Somewhere/Anywhere Podcast.

Spanish Political Parties Series Part 4 of 8

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Every origin story worth telling has its incongruities, and the Spanish Socialist Party offers a particularly rich one. The first episode of this 3-part episode opens with a Bizet aria, a wall of Goya’s blackest paintings arriving at the Prado, and a founding manifesto proclaiming the war between two unequal and antagonistic classes. From these three artifacts the conversation reconstructs how a party born among Madrid café printers in 1879, with the husband of Karl Marx’s daughter Laura sitting at the table, grew over the following century into the organization that would claim to embody modern Spain itself.

It is, Diego and Rasheed, insist, a story that cannot be told without the deep history surrounding it. So before the socialists do much of anything, we pass through the long and turbulent nineteenth century that produced them, the dynastic civil wars fought in the name of a pretender called Carlos, the glorious revolution that toppled Isabella II, the brief farce of an imported Italian king, and the conservative settlement that Antonio Cánovas del Castillo engineered to end the chaos. That settlement, the Restoration, ran on turnismo, a gentleman’s agreement by which liberals and conservatives simply traded power between themselves, and the hosts cannot resist noting how closely the complaint resembles the charge of bipartidismo leveled at the two large parties today.

Into this closed system arrive the ideas that would tear at Spain for a hundred years. The episode traces the rivalry between Marx and Bakunin and explains why anarchism, not socialism, found the readier soil in a rural country with little industry and little appetite for capturing a state that most peasants experienced only as a tax collector and a recruiting sergeant. It follows the institutional brotherhood with the German social democrats that would, generations later, quietly finance the rise of Felipe González. And it lingers over the texture of the age, the tertulias and the sobremesa, the printers and the pamphlets, the bourgeois comfort of men who theorized the abolition of the bourgeoisie over wine.

The narrative then gathers pace through the catastrophes that made the party matter. The disaster of 1898 and the loss of Cuba, Puerto Rico and the Philippines gives way to the corrosive pessimism of the Generation of ‘98, the essayists whom the hosts accuse, not gently, of pouring intellectual gasoline on the fire. We move to the Tragic Week of 1909, whose brutal suppression broke Pablo Iglesias’s isolation and won the socialists their first seat in Congress through an alliance with the republicans, and then to the delegation sent to Lenin’s Moscow and met with the chilling question, freedom, what for. After a comfortable spell of collaboration with the dictatorship of Primo de Rivera comes the Republic, and with it the heart of the hosts’ argument.

Rasheed and Diego walk through the genuine reforms of 1931, the electoral rout of 1933, and the armed rising in Asturias in 1934 that they regard, alongside historians such as Stanley Payne, as the real beginning of the Civil War, a socialist insurrection put down by a general named Francisco Franco in what is, in this telling, his first decisive appearance. By 1936, with the Popular Front narrowly and contestably in power and José Calvo Sotelo murdered, the road runs only one way, and the party that had spent six decades fighting to reach paradise finds itself instead in exile in Toulouse, a charity case kept alive by foreign comrades while communists, reformists and students did the actual work of opposing Franco.

What holds the whole sweep together is an uncomfortable thesis, advanced without much restraint, that the socialists were for most of this period not the protagonists of Spanish history but one actor among several in a wider insurgency against the established order, and that on the rare occasions they laid hands on real power before 1975 the nation came apart. The fact that the words Popular Front are being whispered again in 2026, as a governing left weighs a single list to hold off the right, gives the history an edge that is anything but academic. This is the first of several parts, and it ends precisely where the party’s long thaw is about to begin.

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Spanish Political Parties Series, Part 3.

Full Transcript Below

The press has a word for Vox and the word is fascist, and once a word like that gets attached it does a great deal of work that actual thinking would otherwise have to do. Diego and I have spent enough time around the people who run this party to know that the word is unequivocally wrong. That is not an ideological defense of everything Vox stands for. It is a precondition for understanding.

The party begins, as most things in Spanish conservatism do, with a wound. Santiago Abascal grew up in the Basque Country when ETA was still killing people for the crime of belonging to a constitutional party, and his father was a local councilman who spent years under active threat of assassination. That formation does not produce a moderate temperament and it was never going to. What it produced was a politician for whom the Spanish nation is not an abstraction available for renegotiation but something his family had paid for in a fairly concrete way. When Catalonia held its illegal referendum in 2017 and the Partido Popular looked too cautious and too frightened to defend the constitutional order, Abascal had already spent a decade concluding that PP’s caution and fright were not accidental. Vox was the result. Everyone said it would go nowhere. Then Andalusia, a socialist stronghold for four decades, handed the right a majority in 2018 on the strength of Vox’s twelve seats, and the predictions have been running behind the facts ever since.

What we try to do in this episode is take the party’s ideas at the level of seriousness they actually operate at, which is higher than the coverage suggests. Jorge Buxadé, the party’s lead figure in Brussels, is a state lawyer and a law professor who has read every treaty he objects to and whose case against EU overreach turns on the subsidiarity doctrine rather than sentiment. The economics bench has included people who understand and practice international arbitration. The transatlantic network built through Foro Madrid and the Disenso foundation connects Madrid to the serious anti-socialist opposition across Latin America, like María Corina Machado and Milei and Kast, not as a vanity project but as the continuation of an Aznarista tradition the PP abandoned when it defunded FAES. On immigration, on the gender violence law, on the industrial consequences of the disastrous European “green” agenda, Vox tends to arrive at the position the PP eventually adopts, about two years early and without the embarrassment of pretending it was always what they believed.

Some criticisms are real though and we do not skip them. It is also, for now, a party organized around one man in a way that raises a question neither Diego nor I can answer cleanly, which is what Vox looks like once Abascal is no longer the face of it. Marine Le Pen was supposed to be the ceiling of her movement and Bardella proved otherwise, so the question is genuinely open. What is not open, or should not be, is whether the party deserves to be understood rather than simply categorized. That is what this episode is for.

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Rasheed: Diego, and we are back for another episode in our series on political parties in Spain.

Diego: Are you trying to get me to sing? If you’re trying to get me in a karaoke mood, that is a Julio Iglesias song. That’s what you need to do, Just put that on and I’ll sing. But I was almost weeping the last time we played a song here, so let’s leave music out for a while.

We’re gonna talk about Vox

Rasheed: Yes, we’re gonna talk about Vox. V-O-X. Latin for voice. Latin, not Spanish, which is also a curious touch we will get into, of course.

Diego: We are Mediterranean tribes, after all- ... and we were part of the Roman Empire, Hispania. And, today, I guess, will be a very patriotic topic because regardless of what they speak about, be it housing or economic policy; national priority is always very high on the list of things that Vox advocates.

And for our listeners, Vox is your alternative right party in Spain, your Trumpian right, your non-traditional, non-institutional political movement that has developed itself beyond what we could consider the legacy political traditions of the center right. And today, for reference, it sits in the regional government of different territories in Spain.

It is key to the governance of every single territory where PP, the Popular Party, does not have an absolute majority, which is many areas. And it also holds the key for governance in many municipalities where, again, if PP is not able to get an absolute majority, then Vox will enter coalition agreements, either joining the cabinet or at least supporting it from the local parliament.

But therefore, today’s center right spectrum cannot be understood without considering the smaller partner, which by the way, is not that small because it’s polling rather favorably at around 16% of the vote. Of course, PP will poll roughly twice that number. But in some demographics, for example, amongst young people, Vox is the more popular political movement in the country, and in some regional elections, it’s surpassed and even contested for second place with the Socialist Party. So we’re talking of a relevant political movement which did not have a single seat, a single representative at any political level, European elections, national elections, regional elections, local elections - until 2018, if I’m not mistaken.

But following a sweeping advance of the center right in an Andalusian regional election, Vox became a thing, and it stayed there, and it’s actually grown. So it is a big movement.

Rasheed: So there are a lot of myths and biases about Vox when it comes to international media. Of course, it is the alt-right, far right, deep right.

Diego: Yeah I wanted to keep it as alt-right because I do think the term is more or less justified.

Rasheed: Yeah, but alt-right has a technical terminology if you think about it as literally the alternative right-wing party. But also alt-right is the synonymous term for crazy, far-out racist bigots when it’s used in English.

Diego: Well I wasn’t going for that!

Rasheed: That’s how people use it so you have to be careful and just say, “Yeah, it’s an alt-right party.”

Diego: Well, I’ve been using that for a few episodes now. Glad you told me.

Rasheed: In general public conversation, at least in English, when that term comes up, that’s what people usually mean by that in English.

Diego: There’s so much to learn on this podcast, you know? Like when we use the word technocrat, which is a good thing to be, among elites in the Anglosphere, but here it’s kind of like, not really…

Rasheed: exactly.

Diego: Well-trained but lacking ideas anyway. So what I meant is a new political movement.

It’s not a legacy, center-right group. It definitely has nothing to do with the center. It’s clearly a conservative group. And yes, their partners at the international level are the Donald Trumps, the Marine Le Pens, the Javier Mileis... the Giorgia Melonis of the world. They sit on the Patriots group at the European Parliament, so obviously those are their companies.

Rasheed: But that was also a recent change we will get into.

Diego: But they ultimately, this is a spin-off off of PP, so it should be taken as such.- This is kind of the case with Alternative for Germany, a group of disgruntled people that were disenchanted with the CDU and its junior CSU partner from Bavaria. They just created this new movement, and 10, 15 years later they are a thing in German politics. It’s a similar story here with Vox.

Rasheed: Yeah, similar kind of dynamic, but we’re not saying that Vox is similar structurally to AFD because there are quite a lot of differences in terms of how they see each other. Even when you’re speaking to people from Vox, they always say, “the AFD is a bit too wild for us.” So we will get into why they actually don’t see themselves as a parallel party.

Diego: What we won’t do here is simplify things for the sake of simplifying. We’ll go deep and explain the roots of this party, what it stands for. Surely if you just want to eat the media propaganda, well then, these guys are just racist, homophobic, socialist, crazy far right.

In that case, turn off this podcast, move on to the next one. If you want to know what Vox really stands for, good and bad, because there’ll be criticism here on this episode, stay tuned.

Rasheed: So there are two ways we can start. One way, of course, is to discuss the why. What motivated the leaders to split from PP, especially after the 2017 crisis in Catalonia with the illegal referendum.

But I think it’ll be more useful to think about the leader of Vox and start from there. Santiago Abascal, motivates him? Why did he decide that he needed to leave PP to start Vox? That to me is a good start point.

Diego: So Santiago Abascal was born in the Basque Country. At the time ETA, a socialist separatist terrorist group was very active in the region and across Spain. It’s not active anymore, thank God.

It does have a political arm that is alive today called Bildu, which is a disgrace, and it’s part of the current coalition of alliances that the Spanish government has. But back when ETA was out in the open killing people, they took the lives of 1,000 Spaniards, roughly, and they drove hundreds of thousands of people out of the Basque Country with their continued pressure and boycotts and just violence and intimidation.

There’s films that depict this, some of them available on Netflix about policemen that had to infiltrate ETA and try to get information to destroy their operation. Abascal was born in that environment, and it was a hostile environment.

His dad was a local councilman at a very small town in the Basque Country, so nothing too fancy or big. But he didn’t shit from these assassins. And as a result there were dozens of attempts on his life by ETA, literally dozens. So Abascal was born in that environment, and I guess that shapes who you are forever, because these people are trying to kill your dad, and then they’re trying to kill you for your ideas.

And your ideas, in principle, are safeguarded by the Spanish Constitution, Spanish democracy and Spanish history. No one would dispute that the Basque Country has been an element of the Spanish kingdom for ages. But there you see how politics can affect your life in the most violent ways possible.

And when Abascal was attending university, he had a police escort, so he did not have a normal youth either. He served the Popular Party, which he was a member of from a very young age. Even underage, I think he was already in the youth movement. And it was at that point at which he made a jump to Madrid.

His life had been threatened several times even when he was a low-ranking politician from PP. Everyone knew who he was just because he was one of the heroes of Spanish democracy that were running for office in a place where you could literally get shot around the street for being with PP.

By the way, these guys shot the socialists too, but now apparently the socialists don’t have a problem striking coalition governments with the political heirs of this terrorist group. Not him, for sure. So he came to Madrid and he set up a foundation called Fundación DENAES (La Fundación DENAES, para la defensa de la Nación Española), which I guess is his first project here in Madrid that was done outside of the political party that he belonged to. and his father belonged to the popular party. And it was the foundation to defend the Spanish nation. That was its goal. So in principle, that is not my forte. I guess that’s not what I speak about or what I write about or I research about the most. I’m a unionist so I would never support the separation of Spain.

I could respect people that may have these ideas, but not me. Don’t count me to fragment Spain, which is a cultural historical reality that’s been around for hundreds of years just because some politicians advocate for it. So he set up this foundation, and he created a contest, an award for whoever wrote the best essay on a topic.

And I was nominated. I didn’t win, but I was nominated for one which was based on the 1812 Constitution of Spain, which remains a landmark document for Spanish constitutional history. Many would argue it is the best and most relevant political constitution since the American one.

Rasheed: And you can find it in Congress today, the actual Constitution, the original one alongside the desk that it was signed on. It’s still in Las Cortes Generales in Madrid near the doorway. So you can walk in and realize, “oh, we are here because of this.” And they chose the 1812 Constitution as that particular landmark in political history.

Diego: This is also a very classically liberal constitution.

Rasheed: Surprisingly so. Not surprisingly so for the time, surprisingly so in an objective sense. One of the core points, for example, in the Cádiz Constitution, or also called “La Pepa” in Spain, is the idea that even the people in Latin America should be considered to be Spanish citizens in the empire. This is very interesting when you think about how now, still, Latinos have very fast access to Spanish nationality, much faster than anyone else. They have a two-year period, where a non-Latino or non-person requires 10. That kind of element is still present in Spanish politics.

Diego: For sure, and we’ll speak about that in the context of Vox. As you could probably imagine, with the sort of movements that this party’s involved with, they do have a tough stance on immigration. But they do have a much softer touch when we’re talking about Hispanic immigration.

Now, that has become a bit less pronounced lately but it is also a good sign that this concept of Hispanic cultural, political heritage, historical legacy, is a part of its DNA. So I entered that contest, and that’s how I met Abascal. So I’ve known him for many years now.

And we have a very cordial relationship, and though we may or may not agree on some things, I respect him. So that’s why whenever PP frames them as far-right fascists or whatever, I just roll my eyes, because A -they’re not. B - they’re actually a spinoff of your party and C - they wouldn’t exist if your party had followed up on its political platform promises. Why are you buying the left’s narrative if ultimately you need these guys’ votes to govern? You’re diminishing your own political position by essentially saying these guys are fascists, but then a few days later you’ll take the votes and just remain in power.

Doesn’t that make you a fascist or guilty by association? But that’s how it all started, and I guess my relationship with him has been ongoing there. By the way, I also met Ortega Smith, who’s now been disgraced as their Madrid leader, back then. So many of the people that were involved with Vox have been there for a long time, but he is no longer around.

Rasheed: There are several nuances about Vox that will come up later in conversation. One is how they are framed as a far-right party which is not accurate. The other is how they make a distinction between Latino and non-Latino immigration, especially with regards to North African immigration. They even have these massive conferences and programs in Latin America for Madrid.

Diego: That’s a very important point you make because for the longest time that political, ideological bridge across the Atlantic was kept alive and protected by the FAES Foundation under Aznar. Most of the center-right leaders that you see today in Latin America, I met in person.

Not because I was extremely well-connected, because I was 20, 22 years of age. I was just a kid. But they all came to the FAES events here in Madrid. So María Corina Machado, the Nobel Peace prize winner, I interviewed her back in 2013. Guillermo Lasso, president of Ecuador, met him. Macri, president of Argentina, I’ve met him. Iván Duque, Juan Manuel Santos, Álvaro Uribe, presidents of Colombia, met them. That dialogue existed. But FAES became a much smaller think tank when they detached themselves from PP after Aznar sort of distanced himself from Rajoy who pulled the plug on party funding for FAES.

That left a vacuum that was filled once Vox came up the rankings with a program called Foro Madrid that is doing a fantastic job of keeping everyone that is to the right of the crazy left that is governing some countries in Latin America (and has destroyed many others) united and coordinated.

So the María Corina Machados of the world, the Javier Mileis of the world, like all of these folks, today are connected through Disenso’s work, and Disenso is the FAES of Vox, it is their think tank.

Rasheed: That’s right. I spoke at Foro Madrid last year in Asunción in Paraguay of all places. I flew to speak at their event. So we’re talking about Vox from personal experiences as well.

Diego: So you’re a far-right guy now. It makes you a fascist, man. Get out of my room!

But seriously, think about who’s sitting next to you. It’s just really respectable people, future presidents of many countries, current MPs from many countries. Fernando Nistal, a friend of ours who is the head of the think tank of one of the largest, if not the largest, private university in Spain. Don’t fall for the “far-right” label. These events are more respectable, moderate, and institutional than much of the Republican Party stuff these days in the USA.

Rasheed: The president of Paraguay opened the conference.

Diego: Completely normal and mainstream.

Rasheed: Mainstream indeed.

Diego: You do have to tell us about how you got into Paraguay at some point, because I know there’s quite the story there. Some strings were pulled there to get you there due to a visa situation.

Rasheed: I can talk about it now and it’s a hilarious story.

Diego: Go ahead.

Rasheed: So I have a Barbadian passport And usually I don’t need a visa to go anywhere, especially in Latin America. So I thought, well, it’s Paraguay, it’s a small country.

Clearly I won’t have to get a visa. So I had my tickets booked and everything. And then when I went to check into my flight the day before, 24 hours before the flight opened, and I’m asked for my visa number. I was like, “Oh, that must be a mistake. Of course, I don’t need a visa for Paraguay. Of all places, Paraguay.” And then I checked and there it was. I needed a visa.

Diego: I can see you looking confused and just saying to yourself “But why?”

Rasheed: That was my exact response. I had to double check and there it was on the immigration website for Paraguay: Barbadian citizens need a visa. Not a digital one either, I needed to go to an embassy and get a bona fide physical document.

Diego: Due to hordes of Barbadians trying to attack Paraguay all at once.

Rasheed: I’m sure there’s no reason at all for this.

Diego: Diplomatic laziness.

Rasheed: Yeah, exactly. That’s all it is. No one goes to Paraguay! But this is a real thing.

Diego: There are all those digital nomads these days that consider Paraguay. But the consensus seems to be, and sorry to any Paraguayans listening, that it’s a bit boring.

Rasheed: It’s very boring. I won’t mince words with that. Oh. It’s a nice lower tax jurisdiction. But my God, it’s very boring. Also Americans have a faster visa process. But for me I would need to do it the old fashion way, in person at an embassy

And that’s just not possible at this point. So I called someone from Vox, who does the organization of the conference in Asuncion, who’s already there, and I told him my predicament. Granted, completely my fault, I understand that, but I have to be there tomorrow. And he went to the mayor of Asunción, who called the Minister of Foreign Affairs, who called the minister of something else, who then called the president of Paraguay, and then it chained all the way back down where they gave me a special invitation letter from the state council.

Diego: And here you are calling them boring. You should be an ambassador to Paraguay!

Rasheed: Hey I’m going back. I am going back soon, next year, to be clear.

So the government sent a letter to the embassy in Madrid, and the embassy in Madrid sent a letter to the airline so that I could get a special visa waiver to access the country in less than 24 hours.

When I arrived at the airport I told the check-in agent, “This might sound crazy, but I don’t need a visa. There should be a letter here for me from the government of Paraguay.” And she goes., “What?” And then she called her manager, and then the manager said, “Oh, you’re Rasheed. Yes, we have a letter from the embassy, a strange order to let you board the plane.”

Diego: You’re the most famous guy in the airport.

Rasheed: Come on. It was truly ridiculous. That,

Diego: That’s superstar treatment, to be honest. Just like that funny story about Ronaldinho, the very famous football player. He entered without a visa and ended up in jail.

Rasheed: In Paraguay?

Diego: Yeah. He was in jail for a few hours. A few phone calls were made and everyone was like “Come on, that’s Ronaldinho, he’s just here to play a game.” And apparently while he was waiting, he was just playing football with the inmates.

Rasheed: Oh, my goodness. When I finally made it to the conference I met the mayor who signed the letter for me and personally thanked hom for intervening.

Diego: I hope your talk was good.

Rasheed: A+ to Paraguay for effort. I’m definitely gonna go back at least once a year. That was fantastic.

Diego: An amazing story that just goes to show the Vox connections across the Hispanic World. Their reach across Latin America is substantial and quite serious. And PP has recently recruited a diplomat who specializes in Latin American affairs to be the head of council for Feijóo’s foreign affairs strategy. And he’s recruited part of the FAES staff because obviously they realize that, well, if you’re not sitting on the table, someone else will take that seat, and Vox has done that very well. And that all stems from a vision of Spain and a romantic view of Spain’s history. It’s like a way to evoke the Spanish Empire.

So if that was worth something to you as a Spaniard, you surely don’t look at Latin American relations with indifference. These guys may be nationalists in many ways, or patriots like they call themselves, but it is not as if they advocate for pulling out of the EU.

They are Euro critical, not Euro skeptic. I wouldn’t label them as that.

Rasheed: The term Euro skeptic to me… What does it mean? I think it’s lazy. I prefer the term “Euro optimist”. In the sense that I, meaning someone from Vox, believe there are so many problems with the European Union but they can be fixed, and they can be improved. That’s why it’s an optimistic story. It’s not a skeptical story.

Diego: They are there. They engage. They get reforms done. We had our podcast about the EU, and I’ve argued then and I will continue to do so whenever I get asked about this: most of the current issues of the EU come from the obsession that the European PP has had with always doing things hand-in-hand with the European Socialist Party.

Rasheed: Correct.

Diego: Now, there was a time for bipartisanship at the beginning of the European project. For God’s sake, Europe killed itself. So the more broader agreements you can get to lay out the foundations, that’s valid. But we’re in 21st century politics. Maybe there’s too much polarization, but the idea of just forcing something that is unnatural, for PP and the Socialist Party in Spain to be fighting all the time yet be the best of friends in Brussels is ridiculous.

Rasheed: And they always pointing it out all the

Diego: And Vox is right. PP has had double-speech on many of these issues because then they’ll go to Brussels, and they’ll allow deals to go through with the support of the socialists.

That’s how the overall view of things was being shaped before the party existed. Then there were some trigger events.

Rasheed: Yeah, but we should say before we leave this point that even one of the main people in Vox that does a lot of the foreign policy, Jorge Martín Frías, is also a former PP person as well.

Diego: I consider him a friend. And I don’t use that word lightly, but I like Jorge a lot, and he’s a nice guy. And he’s an MEP who had been a member of FAES. He had been an advisor to one of the key members of PP in the municipality of Madrid. And he had also launched a think tank, which instead was sort of inside PP in a way called, Floridablanca, where he did great work alongside another current MEP who is linked with PP, Isabel Benjumea. And so Jorge is part of that movement. There are others like Ortega Lara, for example.

He’s a very symbolic member of Vox because he was kidnapped by ETA, the terrorist group, and held in a two-by-two room, if you can even consider it that.

Rasheed: A cell.

Diego: Yes, a cell, with no light and barely any food. He didn’t see light for literally a year and a half to two years. And one of those vivid memories I still have from my childhood in relation to political stuff is when Ortega Lara was released.

I didn’t know who he was or why this mattered. I just remember this guy that looked like someone right out of a survival movie where he’d been on a desert island. He was decrepit, looked absolutely awful, and I just remember his eyes being absolutely lost. So that was a big deal, a huge deal. So no Spaniard that lived through those moments forgets them, and I was just a kid. No one forgets when Miguel Ángel Blanco was killed. He was the leader of PP in San Sebastián, a beautiful city in the north of Spain, in the Basque Country. Great food, great wine, whatever.

But he was the leader of PP. He was going to become the mayor. That would’ve been a turning point for local politics there. And he was shot in his head in a restaurant in the center of the city. I get goosebumps and my hair rises because this is a really serious part of Spanish modern political history. Ortega Lara, the guy that was kidnapped, was a member of Vox. I think he’s member number one officially. So when PP was too weak to defend Spanish unity with the Catalan referendum, people like Abascal a decided to launch their own platform, which from the get-go was called Vox, and still today it’s called Vox. That’s how it was born.

It’s going to be 10 years now, roughly speaking. I think the first time they stood for an election was the 2015 European election.

Rasheed: Correct, and they won nothing.

Diego: They almost won a seat. I say almost because European elections do have a more favorable electoral system since there’s no territorial division of seats.

They’re all allotted nationally. So recently, that party that we’ve mentioned, sometimes called Party’s Over (Se Acabó La Fiesta), got free seats because the electoral system does allow smaller parties to get a little boost on the European elections. But they fell a bit short, and then it looked like it was going nowhere.

And I remember seeing Abascal walk into a room full of people that liked him personally, respected him and then they all shook his hand, and then he left. And I remember all these people sort of elbowing themselves and saying “Yeah, poor guy. He’s going nowhere. He’s done.”

So people thought he was done but he wasn’t. Some people heard of Vox, they didn’t get a seat. Then two years go by, almost three years go by, and boom, there’s a sudden shift that no one saw coming in Andalusian politics. Andalusia being the largest region in terms of population with nine million inhabitants, also in terms of territorial size.

It’s essentially the southern area of Spain run by the crazy and corrupt socialists for 40-plus years. Suddenly, PP alongside Ciudadanos, this centrist party which came up and disappeared in a matter of years, and Vox are able to form a majority. And since then, Vox has been a relevant force in Spanish politics.

Rasheed: It is very surprising that Vox was able to break through in Andalusia of all places. Historically, a socialist stronghold, Andalusia would give Vox 12 seats in 2018

Diego: So if you look at it through the lens of the electoral history of Andalusia, you would have never guessed that Vox would be the key for that region to swing right. You would have guessed that PP at some point could win because of the strong local power they had in the largest cities, Sevilla, Malaga, Cordova, Granada and Cadiz, all very beautiful cities by the way.

But then in the rural areas, they did very poorly. But at the same time, if Vox is a party that is not so much about urban elites, cosmopolitan discourse on politics, globalist, like they call discourse, but rather bottom-up movement sick with top-down policies enacted by bureaucrats that do not take the regular guy into the equation, which all sounds very Trumpian, then it doesn’t become so awkward, right?

Because Trump did win on traditionally Democrat strongholds. When you look at it from that filter, then the Vox success in Andalusia doesn’t seem so awkward. I remember having this talk with my wife and telling her, “When Andalusia swings right, it will stay right forever”, because it doesn’t make sense in what is essentially a socially conservative area with a large rural population as well, plus very corrupt socialist leadership. And I stress the term corrupt in the case of Andalusia. When they are able to overcome the legacy factor that our grandparents voted for the socialists, our parents voted for the socialists, so we’re voting for the socialists, then there’s no going back. So you could argue the Trump coalition has changed some territorial dynamics for the Republicans, mostly for the good because the party now has wider support in some areas. Also for the bad because it’s now become un-votable in some other territories.

But as a net they can contest in areas where the Democrats would traditionally be the only ones talking to regular folks, like the hardworking, working-class heroes. So Vox connected in Andalusia because of that.

Rasheed: And from there, obviously Vox had a very big boom in 2019 nationally also.

But then 2023, they went down a bit in terms of their electoral trajectory. And again, people thought, “Okay, Vox has peaked. The ceiling has been reached. It’s just kinda down from here. They’re gonna disappear like Ciudadanos. PP will again be the singular coherent force in the right or center-right movement.”

But that didn’t happen. Vox is now even stronger than it ever was.

Diego: Yes, and in our PP episode, I kind of argued that if PP in the ‘80s had a ceiling. Certainly Vox in the 2020s has a floor, I would argue roughly 10% of the electorate. These guys are sticking with Vox for a while.

I can’t say in 20, 30 years from now. I can’t predict that, but at their worst, they’ve always polled above 10%.

And that shows you that there’s a lot of disgruntled voters who do not trust PP anymore. And I don’t think they buy everything that Vox stands for, but they don’t trust PP because of the Rajoy years.

And still today with Feijóó it’s just not enough for them. So that loyalty that Vox has created around has stuck. And as we’ll see, there’s been platform changes and adjustments. Some relevant faces have been run out of the party, and they’ve been kind of ruthless managing internal dissent, to be honest. But the fact is that they remain and they’re actually growing and more relevant today than before. So they’ve clearly not followed the same path as Ciudadanos, which was the other center-right group that crept up in 2018, because they faced the separatists very well in Catalonia, so they became a centrist force that people supported in the 2019 election. They went down the toilet just two years later, and they don’t have a single seat anywhere anymore.

But Vox is here to stay for at least for a long time, 100%.

Rasheed: I want to dial into their ideology, because that is the part that people are most confused about or also most ignorant about. Let’s ease into that. We talked about the fact that within PP there are these factions of ideology in PP from the beginning.

That’s how it’s always been. You don’t think of Vox as having factions, but they do, or at least they used to, it depends on how you frame it. And one person that really signifies or symbolizes the more European liberal, freer market business is Iván Espinosa de los Monteros.

Diego: Yes.

Rasheed: He’s a founding member of the party. He was essentially kicked out of the party a year and a half ago.

Diego: So was his wife, who was the leader of Vox in the Madrid region. She performed very well to be honest, because she was running against Ayuso. So she was able to get a very decent number of votes considering she was running against the superstar of center-right politics.

Iván Espinosa is the son of a businessman who at some point had relevant posts in different companies, like an airline or like Inditex, which is the owner of Zara, the fashion brand. And Iván speaks perfect English and French.

You get a marketing team to think of potential candidates that people would love, at least in our realm, he would be that candidate.

Rasheed: Not only WOULD people love, people DO love. This is the tricky part here, because Iván is extremely popular in quote, “our circle of people.”

Even now when he gives talks and so on, the room fills up. It gets a crowd. People, people really are drawn in by Iván. He’s like the star when it comes to Vox in terms of the urban elite.

Diego: Everyone around Abascal was not seen as someone that had a profile that could in a way shadow him. But the party’s development was originally very strong, very positive, but then there was a pivot. Between 2021 and 2023, once the growth trajectory was over and Vox had seemingly peaked and actually started to go down in the polls, they clearly decided to pivot away from becoming a reformed, improved, right-wing version of PP.

“Fresh with no filter. We’ll say and do what PP voters really would like PP to do. You can trust us and you can’t trust them anymore.” And they would talk a lot about economic freedom. That was on the agenda. It was explicitly out there, flat tax proposals etc. But they realized, “our voter base knows we stand for lower taxes and less regulation, but our growth trajectory is going to be determined essentially by the migration debate.”

So they decided to refocus more on the working class areas. They saw how their performance was actually better there. They were getting huge crowds at their rallies. Equivalent to Trump, only that, of course, Trump eventually made it to the presidency. They’ve never won an election per se.

They’re the juniors. They’ve always been the secondary force of the right. It looks like a movement sometimes, not just a party, but a movement, because there are a lot of excited young people showing up at rallies that fill squares of middle cities, the inner cities, and importantly medium-size towns.

Rasheed: But importantly, they’re getting young people deep in Madrid, Montero and the like.

Diego: Yes.

Rasheed: They’re both of them now.

Diego: It’s interesting because it has not eroded PP’s support much but it has eroded the left’s support a lot. So it does seem like they are able to get votes away from the far-left into their voter base.

Rasheed: Which is a very interesting example of the horseshoe theory. I don’t know the term you have in Spain where at some point the far left and the far right eventually meet and become the same thing.

But the problem is they don’t actually say anything similar to what the far left says. So that’s why in this example, I don’t think it’s actually a horseshoe.

Diego: Yes. There’s no ‘eating the rich’ dynamics here. Perhaps the similarity could be anti-free trade, but that is a caricaturization because at the European institutions, they’re not anti-free trade, but rather they want reforms on the free trade, or no more free trade agreements for a while.

Rasheed: They’re very pro-deregulation of most sectors.

Diego: So what is it that resonates with these voters? Well, first of all there is a clash. Although Spain’s been one of the most successful countries in integrating massive migration quickly, some elements of migration have been received more negatively in working-class areas and we’re mostly focusing on the Muslim population living in Spain.

There is a clash there, and only Vox will speak about maybe banning the use of the burka or not letting certain practices be allowed in Spain.

Rasheed: Which is a very popular position of the common person in Spain.

Diego: And so Vox will say these things. And whereas the left in Spain, whether moderate, if there is such a- there no such a thing as a moderate left in Spain these days.

But the socialist and the communist in Spain, they have these “woke” obsessions, and they’ll speak about identity politics all the time. To a regular guy who needs housing and he needs the streets to be clean and safe, perhaps a bit more opportunity and less bad governance,, these guys sound like they could save their neighborhood.

So these guys go on tour around the neighborhoods, and people shake their hands and people are excited when they show up in town. It’s like the circus came to town. It’s like, “Hey, you’re the only ones fighting for us.” Or “You’re the only guys that can save us.”

People in the countryside think this as well. They react very positively to them. And that is why they are gaining ground. So by definition they have eroded PP because if Vox did not exist, one could argue 90% of their votes would be baked into the PP’s polling intentions. But that’s on PP, they lost the votes.

Diego: And recouping them is harder for PP because now these guys can actually go and get votes of younger people that are fed up with socialist government, socialist policies, socialist decay and socialist corruption. Likely they do not feel that PP speaks to them, and they resonate more with Vox.

But sometimes I also challenge them not to become too cartoonish. I’ve even texted some of them about their comments, “Hey couldn’t you say what you just said without swearing?”

You can see how the party becomes a competition internally of who is going to become more relatable to the regular guy.

Who can be Trumpier than Trump?

Abascal is growing a beard and running a motorcycle and going to a bullfight. This doesn’t mean every single guy in Vox needs to behave like that. But they do have this herd behavior to them.

Rasheed: Which is funny because Trump doesn’t actually try to be normal.

He very much likes being a rich guy that does normal things for the media that makes it really clear this is a thing he’s doing for the media.

Diego: Yeah but the point is the truck driver in Michigan loves him.

So these guys are not billionaires, of course. By the way, they’re the best dressed MPs in Congress, male or female.

Rasheed: Especially Ignacio Garriga, who we will get to at some point.

Diego: And then there’s women like Pepa Millan, who is very elegant. But what I mean is that they have well-dressed guys in Congress where today wearing a tie is almost a revolutionary act for some on the left. But on the streets they sometimes dress down so they seem more relatable to folks out there. They’ve connected with young voters this way.

Rasheed: And on the point of whether they overlap with PP or not, we can have a bit of analysis.

We did analysis on the overlap of agreement and disagreement between the last two electoral programs of Vox and PP.

This is from the 2023 election. And very clearly the agreement is very strong on tax cuts, reindustrialization, anti-ocupación and those kinds of topics.

Diego: Tone is very relevant. Because we ran this as an AI analysis. It’s fantastic.

And the tone for PPis described as it really is, which is reformist, managerial, I would argue technocratic, that last word does not have the same connotation in English. So reformist, managerial, institutional andI argue a bit bland and boring at times. Vox sounds combative, sovereigntist, civilizationalist and maybe nationalistic and populist.

Diego: So coming from this, like you say, there’s many areas where there’s strong overlap. Strong overlap, and those other areas where there is much less of an overlap, and I think it makes sense to even go one by one.

Anti-squatters. I know some of our listeners may not understand that this is an issue. But it’s an issue in Spain. People break into your home and then you can’t kick them out. Some people have to hire goons to kick them out of their home.

Rasheed: Goons, like chavs.

Diego: Yeah, the chavs can be hired to show up and just kick them out, because if you go through the legal process, you stand to lose thousands of euros. So it’s easier to just pay the goons directly or wait for two years to get them legally out of your house.

My parents are dealing with this right now in their secondary residence. And I told them, “Go pay the goons.” And they were like, “But that’s not fully legal.” And I go, “Yeah, who cares?” Currently they’re still dealing with it.

It’s been more than two years and I’m like, “Well, told you so.”

Could be chilling at your other home. You paid for it. You work hard. God knows my dad has. He started working when he was 12, built that little home for himself and can’t enjoy it. Why? ‘Cause he didn’t call the goons.

So they both are anti-squatters, pro judicial independence, anti-corruption.

But as we’re recording this, the socialist prime minister between 2004 and 2011, Rodriguez Zapatero, the axis of evil, the worst of the worst, even worse than Sanchez, has been formally charged with very serious criminal charges.

Sanchez is the political son of Zapatero, right? So when we talked about socialist corruption, we did a flash episode on it, there’s just so much of it.

So anti-corruption, pro-judicial independence, pro-family, pro-natality. Do they have a real solution for that? They just throw money at the problem, it won’t fix it. But in principle, they both stand for educational choice and are staunchly anti-terrorist, so in those areas they are fully in agreement.

Diego: So if they have to meet and be real to each other and stop the political calculation and the zero sum of, me winning you and taking votives away from you., These are areas where you need to get an agreement done in two minutes.

Rasheed: So the problem is where they have sharp divergence. Immigration, of course, is the biggest one.

Diego: Yes.

Rasheed: And the immigration divergence is hilarious in some ways because the general Spanish population agrees with Vox when it comes to immigration. And PP, and of course PSOE, Sumar and the left-wing cabal, are against the population when it comes to immigration.

So Vox isn’t in some stark differentiation, some extremely post. They’re saying, “Hey, let me just give what the normal person on the street wants when it comes to immigration.” But PP is saying, “No, we have this grander view of immigration,” and they’re actually not sticking to what people want them to stick to.

Vox’s immigration policy is not some extreme position, I have to make that very clear.

Diego: It’s a law and order position.

Rasheed: Law and order, but also it’s more about cultural integration. It’s anti-multiculturalism. Yes. It’s pro-Catholic conservative,

Diego: And it should be noted that Spain has taken in more than 3 million immigrants in the matter of four or five years. We’re a 50 million-people country, and most of these 3 million people are located in a series of areas. They just don’t go to an empty lot of land. So it does make sense that migration would become a topic.

And I would argue that Spain is a fairly tolerant and open society.

Rasheed: Very open, very tolerant. I would go further than you on that.

Diego: I just don’t want to push it because these days when I see how large of a concern migration is second-guess how open, how tolerant. But on the net, I mean, you’re the immigrant here in the room, right?

So you can attest that, in principle, most Spaniards are welcome to letting people in through an orderly process and letting them do their thing.

Rasheed: It’s a fact of life that when you walk around the streets in Madrid, it is not native-born Spanish people on the street begging for money.

It’s a fact of life.

Diego: Yes, yes.

Rasheed: It’s not some joke.

Diego: Yeah, exactly. So I would argue that we made this analysis based on the 2023 electoral referendum. And I would argue that PP has shifted widely in the last six months on this topic. So does this give them credibility? Not necessarily, because now when they are striking regional government agreements, Vox is always branching out with their key clause: everything we do together needs to respond to the priority of Spanish nationals, so we call this national priority.

Rasheed: To this day I cannot understand why this is controversial.

Diego: PP stutters when it hears this because the left-wing media is saying, “Oh, look, there’s the fascist, there’s the racist bit, and the PP is about to buy it. Look at them buy it right from the racists.”

Rasheed: But it’s nonsensical.

Diego: Exactly.

Diego: PP overreacts when they hear national priority.

Rasheed: But this is why I think people don’t trust PP.

Diego: I agree.

Rasheed: “Oh, well, it should be that the tax money that Spanish people pay for public housing should prioritize Spanish citizens.”

That is the big controversy that makes PP go, “Hold on, I’m not sure about that.”

Diego: No PP voters are against that.

Rasheed: Exactly.

Diego: They made this big shift six months ago, roughly, when they realized that immigration was becoming a big problem and Spaniards were becoming more and more concerned with this.

Rasheed: And, and the fact that it took them this long…

Diego: That speaks volumes. And it harkens back to when I say that Vox may have a ceiling, but they definitely have a floor and I refer to at least that 10%. People have taken notice that shifting the PP machinery takes a lot, and committing PP hardcore real reforms and turnarounds in certain areas of policy has become way more difficult than in the Aznar years or than in the region of Madrid, where Aguirre or Ayuso first have no problem doing radical, good policy. But for PP, they’ve even made this turn against disorder in the migration policy and so on. But then when Vox asks them to put their money where their mouth is and broker an agreement in a region, and they use that national priority clause that needs to be a common thread in everything that the regional governments do, they get labeled as racist by the left wing. And then there goes PP sort of wavering, tippy-toeing around them, saying, “No, sorry not national priority.”

Then ultimately they take their votes and they do enact some of their suggestions. For example, if you pay 50% of your salary in taxes, like the de facto every worker in Spain does (when you factor in direct and indirect taxes and social security), you will want to receive access to healthcare prior to those who may have come illegally or may have come recently and who would at least be expected to contribute.

And the idea that nationals would just be net contributors and foreigners would become net recipients, that is obviously going to not go very well with workers, especially if you have a socialist government which has led to the stagnation of wages in Spain.

In real terms there’s been a decline in wages. You have 3% less pay today than before this government came when you compare equivalent full-time jobs. 3% less money than in 2018. That is a massive decline. We’ve run the numbers at the Instituto Juan de Mariana.

There’s no other country in Europe with numbers like this. They’re horrible. The only people doing well are pensioners, but workers are getting killed by the taxes that fund these ever-growing pensions. And I know this is a topic in other European countries, but at least their salaries are growing less than pensions and pensions will go into a deficit in the future. No, no. Pensions here are in deep deficit now, not 10 years from now or 20. No, they’re in a deep deficit right now. They’ve been in the hole for 15 years, and salaries are decreasing as pensions are increasing. So it gets to a point where young people turn against the system.

They turn to Vox. And with the migration thing and the national priority bit, PP’s is again falling.

Rasheed: It also feels like PP only made this recent pivot because of the recent regularization.

Diego: Let’s be honest here. They did it in the fall of 2025.

Rasheed: I feel it was tentative.

Diego: I think the trigger for them is that suddenly immigration became the biggest concern of Spaniards, along with housing. And there was a big jump after last summer. So coming into the new “season” of politics in the fall when you kind of reshape what you’re going to be talking about, they did reposition themselves.

But surely now Sanchez has called for a broad illegal amnesty for illegal immigrants with no control, no guarantees.

Rasheed: But given the number of people that potentially can regularize after being in Spain illegally for…

Diego: Maybe for months...

Rasheed: So what? Five months?

Diego: And all you need to do is show you have a phone line, no documentation at all

Rasheed: Nothing. No criminal record. Nothing at all.

Diego: I was in a car driving on the southern skirts of Madrid, and I was listening to a district level radio station, and they were playing ads saying, “Are you illegal? Do you need some help with your papers? Come and we’ll fix them for you. You’ll be legal in three months.”

Rasheed: I’ve seen billboards with the same message.

Diego: Well, I can see how that could upset some people.

Rasheed: I’ve seen ads online.

Diego: There’s lines for healthcare services, lines for education.

Rasheed: People say “But Rasheed, you’re an immigrant yadda yadda”. I feel like legal immigrants also are almost more upset than citizens.

Diego: And that’s a very US thing.

Rasheed: Yeah, also true. Because I’m trying to do things in the bureaucracy, and I can’t do shit because it’s completely clogged up by all the illegal immigrants trying to regularize. And I’m paying so much money for this.

Diego: They’re getting the same kingly treatment you got in Paraguay!

Rasheed: So because that happened, I should point out that when Sanchez and Sumar, that cabal, made the regularization plan, which was done by decree, not by a parliamentary ruling, there was a rally. Irene Montero, did a rally where she was saying, “Yes, we need these new people to come to Spain to get the fascists out of the numbers.”

Elon Musk has tweeted about this. The Spanish left-wing is openly saying “We’re losing the next election, but if we give paper to illegals, they’ll be grateful to us and vote for us in the next election.”

Rasheed: It’s a literal replacement theory of the conspiracy far-right being acted out before us with video cameras.

Diego: We have a common friend, Juan Navarrete. He’s the vice director of Juan De Mariana, and we love him. He would tell you “So much for things being conspiracies because sometimes many of them get proven right.” So this big replacement theory sounds outrageous, but I’m watching and following it with my own eyes.

Rasheed: The minister foreign minister and current MEP in European Parliament said, “Hey, we want to replace -”

Diego: And the minister, and her number two. And they’re openly saying that they want to replace locals to get a better result in the election and swing votes back to the left.

Rasheed: It’s completely crazy. Insane, actually. But again this is the current dynamic that we now have in the immigration debates. So it’s not just simply some illegal people coming in. It’s a much more dramatically wide tapestry of conversation now.

And I still think Vox is the only party, maybe ironically even, that has a sane position on immigration. Ayuso in Madrid has a bit more rationality than PP generally on the topic. But at least now PP nationally is coming a bit closer to common sense, I would say.

But Vox was there before, and Vox is still further into the consensus on immigration, than PP.

Diego: I was just cracking up internally when you said common sense. I recall when they (PP politicians) were coming up the ranks, they would be challenged to define themselves politically and were asked, “Are you extreme right?”

And they would always, all of them choreographed, answer, “No, we’re extremely necessary.” They would say that like parrots. Immigration, that is the hot button issue. Whatever we name now is a non-issue in Spanish politics compared to immigration, housing and corruption.

Rasheed: That’s true. But to be clear, immigration is a latent issue in healthcare, in housing, and in education and security.

Diego: Exactly. Spain is one of the safest countries in Europe, but crime rates have increased, and the data would show that roughly 50% of serious crimes are committed by immigrants. So it is a reasonable call to deport illegal or legal aliens that are committing serious crimes.

Rasheed: I would say immigration also underlines another social topic that comes up with the ideology question, which is LGBT issues.. I hate that term, by the way. I don’t like to say that. The term I use is gay rights.

Diego: They just keep adding more letters.

Rasheed: Yes, it’s nonsense. LGBTQIAWHWPQ X, Y, and Z. Who cares? I prefer to say gay rights, but I get into trouble.

In any case, you’re seeing now this shift because of immigration, but especially Muslim immigration to Spain, of many more young gay people shifting to the right.

Because they’re like, “I cannot walk around Barcelona and be harassed for being gay!”

Diego: Well, you know what’s wild to me? This is gonna get me in trouble, but young women in Spain predominantly still are the only socio-demographic group that has not clearly made the right-wing shift.

In other countries, I know there is a gender divide, not necessarily the case in Spain. There is such a thing as a gender divide in that men vote for the right more than women, and women vote for the left more than men in Spain, roughly.

But on comparable terms because in relative terms, because in reality, there’s more right-wing people in Spain, period. But this is fascinating when you consider the broader topic of immigration and especially the dynamics of Muslim migration in some areas where there is a notorious significant rise in sex crimes, offenses, and other violent crimes. This is correlated with migration from three, four countries, predominantly Morocco, but not limited to Morocco. There are four countries that represent a minority of migration but an overwhelming majority of crime.

Data has been shared by the police forces at last. This is the first time it’s been talked about and organized by country of origin.

I know Vox is working on a report about this topic and it will probably come out soon. And from what I’ve heard the numbers are very serious. In the city of Barcelona, 70% of sexual crimes and close to 90% of violent crime around the street and 85% of petty crime is done by foreigners.

Diego: And when you narrow it down, because there’s, like, millions of foreigners in Spain, the fact is that these are a minority and it’s essentially Moroccans and foreigners from the other countries mentioned... The first people who should rally against these minorities are Moroccans themselves.

Because they are going to scapegoat them as a group that’s going to be dealing with the bad actions of bad actors within their group. But the local official communities of Moroccans in Spain denounce racism against them whenever they do these numbers are thrown out.

And it’s not just Moroccans, but it’s predominantly Moroccan crime. It’s what the numbers say. This censor report from the Vox think tank is based on official data. So there will be no debunking that, and that is going to be a conversation changer.

And I know it’s coming out soon because I’m a journalist and they tease when they’re close to publishing things. But when it drops, I’m telling you, it will be straight from Abascal’s mouth, and when he shares these numbers you won’t be able to dispute them because there are numbers directly from the police.

We had our conversation about the media in Spain. There’s an episode we’ve recorded as well about the media landscape on how to understand it. And I singled out the objective as very good investigative reporting. And they were able to access one-day records of detainees.

You’re innocent in legal terms. You’re just detained. It doesn’t mean you’ve committed a crime. But on a regular day, three-quarters were immigrants.

Sure there could be police bias against immigrants and a self-reinforcing cycle as well because if more illegals commit these sorts of crimes, then you’re also more likely to arrest an immigrant and then some innocent people get detained and they shouldn’t. So do not take that word as an absolute. But the size of foreign-born population is 15%, roughly speaking, so if it was homogeneous, we’d be talking percentages around 10, 20%, and we’re talking 60, 50, 70, 80. So that’s very serious.

Rasheed: But as I said, even without thinking about, quote-unquote, “crime” per se, there’s the people on the street begging for money, people sleeping on the street.

These are all foreign people. They’re not Spanish. And even if it was just that, that alone leaves a toll on you when it comes to thinking about the drain they have on society.

Diego: And of course, like, it’d be such a shame to lose our in integration model. Spaniards em- Spaniards migrated because Spain was a poor country for most of the 20th century, to be honest. I’m Gallego of Galician descent, as I’ve mentioned dozens of times on the show. Spaniards in Argentina are sometimes labeled Gallegos because there were so many of them. So Gallego is actually a synonym for Spaniard in Argentina.

By not tackling this head-on as Vox is advocating, Spain may actually find itself in a position it shouldn’t be. Because, for example, take Venezuelans. There’s literally hundreds of thousands of them that have come into Spain. Their labor participation rate is crazy. It’s almost 90%.

You don’t get that anywhere. They’re the most hardworking people ever. These guys have learned the horrors of socialism, and they came here for work. And it’s all over Madrid.

Rasheed: My barber is Venezuelan. I like talking with him ‘cause, you know, usually when you have a conversation about anti-socialist policy, it’s usually in some intellectual group.

But he’s a barber, and he says, “Oh, these damn socialists are always causing problems.”

Diego: They ran them out of their own country, around 8 million of them. The average Venezuelan that stayed has lost, on average, 15 kilograms, so it’s hunger, it’s death. That’s what socialism will do.

We’ll move beyond immigration. Onto another important topic

Rasheed: The gender violence, gender law, gender topics in general are an even bigger source of disagreement between Vox and PP. More so than immigration.

Go figure. It’s almost impossible to understand that. But to highlight how this topic is even more stark now. There was a book recently published by a pretty popular journalist here I mentioned earlier, Juan Soto Ivars. I find him a very interesting journalist. Definitely not a right-wing person by any definition.

Diego: He’s probably what you could call a regular center-left guy.

Rasheed: Yeah, like Ezra Klein in the US.

Diego: There is no place on the Spanish left for a center-left guy anymore. So that’s why you get labeled a fascist.

Rasheed: Yeah. Think of Ezra Klein, but Spain.

Diego: Yeah.

Rasheed: And more literary.

Diego: Yeah.

Rasheed: And he published a book called ‘This Does Not Exist’ but in Spanish. And it went through three editions in three weeks. It’s unreal.

Diego: So what does not exist?

What, what does this topic or book argue? Well, Spain has anti-gender violence laws. Which in principle, one would argue, like how could you be against a gender violence law, right? The problem is the way in which it was drafted was governed by this mentality that we should just always trust any sort of claim of gender violence and take it from there.

But by default, you’re guilty, in this case a man, until proven innocent. There will be a massive display, so policemen will show up at your door. You will be left without legal counsel and questioned by the police for hours. Then whenever you do have the chance to exercise your right, you will still be fighting an uphill battle from there.

So this has become an issue for the following reason. Out of the hundreds of claims of gender violence started by women in Spain, less than 20% of cases make it into court. That is a huge gap. And the fact that there are so many legal asymmetries between men and women in a dynamic that lands 80% of men in preventive jail for something that won’t even go in front of a judge, that is a grave situation.

And no one is disputing that, hey, there is X witness, X medical proof, X evidence, just enough. The slightest chance should be enough to hold that guy and take it from there. Give him his rights, but of course, take what happened very seriously. We’ve just done the complete opposite. There is a slogan among Spanish socialist feminists, that goes, “Always trust what women say.”

But unfortunately, in human affairs, especially in divorce situations, separation or breakups, these claims have become part of legal strategies that give you leverage to negotiate custody, to negotiate assets allocation among former husband and wife and so on.

Some would argue many of these claims are fraudulent, they are not based on enough evidence to even make it to court. They’re just thrown away as soon as they are examined by a judge. And feminists, socialists would argue, “Well, you’re arguing that there are fake allegations going on massively. This is not true. This does not exist.” . Or, “This is just a very small percentage.” When you crunch the numbers, you realize that at the end of the day, one out of every 10 guys that is accused of this is just an asshole who really deserves the harsh treatment that a law like this provides.

But eight to nine of them are either 100% innocent or cannot be proven guilty under a rule of law scenario, so therefore we have to understand that they are innocent. And so the fact that PP is not willing to discuss this law at all has given Vox a lot of disgruntled male voters.

Those voters have had the opportunity to see, well, they’re willing to talk about this. And there’s hundreds of thousands of men who have gone through a bad divorce and a bad separation, and hundreds of thousand men that have faced these claims that were maybe taken back later. But they were used as leverage over these disputes.

Rasheed: It’s one of the surprising topics that have now become the point of a political divide. No one would have seen this coming 5, 10 years ago for sure, but now this is one of those dark things between PP and Vox. It’s shocking how PP really doesn’t do anything about this at all.

Diego: I’ve argued though that the Libertad Digital, Instituto Juan de Mariana, and the other intellectual circles are essentially saying what PP will eventually say in 10, 15 years.

So that drag is a big opportunity for Vox because they pick up on things quicker, and therefore they’re more in tune with the regular voter of the center right, in many of these topics. So with the gender violence law these statistics have been available for a long time.

You can clearly see an overwhelmingly higher number of claims versus the number of proper legal processes that get started, and an even smaller number of people that get condemned as a result of a process like this. We all support the harshest treatment for criminals, but what about that 85% or so of cases that don’t even make it to court? They’re just instrumental in many cases. And by the way, the number of women that report suffering from domestic violence is comparatively low in Spain compared to other European countries-

Rasheed: I would bet, yes ...

Diego: We say things like, “Poverty is lower than it’s ever been.” This is true, but there should never be poverty. There should never be domestic violence either. But you need to look at trends. Spain has way lower domestic violence rates than other European countries, certainly northern European countries that are often seen as more civilized than us savage Mediterraneans.

Also the number of women that unfortunately have been killed by their male partner has remained very stagnant in the last 15, 20 years, in spite of the fact that there’s been literally billions of money poured into propaganda or programs that, to be honest, don’t really tackle the specifics of women who need help. Instead they just brand men as horrible monsters that need to be restrained.

Rasheed: Yes of course, because modern feminism is not about helping people.

Diego: Yeah.

Rasheed: Come on, Diego.

Diego: So you see these very sad stories like “woman was killed today by her partner”. And she had started legal action against him, and had gotten a legal warrant to get this person away from her. And there are some electronic devices that should be attached to both parties, to allow any kind of physical interaction between them, and enact that decision by the judge if he’s preemptively out of jail or whatever.

And women get killed. And it then turns out that this socialist government bought those electronic device systems that did not work on the AliExpress discount shop. This government let a thousand sex offenders either enjoy a reduction of their penalties or just get out of jail completely via poorly designed “feminist laws” to “protect women.”

So considering all of this is true, I now pose a question to young Spanish women: Which way do you wanna go? Who’s protecting you right now?

Rasheed: I think I told you I had a conversation with a friend of my husband. And she said to me, “I voted for PSOE because PSOE is a center party.”

Sometimes you hear some things where you can’t be angry and you can’t laugh. You just have to just stay silent. I could have never thought someone could be that insane about politics.

Diego: I’m hearing Kenny Rogers in my head singing The Gambler. I’ll just keep a straight face. You know, count your money as you’re sitting on the table.

Rasheed: It’s truly bizarre.

Diego: Yeah.

Rasheed: But onto another point of critical divergence between PP and Vox is the EU and the role of the EU in Spain and just in the general concept of the European Union.

I think here is a good point to mention one of the key Vox ideologues, as one would call him Jorge Buxadé.

Diego: He’s an MEP.

Rasheed: He’s from Catalonia. He is also one of the people who is pegged, in the left-wing media, as a really terrible, insane fascist and the perfect Platonic ideal of why Vox is an evil party.

Diego: To be honest, I don’t think he will deny this. If you track his beginnings in politics, he was tied to what could be very easily labeled as more far-right groups. But so was Giorgia Meloni, so people do evolve or change. So I will say that when he gets labeled a Falangista, which is a Spanish term, akin to fascist, I’ve heard him joke about this and introduce himself to a libertarian common friend of both you and I, as, “Great to meet you. I’m Jorge the Falangista.” He’ll joke about it, so he’s aware of that. And yeah, his political youth was spent in some of these circles.

Rasheed: But again, that is not the same interpretation as when you hear the word fascist.

Diego: Yeah like in Germany, for example.

They’re very different terms. I was just clarifying like an honest journalist. You can’t talk about Meloni without understanding her life.

Rasheed: Of course.

Diego: He’s an extremely well-read guy. He’s a state lawyer like the mayor of Madrid who we’ve mentioned, he’s PP, so these are really smart guys.

Rasheed: Top, the cream of the crop in many ways in Spain. Literally are credentialed as the cream of the elite in Spain.

Diego: Qualifying as a technocrat in the good sense.

Rasheed: Yeah, in the proper sense.. In Spain they have these really intense exams you have to pass to be a state lawyer. He is in the top group.

Diego: I must say, there’s too many of them doing policy these days, not because I don’t like them but because we need a balance. So there’s a lot of state attorneys and a lot of public workers.

But we need entrepreneurs, and there’s none. We need investors. There’s none. We need some intellectuals, some disruptors.

Rasheed: That’s not the fault of the state attorneys if the other people don’t join in.

Diego: Yeah, yeah. Fair enough. Fair enough.

Well I’m not joining. These guys know it. PP knows it.

Rasheed: Buxadé is also a lecturer in law, for example, in a university in Catalonia, one of the best in the country, and he has a blog. But he also he wrote a couple of books recently, actually last year or year before, about certain topics in books.

Diego: Sovereignty.

Rasheed: Sovereignty, globalism.

Diego: Somewhere, anywhere.

Rasheed: The literal dynamic of this podcast.

Diego: I’ve met him. He’s an interesting character. If you just buy the propaganda, it’s very simplistic.

If you meet Buxadé, you may not agree with everything he says. You may disagree with most of what he says, but regardless of your position, he is a very smart guy, and he’s not just throwing stuff out there to see what sticks. He knows what he’s saying.

Rasheed: If you read the book Globalismo, the cover looks like propaganda, like Agustin Laje, who is a famous writer also.

Diego: These guys read Ludwig von Mises. And he’s got his comments on Human Action.

Rasheed: But if you read Globalismo, it’s like it has citations of articles in European treaties.His arguments are detailed arguments. Again, you might not have to agree with everything he says, but I think most of what he says is correct. On the margin we have disagreements, but on the core things…

Diego: I don’t think anyone on the left can enter a room and debate him without resorting to name-calling.

Rasheed: Exactly ... to

Diego: be honest.

Rasheed: Impossible. Impossible. He’s too, he’s too concrete. He’s too credible in the arguments.

Diego: And if you’re a libertarian free marketeer and a classical liberal who stands for free trade, he’ll challenge you, ‘cause he knows the dynamics of free trade agreements, and he’ll say, “Yes, but...” And he’ll know very precisely why.

Rasheed: No, but I think this is an important detail where when liberals usually talk about free trade, they don’t talk about free trade agreements. It’s a very important distinction. Exactly. It’s about free trade agreements as they exist in the world.

Diego: So that’s what makes him an interesting character. Yeah ... for sure, and he’s become very relevant. There’s an intellectual that’s a high-ranking MEP in Brussels. His name is Hermann Tertsch. That’s a very German/Austrian name, to be precise. He was the face of the new show of the Madrid TV station for a long time. He was in El País, so he comes from a left-wing newspaper background. He was a war correspondent in the Balkans. So he’s lived 40 lives. There’s room for him in Vox too. They’re an interesting bunch. Yeah ... there, there’s economic spokesperson-

Rasheed: Martin Fritz is also MEP currently. We mentioned him earlier.

Diego: Their economics spokesperson, Figaredo, is also a very qualified lawyer, very familiar with international arbitration which is an area in which I do a lot of consultancy work. So it’s hard for me to come across politicians that fully understand international arbitration, its dynamics, its systems, its enforcement, and litigation. It’s complex. We’ve recorded an episode with Ashley Messick, who is even an expert on the enforcement of international arbitration.

So with Figaredo or with Ruben Manso, who by the way was left out of Vox when Ivan Espinosa was run out, but who was a very eloquent economics guy for Vox for a long time.

We’ve said good things about them and some bad things. These guys don’t like dissent one bit. It’s funny that their foundation is called Disenso. But we’ll get to that. ‘Cause you get kicked out.

Diego: So the only two politicians that I’ve entered a room and fully see them understand international arbitration and get what it is we’re talking about, were the former number two in the economics department of Vox, Ruben Manso, who has since been run out, and Figaredo, who’s on the ground. So they do have qualified people.

Rasheed: They do have very qualified people. So internally this is where Vox also has a very dramatic divergence with PP on the EU topic. Buxadé, who is the main EU guy for Vox, who’s the head of the Vox delegation in the EU Parliament, is a very key feature of this role that Vox plays in the EU.

When you think about how they perceive the EU, this is always framed as them wanting to leave the EU. That’s not what they’re discussing. They’re discussing the original treaties as they were designed, as Spain signed them to join the EU, which should be respected.

Therefore, this kind of overreach, this over-extension, this lack of (in legal terms as Buxadé would use them), this non-adherence to the principle of subsidiarity of the treaties is something we cannot let completely slide over time.

Diego: I agree and I think that if you take a look at where he’s coming from with many of these arguments, he’s very technical too.

Rasheed: But most importantly, he’s right. He is correct.

One of the primary complaints against the EU is that it’s doing too much. Yeah, I agree with all those arguments. It’s doing too much stuff. And on the flip side, as I mention all the time on the podcast, the member states themselves need to actually take on the reins of sovereignty, do the work, and stop outsourcing the blame and scapegoating the EU. So essentially Buxadé is saying, “No, no, these are our problems. We have to solve them with our own solutions.” What is the controversy here? Well, the controversy is that in the PP and the EPP philosophy, they actually don’t have a view of this kind of concept. They think everything can be solved through more integration.

So climate or green policy is another area of disagreement we’ve listed. Because Brussels has led a failed climate agenda, which is industrial suicide..

If that was the aim then you would just draft the European Green New Deal. God knows we’re not a high-growth economy in Europe these days and it hasn’t been the case for a few decades now. We don’t have many fast-growing modern industries, but we do have a car manufacturing industry that serves our own domestic market and is also competitive outside of it. So you would think the last thing you want to do is to punish that industry.

But then again, European elites went ahead with that. Local elites, in this case PPM Socialist Party leaders, just signed off on that. We even set a deadline for combustion engines on cars which were supposed to not be sold anymore in just a few years’ time. In 2030. 2030. Yes that soon, it’s crazy.

Rasheed: They recently rolled that back, I believe. But the fact that it was even there…

Diego: But that minute jobs began being cut. Investments stopped being done. Offshoring began to take place, and many growth projects that could have been developed just went down the toilet.

And regardless of the EU now rolling this back and, parties at the national level reconsidering this no one’s going to pay for this because there’s no skin in the game. But what would be the penalty for Ursula von der Leyen and her team for doing this to the European economy...

10% of Spain’s GDP is linked to car manufacturing. There are entire cities that depend on car making. Vigo, for example, in Galicia. Pamplona in Navarra. There’s areas in Valencia, in Catalonia, Valladolid. These are industrial powerhouses where working class people can still get good salaries and stable jobs in stable industries, and all of this has been destroyed by EU regulatory policy, which PP and PSOE agreed with at the European level and have not questioned at the national level. So Vox has picked that up and workers realize that.

Rasheed: Vox was out against this topic from the beginning in the European Parliament against EPP. They’ve been on that topic. So Buxadé led that charge in the European Parliament, and they’re pushing that stuff also domestically with Santiago and so on here in Spain.

But this divergence is also key. It’s the same idea of the EU role versus non-EU role. But yeah, Vox has been on the common sense vote on this issue again way before PP tried to kind of recalculate and realise “Oh, maybe we shouldn’t get rid of all the combustion engines”

This is EPP, the biggest party in the European Parliament where PP is.

Diego: And it’s killing one of Europe’s largest industries.

Rasheed: It’s killing Spain.

Diego: This brings us to the European Parliament dynamics that Vox has followed since its inception.

So it was not elected for the European Parliament back when it was first founded, as we said. 2015 was when they first ran. But then they eventually get elected in the next election and they have had a good result in the following European election, so there is a large group of Vox MEPs in Brussels.

But originally, they sat with the British Tories and the European Conservative and Reformist Group, which is now essentially led by Giorgia Meloni and her Fratelli d’Italia party. So these were the more moderate elements of the European new alternative right parties or whatever you want to call them.

And I thought that was a very good move, and I thought the European Conservative and Reformist Group better represented what they were trying to signal here at home. Now, since then, Rassemblement National in France, the Marine Le Pen party, which is no longer only led by her and Bardella has become its face. The Orban party, which was a member of the Popular Party, and other elements that sort of sit as well on the alt-right spectrum have created their own political party for the European Parliament, which is known as the Patriots Group. And since then, Vox made the jump away from ECR and into Patriots.

So there is room for consolidation, and these two could become a very large group in the European Parliament if they were to get together. The Polish PiS, P-I-S which was in government for a very long time could very well favor a movement of sorts in this direction, but we’ll see.

Vox did pivot and went from ECR to the Patriots Group

Rasheed: I think it’s also worth noting that Abascal is also the president now of the Patriots EU group. Not in the European Parliament ‘cause he’s not in the European Parliament, but the general European group outside of the literal parliamentary people. Abascal is the official president of that group.

And as we know from speaking to people from Vox and Patriots, we know that one thing they like a lot inside the Patriots group is the fact that Vox has this opening to the Latin American community. It’s a big market that they also can see themselves having more allies with than just Europe itself.

Diego: Giorgia Meloni spent Christmas at Abascal’s home here in Madrid. They’re not members of the same European Parliament group. But that’s clearly telling you something. There’s a lot of synergies between Patriots which has a bit more radical and more populist stance in many areas for sure.

Ultimately, voters for ECR parties and Patriots parties probably overlap in many cases. Maybe with the Patriots member from Poland, it’s not large, but that’s because the ECR member from Poland is the Law and Justice Party, which is the largest party there.

Or maybe the Patriots member from Italy, I don’t know if they have one. Maybe it’s the League, the Northern League. They do have one.

Rasheed: It’s the junior partner of the Meloni coalition.

Diego: Yeah it’s a junior partner, but that’s because the ECR has the larger coalition members.

And then I don’t know if ECR has a French member. I guess if they did, it would be someone like Eric Zemmour or something like this. The Patriots member Bardella, Le Pen, they’re the largest group in France. So consolidation makes sense, if you ask me, and they would be larger than the Socialist Party.

Rasheed: They’ll also be larger than EPP. They’re right now the third-biggest party.

Diego: And they could, they actually lead the charge. That means that they can have a lot of say over negotiations over how to form the commission, and then the commission could be run elsewhere.

We’re not saying that it’s going to happen.

Rasheed: These are big ifs, deep ifs here.

Diego: If all right-wing parties in Europe united, they would be squashed, right?

Rasheed: If they were to come together, that would be the biggest group in the European Parliament. We would have a substantially different European Union outright. But of course insularity and various conflicts prevent that.

Diego: Leave it there for thought, and we’ll see what happens in the future.

It is true, however, that PP lately has been striking agreements in parliament with these two groups.

Rasheed: There have been some regional elections recently in Spain. In particular, we’re gonna focus on Aragon, Extremadura, and then we’re gonna talk about Castilla-La Mancha as a potential option as well.

But yeah, what happened in Extremadura?

Diego: Or Andalusia.

Long story short: PP wins all of these elections that have taken place, and it does not gain an absolute majority in either of them.

PP’s performance, however, was good in Extremadura, got better in Aragon, got better in Castilla y León, and then was worse in Andalusia. So there’s not a very recurrent trend there. Vox did very well in Extremadura, did okay in Aragon, did so-and-so in Castilla y León, and also not a lot of growth in Andalusia.

So the main takeaway here is that these guys hurt each other whenever they start negotiating power. I think it’s hurt- hurting Vox the most, but that’s kind of the bear hug theory, right? When there’s a bigger guy in the room giving you the bear hug it squashes you. So for Vox to turn big words into concrete action is proving tricky, and PP is pushing negotiations to the limit with them.

Should they? From the ideas perspective, people are outraged. Why are PP and Vox making life so hard for each other? Well politics, it’s a zero-sum game. And beyond ideas, these people are trying to salvage their organization, which they want to thrive, at the expense of their rival, which is Vox.

So if you’re just talking about ideas, I think these regional governments could be formed... It’s oversimplifying things in a matter of minutes. But it should take just a couple of long meetings, a couple of afternoons, some beers, some wine or just some food. Just a weekend. Just a nice weekend of five well-chosen guys, maybe one representative from the National Party to be present, and then just four regional leaders meet, fight a little bit, but just let’s get this done.

Leave the weekend with the agreement done. But then the National Party is kidding. So Vox sometimes signals, “Fight this some more. Fight it to the end.” And then it becomes detrimental for Vox. Or maybe PP says, “No, no, don’t give in.” Tease that you’re willing to go for another election if there’s gridlock, and then they lose power.

So these dynamics are hurting the center right a lot because every focus should be on the Socialist Party, its corruption, its horrible economic performance, and how rotten the entire picture of Spanish politics is because of Pedro Sánchez and everything around him. And because of this, daily political gossip is about how PP and Vox, although they win and they should be celebrating, and the socialists are getting their worst results in history in many of these regions, they’re not leveraging all of that because then the bickering begins, the infighting begins and the dynamics between them have become quite toxic.

And Feijóo tried to soften this by sharing an open letter which essentially gives authority to PP leaders at the regional level to say yes to most of Vox’s recurrent demands. I think that was a smart thing by PP.

Rasheed: But Vox had a very negative reaction to that open letter, Abascal in particular.

Diego: Ideas-wise you can, you can say, “But that’s what we’ve been saying from the beginning, but you guys, you’re saying that now, but we don’t trust you’ll do that.” But if you want to save face, if you’re saying, “We want X, Y, and Z, and you’re making this extremely hard ‘cause you won’t give us X, Y, and Z”. PP has noticed that if they give X, Y, and Z, they’ll get criticized from the left for whatever they do, but their voters won’t be opposed to that. Indifferent voters that could swing PP or Vox either way will actually like that PP’s not just posturing as if they were oceans apart from Vox, which they’re not, or voters are not definitely.

And Vox suddenly has fewer areas of difference to pick from. So we were naming some. And immigration, that is no longer such a big divide as it was when the manifestos were done for the past election. The EU politics dynamics and the climate agenda in Europe, that gap has become smaller in the last year.

The Draghi report, the criticism, the new agreements at the European Parliament level, et cetera. Gender violence, that hasn’t changed because, you know, this doesn’t exist. And the territorial model, which is something they don’t agree with because PP believes in a decentralized Spain, while Vox does not believe in it.

Vox does not believe in it, but Vox will never have a majority to change Spain’s territorial status. There’s no way for Spain not to have a decentralized state, period. So Vox has, in general terms, argued against it. In practical terms, it stands for a regional election. If you’re an atheist of this, you would just say, “No, no, we’re not, we’re not partaking in this way.” There was talk at first of Vox not running in regional elections and to just be a national movement, but clearly they did not decide that.

And by the way, Vox has an issue here. Suddenly they’re joining coalition governments, but they have to make hundreds of appointments. And do they have the political, you know community or well-trained talent? I don’t know if they do. They’ll have to find a lot of people who’ve been activists and active in party politics, but does that translate into the ability to manage?

Rasheed: I think surprisingly, we’ve been very positive about Vox this entire episode. But this part of Vox really is a problem. And this is the same problem that most of these new establishment right or center parties across Europe have.

Reform has the same problem right now in the UK. Yes, you sprung up relatively quickly, but you don’t have the institutional infrastructure to support the actual party management. And now you’re in government, who are you gonna appoint?

Diego: Farage was a single issue party, movement, leadership, state of mind for the United Kingdom. It was either in or out of the EU, and that was it. Managing councils and national government, can Reform do that in the UK? Can Vox do that here? Well, they’ve had negative experiences in regional governments, but they’ve also argued that they were not smart at the negotiation table.

So it’s hard because they do think they were not smart the last time. Voters don’t like fighting from PP or from Vox. An overall problem here being I’m not a PP guy, I’m not a Vox guy, I’m just a classical liberal in Spain. I don’t need these two guys fighting every day over the smallest of things while I have the devil governing my country.

So that is an issue. And it’s part of the reason why some people may say that Vox has peaked lately. We’ve heard that before when they had 60 seats in the national parliament. They went down to 45, but now they stand to go up to 70 or 80, so be careful what you say. Also, if young generations support Vox massively, which is what the dynamics show, that means that although some of them may become more of moderates with time. The taboo of voting for Vox is not going to be there. So once you’ve voted Vox, it’s easier for you to vote Vox again throughout your life. Maybe not always, but it’ll remain an option for you.

Rasheed: And also to be fair, Vox in many ways has also become more moderate as a party, especially on social issues, like the LGBT topics, abortion etc. That association they had, being so much against “gay marriage” and these things, it’s not really there anymore. Only far extreme left use that argument. So Vox itself has lost that extreme tinge, and now it’s already seen as a more moderate party.

Diego: And we did touch on the gay marriage debate within PP. It is a non-issue today for PP and Vox. No one’s discussing that. So that’s why things have become more about power dynamics. When things get nasty that means that you’re fighting for power.

So that’s where we’ll leave it for today. I think that’s been a very thorough discussion of the history of Vox. But I think that the one question that I do want to throw out there is that Abascal’s leadership has remained unchallenged. Internal dissent has not been tolerated much, so most critical voices have essentially been shown the door.

What does Vox look like in 10 years? And what does Vox eventually look like without Abascal on top?

Rasheed: While that is a salient question, I’m still unsure what Vox will look like in two years.

Diego: Some people say that Vox is a movement around a leader. And leaders have an expiration date. Also, Abascal doesn’t do a lot of media.

In fact, he doesn’t do a lot of public appearances. He gives his speeches in Congress whenever there’s a session. He chooses very smartly where he goes, and he’s not over-represented in the media. He’s working, but he’s not proactively trying to be everywhere or trying to be sympathetic to everyone.

Rasheed: But I feel that is also true of Feijóo, for example. I feel like in Spain, the leaders are pretty strategic in where they do these kinds of things.

Diego: Feijóo is doing a meeting every day where it’s taking a picture, shaking some hand, kissing some baby.

Rasheed: So is Abascal, just not on TV.

Diego: No, no. Abascal will post a couple of tweets but you could literally go days and days without seeing him in public.

That’s why you don’t watch Spanish TV, which I’ve praised you for. ‘cause there’s nothing valuable really on TV. But if you do, there’s literally many days in which you’ll hear something from Vox but not Abascal.

I’m just saying that some people thought the Le Pen movement in France was a Jean-Marie Le Pen platform. Then his daughter brought it to new heights. She was horrible in many areas, like I disagree with her specifically in economics.

And then Bardella made the party even more popular. So careful with just assuming that yes, personalistic party, yes. They’ve run on the Disenso, yes, I get it. Abascal’s going to be relevant for a long time, and he’s a founder of the party, so why shouldn’t he be? In a way it’s his shop, right? People sometimes feel like Vox will go away like Ciudadanos did.

Well, Vox has been around since 2018, and it’s polling the highest it’s ever since then, so it’s here to stay.

Rasheed: I think a deeper question this is given the dynamic of young people overwhelmingly not only just supporting Vox, but being excited about Vox, and the fact that PP for internal party dynamic reasons isn’t really that enthusiastic to young people and the young will become the senior voters, and also at the same time PP doesn’t seem to have a very particular rudder towards a strong directionality, Could it be that Vox could actually become the senior party In the center-right dynamics in Spain?

Diego: That is a question that Jesus Fernandez Villaverde has thrown out there a lot.

He’s making a lot of projections. I don’t like demographic projections that are too long because they get outrun. Jesus is a brilliant scholar, a professor at the Pennsylvania University, but he’s a Spaniard. He’s warned about how fertility is falling even faster than we thought it would in countries where we didn’t even project it would go down.

Yet at the same time, he’s making these projections of what the Spanish electorate will look like in decades. I see some inconsistency there.

Rasheed: That’s not inconsistent because it is a demographic drift that happens all the time with these current population numbers.

Diego: But just notice how we don’t even know what the demographics look like because 2 million inhabitants could be illegal immigrants who could be brought into the electorate soon.

Rasheed: Let’s say numbers are not going to change at all. Where we are now is fixed.

Diego: You’re asking what is called the Sorpasso question. Sorpasso is an Italian term which means “to surpass”. We always use the Italian term in Spanish.

Will there be a sorpasso? I think it’s very hard for Vox to get a sorpasso because there’s many areas in Spain in which their presence is very marginal, and territorial dynamics matter. I also think that just because the young voters are predominantly right-wing and with Vox, that doesn’t necessarily translate into support for Vox forever.

Rasheed: I also think the lack of institutional sophistication is what will limit Vox in the medium term. Because again, it’s okay to get support for elections but when you have to run, cities and local councils…

Diego: It’s not a rally. You’re not just shouting things to a crowd.

Now you have to manage a budget and make legal decisions. And you need a lot of expertise, and will be doing a lot of crunching. Deregulation, how do you deregulate? There’s no human power that can deregulate Spain. We’ve spoken about how this can be done today through tools and through properly trained AI, but not by the human team of a newborn party that has no political cadres ready to take on this challenge.

So we’ll see where it goes. I’ll leave this as uncertain. I don’t think it’s that much of an easy thing for them.

Rasheed: And of course, we’re assuming PP doesn’t get itself together.

Diego: How do you model who’s going to be the PP leader?

Say there’s a disaster and the left is able to cling to a majority, so that’s bad. But say four years later, now the country’s definitely even more down the toilet, and say, for example, someone like Ayuso is brought as leader by PP like many people have supported. What happens then Vox?

Well she certainly attracts many people that vote for her regionally, but then nationally they do prefer Vox, or locally they do prefer Vox. So what happens? I wouldn’t overthink things.

Rasheed: It’s not overthinking, it’s more like thinking.

Diego: It’s not overthinking. I’m just saying there is too much uncertainty, too many unknown unknowns to go that deep into what could happen in the future, but that is something that I think PP is looking at. And by the way, many of the people surrounding Feijóo are rather young.

So he realizes that.

Rasheed: Okay, Diego we’ve come to the end of our Vox episode. I think the core thing we tried to show is that, though Vox actually has-

Diego: That it’s just a bunch of fascists!

Rasheed: That Vox has a very credible agenda that tracks very closely to the median voter in Spain, and it’s not actually some extreme party. The people in Vox are actually very credible at the top, even though the scandals might not make it seem that way. And there’s a very serious force when it comes to thinking about the center and center-right dynamics in Spain.

Diego: And we’ll be here on the next episode of the Somewhere Anywhere podcast. We’ll keep doing this series on political parties in Spain. And of course now we’ve covered, roughly speaking, the center-right spectrum and what’s next? Well, there’s a lot to talk about on the left wing side of things.

The Socialist Party, the Communist Party and its different incarnations through the years, and we’ll be here to take you all the way and deep dive on all of those topics, and many other issues of the Hispanic sphere and beyond.

Spanish Political Parties Series, Part 2 of 8

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The second half of our PP story opens on the worst morning in modern Spanish history. On 11 March 2004, three days before a general election the Popular Party expected to win comfortably, an Al-Qaeda cell detonated bombs on Madrid’s commuter rail. Roughly 200 people died; it remains the deadliest terrorist attack the European Union has ever suffered, larger than Paris or London, and yet curiously less fixed in the international memory. We try to hold two things at once here: the human tragedy of 11M, mourned every year much as the United States mourns its own September date, and the political rupture that followed it.

In 72 hours an electorate that was set to re-elect a government turned and removed it. How much of that swing was authentic moral revulsion at a governing party that had first blamed ETA, and how much was a coordinated campaign to pin the dead of Atocha on Aznar’s alignment with Washington, is the question we sit with rather than resolve. What is not in dispute is that the left learned something that morning about the uses of the streets, and that the school of Zapatero was founded in those three days.

From there the episode becomes, in large part, an extended meditation on a single man and a single temperament. Mariano Rajoy governed the Spanish right for fourteen years, from the shock of 2004 to the no-confidence vote of 2018, and we make the case that his defining gift and his defining flaw were the same thing: a genius for staying still. He won the largest victory in the party’s history in 2011, one hundred and eighty-six seats, and yet that triumph rested on a collapsed Socialist government and twenty-five per cent unemployment rather than on any positive enthusiasm for him. The “technocrat” label, which in English flatters and in Spanish insults, captures the puzzle. We trace the ideological inconsistencies that hollowed out the party’s credibility: opposition to same-sex marriage later quietly abandoned, a Historical Memory Law denounced in opposition and never repealed in power, tax cuts promised and thirty tax rises delivered. Whatever one’s own position on each issue, the pattern corrodes trust, and trust, once spent, does not return.

The Catalan crisis of 2017 is where we locate the real fracture. Faced with an illegal referendum staged with plastic ballot boxes, Rajoy reached for the judges and reached for Article 155 of the Constitution only after the fact, when the political moment had passed. It fell to King Felipe VI to give what was effectively a political speech, and to the novelist Mario Vargas Llosa, not the prime minister, to headline the great unity rally in the streets of Barcelona. Separatism has fallen since, but the lesson voters drew about their own government’s passivity proved expensive. We argue this is the moment the big tent that Fraga built and Aznar perfected began to come apart, scattering its classical-liberal and conservative occupants toward Ciudadanos and Vox.

The final part of the episode is a study in self-inflicted wounds. The Gürtel corruption affair was real but local, and the party’s failure to defend the figures later acquitted of every charge.

Then came Pablo Casado, young, articulate, genuinely a man of ideas, who destroyed himself in 2022 by moving against Isabel Díaz Ayuso over allegations we find, having seen the dossier, remarkably thin. Which leaves the strangest fact in Spanish politics today, and the one we keep circling: the most popular figure on the Spanish right does not lead it. Alberto Núñez Feijóo, the overly-cautious Galician brought in as the adult in the room, has stabilised the party and brokered an uneasy coexistence with Vox, but excites no one. Ayuso, who may simply not want the job for reasons that are as much personal as strategic, remains the star.

We close on the party’s own 2025 self-description, “centro reformista,” a phrase that means precisely nothing, and on the road to 2027, where the only thing certain is that voters will be excitedly embracing PP but unambiguously signaling no more Sánchez.

Next in the series: Vox.

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There is a tidy story we tell ourselves about who pays their debts. Rogue regimes and resource-rich autocracies default; mature European democracies, embedded in the rule of law and dependent on the confidence of the markets, do not. This episode is about what happens when that story breaks — when Spain, facing a wave of international arbitration awards arising from the retroactive cancellation of its clean-energy incentives, decides it would rather not pay, and finds itself the subject of frozen bank accounts and seized buildings across Europe.

Our guest, Ashley Messick, has spent fifteen years in the unusual profession that exists precisely for this moment. She is the person investors, law firms, and corporations call when a state goes rogue: when an arbitral award has been won and the debtor simply refuses to honor it. Her work sits at the intersection of law, private intelligence, and political risk — asset tracing, cross-border enforcement, and the patient, adversarial craft of forcing a sovereign to the negotiating table.

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The intellectual heart of the conversation is a single, counterintuitive claim that Messick returns to again and again: winning the award is the easy part. An investor who prevails at the World Bank’s ICSID tribunal holds a piece of paper recognized across jurisdictions — and then confronts a second hurdle that can consume years and millions more in fees. How do you actually collect from an entity that controls its own courts, hides behind sovereign immunity, and has every incentive to dig in? The episode is, in effect, an anatomy of that second war.

To get there, the hosts walk through the doctrine that governs it. Sovereign immunity means that certain assets are simply untouchable — embassies, warships, the inherently sovereign functions of a state. Creditors may pursue only assets of a commercial character, which forces a kind of forensic cartography: where does a country conduct business in its own name, through which state-owned companies, in which friendly jurisdictions? This is where alter-ego theory enters — the argument that a state-owned enterprise is legally indistinguishable from the state itself, and therefore fair game. Messick recounts testifying in Portugal to establish exactly this, in a jurisdiction with no prior precedent for it, illustrating how enforcement law is being actively built case by case.

The conversation grounds the theory in cases she has lived. The fifteen-year saga of Perenco v. Ecuador — born of a punitive windfall tax and a seized oil-field operation, escalated through a France–Ecuador bilateral investment treaty, and resolved only through what she calls “death by a thousand cuts,” a campaign of commercial pressure that culminated in a threatened coupon payment in Luxembourg. The Repsol–YPF nationalization in Argentina and its still-pending award. The serial defaulters — Venezuela, the Congo, and others — that have weaponized Interpol notices against the very creditors pursuing them. Each case is a lesson in the same underlying chess game: leverage, jurisdiction, and the slow accumulation of pressure until paying becomes cheaper than resisting.

And then Spain. The hosts trace the origin — generous renewable incentives under one government, retroactively gutted under the next, followed by Spain’s withdrawal from the Energy Charter Treaty (with its twenty-year sunset clause leaving prior investors protected) in a move that echoes Ecuador’s exit from its own treaty framework. What follows is the tangible machinery of enforcement: a roughly €250 million freeze on Eurocontrol air-traffic payments owed to Spain’s state-owned ENAIRE, a freeze that ballooned toward €800 million before Spain posted a bond; the loss of a €10 million Instituto Cervantes building on a prime street in Utrecht, attachable because Spain had rented it out for non-cultural commercial use; and the looming question of FIFA World Cup payments. For Messick, none of this is the surprise. The surprise — the genuine outlier — is that she is running this playbook against Spain at all.

The episode closes on the structural force that made this entire world possible: litigation funding. Where once a wronged investor who had lost everything also had to find five or ten million dollars simply to bring a claim, third-party capital now underwrites both the claim and the recovery, rebalancing a power asymmetry that long favored states over all but the largest multinationals. Combined with courts around the world growing more receptive to enforcement actions, the result is a landscape in which awards once thought symbolic are increasingly being made real — and in which a developed democracy’s refusal to pay carries a reputational cost it cannot fully control. As Diego notes in closing, the cautionary tales run from Kirchner’s Argentina, where a president reportedly flew commercial to avoid having a state aircraft seized, to the company no government wants to keep. The open question the episode leaves hanging: if Spain can end up here, who is next?

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Spanish Political Parties Series, Part 1 of 8

Why does Spain’s Partido Popular (the Popular Party) speak so many different political dialects at once — Madrid’s free-market libertarianism, Galicia’s institutional conservatism, the Christian democracy of its old guard — and yet remain the largest political party in Europe? In this opening installment of a new series on Spanish democracy, Diego and Rasheed argue that the answer lies not in incoherence but in DNA: PP is, and has always been, a coalition wearing the clothes of a party.

The conversation moves from the death of Franco in 1975 through the engineered transition under King Juan Carlos, the founding of Alianza Popular by the formidable and unelectable Manuel Fraga, the collapse of the centrist UCD, the failed “Roca Operation” through which Catalan economic elites tried to manufacture an alternative center-right, and finally the 1989 Sevilla congress where Fraga surrendered the stage to a then-obscure regional president named José María Aznar. Along the way: why a brilliant Francoist minister who helped draft the 1978 Constitution could never win a national election; how Margaret Thatcher personally berated Fraga over Spain’s vote on NATO; why the “Clan de Valladolid” outmaneuvered Fraga’s preferred successor, the glamorous Isabel Tocino, in a weekend confrontation at his Galician fishing house; and the case for Aznar as perhaps the most consequential pro-liberty Western leader of the late twentieth century outside Reagan and Thatcher.

Threaded through the narrative is a quieter argument about democratic self-restraint — Franco’s regime dissolving itself into a constitutional monarchy, Fraga stepping aside despite holding the party in his hand, Aznar imposing his own two-term limit at the peak of his power and keeping the promise — set against the unraveling of those unwritten rules in contemporary Spanish politics.

Part I closes on the eve of the 2004 election, with PP at its absolute majority and Mariano Rajoy chosen as Aznar’s successor by a finger pointed across the cabinet table. Part II picks up with what happened three days before the vote.

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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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Rasheed Griffith

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.

Or listen on Spotify

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

How Milei Can Fail (Is He Really Libertarian?) - Capitalismo

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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Disgruntled Musings, Episode 12:

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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.

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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: 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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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

Recommended

• Ecuador: All You Need is Dollars: La Recuperación del Ecuador - Francisco Zalles

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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?