Free Markets & Limited Government: Lessons from the Founding Fathers for Today  – EP218

The economic philosophy of America’s Founding Fathers was centred around individual rights, limited government intervention, and a largely free market. In EP218 of Economics Explored, host Gene Tunny interviews John Nantz about his book, “Rediscovering Republicanism.” John discusses the insights of the United States Founding Fathers, such as Ben Franklin and Thomas Jefferson, and how their ideas on limited federal power and local governance are still relevant today. John argues that the country needs to remember these insights and explore how we can apply them to our current situation. Gene asks John, among other questions, how the Founding Fathers tried to reconcile their beliefs with the slavery that existed in the Southern states.
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About this episode’s guest John Nantz

John Nantz is a Stanford-educated, McKinsey-trained strategy consultant and author of Rediscovering Republicanism. Through his book, John re-introduces Americans, particularly younger ones, to the inspiring founding values and ideas of their country. Also, based on his book, John started a highly popular TikTok series on American history that has earned over 4 million views. 

What’s covered in EP218

• Rediscovering Republicanism’s founding vision and values. (0:03)
• Rediscovering American republicanism and its values. (2:25)
• US history and political system. (7:21)
• US Constitution and citizen power. (10:23)
• The economic vision of the US Founding Fathers. (15:01)
• The Founding Fathers’ views on slavery and the Constitution. (20:04)
• Slavery and political representation in the US Constitution. (25:04)
• US government role and individual rights. (30:05)
• Federalism, welfare programs, and state roles. (36:22)
• Poverty, government role, and healthcare in the US. (40:44)
• Healthcare and retirement systems in Australia and the US. (48:05)

Takeaways

• The founders of the United States had a vision of limited central government power, with a focus on individual rights, state governments, and civil society taking on more responsibility for problem-solving.
• The current state of the United States has deviated from this vision, with a significant expansion of federal government power and involvement in various areas such as social welfare and education.
• John Nantz argues for a rediscovery of republicanism and a return to the original vision of the founders, with a focus on individual rights, competitive federalism, and a reduced role for the federal government in areas such as welfare programs. The author suggests that this approach could lead to better outcomes and more innovation in addressing complex social issues.

Links relevant to the conversation

Amazon page for John’s book Rediscovering Republicanism:

https://www.amazon.com.au/Rediscovering-Republicanism-Renewing-America-Founding/dp/0761872337

Transcript: Free Markets & Limited Government: Lessons from the Founding Fathers for Today  – EP218

N.B. This is a lightly edited version of a transcript originally created using the AI application otter.ai. It may not be 100 percent accurate, but should be pretty close. If you’d like to quote from it, please check the quoted segment in the recording.

John Nantz  00:03

And that was exactly how the Founders intended it was that we wanted these local organisations to take responsibility for lots of stuff. There’s lots of important things that the central government shouldn’t be doing, because not competent to do it. So these are insights that they had, that we clearly have lost. And so that you know if that’s part of the book is trying to refresh people’s memory and help them rediscover them, and then talk about how we might apply those those ideas and concepts to our current situation.

Gene Tunny  00:37

Welcome to the economics explored podcast, a frank and fearless exploration of important economic issues. I’m your host, Gene Tunny. I’m a professional economist and former Australian Treasury official. The aim of this show is to help you better understand the big economic issues affecting all our lives. We do this by considering the theory evidence and by hearing a wide range of views. I’m delighted that you can join me for this episode, please check out the show notes for relevant information. Now on to the show. Hello, and welcome to the show. In this episode, I chat with John Nance about his book rediscovering republicanism, renewing America with our founding vision and values. It’s about Republicanism as a political idea rather than about the Republican political party. John argues that the United States has forgotten or overlooked the insights of its founders. He argues that his founders like Ben Franklin and Thomas Jefferson, they had insights on governance that are still relevant today. John tells us that the Founders intended for the federal government to have limited power, with state and local governments, community groups and citizens themselves taking on more responsibility for problem solving. John is a Stanford educated McKinsey trained strategy consultant. Based on his book, he started a highly popular Tik Tok series on American history that has earned over 4 million views. As always, if you have thoughts on this episode, or other episodes, or ideas for future episodes, please get in touch. I’d love to hear from you. Let me know if you think a return to traditional Republicanism with a limited role for the federal government is desirable or feasible. Right. Oh, let’s get into it. I hope you enjoy my conversation with John Nance on rediscovering republicanism. John, Nancy, welcome to the programme.

John Nantz  02:24

Bing, thank you. This is great, it’s good to Good to see you. Appreciate you having me on and appreciate you getting up a little early in Australia to do this.

Gene Tunny  02:32

Oh, of course. It’s good to connect. And you’re joining us from Austin in Texas. And you’re you’re currently running a boutique advisory firm Redwood advisors. Before we get into it. Could you tell us a bit about Redwood advisors and what you do there, John? Yeah, sure.

John Nantz  02:48

Happy to tell you a bit about it. So. So I started my professional career at McKinsey and Company went to undergrad at Stanford did some time in McKinsey. It’s a big consulting firm, and actually left the firm to write the book we’re talking about today, and ended up getting a few clients when I was writing the book. And, you know, because when you’re writing a book, you’ve got a little bit of free time and not a tonne of money. So ended up doing some work independently, really loved it, and had an offer to go back to McKinsey but decided to strike out on my own and it’s worked out. And so I have a small boutique firm here in Austin, Texas focused on a lot of strategic planning work.

Gene Tunny  03:26

Excellent strategic planning for corporates, for businesses that this sort of thing you do a

John Nantz  03:32

lot of private sector, some social sectors. So we’ve done projects with companies, your listeners may be familiar with, like lifts, and National Geographic and NASA education, the Bill and Melinda Gates Foundation, the D’Aleo foundation, so it’s a good mix of private sector and social sector. And yeah, it definitely definitely keeps me busy and in stimulated, so.

Gene Tunny  03:57

Very good. Okay. It might might come back to that a bit later. That’s interesting. You mentioned Ray Dalio. I mean, obviously, you know, huge name and someone who, you know, economists obviously keep an eye on for, for all of his, you know, his interesting analysis over the years, so that’s terrific. Okay. So as you mentioned, John, you, you wrote this book, rediscovering republicanism, renewing America, with our founding vision and values to kick off with what do you mean by republicanism? This is something different from the current Republican Party. Is it the values of that party or what are you talking about here? Yeah,

John Nantz  04:38

it’s a great question. So and obviously talking to someone from Australia. If it’s just the Republican Party, United States, it’s a little less interesting. So yeah, the book, the book was really focused on Republicanism kind of as a as a political idea, not not certainly not a political party. And if you look at republics, you know, you go back to ancient Greece, you go up back to ancient Rome. These are sort of the first examples of republics. Obviously, there’s some differences in terms of how you define them. You know, some city states in Greece would qualify as direct democracies, where people actually get together and vote on laws themselves. But pretty quickly things turn into republics, where people would basically vote on elected officials to go represent them and to make laws. And that’s kind of the definition of a republic versus democracy is you elect this sort of middle layer of elected representatives to represent you hence the word like Republic. So when I use that word, rediscovering republicanism, you know, there’s this you know, kind of after the, during the Enlightenment era, you think Montesquieu, and some other Locke, etc, there was this rediscovery of, of Republican theory, going back to kind of ancient Rome and Cicero, but at the time, you know, 1600 1700s, the world was largely ruled by kings. It was a monarchical time. But people had this thought of, well, could we start republics? Could we start them and the United States was one of the first countries to do that. It was the first written constitution, actually, there was a slight predecessor in Corsica, actually, I think technically can take credit for having the oldest written constitution. But the United States is obviously largest, you know, first written constitution of note in 1787. When that got done so United States kind of kicked off this Republican push, obviously Australia, New Zealand, most of the anglophile Anglophone world has Republic’s India has a republic. So we live in a Republican age. And that’s kind of the way that I’m using that term. And when I say rediscovering republicanism, at least in the United States, you know, things have changed a lot from when the country was started. And I think we have forgotten or overlooked a lot of the insights that the founders of this country had in mind when they put together our political regime. And so my book is when it says rediscovering, what I’m kind of arguing is I think we need to go back and take a look and understand a bit better, why the country was set up the way it was set up. And, and I also further argue that we should we would benefit from reapplying those insights and recommendations to to today.

Gene Tunny  07:20

Okay, well, we’ll get into that. I just want to just mentioned zoning is a bit of trivia. So Australia, I’d say yes, effectively, we are a republic, although, legally we’re not we had a referendum 24 years ago to determine whether we should become a republic because we’re still technically a constitutional monarchy, even though we’ve severed any real legal connection with the United Kingdom. There’s no appeals to the Privy Council as There once was. And our laws don’t have to get passed by an imperial Parliament or anything like that. We’ve were completely independent in that regard. But legally, we’re still we still have a governor general who represents the king. So yeah, it’s anyway. That’s the domestic political issues. Yeah. You wouldn’t be aware of or wouldn’t. It’s just, it’s just a real oddity. Okay. Sure. I’d like to ask you about the these founders. So you’re talking about Ben Franklin and Thomas Jefferson, Alexander Hamilton, Madison, what are these insights? What are those insights that those founders had? And if I’ve left any, any important founder out, please let me know.

John Nantz  08:31

Yeah, no, that’s, you hit a lot of the big names. So when they start in the, you know, at least the United States, there was a very, very challenging and complex situation because the United States had basically declared independence from England, United Kingdom 1775 7017 76 period, there obviously, was a war. We call it the Revolutionary War. I’m not sure what the English call it, but I’d argue would love to know what they call it, but it was the 90s. We call it the Revolutionary War. And that wrapped up in 1783. And we had something the governing political document was the Articles of Confederation. And basically, how that worked was each state in the United States that was 13 at the time was pretty much its own government. So the analogy would almost be we almost it was almost like a combination of NATO and the European Union trade bloc. So it’s actually honestly a good analogy is modern day Europe. Actually. Each of the states had their own nine had their own navies. All of them had their own armies. So we have 13 different armies in the United States. So and I people don’t know this, it’s a fascinating period of history. fascinating period of American history. People just kind of, you know, glossed over it because it’s complicated, but it’s it’s absolutely fascinating. That’s 17 Three. Well, it turned out that that was a very fraught situation because the different states hates as states will do start to compete with each other, they started taxing each other’s trade. They wouldn’t let trade merchants go through their ports to get other states. There was not unified policy with foreign powers. So England wasn’t. England had agreed to leave certain forts on the borders of the United States, but didn’t it didn’t didn’t really have an army to enforce those provisions. So the English were just like, well, we’re not going to leave. And you’ve got Spain is on the Mississippi River with New Orleans and is is is blocking the export of farm goods. So there’s and then you have actual local domestic rebellions called Shay’s Rebellion. So you have these farmers rising up and saying, We don’t want to pay our taxes to the Massachusetts government, you know, and we have guns, you know, if you want to come to get the money coming taken. So this is a very challenging situation. And so, in 1787, a lot of the founders of the country that people that you were just mentioning, were like, Okay, this is not a stable equilibrium, this is going to devolve into European squabbling, or we’re going to be taken over by a foreign power, the English will come back. We have to, we have to rethink this. And so it’s it’s very interesting situation where you have these, these men, who has spent seven plus years of their lives revolting from the United Kingdom, fighting a war against central authority, because of how corrupt think they they view the English as at the time getting together and saying, we actually need more central power to hold us together. And so that was the really rich situation that the founding fathers of the United States and Philadelphia in 1787 found themselves is we just fought a war we lost 10s of 1000s of men against this will be called a foreign despotic power that was called Becoming corrupt. And now we’re getting together to basically create a new one. That is a very, very tight rope to navigate. And so that’s kind of what they were trying to do. So I think what that basically meant was, we needed to have a centralised power that could deal with foreign affairs, that could create a consistent set of laws in the country. Eliminate, you know, interest, state taxes, or kind of getting rid of a lot of the things that clearly weren’t working in that 7377 period, while at the same time not letting the government get out of bounds, because what the founders believed was that what the exam but the English example showed, is, if you have no restraints on the government, it’s just going to keep growing and growing and growing and growing. That’s just the nature of government. So they were trying to thread that needle. And so the three things that I talked about a lot in the book is the kind of bulwarks of this political order, or the first was really very strong individual rights. So the government, you know, it’s interesting, if you look at the language of the 18th century, and you guys may, I don’t, not sure where you all are now in the in, in Australia, but at least the United States, the citizens were called the subjects of the king, which is, if you actually slow down for a second, you think about that, that’s actually a really interesting turn of phrase, because basically, we are subject to the king, the king has the power, and we are subject to it, it’s very clear the power dynamic there. So they want to do is they want to make each citizen in the United States at least, is really the raison de Jatra of our political polity. We’re not a collective, we’re not at the beck and call of a king or an aristocracy. Each citizen really is their own little centre of political power, right, and the government is here to serve them, not the other way around it, the people are not the subjects of the king, the king, the government is really the subjects of the people. That’s why the Constitution is the first start, you know, the first phrase is we the people. So we the people come together to create a government to serve us. So it’s a huge inversion of the historical relationship. So he basically had and then, of course, you have the bill of rights in the United States, which were the first 10 that came out on free speech and establishment of religion, basically saying, if the government forgets what it’s supposed to do, it’s not supposed to do these things. Right? These are out of bounds. And then in the Constitution itself, there’s this listing of the powers of the federal government, what the Congress can do, the president can do, etc. All of that was intended to support a regime where the government had pretty limited powers. And the citizens had come at this open ended, right open ended ability to sort of do what they want. So that was political idea. Number one is let’s put the citizen as the primary political power in our country, not the government. The second was state governments. So like I was saying, originally, in the United States, we had these state governments, the 13th, were really their own countries enlarged in the election. So the United States those what happened is those 13. The concept is called federalism. But the federal government doesn’t have doesn’t have all the power in the United States. And I think this is common in the Anglophone world. These these subsidiary government, governments provinces is done. I don’t know what term is used in the United Kingdom. But that’s another term I think, in Canada, they use the word province Anyways, these provincial governments or state governments actually have a lot of power. So United States, they have the police power, they have the education power. So you know, there’s local laws that they can enforce that the federal government actually can’t election law, for example, it’s a state law is the state prerogative in the United States. So the states got their own power, which was separate from the federal government. And that was intended to sort of like make sure that the federal government didn’t get too big. And then the third thing was the civil society. And this was a sort of a softer, more tacit thing. But it was absolutely critical to how the founders looked at the world, which was, we don’t want government to be the problem solver for every social problem. Like that idea, which is endemic now. Yeah, is would is totally foreign to them. Right. You know, Benjamin Franklin, you know, started the first public library, quote, public, it was a private library, right formed by the citizens of Philadelphia didn’t need the government managing it. Same thing with fire departments. Same thing with toll roads, in the United States, all of this stuff was done, sometimes locally, with the citizens working amongst themselves, sometimes by the local or state governments. So that was the third one was they assumed that and that’s where the indigent like help for the poor. You know, we we’ve had that in our country since the 1600s. But the federal government hasn’t didn’t get involved until the 1960s in the United States. And that was exactly how the Founders intended it was that we wanted these local organisations to take responsibility for lots of stuff. There’s lots of important things that the central government shouldn’t be doing, because not competent to do it. So these are insights that they had, that we clearly have lost. And so you know, that’s part of the book is trying to refresh people’s memory and help them rediscover them. And then talk about how we might apply those those ideas and concepts to our current situation.

Gene Tunny  17:35

So what I liked about your, your book, you talk about the economic vision that they had, they had a vision of a particular type of economy and people within that economy, you talked about self reliance, but it’s broader than that, isn’t it? I mean, in the concepts that you were talking about in their book, we could you could you explain what the economic vision, the economic vision of the founders was pleased, John.

John Nantz  18:03

Yeah. And I know that’s, that’s of interest to you. And a lot of your listeners, this is this is this is this economics perspective. So, you know, to give a sense of how important this was to them. A lot of people don’t know this, but actually, in the Constitution, there’s a fair amount of language around intellectual property rights, which is kind of fascinating. You’re like, wow, I mean, it’s not a very long document. But they actually took the time to articulate rules around or guidelines in terms of, okay, if you create something, how long can you patent it? Can you have rights to that, etc. That is a huge tell about how they expected things to play out how they wanted them to play out. So the founders were sort of setting up this system, that they their vision was they would have, you know, independent, free, you know, individuals making largely free choices, working together. To, at least in those times, many people were working on their farms, so obviously run their farms independently, but they had manufacturing firms, traders, all these people doing, all these folks will be working independently, to build wealth to create income for themselves and their families. They’ll be working together collaboratively, sometimes in the economic realm, sometimes in the social realm to sort of solve social problems, but they will be doing this sort of in these voluntary civic society. This is what Tocqueville who visit United States, this was the most remarkable thing he thought he found about the United States was all these civil associations that were solving various problems. So that yeah, I don’t know if that answers your question. But, you know, obviously, the Constitution is a political document. It’s kind of how things should be working politically. But embedded in that is this vision. It’s a political system that was intended to support and for Oster, a very largely free market. I mean, we didn’t have regulations in this country. I think the first regulation, I could get this wrong, but it was there, there was like a little bit of federal regulation in the 1820s. Regarding like smallpox, but you didn’t even really see the first thing, the concept of a federal regulation, even the concept, federal even existed until the 1850s 1960s, the federal government ran for 80 years, that tells you how not involved they expected the federal government to be. They didn’t even think it was something they didn’t have the idea of doing it, that they assumed all of this would be done, either at the individual level or the state level. Yeah.

Gene Tunny  20:43

How did the Founding Fathers reconcile this? The belief in, in limited government or in or in freedom in rights? How do I reconcile with the slavery that existed in the southern states?

John Nantz  20:59

It’s great question. It’s a very fraught question. It’s very interesting. And obviously, there’s, there’s a lot of this is kind of a hot topic in the United States. There were basically what, here’s how I would characterise and of course, each person had their own perspective. Right? So I’m characterising a group. But obviously, each person has their own view on it. But I’m broadly This is I think, correct. He looked at the people who were there at 1787. In the room, the broad consensus was, this is not the future. This is not in line with our values. So there was a pretty clear, I mean, you couldn’t have gone through the Revolutionary War with, you know, no taxation without representation, right. And you think, Well, how does that apply to slavery. And by the way, if you, you know, you can read books on this, Bernard Bailyn has some, the ideological origins of the American Revolution is Pulitzer Prize winner and fantastic. It was not lost on these people, that the ideology of the revolution did not support the philosophical underpinnings of slavery, that was not lost that intelligent people. So you have that you also have the reality of slavery, which is that you have the majority of southern wealth in slaves, you have, I think, at that point, almost a million slaves. So which is a good portion of the country back to a bigger portion of the country at that time, then then now and a bigger portion of the country then then, actually, during the Civil War, because the Civil War, the North actually grew more? So you had this practical consideration? You had this this IDI, you know, idea. And so what they did is they tried to come up with some compromises. So So one thing is the word slavery is not in the Constitution, which is a very important thing, they knew the word could have been the reversions of the Constitution, drafts that included it, and they took it out, because they didn’t want the word in the documents. And I think that’s a huge important tell. They had this compromise on the three fifths compromise. You can argue that both ways, but I think again, you kind of see them struggling with how do we deal with this. Very importantly, black people don’t know this. The Constitution actually included a provision allowing the elimination of slave imports in the 1800s, early 1800s, I think of 1805 1806, I might be getting that wrong, but it’s during Thomas Jefferson’s presidency. So the Constitution actually predicted we’re going to ban the import of slaves, which they actually did. So the second that day came around the United States embargo, the slave trade in the early 1800s. So we didn’t actually import slaves. So you can kind of see where all this is going. Everyone is sort of like, and then here’s the other interesting thing is that that time, a lot of people thought that slavery would just sort of go away, that it would sort of not be, it wouldn’t be economically efficient, right? That actually slaves would be more of a burden than a boon. And that this is actually what they believed. And there was some good evidence for that at the time that it actually wasn’t that productive to pay for and feed slaves relative to what they could produce. The cotton gin and all that stuff. What really changed the dynamic is an early 1800s, Eli Whitney came up with a cotton gin, which allowed the very efficient This is an economic point, by the way that a lot of political historians don’t understand. But it’s fundamental to what actually happened. Eli Whitney creates the content, I forget when I think it’s in the early 1800s, which massively increases the productivity of cotton production, meaning you can kind of go out and get all the stuff that’s in these cotton balls out using just running it through a machine as opposed to doing it by hand. So we’re not talking about 20%. We’re talking about multiples more efficient. At the same time, cotton demand is skyrocketing. And no one wants to go outside and if you’ve been to Mississippi, but like you’d have to pay someone a lot of money to do that. That created a massive demand for slaves and that’s where you see the price of slaves United States starts to skyrocket. As they can produce cotton, which then can be sold into the, into the global market. That is what made slavery last. And that’s I think what led to the war, because 10% of African Americans or I should say blacks in the South were free. By the beginning of the Civil War, people don’t know this, but Manumission was actually not uncommon. And there are some parts of Virginia 15 20% Were already freed before the Civil War. So the founders thought this was kind of going to go away, it was a little bit naive. But that was their belief. They didn’t think it was. They didn’t think it was moral. They weren’t proud of it, they wouldn’t have they won’t even say the word. And just it technological and historical things intervened, and it took a civil war to figure that out wrong.

Gene Tunny  25:43

And what was the three fifths compromise? Is this? I mean, it sounds ghastly, is this actually counting a slave as three fifths of a, of a person for the purposes of, of some calculation? What what’s the what’s it about there? John, please? Yeah, it’s

John Nantz  26:01

no, it’s a good, good. Yeah, good question. So. So obviously, slaves can’t vote. So it’s very interesting, because it’s the southern slave people. Let me actually, I hope you don’t mind. Let me go back really quickly to the Constitution. In the debates, there were some people from some of the southern states, particularly South Carolina, I think your guys made Pickney, who basically said, if we are not allowed to have slavery, we are out. So I want to be really clear about that. It was not. And it kind of makes sense. When you look at their economy, it makes sense why those people would not support that. And so basically, hope you don’t mind. But let’s just quickly go back, I wanted to wrestle this one down, which is that the South would have would not want to join the Constitution is there is a very simple, so if you’re from the north of Europe, in New York, or Pennsylvania, or whatever, where they didn’t have a lot of slaves, they didn’t support slavery, the South would have just started their own country. So we would have had the Civil War, but 80 years before, so the compromise was required to get all 13 States in. Okay, so let me just, that’s a nice segue into the three fifths compromise, you had to have a compromise, or the states would have just left, I mean, you know, that it said South Carolina was not going to be in for that. So the three fifths compromise was basically, slaves largely couldn’t vote. But the South was still like, Yeah, but they’re people, we feel like they should get some representation. So the compromise was three fifths. So when we’re deciding how to allocate in our country, the House of Representatives, which is by population, a slave would count as three fifths of a person. So if I have 10 slaves, that would count that would be worth six white voters. And that’s how we decide how many representatives a certain state would get. Now, each state also gets two senators. There’s a very, you know, you can argue this both ways, like some people say, Oh, that’s, you know, some people who they say, hey, well, you’re kind of acknowledging they’re a person. That’s good, right? So some people say there’s an abolitionist, anti slavery part of the three fifths because you’re kind of conceding their person. And then of course, other people say the opposite of, yeah, but you know, you’re giving slavery more political power, and you know, etc. So you can argue both ways.

Gene Tunny  28:21

Yeah. Okay. I was just interested in what that what that was. Exactly.

John Nantz  28:25

Yeah. So it gave the slave states more political representation. Yeah.

Gene Tunny  28:29

Okay. Yeah. Okay, we’ll take a short break here for a word from our sponsor.

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Gene Tunny  29:07

Now back to the show. Okay, so, you would argue in favour of rediscovering the rediscovering republicanism, the original vision, the values of the founding fathers? How would you apply this today? I mean, look, you’ve got them in the we’re in a different economy, aren’t we? We’ve got an industrialised society, more people living in urban areas. We don’t have the same I mean, there’s organised religions just fallen off a cliff. I mean, more so in Australia than in the United States. We’ve got a massive welfare state we’ve got money in events intervention everywhere. How would you go about it or what are you I suppose what do you see as the the worst areas or where would you apply this vision for as to how do you how would you see this applaud today, John?

John Nantz  30:04

Yeah, no? Great, great, great question. So what I would say is, you know, even at the founding period, the the federal government, the central, our central government had a lot to do. They were completely in charge of military National Defence, they were completely in charge of Foreign Affairs. They were completely in charge of intellectual property law. They were completely in charge of any legal disputes across state lines. This is the founding, by the way, this isn’t reason this is like at the beginning. So when we say, and I think it was an important insight, which is the founders didn’t say we shouldn’t have any central political power the the federal government constitution, the whole reason it exists is to stand up a federal power. A lot of people in United States don’t understand that. Okay. So it’s not about whether it should exist or not, it’s about what it should do. And I think that’s where we were, we got off, at least in our country, and I think a lot of countries across the developed world, particularly in the Anglophone world, we all we all actually have pretty similar traditions, we may think we’re really different. But, you know, compare yourself to China, right? Compare yourself to Russia, and I think we can realise, okay, there’s a lot of commonality among the English speaking peoples of the world. I think what we did in the United States is we just really index on on central power. You know, it depends on what country you’re talking about. But for us, it was really the Great Depression, we have would be called the New Deal in the United States, which just led to this massive profusion of federal power. We, the federal government get into the economy in a really big way. We had the creation of Social Security. We had Works Progress Administration, which employed millions of people to like do various projects across the country, regulatory state, social welfare. So the federal government, at least in our country, and I think in a lot across the world, took on responsibility for helping the the indigent among us, the people who are economically, in challenging circumstances. Wow. Right. That’s a massive amount. And they’re still doing national defence, and they’re still doing Foreign Affairs. And I would argue we’re not doing it that well. At least I’m just gonna say the United States in the last 50 years, I don’t think is a high is not a high point of American governance, right, you can look at, you know, the wars we fought in, I’m not sure those were the smartest wars, or poverty rate, really, isn’t that great. We have a massive homelessness problem, our education really hasn’t gotten better. So, you know, we we made this change. It sounded good. And then, of course, in my book, I talk about the evidence, I say, look, I think if you look at the evidence, it’s hard to say that this was a positive experiment, right, we ran an experiment, and things really didn’t get a tonne better in a lot of areas. So in the book, what I’m saying is, let’s rediscover some of those insights and apply them. And so we go back to those three things, the individual rights, the federalism or subsidiary of like using more local governments, and then civil society. So I quickly tick through through each if you like, individual rights. I think the most salient example there is, is retirement. We’ve got Social Security, we’ve got Medicare. In our country, I’m sure you all have similar programmes in Australia, if not even

Gene Tunny  33:14

more comprehensive, and more expansive. Yeah. Yeah. So

John Nantz  33:18

you guys have more expansive. We’ve had conversations in the United States about, you know, setting up individual accounts, you know, we’ve completely socialised your retirement income and healthcare, meaning you pay in some payroll taxes, and then the government promises to give you some money and to take your healthcare when you’re older. Which is one way to do it, I think a more American way to do it would be to give people individual accounts. So when they save money, it goes into an account with their name on it, that they get to have some influence and control over with a backstop. So if you run out of money, right, or if you are too low, or you need help topping off your healthcare premiums, the government’s there for you. But let’s at least give people an opportunity to kind of manage their own affairs. It’s a much more American way to do it. Right. I’m not saying it’s how every country should do it. The United States, I mean, people here like to take care of their own stuff. So this having a big social insurance model, which we kind of got stuck on, and it’s quite the narcotic. We’ve been on this since the 1930s. It’s hard to get off. But in my book, I think we should I argue we should. And I think there’s really good reasons to do that. And I think that would be a huge step towards getting back to a citizen first approach to life in the in the united states. States. The federal government, United States got into education, they’ve gone to social welfare. It’s gotten into a tonne of stuff. It’s kind of crazy. The idea that these people could manage all of this stuff simultaneously. It’s just horses completely far completely far fetched. So in the book, I basically argue some of these, some of these powers should go back to the state governments, we have 15. United States, I don’t know how many you guys have in Australia. But, you know, like homelessness, we’re not gonna figure it out in Washington DC, we’re just not, we may not figure it out, we may not figure it out anywhere. But I would prefer we have 50 Different states trying things. And to see what works, and some states are going to be more conservative, some states are gonna be more liberal, some states are going to have more law and order, some people are gonna be more permissive, fine, run all the experiments. It’s just like science 150 experiments get results you can learn from each other. Right? The centralised model is very, it’s actually not always nonscientific. It’s like, let’s just have some smart people come up with an idea. And that’s how it’s gonna be one way. That’s not science. Right? That’s philosopher Kane. That’s like, that’s like Plato, the, you know, going back to that way of looking at the world. So with these types of complex things, I just think we’re gonna get better results. If we let 50 different experiments. And let’s add Australia, let’s add Canada. I mean, we can learn from you guys. You can learn from us, these are global issues, and figure out what works and decentralise that. So that’s kind of like saying the book is let’s get the federal government out of some of these social issues, these kind of social welfare, domestic issues, and let the state governments take the lead.

Gene Tunny  36:21

Yeah, yeah. So you’ve got this vision of competitive federalism. And look, I? Yeah, I think there’s a there’s a good point there. There’s some good points there. Particularly, you see a state like California where it’s, I don’t know if you’d call it a failed state, but that it obviously is not the power that it once was. It said, it’s got some problems, and you’ve got people leaving California and going to places like Florida or Texas. So yeah, I am

John Nantz  36:51

one of those people. I lived in San Francisco and I moved to Austin, seven years ago. You’re looking at one of those refugees. Yeah,

Gene Tunny  36:58

yeah. Yeah, absolutely. Okay. And that’s why

John Nantz  37:02

I love federalism, right? Because, you know, at least at least on some issues, I get to choose the regime I live under, you know, and I don’t mind that California does it that way. And they, if they want a top tax rate of 14%, and they want very lacks homeless rules, and they want all this stuff. There’s an argument for that. And there’s also an argument for no income tax, which we have in Texas, and law and order, you know, like, you can’t sleep and set up tents on the sidewalks in this state. We got we have we have places for you. We have camps, but it’s not downtown. Yeah. And, you know, and that’s just, that’s just how we do it. So, you know, I think it’s good. And we can learn from each other.

Gene Tunny  37:48

I’m wondering, John, with your, your idea of having the federal government get out of some of these areas? And I mean, I’m just thinking, I mean, what else needs? Have you thought about what else needs to happen? I mean, if I look at it, I think I mean, you talk about civil society. Now, you’d have to have a big increase or a big boost in civil society or in, you know, welfare philanthropy from, from the private sector to be able to fill that gap, because it’s going to be huge, was presumably when Lyndon Johnson introduced the Great Society. I mean, that was one of the periods where you had like FDR, but then you also had Johnson, who brought in a lot of the new welfare programmes, and then that’s right. Presumably, he was mean, I think, was he concerned about poor, the poor living in the Appalachians? Or there was some, you know, really remote areas of the states where people were living in really poor conditions. So it’s generally concerned about poverty. I’m just wondering, have you thought about, you know, how would this, how would this work? What else needs to happen? If you if the federal government suddenly I mean, what are you talking about? You’re talking about cutting the welfare programmes? I mean, how, what happens in that circumstance? You know,

John Nantz  39:10

I so it’s a great, it’s a good question. So I’m on welfare. I actually think just I think sending it to the States. I think there probably is a state role there. states in the United States had been had been involved in indigent programmes since the 1800s. So state governments have had a role here for a long time. What’s new is the federal government getting involved. That’s what’s relatively new. And it’s funny now, West Virginia is one of those conservative states in the country, which you were talking about women and Johnson referring to Appalachia, and they’re still quite poor. And the reason is, if you if you visit, is that they’ve seen the impacts of these programmes that for decades and you create dependency and you create a lack of work and you you know, federal government has a really hard time, right monitoring anything And so, yeah, it’s, that’s a whole thing we could go down. But there are a lot of things that are not helpful for people in the long run that that I think federal programmes are really not very good at determining like, are you an addict? Like if you’re an addict, there is a very big difference between someone who lost a job at a steel plant or a car plant and someone who is addicted to alcohol or opioids or whatever. And if you’re sitting both of them the check, right, which is what the federal government basically does, right? That’s kind of what they’re in the check distribution business in this country. That’s great for the person who’s down on their down on their luck, right? It’s really not good for the person, you’re you’re now literally paying someone to stay in the addiction cycle. And this is happening to millions people. I mean, you know, so there’s a finesse required. Poverty is so funny, because it’s conceptually really simple. It’s like, oh, here’s this person, they haven’t they don’t have enough money. Easy definition. The solution is really complicated. And it’s heterogeneous. It completely depends on the person, right. And people who in as part of my book, I cite people who spent decades working on this issue, and the one thing that’s consistent when you listen and learn and spend time with people who’ve worked with poor people, is able to tell you how complex it is. So and that is one thing that federal government is really bad at. And laws are really bad at because laws are, by definition, treating multiple cases the same way. That’s what law is about. That’s what they are trying to get at in my book is I think there’s something in that I think, I hope my book is making a contribution to this conversation, because what I’m arguing the book is, there’s something inherent, right? It’s not that we have bad people or that people are not competent. It’s the idea that somehow you’re going to pass laws that are going to create these formal bureaucratic programmes that are going to successfully tackle complex problems, like poverty is inherently a very questionable assumption. Yeah, right. Yeah. So that’s why I’m saying poverty, you push down to the states. They can work with social sector institutions, they can be much more innovative. And there’s a lot of evidence to support that. Yeah. Yeah. I think that’s I don’t think we get government completely out. I don’t. Yeah, I don’t personally support that. But I do. I think the state governments, I’d love to see them play a much bigger role, I think they’re gonna be a lot smarter, I think they’re gonna be a lot more creative. I think they’re gonna be able to handle diversity of cars a lot better. You know, that sorry, we’re having as a country, and I think we might get there. I gotta be honest. I’m actually, next 50 years, I think it’s possible that that some of the things I’ve talked about this book will will happen. Okay.

Gene Tunny  42:46

Finally, I’d like to ask you about healthcare, John. So I mean, one of the things like, from an Australian perspective, we look at the US and, and a lot of a lot of us over here would probably think, oh, we’d actually rather live in Australia with with the single payer or the socialised medicine, or whatever you want to call it, then in the US, because I mean, we we looks like we get better outcomes in terms of life expectancy. Now, I mean, this is not to necessarily be negative about what’s what’s happened in the States. But how do you see the role of government in in healthcare and you had the Obamacare now that didn’t really replicate what we’ve got here in Australia or the UK, but it moved to your way from where you were? And how do you see the role the federal government in in health care, given that if you look at other countries, it looks like there might be public support for that, or that looks like something that may be beneficial? How do you how do you think about health care in your framework?

John Nantz  43:53

Yeah, that’s a good it’s a good question. So yeah, I mean, look, the United States is a bit of an outlier in terms of how we do this with with a private market, really playing playing a leading role. What I would say on healthcare that I think might be interesting to your listeners is, there’s the way that I think about and this I think, helps kind of understand what’s going on the United States. You can there’s the consumption and provision of medical care and you can socialise or privatise either. So almost imagine a little bit of Punnett square. So I’ve got the provision, which is like supplying it, I can have private practices and all this stuff or I can have a nationalised socialised system, which you have in the UK, you sounds like you guys have in Australia. And then the consumption can actually also be privatised, or socialised meaning, the amount that’s provided to the to the citizen can be controlled or it could just be like, hey, the government’s gonna provide it but you can consume as much as you want. So you can privatise demand. In India, in a lot of developing countries, we have private supply and pry I have it consumption, meaning we have it. That’s true. That’s right. The government doesn’t have much involvement there. They do among among all people, and he have some insurance companies but they actually have a lot of self pay. So it’s almost like a it’s like an actual market. Would you see there is typical market dynamics is actually relatively low cost, actually decently high quality. Then you have you guys UK, socialised consumption, socialised provision, the doctors are paid by the government. And and there’s waitlists meaning Yeah, hey, this is how many surgeries we’re going to do. And you just get in line and you wait until your spot opens up. So it’s socialised consumption. We have a very weird thing where we socialised the consumption. But we privatised the provision. So we socialised a lot of people’s consumption. So they’re gonna buy a lot of it. But then we actually privatise the doctors are still for profit companies. Yeah, well, that’s gonna get you guess what that’s gonna get you that’s gonna get you really expensive. You’re gonna spend a tonne of money because I still have a bottom line as a hospital or a physician group. But my consumers don’t care. Well, that’s where you get the United States where we have 8090 $20,000 per capita. And like you said, accurately, we don’t have better life expectancy. We just don’t. That’s the evidence. So I don’t get a tonne of I don’t get into this a tonne in the book. But I think to the extent that we can, if we’re going to privatise the provision, if we can do something to incentivize, we probably I think that’s not a stable equilibrium. I’ll be honest with you, I don’t think it’s stable. You’re either gonna go socialise or you’re gonna go privatise, you can’t have the middle because in the middle, it gets super, super expensive, which is what we have. You either have market forces, controlling demand, like you have in India and China, and some other developing countries, which actually has some benefits to it, or you go full social. That actually does make sense. There’s an argument for that. So I think we’re in a bit of an unstable equilibrium. Switzerland has a model similar to this where they have private insurance companies, and then they basically help people pay for their insurance. That’s probably where America is going to land. Honestly, this is in the Obamacare in the ACA like world, where we base is you take take Medicare, for example, with the United States, it’s our programme for old age 65. And up. The portion of the party that’s growing the most is Medicare Advantage, which is private insurance companies getting people’s premiums and supplying them as opposed to Medicare, which is the government programme. And Medicare Advantage is almost up to 50%. So what we’re finding is American seniors are choosing the for profit insurance company, just apply their care. And it’s completely voluntary. Ron? Yeah. So look, healthcare is super complicated. I work at it from a business perspective. I wish I could tell you where it’s going. I can’t. But yeah, I don’t think what we have now is sustainable.

Gene Tunny  48:05

Yeah. Yeah, I agree. I mean, I don’t have the answers, either. I just, I’m just interested in how, in how you do things over there. And yeah, well, I mean, I mean, there’s like one point that john cochran made, or John was at a, an event, he came over to Australia for a reserve bank conference, and I interviewed him at an event in Sydney recently, and the point that he made was that if you want to, you know, the US still has the best treatment of the world. I mean, you have to be able to if you’ve got the insurance, and you can get the best cancer treatment, best treatment for anything in the world. So there are some great things about the American system and, and you don’t have to wait as you might do if you go have to go to a public hospital here in Australia. That’s one of the issues of the cueing. So yeah, look, there are some the pros and cons with each system. So yeah, just thought I’d better clarify that this has been great.

John Nantz  48:57

I love Yeah, well, and I love the question. And I would just say Do you mind if I can I know you’re trying to get your heads up? I was just gonna say that. It is really interesting. Because one way to look at this and this is an economics perspective is the US when you look at profit pools. So when you look at where our drug companies and medical device and technology companies making money, the US is I think two thirds of the profit pool not revenue profit pool, right? Yeah. Two thirds. So here’s what’s interesting is if we did socialise and the political will go down massively because the government would buy everything, you would absolutely see a reduction. i There’s no i I don’t know. I’d love to see this argue the other way. But I’m I’m pretty confident. Yeah. Just based on basic economics, that the province will drop that much, you would see a substantial reduction in drug development medical device, because what’s happening now is the United States mark is basically subsidising r&d. Yeah. What’s the what’s the developed world globally? People in Australia are benefiting from if we socialised and our market shrunk and was more competitive. We took our cost per capita from 18 to 12, which we could absolutely do. Right? There’d be a lot less money and all those things. And so knee replacements, you know, weight loss, drugs, diabetes, drugs, all the stuff that we all love with the pace that it would slow. So there’s a huge benefit globally. So the way that we’re doing it, I’m just not sure we’re seeing the benefit.

Gene Tunny  50:26

Yeah, personally, I think that’s a good point. And that’s the point that Russ Roberts has made, if I recall correctly on econ talk, so very, very good point. Yeah. Okay. I just might clarify a couple of things, John, because just so I don’t give you the wrong impression of what we do over here in Australia. So yeah, we do have, we’ve got a Medicare system, which covers a lot of, you know, the whole population, which means you can go to the doctor and get a lot of that, that primary care paid for. We’ve got state hos state hospital systems are a public public hospitals, which will, you know, provide the free health care for people, but we also have a private system, you can get private insurance, and then you can go to a private hospital if you want to. But, I mean, there’s a heavy reliance on the the public healthcare system in Australia, and Medicare does pay for a lot of basic services. So health care, primary health care, and also, you know, AI tests and things like that for, for the whole population. So, you know, we definitely do things different. The other thing is retirement. We’ve got, we do have those individual accounts, like you’re talking about, but we still have the back, we’ve got a backstop of the pensions, the age pension system, but the fact is that most people can arrange their affairs so that they get either the full pension or part pension, right, you need to accumulate a lot in your individual retirement account not to actually get access to the pension. So we introduced individual retirement accounts, compulsory, super, but we haven’t actually, we haven’t really tried to avoid the problem that they were trying to, to avoid.

John Nantz  52:05

Yeah, bit of what you guys are ahead of us there. You guys are ahead of us there. Yeah. It’s so funny, because I’m like, sometimes I’m like, Yeah, I feel like we’re really, the United States is really behind the ball in a lot of ways. It’s like, you guys are doing it. Sweden is doing it. The United Kingdom is doing it. I mean, I would argue more left wing countries in general, right. But when you look at the actual policy, it’s like not really, right. I mean, you guys have these, we don’t have that. We have 401k, as you all know, stuff. But yeah, we don’t have it in our government system. And the thing is, Gene two is like this stuff is going to take decades to play out, you know, so it’s like, you guys got it set up. But you have to get this really high threshold. You know, very few people are there. You know, but let’s, you know, give it 2030 4050 years, you know, saying And and I think it’ll start to work.

Gene Tunny  52:51

Yeah. All right. John. Nance, thanks so much for the conversation on your book rediscovering republicanism, I really found that really enlightening. And I really like how you’ve thought a lot about these issues and the, the, you know, the founding vision and the values and how that could be applied in the modern context. I think that’s, that’s terrific. And I really enjoyed the conversation. So thanks so much, John. Thanks,

John Nantz  53:17

Jen. Really appreciate it. Thank you for the time.

Gene Tunny  53:19

Thank you. rato thanks for listening to this episode of economics explored. If you have any questions, comments or suggestions, please get in touch. I’d love to hear from you. You can send me an email via contact at economics explore.com Or a voicemail via SpeakPipe. You can find the link in the show notes. If you’ve enjoyed the show, I’d be grateful if you could tell anyone you think would be interested about it. Word of mouth is one of the main ways that people learn about the show. Finally, if your podcasting app lets you then please write a review and leave a rating. Thanks for listening. I hope you can join me again next week.

54:09

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Credits

Thanks to Obsidian Productions for mixing the episode and to the show’s sponsor, Gene’s consultancy business www.adepteconomics.com.au. Full transcripts are available a few days after the episode is first published at www.economicsexplored.com. Economics Explored is available via Apple Podcasts, Google Podcast, and other podcasting platforms.