David Remnick: For decades, economic arguments in this country, in the broadest sense were usually over taxes and spending. For a long time, Republicans and most Democrats alike have been in favor of free trade, the idea that the global flow of goods and services should be as open as possible for the sake of growth and efficiency. Even if it hurt some workers, the prevailing economic wisdom was that free trade was a necessary aspect of capitalism.

Now, this was and has always been contentious. Unions have fought agreements like NAFTA. Critics say that the globalized economy led to deindustrialization in much of the country, and that, that deindustrialization, as we know, gave real fuel to Donald Trump's populism. Trump has been a longtime proponent of tariffs, and he seems to relish the prospect of a major trade war with the Chinese. Those positions reached their fruition with his highly chaotic tariff rollout recently, which, of course, tanked the stock market and put us near the brink of a global recession.

Even many Trump voters have told pollsters that they disapprove of this tariff policy, at least its chaotic nature. A new book by John Cassidy, our staff writer, takes a long view of these debates. It's called Capitalism and Its Critics: A History. Cassidy has been covering economics for The New Yorker for a long time, and he writes our weekly column called The Financial Page.

Now, John, I think most people in America think of capitalism almost as the eternal natural order of the universe, somehow like the weather, but it has a real beginning, and that's where you start your book. How did capitalism start, and what did it replace?

John Cassidy: That's actually a pretty complicated question. Most of the book I've written about is industrial capitalism. We do have a start date for that. It's usually dated to about 1770 in England in the cotton industry, where a series of inventions led to the rise of the factory system. Now, that arose on top of another system of capitalism, which was called mercantile capitalism.

David Remnick: What's the difference?

John Cassidy: Well, it's actually very timely. Prior to Adam Smith and prior to 1770, the government and the economy were pretty much intertwined, a bit like they are now under Trump. Protectionism was the order of the day. Britain and Holland were the sort of empires in the 17th and 18th centuries, and they fought wars over it. They basically were competing for the colonial trade. The Spice Islands in what is now Indonesia, the trade in India, cottons, all sorts of goods came from the East.

David Remnick: Adam Smith, of course, is often thought to be the godfather of capitalism, the philosopher of the free market. You cite him as a critic of capitalism.

John Cassidy: Right. Now, there's a bit of a conceit there because, of course, Adam Smith is the hero to a lot of capitalists and conservatives. I remember when I used to be a correspondent in Washington, covering the White House in the late '80s, the Reaganites all walked around with their Adam Smith pins on.

David Remnick: Right. Trump people wouldn't do that?

John Cassidy: I don't think so. Not most of them. Adam Smith wrote The Wealth of Nations to critique the mercantile system that we just mentioned and basically defend free trade. He said that protectionism was harmful. It led to corruption. You had these huge corrupt companies like the East India Company, which was actually bailed out by the British government. In his time, Adam Smith was a critic of the existing form of capitalism at the time, mercantile capitalism.

David Remnick: What compelled Adam Smith to come along and defend free trade? Was it purely technological invention?

John Cassidy: No. It's a very good question. Number one, he said that we depend on other people for our livelihoods, basically. You depend on the butcher to provide you with food, you depend on the tailor to clothe you, et cetera. He said the market is this mechanism which coordinates all these different forms of economic activity efficiently. If there's competition also, fairly, because things sell for pretty much the cost of producing them with a little profit margin, Adam Smith didn't have Google and Amazon.com to contend with.

David Remnick: That's the thing he critiqued as the godfather of capitalism. It's largely with monopoly power, isn't it?

John Cassidy: Exactly. He viewed the great colonial companies-- They were actual monopolies. They had monopoly grants from the government. I know a lot of the government ministers invested in the East India companies, so it was sort of crony capitalism. Again, very contemporary. At the moment, the monopoly aspect is front and center. At some points, in the 2008 crisis, this instability question is front and center. That was front and center when Marx and Engels were around thinking that financial blowups in New York were going to end capitalism.

David Remnick: When you look back on your reading of Marx, which began when you were very young and you've been thinking about Marx for a long time, early on in both of our careers at The New Yorker, you wrote a terrific piece about Karl Marx. Not for the last time, either. What did Karl Marx and Friedrich Engels get right in your view, and what not?

John Cassidy: I take two things from them, basic things. Number one, The Communist Manifesto was the first book about globalization. They have these great ringing phrases about the bourgeois going to the ends of the earth and destroy all that is holy is profane. It's a global system which sort of rips up everything in its path. I think that is a very profound and correct analysis.

The Marxism, if you boil it down to one sentence, classical Marxism, is that the most important divide in society is between the people who own property and the people who don't. Ownership of property is dominated by the capitalists, especially industrial capital workers; the only thing they have to sell is their labor. They have nothing to lose but their chains, in the famous phrase.

David Remnick: What about now? We've seen in recent years, starting when Bernie Sanders was running for president, polls that showed declining support for capitalism in really significant ways. John, what would you say is happening?

John Cassidy: Well, I think what's happened is capitalism itself has put its worst face forward in the last 20 or 30 years through the growth of huge monopolies which seem completely beyond any public control or accountability. Young people, they look through capitalism and the economy through the prism of environmentalism now in a way that they didn't in our generation.

David Remnick: At the same time, there's one socialist senator, Bernie Sanders, and he draws big crowds. What is his position in the Democratic Party firmament, the American firmament, at this point?

John Cassidy: Bernie always calls himself a socialist, but his view of socialism, unless I'm very much mistaken, I've interviewed him a lot of times, I haven't seen him recommending nationalization of the means of production. What Bernie is in favor of, higher taxes on the rich, control over monopolies, public healthcare, public education. That to me is Keynesian Social democracy, in the European context, anyway. In the US, there's always been such a mythology surrounding the free market and the small businessman.

David Remnick: Why is that particular to the United States? What are the roots of the resistance in the United States, as opposed to Europe, to social democracy, as you describe it?

John Cassidy: To some extent, the American economy for a long time did live up to that. There was the idea in the US there was more social mobility in the US than there was in Europe. People really did think that with hard work, they could get ahead and do well for themselves. I remember when I first came to the US. I realized that quite a lot of working-class, what you'd call middle-class people, have second homes. There were all these modest cottages out in Montauk where what I would call working-class people went for the summer. Now, of course, they can't afford it now, but we're talking 30-40 years ago. I think there was some material basis for the American idea that there was American exceptionalism. This was a land of opportunity. Obviously, a lot of people still believe that, especially a lot of immigrants.

The more cynical leftist take on it would be that, well, of course, because it's always been manufactured consent. America's always been dominated by the capitalists. They've always owned all the media. There's never been a proper left-wing movement here to take them on. I've got a bit of sympathy for that. I've got a bit of sympathy for both views on that. I'm agnostic as to which one wins. I grew up in the sort of English, British Keynesian tradition.

David Remnick: John Maynard Keynes.

John Cassidy: John Maynard Keynes.

David Remnick: The Keynesian tradition from the economist John Maynard Keynes, what is that? What's the tradition in the history of capitalism?

John Cassidy: The phrase I use in the book is managed capitalism. It's a capitalist system, but you manage it in various ways. Number one, the original crux of Keynesianism, you need the government to boost demand in times of slumps, so Keynesian stimulus policies. It's not just that. Keynesianism also involved a whole series of attempts to manage the financial sector, for example. It was a social bargain, basically.

The capitalists were allowed to continue to own companies. There was still quite a lot of inequality, but in return, there were this whole set of social guarantees; unemployment insurance, the National Health Service, which Bismarck started first of all, but then was put into effect [unintelligible 00:10:11] [crosstalk]

David Remnick: What you're describing is more European than American.

John Cassidy: That is. Even in the US, the New Deal was a form of managed capitalism. The reason why I've become more sympathetic to the Marxist ultra-left view in the last 30 years or so is because that managed capitalism has basically disintegrated. Not completely disintegrated, but it's been massively on the defensive.

David Remnick: How would you describe that? It's because of the diminution of labor unions, the growth of monopolies, the increase in radical income disparities.

John Cassidy: The car worker in Detroit, if he's put on a level playing field with the car worker in India or China who owns a tenth of the salary, really can't compete. Now in the car industry, governments have always intervened. The car industry is always seen as too important to leave to the market. The clothing industry, for example, the US used to have a huge textile industry, that basically went away in the '80s and '90s. Then China came along, the China shock in the early 2000s, that's basically an unprecedented shock.

A lot of American economists took a long time to recognize that. Even the people who supported unrestricted free trade, I think now recognize that the China shock was huge and did a lot of damage to industrial areas and has given a boost to populism, including Trumpian populism.

David Remnick: Now you have exactly that, Trumpian populism. At the center of White House policy to combat globalization, to combat de-industrialization is the use of high tariffs. Trump rolled this policy out seemingly fairly chaotically. What is the theoretical impulse behind it? Why is Donald Trump so pro-tariff as he has been for decades?

John Cassidy: Right. That's a very good question. The man himself, why is he so anti-free trade and pro-protection? It seems to go back to the '80s in Japan when Japanese car companies were first coming in here. I think he just sees it in terms of a businessman that, "We're giving them our valuable markets." That's always bad. It's like letting a rival casino set up next to his. It shouldn't be allowed.

Beyond him, there's always been this debate about how far protectionism is justified. America in its early decades, century was a protectionist country. The argument is that when you don't have any industry and you're trying to build it up, you are justified in providing temporary protection for yourself. That doesn't justify slapping tariffs on everything. Trump's argument seems to be that all trade is bad. He's not just saying we have to counter unfair trade or we have to defend our infant industries, such as they are.

David Remnick: Is there a logic to that?

John Cassidy: No, no. That was the basis of his--

David Remnick: It's just emotional.

John Cassidy: It seems to be. It's instinctual, I would say, on his part [unintelligible 00:13:16] [crosstalk]

David Remnick: Where do you see this policy of Trump's going? He's yanked back certain measures because he saw the markets tanking. Yet, it seems one of the great own goals in the history of policy.

John Cassidy: Even though the MAGA movement portrays itself as a movement for workers, and a lot of the foot soldiers are around the country, it's still a Republican Party. A Republican Party is still a party of business. I didn't think it was going to be sustainable to have a Republican government introducing blanket tariffs because it damages so many businesses and the markets are going to hate it. I think he thought he could take some pain, but when it came to it, it didn't. That's the great irony here. The Chinese have shown that they're willing to take more pain than we are. They can withstand a tariff war because they're a single-party totalitarian state.

David Remnick: Public opinion is not playing a big part.

John Cassidy: Public opinion is not particularly highly rated.

David Remnick: Essential, yes.

John Cassidy: Z doesn't really seem to care about the stock market that much either. If Trump is going to tariff all America's major trading partners, this gives China an opportunity to make outreaches to Europe, Asia, and the global south and replace the US in various parts of the world.

David Remnick: John, there's a tension inside the Trump administration where economics are concerned. You've got the economic nationalism of the Steve Bannon wing, and then you have Trump himself in some ways. You've got somebody like the Treasury Secretary or the Commerce Secretary who are big-time capitalists. They're not economic nationalists, strictly speaking. What will prevail in the administration?

John Cassidy: Is it Bannon or Besson? I guess it would be the--

David Remnick: The Treasury Secretary.

John Cassidy: The Treasury secretary now is the representative of Wall Street, although until recently, he wasn't doing a great job even defending Wall Street's interests. I think Trump is always going to end up straddling the two. I think he emotionally and instinctively is very much on the Bannon, ultra-protectionism, economic nationalism side of things. I think, as we've seen in the last few weeks with the whole tariff fiasco, there isn't a political coalition inside the Republican Party to support that over the long term. Trump himself is not willing to take the political heat that comes along with that. Once the stock market starts crashing or falling sharply, once the bankers start calling up and saying, "Mr. President, the bond market's going berserk, you have to do something," once the opinion poll numbers start falling, he backs off.

David Remnick: Once inflation starts rising and recession kicks in--

John Cassidy: Right. I'm afraid it looks like look to me, we're condemned to just continuing chaos with him rotating between the two wings. I think all we're guaranteed is more instability and chaos.

David Remnick: On that splendid note, John Cassidy, thanks so much.

John Cassidy: Thank you.

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David Remnick: Capitalism and Its Critics: A History. That's the title of John Cassidy's new book. You can find Cassidy writing on the economy every week in his column, The Financial Page at newyorker.com. Of course, you can always subscribe to The New Yorker there as well at newyorker.com.

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