The New Bazaar
160 years of the racial wealth gap
This is a special, between-the-seasons episode of the New Bazaar.
Right now, the white-to-black wealth ratio in the United States is roughly 6 to 1. Which means that when you add up all the wealth that someone can own—their cash, the value of their house, their investments in the stock market, and so on—the average White American has six times the wealth of the average Black American.
That figure alone should be disturbing enough. But making it even worse is that this wealth ratio of 6 to 1 is about the same as it was back in the 1950s, seven decades ago.
Some of the reasons for this long-term persistence of a big racial wealth gap are probably familiar to anyone who knows even just a little about American history. Not just the history of slavery, but also what came next: Jim Crow and segregation, the numerous racist laws and policies that were passed, and the history of racial violence—all of which made it impossible for Black Americans to accumulate as much wealth, and to get the same return on their wealth, as White Americans.
Maybe less understood is another cause. If you consider the immediate aftermath of emancipation and the Civil War as a starting point, Black Americans simply began with much less wealth from which to build more wealth—and that initial difference has continued to have a big lingering effect even a century and a half later.
These are just some of the conclusions in a new working paper from today’s guest, Ellora Derenoncourt, and from her co-authors Chi Hyun Kim, Moritz Kuhn, Moritz Schularick. Ellora is an economist at Princeton University, where she is also founder of the Program for Research on Inequality. On this episode of New Bazaar, Cardiff speaks with Ellora about this fascinating paper and about some of her other related work.
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Angus Deaton on life in America01:12:18Angus Deaton—Scottish immigrant, Nobelist, and one of Cardiff's favorite economists—has written a new, forthcoming book titled Economics in America: An Immigrant Economist Explore the Land of Inequality. It’s great, if also hard to categorize. Partly it’s a memoir, about his humble origins in Scotland, where he was born; his studies at Cambridge with better-heeled peers; and his subsequent decades as a Princeton University, Nobel Prize winning economist. The book is also partly a reflection on a lifetime of practicing economics, and the good and bad of the economics profession. There's plenty of both.And finally it’s a series of observations about the American economy, including a fascinating self-analysis of his own ambivalence towards the US, his adopted country—the many great things here, including the lives that he and his family have led; and also, yes, some of the devastatingly grim things about life here for so many others. Related links: Economics in America, by Angus Deaton (available for pre-order)The Great Escape, by Angus DeatonMortality and the economy, featuring Anne Case and Angus Deaton
Malcolm Gladwell's Next Chapter33:00Last summer, Cardiff interviewed Malcolm Gladwell for another podcast that he hosts called The Next Chapter, by American Express Business Class. On that show, Cardiff interviews bestselling book authors (like Gladwell) to find out what they’ve been up to since their earlier book was published, and to learn what they would add to it now that some time has passed—hence the “Next Chapter” of the title.And in the case of Gladwell, what he’s been up to in the last few years is podcasting. Specifically, he co-founded Pushkin Industries, a podcast production company for which he hosts his own excellent show, called Revisionist History, and has written an audiobook, The Bomber Mafia.As it happens, Gladwell and Cardiff have the same favorite dead economist, Albert O Hirschman. And since Hirschman comes up a few times in their chat, and because the chat also covers a number of fascinating economic themes generally, it's the perfect episode to also air on The New Bazaar. The chat was recorded at Gladwell’s offices in Hudson, New York, last year. And if you like the episode and want to hear more of these interviews, please consider subscribing to The Next Chapter on your podcast app of choice. There you'll find other interviews hosted by Cardiff with guests like Adam Grant on how to think creatively; David Epstein on why it’s good to be a generalist; Susan Cain on introversion; and Mashama Bailey and John O Morisano on entrepreneurship and partnership in business. Here's a few places where you can find the show: Spotify: https://open.spotify.com/show/4ILMYVnqfO0g9aVkFFqfa2?si=4eef0597c6f4466d Apple Podcasts: https://podcasts.apple.com/us/podcast/the-next-chapter-by-american-express-business-class/id1627810508Stitcher: https://www.stitcher.com/show/the-next-chapter-by-american-express-business-classGoogle Podcasts: https://podcasts.google.com/feed/aHR0cHM6Ly9mZWVkcy5zaW1wbGVjYXN0LmNvbS9aODFMX0ZldA
How Vince McMahon built an entertainment empire55:59We're sharing another episode of a podcast we think you might like. It's called The Closer and it's hosted by executive producer of The New Bazaar, Aimee Keane. In each episode, Aimee speaks to dealmakers and insiders about landmark financial deals that have changed our lives in some way. In this episode, Aimee speaks to writer Abraham Josephine Riesman about Vince McMahon's influential dealmaking career. McMahon took over his father’s regional wrestling business in the 1980s, and made it into an international media and entertainment juggernaut valued at billions of dollars. This is the story of how McMahon cleverly bulldozed competitors, acquired rivals and capitalized on the public’s hatred of his tactics. Find The Closer here or by searching for the show on your podcast app of choice.
William Bernstein on stocks, bonds, and the economy57:37These are confusing times for the economy and for financial markets—and for the relationship between the economy and financial markets. At the moment the economy is doing well. The labor market is still creating hundreds of thousands of jobs each month. Unemployment is low. Inflation has come down over the past year. And economic growth has been stronger than a great many economists and others had forecast heading into the year. But that’s just how the economy is doing right now. What about six months from now? Or a year? Forecasting is always hard, and it may well be impossible. But economists sometimes look at “leading indicators” that are meant to give at least a sense of where the economy is headed. And some of those are flashing red, suggesting we might be headed for a recession in the near future. Then again, those same indicators have looked bad for a while now, and still the recession is nowhere in sight, so who knows. Meanwhile, look at the US stock market. It collapsed last year. But it’s come roaring back this year—and this despite the Federal Reserve continuing to raise interest rates aggressively. Is the stock market now overpriced, too expensive? Is it underpriced, a good time to get in? And what happens if we do go into recession? What about bonds and other markets? What happened to crypto and all those meme stocks? Returning to the show to discuss all this and more is William Bernstein. Bill is the author of no fewer than three of Cardiff's favorite books on finance and the economy, including “The Four Pillars of Investing”, which just came out in a second edition roughly two decades after the first. It has all new updated information, data, and charts, plus the lessons learned in the intervening years. Related links:The Four Pillars of InvestingBill's other books and writings
The economics of innovation01:11:21Within economics, there's a semi-famous quote from the economist Paul Krugman: “Productivity isn't everything, but in the long run, it's almost everything.” Krugman’s point is that ultimately, how much productivity climbs each year—roughly speaking, how much more efficient an economy’s workers become at producing goods and services—is also what determines how much our living standards also rise from year to year. And so in the long run, there really is almost nothing that matters more. Unfortunately, since about the early 1970s productivity has climbed much more slowly than in the earlier postwar decades. We have been stuck in a period that economists have labeled The Great Stagnation. And a big reason why is that the pace of innovation—the kind of scientific and technological innovation that leads to fast productivity growth—has also been slow. But now, there’s now a lot of people—including Cardiff!—who are optimistic that maybe the Great Stagnation is ending. That we’ll get back to the faster productivity growth of the past. Among other reasons why: The economy in the last few years has become more dynamic. There’s been a boom in the number of startups that entrepreneurs launch every month. There has been quite a bit of experimentation in the workplace for how to get things done, most obviously the rise of remote work. Incredible new technologies like mRNA vaccines have emerged. These also include things like GPT-4 and other language learning models, suggesting that artificial intelligence could soon have a noticeable effect on the economy. And finally, an intellectual shift, partly brought on by higher inflation, has compelled many people (including policymakers) all across the ideological spectrum to really emphasize the importance of expanding the economy’s capacity for growth, and to figure how best to do that. Which policies and institutional designs can best lead to new technologies and innovations? How do we reform public institutions like the National Institutes of Health, with its $47 billion budget, to fund the kind of science research and development that leads to transformative new technologies? What have we learned about the way science is actually done now?In other words, how do we get right the economics of innovation? That effort is where today’s two guests come in. Heidi Williams is an economist and the director of science policy at the Institute for Progress, a think tank. Caleb Watney is the co-founder and co-CEO of the Institute for Progress. They discussed with Cardiff not only the Great Stagnation, but also recent industrial policies passed by the US government, like the Chips and Science Act (which is aimed at developing a domestic semiconductor industry) and the Inflation Reduction Act (which will spend money to develop new clean technologies, among other things). And they discussed new ideas for how the country’s existing scientific institutions—its commercial labs, universities, and public bodies—should approach the process of scientific discovery.Related links: Heidi's page and work at the Institute for ProgressCaleb's page and work at the Institute for Progress
Inside Facebook's biggest acquisition52:52We're sharing a special episode of a podcast we think you might like. It's called The Closer and it's hosted by executive producer of The New Bazaar, Aimee Keane. In each episode, Aimee speaks to dealmakers and insiders about landmark financial deals that have changed our lives in some way.In this episode, Aimee speaks to an executive at the center of Whatsapp’s $19 billion sale to Facebook, Neeraj Arora. He explains how the deal finally came together, the dispiriting conflict that roiled the companies after the deal closed, and how the deal affected the way he thinks about our privacy online. Search for The Closer on your podcast app of choice or go to TheCloser.fm.
How to save democratic capitalism59:15The combination of a markets-based capitalist economy and a liberal democracy with almost-universal suffrage is very young, having existed for barely more than a century. But what we’ve learned in that short time is that there has never been a more successful political and societal arrangement. None of the tyrannies and the plutocracies that have been the default for nearly all of human history has ever been nearly as good at raising people’s living standards, and at giving people the individual freedoms to choose how they live their lives. But that marriage between capitalism and democracy has always been a fragile one. And in the last decade or two, that system has been under threat from within the very liberal democracies where it exists, especially in the US and across parts of Europe. What happened?The guest for this episode is Martin Wolf, the chief economics commentator of the Financial Times and author of a new book called The Crisis of Democratic Capitalism. As Martin writes:The health of our societies depends on sustaining a delicate balance between the economic and the political, the individual and the collective, the national and the global. But that balance is broken. Our economy has destabilized our politics and vice versa… A big part of the reason for this is that the economy is not delivering the security and widely shared prosperity expected by large parts of our societies. One symptom of this disappointment is a widespread loss of confidence in elites. Another is rising populism and authoritarianism. Another is the rise of identity politics of both left and right. Yet another is loss of trust in the notion of truth. Once this last happens, the possibility of informed and rational debate among citizens, the very foundation of democracy, has evaporated.Martin discusses these themes with Cardiff, what should be done to confront this crisis of democratic capitalism, what a "New New Deal" can look like, the threat (and opportunity) of China as a global superpower, and how Martin's own personal history influenced his values and thinking.Related links: The Crisis of Democratic Capitalism Martin's columns at the Financial Times
Macro Musings with David Beckworth55:06This is a special episode from the podcast Macro Musings, hosted by economist David Beckworth. David interviews Cardiff along with Heather Long of the Washington Post and Ryan Avent of The Economist about their reflections on the last three years. What they got wrong, what they got right, what shocked them, and what the lessons of these extraordinary, tumultuous times herald for the future.
Artificial intelligence and the economy of the future01:07:10Joining Cardiff for this episode is Avi Goldfarb, Rotman Chair In Artificial Intelligence and Healthcare At The Rotman School Of Management, University Of Toronto, and the co-author (with his fellow economists Ajay Agrawal and Joshua Gans) of an excellent new book, "Power and Prediction: The Disruptive Economics of Artificial Intelligence".In their chat, Avi and Cardiff discuss:Why AI is best understood as a "prediction technology"Examples of AI already in useWhich parts of the economy could be transformed by AI, and howHistorical analogies to previous eras of widespread technological disruptionHow AI will change the way people and companies make decisionsWhy this change will shift institutions away from blunt rules and towards individual discretionIn the labor market, who will gain and who will lose from the adoption of AIWhat the use of AI might teach us about what it means to be humanAnd all throughout the chat, they look at the fundamental question of whether artificial intelligence is about to make the economy—and the world—a whole lot weirder. And if so, just how far along that path to weirdness are we already?Related links: "Prediction and Power", by Ajay Agrawal, Joshua Gans, and Avi Goldfarb"The impact of AI on the future of workforces", The White House CEA and the European Commission“Before the Flood”, by Sam Hammond"The golden age of AI-generated art is here", by Tom Faber"Historical analogies for large language models", by Dynomight Internet Website