. One report even detailed how disappointed the local police are in the performance of their Kenyan counterparts. See what happens when you take the lukewarm easy way out of bigger army diplomacy? Shit gets worse. It didn’t need to be a civil war. It needs to be a full scale one.

NatGeo lists Barbados as “must visit” in 2025

National Geographic

National Geographic still has a bit of a shine to it even after the Disney purchase, and have dropped their list of 25 destinations worth visiting in 2025. The list is extensive and features wondrous locales of varying significance to diversity, the arts culture and history.

Visit Senegal for a unique culinary journey, Suru Valley India for rock climbing. And then Barbados for… a new perspective on the slave trade. Oh goddamnit. Why is it always a slave thing? I get it we perfected that shit, but c’mon. The attraction in question is the Barbados Heritage District that’s supposedly being built in 2025, designed by British-Ghanaian architect Sir David Adjaye. It’s a museum and sculpture of sorts, way out in the countryside. 

It’s got an interesting design, i’ll give you that but am I gonna start telling people to shell out 1 grand US one way to come look at it… I don’t think so. Did you know Barbados has a new botanical garden? Here we have a chance to really show off our horticultural prowess beyond domination at the Chelsea flower show and all that we have to show for it is a giant open field with a few trees. But hey, come see Barbados for a slave museum. Ugh.

Gaston Browne demands Sandals forks over taxes or get out

Trinidad Express

He huffed and he puffed and he… made a valid request I suppose. Antiguan PM has choice words for Jamaica-based Sandals resorts telling the hotel and spa to stop nickel and diming the people via tax evasion. Oh boy this again. It’s not the first time Antigua or any other host nation for Sandals has had this pain point with the company. This sentiment seems to come in waves depending on how financially screwed the country in question is. It’s like a mother doing the most on a sunday and scolding down the line, taking anger out on each child as she begrudgingly does the chores and regrets life decisions. There’s a US 30 million dollar hole in the coffers of the Antiguan government and Browne says it’s Sandals shaped. The ultimatum was simple: cooperate and pay or ship out.  

This is the problem with relying on 1 or 2 large resorts to carry your capacity or product. Barbados runs into similar problems with Sandals here. We have about three marquee brands, Hilton, Sandals, Radisson and, oops 4, Marriott. They’re moderately sized and we invited them to our shores with huge perks and concessions in the hopes that bookings in their rooms would turn into taxi fares, bus fares, trips to Harrison’s Cave and maybe throw local food vendors a bone too. But there simply aren’t enough rooms between these resorts to drive the cost of a stay down, which would in turn convince a larger number of visitors to make the trip. The concessions are put in place with the hope that the resorts would attract enough volume to offset all the money the government left on the table. If you don’t build enough resorts it won’t work. 

But wait there’s more, Sandals already contributes a massive amount to the Antiguan economy even with these concessions. The income taxes of their workers, among other things, go directly to the government. In other words, it’s not necessarily a capacity problem, merely gaston wanting more taxes out of Sandals via co-operate tax even though the aforementioned employee taxes outstrip whatever they could reasonably extract out of Sandals via a co-operate tax in Antigua. 

Now I don’t place all the blame on the government. It is very likely that Sandals is… optimizing its taxes to maximize profit. But if red alarms are going off and the only solution you can devise is to hit the hotel pinata, you may have a larger problem on your hands. 

And now, the long talk. 

We’re drawing up to the year’s end so I figured we’d have a little mythbusting session. Can I say that? Is Discovery gonna come after me? Dunno let’s go!

Barbados’ non-existent Blue Economy

This term gets thrown around a lot, referring to the resources and opportunities present within our exclusive economic zone or EEZ. Basically what we can extract from the waters around Barbados. Every country has one, at least every country with an oceanic coastline. You’d think for a rock in the Atlantic surrounded by ocean it’d be a no-brainer that we have one… But it’s actually odd we still do. We’ve pretty much nuked our fishing stock into the floor it seems. Even flying fish, which by the way is a cornerstone ingredient of the country’s national dish, is so scarce in our waters we must turn to Trinidad to get them.

What about environmental benefits and protections? Well the reefs around Barbados seem to be mostly dead. Don’t get me wrong, the dead bodies still protect us from the sea but even that’s not safe. During the pandemic Barbados invited wayward ships and cruise liners to take refuge in our waters when no one else would take them. A grand human gesture certainly, but a rather shortsighted one. The ships were allowed to drop anchor just about everywhere. Even on the reef. A 50 ton anchor can’t occupy the same space as a 100 year old reef so physics quickly corrected that faux pas. So resources, barely, environmental protection, laughable. At this point it really is just the ministry of riveting seaside sunset views.

We basically had a constitution

We didn’t need to write an entirely new one on becoming a republic. The questionable bits just needed to be snipped and the modern requirements added. Barbados’ original constitution/charter was written with a rather autonomous colony in mind. We were already far more independent than most realize, even before actual independence. The transition to a republic was little more than a publicity stunt which has turned into an embarrassment at this point because the new constitution is essentially being held up by God. There are literally people in the senate right now who cringe at the idea of gender-neutral wording for anti-domestic abuse legislation. Color me unsurprised at this shameful delay.

The import bill is a scapegoat in every Caribbean budget

Every Caribbean country spits up a budget yearly whereby the government lays its plans out for spending all the hard earned money it stole from you in taxes. Delicious. Transportation, healthcare, construction are all big ticket items where we gawk and awe at any increases or slashes. But one particular item gets a bad rap by design. The government wants you to think it’s a huge expense that needs to be slashed for the better good. That item is the import bill. Most of the economies in the lesser Antilles are import heavy. They do not produce enough of any one service or goods to export (besides maybe Trinidad, Jamaica and the DR). They don’t make diddlysquat. I remember years ago looking at an Atlas in school that showed that Barbados’ primary export was electronics… primarily light bulbs… what?

You see as these countries modernized, so did their taste in food and goods. Even if you live in Saint Lucia, you can enjoy cereals from the USA and fruit from Asia. it’s not as extensive as our larger neighbors with their juggernauts like Walmart, but even small territories in the lesser antilles can enjoy being a part of the global market. Every video game, pop tart, bottle of wine, Zara dress and even kit from Fenty Beauty, will cost us. We pay for them in US dollars of course, no one wants our ratty single use money. But it is worth it. Our government thinks otherwise. They don’t like when you spend USD so they demonize the import sector every chance they get. They push initiatives like “buy local” and slap high tariffs on imports to dissuade purchase. If Caribbean governments had their way we’d all live off boiled sweet potatoes and fish all day while they get to blow the US reserves on their next BMW. Don’t fall for it. You’re as entitled to that glass of wine as your prime minister. After all, you can afford it. It is the government’s job to make sure they can too, by securing foreign investment and diverse streams of revenue to keep the imports going and the population happy. So the next time you see some politician bringing up the import bill and tell you “we have X at home” tell them to shove it and do their job.

The UWI is trap

Hear me out, it really is. Because where are you going exactly with that degree in theater arts? 

The highest number of degrees handed out by the UWI in Barbados is a management one. No marine sciences, or education. It’s the bland concept of corporate people managing. We churn management degrees out like coupons because the UWI has been out of touch with the labor market it supplies for a very long time. The idea that every single person should go to the UWI post secondary is the machination of one Hilary Beckles who was keen to secure the $30000 (BBD) minimum per year that the government subsidizes in fees, per student. We never really had a job market to support these roles. The degree and programs offered at each campus reflect a more global demand, not a regional one. As a result, the UWI directly contributes to the ongoing brain drain of the countries which they serve. The agreed upon process is to get a UWI degree, fumble at some entry level job as a manager and then have that job pay for your post-grad so you can bail at the first chance you get. It’s not really a secret. Maybe trap is a strong word considering it’s a method of escape for some. But there is a non-zero subset who will be spat out and be forced to roam this desolate landscape of a job market or be lured back in to try for a better degree. Don’t do it

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Show notes

The role of the Church in dismantling the slave trade must not be understated. This is just one of many hard truths we examine in this episode featuring British writer and medical doctor, Alexander Chula. In his book "Goodbye Dr. Banda: Lessons for the West from a Small African Country", Dr. Chula guides us through harmful misconceptions about Western culture.

Western culture, the Classics and many of its trappings were not simply tools of subjugation. To frame them solely as such is to apply a reductionist view of a much broader and complex history where they were also tools of enlightenment and civilization building. In his book, Dr Chula introduces one such prolific character who recognized the utility of Western culture and used it to enrich and spotlight his own country's literary prowess. Malawi's first prime minister, Hastings Banda serves as the focal point for understanding the true role of Western influence via colonialism in Central Africa.

His own history and initiatives on return to his homeland provide insight on the contributions of the Church of England, not via force but through countless missionaries who sought to bring development to the region by appealing to humanity. 

Fast forward to the present, and these contributions have been almost entirely forgotten or overlooked. In its place is a regrettable sense of guilt, guiding the narrative solely on emotion, rather than empirical evidence and manifesting via counterproductive reparations movements. How did we get here?

Alexander Chula on X

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• Colonialism: A Moral Reckoning - Nigel Biggar - The Rasheed Griffith Show

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Full Transcript

This transcript was automatically generated by AI and lightly edited by our team. We don’t catch every error, so if you spot one, send us a message/email via shem@cpsi.org.

Rasheed: Thank you so much, Alexander, for coming on the podcast today.

Alexander: Thank you very much for having me, Rasheed.

Rasheed: So, I'm going to start in a very straightforward question. What did you find in Dr. Banda's abandoned castle in a derelict chest on a hill in Malawi?

Alexander: Yes, so this is the scene which opens my book. I should explain that I was, at the time, you might say I'm a medical doctor and I've worked in Malawi in that capacity, but my first acquaintance with Malawi was when I went there to teach Latin and Greek, as bizarre as that sounds.

And while I was there, I explored the ruined palace, which lay about 30 miles away from the academy where I was teaching, where I lived, which had belonged to Hastings Banda, the eccentric and notorious dictator who had founded this academy to promote the study of classics in Central Africa. And we were there to catalogue the library.

And when I went in, it gratified every hope I might have had for the experience. It was abandoned. There were baboons scuttling around on the forecourt as I arrived, there were wild bees nested in a corner of the room, bric a bracs scattered everywhere, and this extraordinary collection of classical books.

And I spent a couple of days cataloging it, but it was only on the very last, my very last sweep of the place that I was exploring this strong room attached to the library. And I had to do it by torchlight because the electricity had being cut off long ago to the palace. And amidst all of these disordered papers and boxes, I found portraits, dusty, battered oil portraits of Mugabe, of Nyerere, of Gadaffi and underneath all of them was a treasure chest, I mean a proper oak treasure chest bound in leather and brass.

And I took it out to the sunlight and opened it to find a 1584 edition of Julius Caesar's Gallic Wars printed by the Venetian Aldean Press, in other words one of the most celebrated presses of the Renaissance. And so that is the question that opens my book is how did this extraordinary talisman of Western culture come to find itself on a mountainside in the middle of Central Africa.

Rasheed: And that sets the stage quite nicely for the general meta concept of the book. And we're going to obviously dive into that. But before we do that, I'm curious, what's your explanation for why exactly did Dr. Banda have such an interest in promoting classical literature in Malawi at its extremely low stage of development?

Alexander: Before we need to delve into some of the historical context here, first of all, who is Hastings Kamuzu Banda ? He is born into the Chewa tribe in the late 1890s, when it has just become a part of the British Empire as a protectorate. And he comes from a family of peasants who are living by subsistence farming, in which, among whom literacy until maybe just a couple of years before was completely unknown.

And he receives basic education from Scottish missionaries who are in the area. And this awakens this extraordinary appetite for learning in him. And he's determined because he recognizes his own intelligence and capacity to learn to set off on foot for South Africa where he is hoping to get to a mission station called Lovedale, which at that time offered what was reputed to be the best education available to black Africans anywhere on the continent including, specifically, in Latin and Greek, and that was something it was famous for. And so Banda walks the 1, 500 miles or so to South Africa. He never makes it, though, to Lovedale. He ends up having to work in the mines on the Rand in Joburg. But when he's there, he's also taking evening classes, supplementing his education, and he gets a scholarship to go to America.

And in America, he embarks on 12 years of full time adult education sponsored by a church, church sponsors. And this begins with liberal arts, with classics, with history, with literature. He then does quite a lot of anthropology. He takes a degree in history. And only then does he switch into doing medicine.

He's really immersing himself in the richness of Western culture. He then comes to the UK, he has a full career, pretty much, as a GP, a family doctor in the UK. And it's only in his late 50s, early 60s that he becomes politically active. The winds of change bring him back to Malawi, where he's by far and away the most qualified man to run the country.

But because he's got this background in Western culture, which he's come to admire so much, he's determined that this needs to be, this should be developed in Malawi as well. And I think the motivations for this are psychologically and historically quite complicated. What then happens is he then rules Malawi for 30 years as dictator for life and begins various programs to promote classical education, including at the university, which he founds.

And then in the final decade of his rule, he sets up this wildly extravagant project called Kamuzu Academy, which is an academy modeled on Eton College in the middle of the Malawian bush at the site of the very Kachere tree under which he'd received his childhood lessons from missionaries.

And at enormous expense, this school is there to educate the country's brightest pupils, boys and girls, whoever performs best in local exams throughout from each district of the country in Latin and Greek. And this is done at a cost of some 14, 000 U. S. dollars per year. This is in the 1980s, at a time when the government allocation of spending on the education of children in ordinary state schools in Malawi is 17 dollars per year.

And at the opening ceremony, Banda stands up for this podium and addresses this enormous crowd of pupils and masters, but also dancing women assembled, Angoni warriors, Gule Wamkulu dancers, and a throng of villagers who have wandered from far and wide to observe this spectacle. And he proclaims to them, anyone who is not interested in learning Latin and Greek has no place at this school.

And he then proceeds to declaim page after page of Caesar's Gallic Wars in Latin. Now he's already got a minister who's having to translate his English into Chechewa for the local population. With the Latin, the minister just tells him in Chichewa, "you heard what Komuzu said", and leaves it at that. But you can see why this provoked such a strong reaction amongst postcolonial thinkers, because there is obviously an element of absurdity to the whole project, but worse than that it was perceived as grotesque, as wasteful, elitist, absurd.

And also you get figures like the Kenyan critic Ngũgĩ wa Thiong'o denouncing this as the paradigm of the colonized mind in pretty much the first chapter of his book on that subject. There's a grain of truth in all of these accusations, but what I've tried to show in the book is, although there is a grain of truth there, what also mustn't be forgotten is that Banda is also a very intelligent, highly educated man, with experiences of both Africa and the West that are virtually unique for an African leader of that period, or indeed any leader of any period.

And dismissing it merely as the colonized minds in the manner of, say, Idi Amin fancying himself the last king of Scotland. It seems to me a rather facile and slightly high handed dismissal of his project. And the next thing that my book is really trying to convey, which is that this project of Banda's, it sounds, when you first hear about it, like this is some total aberration, a perverse obsession of his own that comes out of nowhere.

But when you delve into the historical context of Malawi, you in fact discover that this is entirely consistent with a tradition of high academic ambition, which begins with the first missionary contact with Malawi in the 1850s and 60s and remains a constant throughout that exchange between Malawi and the Westerners who engage with it.

And Banda is really trying to build on that tradition and preserve it.

Rasheed: Do you have an insight into why Banda, as a strong proponent of classical literature as cultural transmission, seems to have a passion for Western modes of education, but clearly not Western modes of government? Do you have an insight into why you think Banda was so reluctant to have a more democratic state of Malawi in the very early development period?

Alexander: Or indeed throughout his rule. There is an extraordinary arrogance to Banda. Banda is a classic African dictator. It will not surprise anyone to learn that he had grievous, grievous faults, which I certainly do not shy away from. There is brutality, there is corruption, there is mismanagement, and there is dictatorship very early on.

And that's tied in with, yes, this supreme arrogance that he and he alone is qualified to run the country. But at the same time, it is understandable because his experience of the wider world and his education did far surpass that of pretty much all of his rivals in the political scene, and not just in Malawi, but on the international African stage.

Banda was certainly initially hugely respected by other African leaders whom he has actually, in some cases, fostered when he's working in London. His suburban house in North London becomes something of a focal point with anti colonial activists dropping in and dropping out, along with members of the Labour party and the Fabian Society, all through the 1940s and 50s.

And so he befriends Nyerere, Kenyatta, but in fact he is perceived initially at least by most of them as their superior because first of all he's older which counts for a lot but because he is actually more experienced. So he's something of a sort of avuncular figure with these figures of course as his politics becomes more reactionary and conservative and in particular when he makes Malawi the only black African state to align itself with apartheid South Africa they, of course, shun him and distance themselves from him very promptly. But up until that point, he is very widely admired and I think he succumbs to the same spirit that most of those peers of his do, that they are, yes, the only people capable of directing the countries that they've come to rule.

Rasheed: Why did Banda ally with apartheid South Africa?

Alexander: So his argument was that apartheid could only be broken down in South Africa through engagement, through positive engagement. His basis for this was his own peculiar experiences in America and in Britain. In America, he found himself in a very unusual situation. In particular when he was in some of the southern states, he found that although he was black, he was mysteriously exempted from the contempt and ill treatment which he saw black Americans being subjected to by white people.

And he was adopted by a black American surgeon who became a great inspiration in his life. And this surgeon, called Walter Bailey, impressed upon him as a young man, that if you are extremely competent, educated, and you do your job extremely well, then you will have the respect of white and black alike.

Because he had a practice in which he had white and black patients. And Banda basically absorbs this as something of a personal motto. Now the problem is it may work just about for Banda, and it works for the overwhelming majority of people who have had less extraordinary opportunities to educate and advance themselves.

But that is, I think, quite deep in his mentality. He's also without, to a great extent, the feeling of acrimony towards white South Africans, white Africans, white colonialist that characterizes a lot of the rest of the politics in the post colonial period. When he goes to the UK, for example, he really contrasts his experience in Britain with his experience in the US.

Now in America, in Nashville, Tennessee, he's actually witnessed a lynching. When he goes to the UK, he can't believe how open and welcoming society is, especially when he goes to Scotland, which is the country that almost furnishes him with a surrogate identity. He goes first to Edinburgh. And not only is he not excluded from society, he becomes something of a local celebrity and he really opens up.

And he even writes to his colleagues back in Malawi saying, "You won't believe it when you come here. The way I'm treated as an equal, it's just extraordinary". And the chief that he writes to comes and visits him in the UK. And when he gets back to Malawi, he writes to Bandar i Ganon and says, I didn't believe you when you wrote those letters to me, but when I came and visited, I saw for myself that it was true.

So because he's had these sort of contrasting experience. He doesn't have the same preoccupation with Western racism that others in the same period have acquired. The result of that, though, is that he can approach South Africa with a, I suppose, a distance from the sensitivity of the alliance. There's also a way in which I suspect he feels a certain satisfaction in his aloofness from that, and that's very much tied into his high handedness and his arrogance, that he feels he's a special case that's actually above the experiences of ordinary black Africans, and that's why he can consort.

And so when he goes to South Africa. They give him a 21 gun salute. He's there pictured having tea with the President of South Africa at Groote Schuur. But from a practical point of view, what he's hoping to achieve is investment. And basically, the South Africans are delighted because it's diplomatic gold dust for them to have a black African country that aligns itself with them.

And in return, they pay for his new capital and a lot of other infrastructure besides. So that's the practical side of it.

Rasheed: You mentioned earlier in passing, you do discuss in the book, that the approach of Banda towards classical education was quite looked down upon and attacked, not only by fellow Africans, but also Westerners, even then. And ironically, that would likely still happen today. What was the arguments used by Western people, or Westerners, British, or even Americans, that this should not really be occurring?

Why waste the time and the money, in particular, trying to teach poor Africans classical literature?

Alexander: I suppose on one level, it does seem obvious. Malawi is a fantastically poor country. It usually hovers around the place of being about the fifth poorest country in the world. It's, people endure extraordinary material hardships.

It's a world of preventable disease, of illiteracy, of infant mortality, and it's, Western involvement since independence, and especially since the fall of Banda, has really been focused on how to improve the material conditions of people in Malawi. And it's notoriously the country that Rory Stewart mentioned as having received a four and a half billion pounds of UK aid money and yet somehow ended up being poorer than when it started.

It's so natural to want to focus on trying to improve the desperate material conditions there and why in contrast to that focusing on classics seems so grotesque and absurd, elitist and wasteful. And it's very difficult to counter those accusations. The one thing though that I think is noteworthy is that.

They're all exactly the same accusations that I've heard leveled against classics being taught in the West. So my suspicion, and this is based also on my own experiences of studying classics at Oxford, which I describe in the book, is there is something deeper here. It's not merely a preoccupation with how to improve conditions in Malawi.

It is also a problem that Westerners have with the study of their own culture.

Rasheed: And what is that problem, exactly do you think?

Alexander: So, Classics, in particular, in Britain, Classical education has become, say, tainted because of its association with the imperial past. The fact that Classics was seen as the educational basis which equipped young British men to go out and rule the empire.

And also because within Britain, of its elitist associations that it's especially its association with the public school system and Oxbridge. And I think there's a powerful resistance to all of those. I think that there is also something deeper. I think there's a growing embarrassment about our culture in general, which is the result of both being uninformed and misinformed about that culture.

For a long time, education has neglected the classics outside the elite sphere. It's neglected the teaching of more recent European culture as well. And also there have been, I think, active efforts to disparage that culture within the educational system. People are left feeling doubtful about the value of European, especially English culture, and its classical antecedents.

And not merely doubtful about its value, but actually inclined to wonder whether it might have been a bad culture, responsible for so much wickedness in the world, inequality, imperialism, slavery, and so on. And I suppose the reason I wanted to focus on Malawi is because it offers an extremely unusual case study in the sort of culture that Westerners have exported to the rest of the world.

Because Malawi has experienced the whole gamut of Westerners down the ages, starting with David Livingstone and the early missionaries through the colonial era when it's part of the British Empire, up to the present day when it's experienced as chiefly through tourists, international development, industry professionals. And I think the view that we flatter ourselves today that we are now respectful, passionately curious, open minded about other cultures, and we contrast this with the bad old days of the past when our forebears were bigoted Eurocentric cultural imperialists.

But what my sometimes mischievous compare and contrast of all these different approaches down the ages, I hope shows is that in the case of Malawi, it was our ancestors, even and especially in the Victorian era, who engaged far more energetically, far more respectfully, actually, and with results that were far more mutually uplifting for both sides and enriching than is almost ever exhibited by contemporary visitors to the country.

Rasheed: You speak a lot about the impact of missionaries in Malawi in particular and this is very often understated, especially now, how impactful they were. So that's the question for listeners. How impactful were missionaries in Malawi?

Alexander: Absolutely. And indeed that was very much what I was chiefly thinking of when I mentioned just then the positive and enriching ways in which Western culture has been introduced to this part of Africa.

The initial contact with Malawi, as it now is, was almost entirely a missionary endeavor. It is an important historical microcosm because it really undermines a lot of the prevailing narratives about the colonial experience and the experience of slavery in Africa. So this is the land that obsesses David Livingstone.

It's a major focus of his expeditions and missionary endeavors. And it obsesses him because once the Transatlantic Slave Trade has been suppressed, the largest in the world is the Indian Ocean Slave Trade. And at its very heart, the most populous territory supplying that slave trade is Malawi, the broad territory of what is modern day Malawi. When Livingston explores the region, what he discovers can fairly be described as Hell on Earth.

It's on that territory have converged a number of different, very malevolent forces, chiefly Omani slave traders, whose empire is reaching its pinnacle at this time and extends from Muscat, Oman to Zanzibar, where the capital is re-centered, as far north as Lamu in Northern Kenya, and down to the border with the Mozambican territories in modern day Mozambique.

And they, together with Islamised African accomplices in the hinterland are predating on that huge swathe of Central and East Africa with the peoples of Lake Malawi towards the bottom end of that. And at the same time you have also got the Portuguese slaving in the area and even more nefariously than them, a peculiar group of mixed race Portuguese African robber barons who are particularly brutal slave traders.

You've also got a tribe called the Ngoni who have themselves been displaced by the Zulus but have assimilated some of the custom of the practices in particular some of the military tactics of the Zulu peoples and they have moved north from what is now South Africa through Mozambique and into Malawi and all of these forces are predating upon the indigenous peoples of Lake Malawi to create conditions which Livingston describes as being the open sore of the world.

You have total disruption of local societies, total disruption of agriculture, associated perennial famine, and when Livingston is traveling up the Shire River, one of the expeditions is confronted by a river that has constantly got corpses floating down it just because the dead are so numerous and the people so exhausted by famine and war that they no longer bother to bury their dead and just toss them in the river. And Livingston is an example anti slavery fanatic.

This is a total obsession of his. And he realizes that to actually end the Indian Ocean Slave Trade, it's going to be much more difficult than the Transatlantic one in some ways, because it's being conducted by small boats, Arab dhows, coastal hugging, going up and down the East African coast. And the Omani Arabs are engaged in it, the Egyptians are engaged in it, the Ottomans are engaged in it.

But, for the sort of large naval vessels that could police the Transatlantic Slave Trade, of the Royal Navy, they can't get in close enough to the coast to actually stop these dhows from operating. And also, the dhows, because they've got a friendly coastline ruled by the Sultan of Zanzibar all the way, they can easily just drop off their cargo as soon as they catch sight of a British ship and deny then that they're slaving. To add to that, there's even the Portuguese and the French are also shipping. They're easier to stop because they are shipping them in larger vessels. It's quite extraordinary, the French are still being caught trading slaves in the Indian Ocean into late in the 1890s.

And the Portuguese are exporting slaves from Malawi even to Brazil in the late 19th century. But that's relatively easy to stop that. The difficult part is this vast trade being conducted. but in very small vessels. And pressure is brought to bear on the Sultan of Zanzibar, and he is eventually coerced into banning the slave trade, but it's a very ineffectual ban that he issues.

The slave market is closed down eventually in Zanzibar, and eventually he's forced to abolish slavery entirely after the Anglo-Zanzibari War, which is to a greater extent about slavery. But it's still not getting to the heart of the matter because there's still this vast trade in the inland which just cannot be controlled.

And this is why Livingston promulgates this idea of the infamous three C's of commerce, Christianity, and civilization, which causes such huge embarrassment today. But for him, he saw it as the only practical solution to suppressing slavery deep in the African interior. And you needed all three, is what he thought, because how can you have a sustainable mission that properly blocks out slavery without the commerce to fund it, the Christianity to embed an alternative moral code amongst local peoples, and the civilization so that there is an alternative vision of society that's not based around slavery.

It was very much tied up in concerns about, in a profound belief that freedom and free trade and education and civilization were all there for the betterment, could all achieve extraordinary social improvement. And I think Livingston's personal experience in this is really important because of how Livingston grows up.

His family are from the Hebridean island of Ulva where they live in conditions of poverty which really as materially awful as any you might find in Central Africa at this time. They then move to a mill town outside Glasgow where aged 10, Livingstone is put to work in the mill doing this difficult and actually quite dangerous work operating spinning jennies.

And he's doing 10 to 12 hour days of work, back breaking industrial labor. But the mill owner has got a lofty vision himself of the power of education, sets up a school for the workers children, and Livingston gets an education. And he self educates as well, teaching himself Latin and Greek. And so he's able to read Horace and Virgil in the original, which is something, by the way, that students at Oxford now struggle to do after four years at university.

But he did it by teaching himself after doing a twelve hour working day, and not just David but all of his siblings. They all improved their lot through education. So it's a very positive vision which he thinks he's bringing to an era of the world which he sees as being consumed by unnecessary human suffering and that it does just need the approach which has worked so well for him and his family and his peers in his native Scotland.

It's actually an even bigger vision that he has because he mistakenly believes that the territory around Malawi will lend itself especially to cotton cultivation, and this is just on the eve of the American Civil War. And he thinks this is great, we'll knock out two birds with one stone, because we can also completely undermine the economy of the southern states of the US by having vast cotton production here.

He's wrong about the cotton, but he's actually right about everything else. Not that he achieves it much of himself, he inspires others. But what he succeeds in doing is persuading a tranche of young, mainly English and Scotsmen, who are from themselves extraordinarily lofty educational backgrounds, to take up his cause in Central Africa and go there as missionaries to introduce Christianity and civilization. And it's really striking because, first of all, his first appeal that he makes in England.is to the universities of Oxford and Cambridge. And so they form the first missionary group that goes out to Central Africa to take up this challenge. And these are men of the highest intellectual and moral caliber that this country has almost ever produced.

Theologians, they are physicians, they're classicists, they're linguists, even musicologists. They're brilliantly educated men with an incredibly lofty, both religious and educational ambition for the country. And the extraordinary thing is that over the next few decades, after initial disaster, after that they actually succeed, by and large in enacting Livingston's vision. And they do it almost entirely peacefully, basically by a heroic appeal to better nature.

There's an extraordinary thing that Samora Machel, the founding father of Mozambique, says about this. That the difference between British and Portuguese colonialism is that the Portuguese sent to Africa their worst, the British sent their best. Now, it's a little odd to find oneself challenging a militant Marxist Leninist for overstating the case in favor of the British Empire, but in the particular case of Malawi, there is, I think, a lot of validity to his claim.

Rasheed: It is quite striking the contrast of especially Church of England in the Civilizational project of the late 19th century to now in 21st century, where not to be too harsh on the church, but it feels like they're trying to dismantle civilization in many ways with a lot of their new positions on things like reparations, for example, or even things like renaming aspects of the church.

Using the Malawi case study, there are also similar ideas in the Caribbean, for example, and other parts of South Africa and Western Africa. It is very striking the turnaround of the same church as a stable institution just after two centuries. Is it striking to you how the Church of England, instead of continuing this civilizational project it has had, has now followed the political moorings of just current society?

Alexander: I think it's desperately sad. I don't know if I go so far to say they're seeking the dismantlement of civilization. I think they are well intentioned. They believe that they're doing the right thing, but I think that they are gravely mistaken and deeply uninformed, especially with their handling of the memory of the Church of England's contribution to eliminating slavery in Central Africa.

So, coming to the fore in the last year or so because of the Church Commissioner's report, which used forensic accounting to establish guilt by benefiting from the slave trade in the early 18th century. It was actually quite a short period of time when there were church investments in the South Sea Company, which participated in slave trading.

And on the basis of this quite short period, the Church has pleaded, I would argue, a wildly disproportionate degree of guilt and has proposed, I would argue, a wildly disproportionate degree of reparation is necessary in the form of a fund of a hundred million pounds, which I think is tipped to be expanded to one billion pounds for, by way of reparations, to the victims of slavery. And it struck me amidst the report that, the report's authors pride themselves on telling an untold story. Voices that are not normally heard, they are amplifying them. But this is history which is not known to most people and needs to be better known.

But it struck me in the midst of this that there are aspects of the Anglican Church's contribution to abolitionism which are reasonably well known. The role of the Clapham sect, for example. But it seems to me that the contribution of the Church of England to eliminating slavery in Central Africa is almost completely undiscussed.

And yet I think it is something that the church should be extraordinarily proud of for and for practical reasons, which I'll, I'll come to, I think should be vigorously asserting. What happened when Archbishop Welby went to Zanzibar earlier this year and gave a sermon?

In which he had, I thought, sort of failed to, honor and uphold the memory of the Anglican missionaries who'd done so much to extirpate slavery in, in Central Africa. There seems to be so much an absorption with the past.

It seems so obsessive. It seems so self obsessed. Because, there's a contemporary issue going on which he is completely ignoring in the midst of this, which is that in recent years slavery has started to recrudesce in precisely this region. So it was a very, very bitter discovery that just earlier this year that a story was broken by the BBC of Malawians who'd been tricked and trafficked to, of all places, Oman, the historical force at the, at the heart of slave trading in the region historically.

There they'd had their passports confiscated. They'd been bound into domestic servitude. They'd also been appalling sexual abuse that they alleged, including gang rape. And in the negotiations that followed, the Malawian government, which bear in mind is the government of the fifth poorest country in the world, had ended up having to pay reparations to effectively the slave owners, to the Omani businessmen who had acquired these Malawian workers in order to get them repatriated.

And it seems to me that if the Church of England actually asserted its extraordinary and heroic historical record in opposing slavery, then it could actually use that as a moral basis for challenging and opposing evils, which are reasserting themselves in the region, even as we speak, but instead it's lost in this totally introspective private narrative about its own guilt.

The arc of history is supposed to bend towards justice, but that won't happen if the actual custodians of that history completely neglect it.

Now Zanzibar is important because for a long time it was the head, it was the center of the University's mission to Central Africa, that mission set up in response to Livingston's appeal to the Universities of Oxford and Cambridge.

And after their initial debacle in Malawi itself, they had to retreat to Zanzibar, which is where they built this magnificent cathedral on the site of the old whipping post that stood at the center of the Zanzibar slave market. And, well, he went to this cathedral. He did fleetingly, though acknowledge that there had been a university's mission to Central Africa and that they had been brave and fought against slavery. But their absolutely crucial role in properly eliminating it from Central Africa, he did not mention. And he did not mention at all the enormous sacrifice, personal sacrifice, that so many of these men made, including their lives.

And it really struck me as a betrayal of that memory. And the preoccupation all seemed to be with his own sense of guilt, the church's guilt. He even condemned those missionaries for not having been suitably repentant for the, not stated but presumably for the church's involvement in the slave trade, what 160 years before they went to Central Africa to try to oppose it.

And he then even started to dwell upon his own personal courage in taking up this cause and how he had been attacked in Britain for taking up this cause, and it all had the character of a sort of a personal obsession with guilt. It is offensive to the memory of those men and what they achieved. So, in the cathedral itself, there's an extraordinary plaque on the wall which reads, "to the memory of Livingston and other explorers, men good and brave who, to advance knowledge, set free the slave and hasten Christ's kingdom in Africa, loved not their lives even unto death."

And yet, when I was visiting the cathedral, I did so in the party of Scandinavian aid workers who just blinked at it. They'd just about heard of Livingston, had heard of absolutely none of the other missionaries who'd been involved in this, and then just muttered, "oh, they were all just colonialists." And it seems to me that level of both ignorance and feeling of moral superiority over these heroes of the past is not confined to gawping Scandinavian aid workers.

It seems to be at the very top of the Church of England as well. Shall I go on here, Rasheed, about some of the details of some of those missionaries? So take, for example, two of the Oxford missionaries, William Johnson, Chauncey Maples, and their friend, Charles Johnson, who are friends in Oxford.

These are young men with astonishingly bright careers. Johnson is, in fact, been offered a post in the Indian Civil Service, which at that period is the equivalent of being put on the J. P. Morgan graduate entry fast track program. They have careers of enormous success, potentially very lucrative careers ahead of them.

But on hearing Livingston's appeal and that of his son's successors. They decide to embrace a life of extraordinary danger and hardship by going to Central Africa to try to oppose slavery. And they've already heard of the disaster of the first expedition that goes out under a man called Charles Mackenzie, who is a Cambridge mathematician, who ends up dying with most of his party in desperate conditions in southern Malawi.

They know the risks especially due to disease, and so on their way out to Africa on board ship, they're devoting themselves to writing their own epitaphs that will rest on the graves that they expect to find in Africa. And sure enough, the third of their party, Charles Danson, is dead within a week. And having lost most of his party and their supplies in a flood, William Johnson has to basically bury him with his bare hands.

But they are totally undeterred. They're even undeterred when Johnson develops this tropical eye infection and goes completely blind in one eye and pretty blind in the other. But for the rest of his life, and this is going on for the next 40, over, almost 50 years, he devotes his life to the region.

And for much of it, he's wandering as a mendicant preacher with a single guide, a bag of books and a bag of clothes, wandering around Lake Malawi, essentially trying to convert people by setting a heroic example and to discourage slavery, again, by appeal to better nature. It sounds so improbable, but the extraordinary thing is that these men actually succeeded in this.

It really used to be a huge quandary for me how such a huge swathe of the world could have been converted so peacefully to Christianity. This is not like the conversion of Latin America by the conquistadors by any stretch. It's done by a handful of very educated, very cultivated men who enter a situation that, as I've described, resembles Hell on Earth and suggest peace on Earth and goodwill to all men as an alternative.

And their message is embraced. Just so enthusiastic by local peoples who are just desperate for some possible vision of hope out of the horror that prevails in the region. And I found it so interesting to actually drill down into what was the concrete experience of these missionaries when they actually set foot in the place.

The first thing to note is that this is a fantastically sparsely populated country, even though it's one of the more populous regions, which is why the slave traders are going there in the first place, it's still got a country the size of England with a population of less than a million when they do the first census in 1911, and that's after a generation of relative stability and peaceful agriculture and so on.

So they can travel for days or weeks without seeing anybody, and then when they do they come across an extraordinary description of Mackenzie, the first bishop encountering a slave caravan in southern Malawi for the first time. And as soon as the caravan sees him and his handful of companions, the slavers just flee in terror.

And it's that easy at first to discourage this practice. The people are just so overawed by the appearance of these strange people. And of course, they start to uncover the atrocities that are taking place. And they then realize it's more complicated and that they're in the middle of intertribal warfare and this will need to be put essentially by commitment to the place and commitment to peaceful means, especially by the time Johnson and his friend Maples get there. By building a secure stronghold on an island in Lake Malawi, they are basically able to set an example and show the fruits of civilization, show the way of peace, and it just attracts more and more people to their cause.

But it's not the educational side is the part that I suppose my book has tried to emphasize, because that for me was what impressed me, perhaps impressed me most. are in the midst of a society in which literacy is completely unknown and in order to teach anything, they have to first learn the local languages.

Several of them, including Johnson, end up then translating the Bible, the common prayer, to local languages. Others of them write dictionaries and grammars of the local languages and only then are they in a position to teach their parishioners how to read the Bible. And what they unlock is the this extraordinary appetite for the written word so that in especially another part of Malawi that I really focus on in the north, Livingstonia. This titan of Victorian missionary endeavour called Robert Law, who is almost completely consigned to oblivion in Britain today, but is still remembered very respectfully in Malawi.

And he embarks on this educational project of really towering ambition, because once he realises how much appetite there is, he realises, actually, I can teach them Latin and Greek. and Hebrew, and literature, and philosophy. And by the time he ends his career in the mid 1920s, there's this extraordinary episode where a British anthropologist is sent from SOAS to investigate levels of educational attainment in the region.

And she comes across an Ngoni warrior walking in the hills one day with a spear in one hand and a book in the other, and it's a copy of Plato's Republic. But when I related this anecdote to a British Oxford educated civil servant of my own age who'd worked for the International Development, DFID as it then was, he just grimaced and muttered something about cultural imperialism.

Now, if this was cultural imperialism, it spectacularly backfired because what emerged from these missionary institutes were educated men of properly independent mind and spirit who became themselves pastors, writers, even poets, political activists, and they go on to form the first tranche of activists who are challenging colonial rule, who set up the first political party in Malawi, and who then are the major movers in the movement towards independence, which most of them actually live to see when it happens in 1964.

But that's the tradition of high intellectual ambition and high culture, the missionaries have introduced, which Banda is then responding to in his own idiosyncratic way with the Museum Academy in his classical project.

Rasheed: So, almost in every domain of humanities, theology, philosophy, literature, sociology, currently you always hear people, especially in the UK, say, "we have not yet reckoned with the past."

That's always a refrain used. Where, in fact, in all those domains, there have been people, their entire careers have been reckoning with the past, have been explaining why these things are true. Even, for example, in literature, you say, oh, post colonial literature is not very associated with the colonial times, and yet you have V.S Naipaul, his entire career was just one topic. And in terms of the church, you have missionary after decade, after century, and yet you say that in the church we have not yet properly reckoned with this story.

And that has always been a very strange lack of historical reasoning that honestly I didn't think was possible. I didn't think it'd be possible and I see the same thing in the Caribbean where you have, in my generation, almost no one thinks about a Caribbean that would still be a British Empire type system, although of course there literally are Caribbean countries that are still part of the UK, Cayman Islands, BVI. In the independent Caribbean, those things are not even discussed in an incredible way.

In the older generation, people around the age of 75, 80 or so, they always say how weird of a mistake it was that the Caribbean became as independent as it is now in the English Caribbean sense. And I find that's a weird generational slide. I don't see any, this is in my view, the pessimistic question. I don't see any counter movement, particularly in the UK, where you're trying to actually teach younger people what happened, what they should be grateful for, what they should be prideful of in terms of the civilizational project of their own society in the Caribbean, in Africa, in India.

I don't know if you have a view on how this is going to turn out or what is currently happening to counter it.

Alexander: I think I share your analysis, Rasheed. I wish I could say something optimistic about it, but I don't particularly feel that way. I particularly deplore this constant talk of needing to reckon with the past.

I agree that we need to reckon with the past, but that is precisely what we are failing to do. We are reckoning only with a highly selective version of the past and not its totality. And so I suppose I was hoping that my book might do something to correct that. I'm not saying that it's the whole story, of course, but it's an important part of the story that gets totally neglected.

There is, in all this, a sense that there isn't actually a desire to reckon with the past. There's no real desire to inform oneself about the history. It's really about asserting one's moral superiority over the past. Because, I suspect, we feel such a moral vacuum without that. Without the comfort that, yes, there are at least our ancestors that we can feel better than.

Yes, without that feeling, our lives are otherwise unworthy. And I think it's a place like Malawi that explains why that feeling can develop. Because when you see the extraordinary material inequality between one's own life and that of people in Malawi, and indeed most people in most parts of the world, it's, I think, natural to feel an extraordinary sense of guilt about that inequality.

But nobody actually wants to reduce their own material circumstances, and the only way to comfort yourself in a situation is to assert your superiority over something. And the thing that's easy to knock is your ancestors, and so you can have all the satisfactions of feeling morally self righteous, even though you live lives of extraordinary comfort and self indulgence.

Can you remind me of the heiress of a Caribbean slave plantation, who I think is a UK journalist, and she made a rather public display of giving something like a hundred thousand.

Rasheed: Yeah, I think a hundred thousand dollars thing, Grenada, I believe.

Alexander: Yeah, that episode struck me as the example of the phenomenon I'm trying to describe.

The guilt of inherited wealth and that need to castigate the wicked ancestors that you got it from, and also make a big exhibition of giving some of it away. But at the same time, you don't give away so much that you actually make any material difference to your own life.

Rasheed: When I discuss this topic, I always remember something that was said by Richard Ely, who was a pastor and also a founder of the American Economic Association back in the 1800s. And he said that, in his view, economics should be taught in theology schools, because that was the only mechanism humans have to create heaven on Earth, to solve the problem of evil. So in his view, similar to Livingston, commerce, Christianity, civilization, you need all three at the same time. And economics gives you the tools to actually approach society in a way to solve the real deprivation, health crisis, bad education, all those kind of things. And he had this kind of applied theology view of the world where that was the thing you do.

You go and toil in civilization to approach Christianity in a more clear light. And in very many ways, I think, we don't really think about that anymore. Ironically, it's almost too inward in some ways now. But, for my last question, I actually want to ask the first question again. Why did Dr. Banda keep that particular book in the chest?

Alexander: This is the priceless antique edition of possibly the quintessential work of Western history, Julius Caesar's Gallic Wars, and There is actually something importantly symbolic in his decision to install it at that palace. So a little background, the palace is about 30 miles or so from where Banda was born and grew up, and it's an iconic, copy style, Great Rift Valley mountaintop called Mount Kasungu.

And Banda specifically built his palace there because it was the site of a battle, and it was a battle in which his grandfather had actually participated during the intertribal wars of the mid 19th century. Banda's grandfather had taken him there as a boy to show him the site where, had it not been for a very unexpected victory on their side, he and his whole family might never have come to exist.

Banda is obsessed with this site and you have to remember that he has been out of his homeland for a very long time. He's left in his late teens in 1915. He doesn't return to Malawi until 1958. And so his life is entirely in the US, Britain, and a very brief spell in Ghana in between. And, of course, his parents have passed away in this time.

He never sees them again after he leaves. And when he comes back, he is desperately trying to reconnect with the culture that he's lost. He is trying to track down relatives. He's trying to extract memories from people. If there's the slightest place that he can recall that has an important association, he memorializes it.

Like the tree under which he receives his first lessons from missionaries, that's where he builds the school. His mother's village, he sets up a new model village with modern houses. A drinking well that he remembers drawing water from as a boy, he, yes, he memorializes. But he can't even find his parents' graves because everyone's forgotten.

And he's so frustrated at how the history just slips from your grasp. And yet this mountaintop, this battlefield site was something that he could definitely concretely remember because the hill is so unmistakable in the big, vast empty plains in which it's set. And I think for Banda, Julius Caesar, the classics, literacy, these were all symbols of the power of the written word, the power of written history to preserve your heritage and to connect you with not just the heritage of a couple of generations which has already been forgotten, but with thousands of years past.

And that really, I think, is why the classics is such a major source of obsession for him. It's because the curious thing about Banda is that for all of his obsession and some would argue fetishization of Western culture, he is also deeply attached to his own in perhaps the way that only an exile who's been severed from that culture can be.

And so when he comes back to Malawi, he's simultaneously trying to promote this high version of Western culture that he's absorbed from abroad, but he's also trying to celebrate what is local. He tries to foster a literary tradition that will revitalize ancient mythology, ancient myth. He tries to, himself is very learned for his anthropological studies on the history of the region, and he tries to impress that into the educational system.

He has rather eccentric views on the major Malawian language, Chichewa, which again he's determined to return to the pure form which he thinks he's the only custodian of before he leaves Malawi, this language which he thinks has otherwise been corrupted basically by foreigners who can't speak it properly in the intervening years.

It's very much the two cultures that he has his own very idiosyncratic version of synthesizing. But what's, I suppose, for me touching about it is that it's that high vision of Western culture which actually does prove compatible with what is local. And that far from being Eurocentric and exclusive, it actually, knowledge of that is what allows him, allows the missionaries who introduced it, to engage with indigenous cultures on a far better, far deeper level than actually most of us in the West manage to engage with other cultures today.

And I think at bottom, it's because for cultural exchange to work, both sides need to have something to give. And for, I think, Westerners can only ever, will only ever struggle to engage with other cultures so long as they have a defective attitude towards their own. And oddly enough, it was summed up by Banda himself who pronounced to his people, yes, learn Latin, learn Greek, yes, of course, but learn your own ways first.

Otherwise, you will be completely lost.

Rasheed: It sounds like what Naipaul viewed as the universal civilization. Dr. Banda wasn't trying to extradite Malawian culture. He was trying to bring it into the universal civilization anchored on Western classics.

Alexander: Absolutely, yeah. And it's really remarkable about, sorry, as a final thing to add to what I said before about the fruits of this engagement with Western culture is that from very early on, from that introduction by the missionaries of literacy, and then very quickly, literature and Western high culture upon it, there emerges a literary tradition of Malawi's own, which is absolutely astonishing in size for such a tiny country.

I mean, there's a catalogue of, poetry becomes something of a national pastime for educated Malawians. And, It's something that Banda himself briefly contributed to and then tries to foster with literary competitions. He tries to produce an anthology of celebrations of Malawian culture. Ironically, it's a tradition which then develops its own life force, as literary traditions are wont to do, and it becomes politically very intractable and highly critical of Banda's rule.

And one of the major sources of opposition to his regime is the famous Malawi Writers Group, of which Jack Mapanje is probably the best known outside Malawi because he eventually escaped from prison and was released from prison in Malawi to the UK where he lives now. And so it is one of the sort of bitter ironies that this tradition that Banda tried to foster ends up actually in opposition to him and he tries to suppress it.

But the bigger concern I think of most of the Malawi writers is one that did accord with Banda's original vision and did accord with the vision of the early missionaries who were themselves truly devoted to the study and celebration of local cultures, in the best cases, in a way that's so neglected today.

The Church Commission's report again, it spoke about how missionaries have denigrated local cultures. And that did happen, but it's not the whole story. You also get a very large number of very learned missionaries whose bias, when you read them, is not talking, writing about Malawian culture. Their bias is so obviously towards the local culture, not against it.

But of course, these are writers that get totally neglected today because they are inconvenient for the Malawian narrative. So the larger point I was to make there was this literary tradition, what it comes to really focus on is how to celebrate Malawian culture, a culture that they know is vanishing with the intrusion of modernity.

There's an inevitability to this, and they know that ancient ways are being forgotten, but that literature offers them this tool for revitalizing that tradition. And it's curious that it's something that's echoed elsewhere on the continent and most famously from Chinua Achebe, who talks about harnessing Western means for African ends and using literature to preserve and reinvigorate culture that's otherwise going to disappear from your grasp.

But actually it's there in the Malawian literary tradition even before Achebe, and it's very much something that emerges from that tradition of high ambition in the humanities, which the earliest missionaries to Malawi fostered.

Rasheed: Alexander, thank you so much for joining me on the podcast today. This has been a truly amazing conversation.

Alexander: Thank you so much for having me, Rasheed.