Adam Tooze on our Financial Past and Future | Conversations with Tyler

Hallo everyone, today I am speaking with Adam Tooze, the famous historian at Columbia University. I have read all of Adam's books. I am a big fan. He is well known for his treatments of German history, the history of the financial crisis, and right now he is covering the financial stresses in our system on Twitter. I very much recommend that you follow him. Adam Tooze, welcome, thank you for Speaking with us.

No, thank you for having me on the show.

Let's go back to the Spanish flu of 1918-1919. Do you think that Western economies were better equipped to deal with the pandemic in percentage terms at that time than they are today?

Well, it's an interesting question. It's an interesting way of putting the question. I mean, what's been striking about the 2020 pandemic is that we have chosen an extraordinarily high-cost route. I mean, we have chosen a comprehensive lockdown as the default strategy for dealing with this. And as far as I'm aware, no one attempted anything remotely like that in response to Spanish flu. At the local level, there were efforts city by city, but there was no comprehensive national lockdowns. In fact, if you study the economic history record, the archive of that period, the policy decision-making in, say, the Weimar Republic, which I've spent some time on, or the minutes of the Versailles Peace Conference, the flu barely figures. I mean, it figures in the sense that occasionally a prominent person will get sick, famously President Wilson. But the idea, I think, of a kind of comprehensive lockdown as part of a public health response, as far as I'm aware— and of course, this has taken us all aback and has caused us to reflect on what we might have missed in the historical record— I don't remember it arising anywhere as an option. And we know that, you know, the consequences were of course dramatic in terms of the loss of life, particularly in what was then the imperial world, the colonies so-called, in Africa and India. So I mean, we're much more affluent than we were then by an extraordinary— I mean, it's very difficult to exaggerate— I mean, order of magnitude, broadly speaking, in terms of the per capita income. And we've chosen a very high-cost route for dealing with the epidemic this time.

Now, we had a V-shaped recovery back then, and it doesn't seem that you're confident about a V-shaped recovery right now. And which feature of the modern economies is the difference? Is it percentage of agriculture versus face-to-face services, differences in inventory, differences in personal risk aversion?

Well, and also, I mean, it's very difficult to disentangle the different effects here, because when you're talking about the era of the famous Spanish flu, we're talking about the aftermath of World War I. Which is a huge shock in both supply and demand side. So there's huge pent-up inflationary pressure on the demand side and massive disruption on the supply side from the demobilization. It's also a period of revolution in much of Europe, which causes huge disruption as well. So, you know, if there was a V-shaped recovery there, it was a V-shape that was, you know, it's recovering from many different forces. Then of course, there's the savage deflation of 1920, '21, which also hits the global economy in the aftermath of the war and the flu. This time round, I'm definitely in the kind of Swoosh camp, modified Swoosh. I don't frankly have a strong set of priors about what a recovery from a collective simultaneous shutdown of this scale looks like, and I am quite suspicious of the comparisons which treat China as a national aggregate and then say, well, that's our future, because even allowing for the exaggerations of the regime's propaganda there, they do seem to have contained the acute virus, the pandemic there in one particular province. So we have to be quite careful about making comparisons with the US or Europe where we've had multiple Wuhan-style outbreaks.

But given the low rate of immunity in most parts of China, shouldn't we be fairly pessimistic about Chinese recovery right now?

Exactly. And so that, given that even in the Chinese case, we're saying something closer to a swoosh than a V, the prospects in the West, I think, are, as I think you were suggesting, quite, quite poor. And it's just unclear to me how a, as you were saying, densely packed urban service sector, face-to-face-based economy of a city like New York, how it comes back under a regime of periodic lockdowns and managed social distancing. It's just a huge huge experiment that we're running.

If there were a Chinese financial crisis coming out of coronavirus, what would that look like? What's the weakest stress point?

Well, I mean, the real estate sector is one obvious one, and some of the hugely highly leveraged Chinese development companies— Evergrande is, I think, most people's favorite as the weakest link in the Chinese real estate development sector. I think I ballpark $100 billion in foreign exchange borrowing on its balance sheet. So an extremely fragile actor. Whether it's systemic in the Chinese context is a different question. Whether the collapse in that firm by itself would have a large enough ripple effect is an open question. The shadow banking system in general in China, I think, is a huge worry. So these are the banks which operate outside the mortgage lenders of various types, but also various types of lenders that support local governments. And then I think there is the rather horrifying experience of 2015, 2016, which is easily underestimated in the West. We were distracted by a variety of other issues at that point, but China went through a really dangerous-looking foreign exchange run in '15, '16, lost about a trillion dollars worth of reserves, which is large even for the Chinese to absorb. And that's another model of what a shock might look like, a financial shock. Mercifully been spared that so far this time around. It would be very bad news for the emerging market economies which are closely coupled to China.

For dealing with the current crisis, financial crisis, what is the statistic you wish we had that we do not?

I think the question that is probably on most people's minds is the weak hands. I'm not sure that I have— it's a great, very pointed question. Is there a single statistic? In '08, the problem in the end was what are called the weak hands, so where the risks were concentrated, where the losses were concentrated, where the leverage was, and where therefore a run would be very, very damaging. And I think that's really, in terms of managing the financial crisis, as opposed to the real economic recession, which is coming our way, that's probably the thing that Jay Powell and central bankers in Europe as well are most worried about. Are there actors out there that could be forced into various types of fire sale, which would then destabilize asset prices? I don't think necessarily there's one number this time round. One of the things I think they're dealing with is that this isn't a bank-centered financial crisis. As Robin Wigglesworth put it in the Financial Times, he was quoting somebody he'd interviewed, that this was a financial market crisis. So it's affecting lots of different markets for credit rather than the balance sheets of individual banks. I think in '08 we would have known, like, you know, we're extremely concerned about Citigroup. That might have been, you know, the mantra by December. This time around, I think the risk is more diffuse.

Won't it quickly become a bank-centered crisis if, say, 20% of Americans are not paying their mortgages, which is an estimate I've heard. It might be rough. Within a month or two, that seems intolerable, that even Fed liquidity injections would not get the banks over that hurdle unless we fix it more directly somehow.

Exactly. And I mean, Neel Kashkari came out in the FT, I think yesterday, calling for a big capital raise on the part of the banking system. To provide them with more shock-absorbing capacity. Whether that hits the big banks this time or whether the neuralgic issue will be the mortgage lenders who are in the frontline of that shock, or the people who are exposed to various types of consumer credit, I think that's, that's a key issue. It's not obvious to me right now that the balance sheets of the really, the core group of systemically important largest US banks are vulnerable. To anywhere near the same extent as they were in '08 anyway. But absolutely, you're right. If this turns into a protracted, extended real economic recession, if this is a very slow recovery, then feeding up from the bottom by way of households and companies' inabilities to service debt, you would expect that kind of shock to develop.

What do you think of the liquidity of Treasury securities, the bid-ask spread on Treasuries, as a way of seeing how well financial markets in general are working? As a way of tracking the crisis.

That's, that was I think very much on the minds of the central banks in the critical weeks in March, various huge fluctuations in price and then gaps in the market where you would normally expect treasuries with different terms to, you know, have a smooth curve of pricing. I know that the Bank of England around the 18th of March was extremely concerned about if you like, just gaps in the market for UK gilts where you would expect a smooth yield curve, and that was no longer, that was no longer something they were seeing. They were seeing irregularity. I think that's, the government debt market is one of the, is one of clearly one of the foundations of financial stability. So far overall, Once we came out of those two really dangerous weeks in the second and third week of March, perhaps not surprisingly given the scale of asset purchases by the central banks, the normal set of relationships between equity markets and bond markets seems to have been restored. There seems to be a safety function being performed by government debt markets, which must be reassuring. If that were to become destabilized, it would indeed set off warning lights flashing, I think.

Under what conditions does stagflation and just a higher rate of price inflation become the most likely possibility? What would predict that as the end state?

I'm—

it is amazing how much we're monetizing, right?

It is indeed.

Something called QE infinity and there's more to come and it will be in more nations.

Yeah, and you would anticipate, you know, if you were kind of— if you had any sort of a shred of monetarist in your body, you would expect to at some point for there to be a price response. I mean, in the short run, the sort of secular stagnation scenario seems a little more plausible because, you know, from a Keynesian aggregate demand perspective, you would expect households to respond to this kind of shock with a higher savings rate, and you would expect— and we've seen quite substantial deleveraging after '08 in the American household sector— and you would expect, you know, business confidence to be shot and lower levels of investment. That wouldn't suggest that general macroeconomic circumstance which would lead to inflation. On the other hand, the monetization is massive. Frankly, I mean, if we could have inflation of 4 or 5%, in many ways that would solve a lot of our problems because it would act as a— it would act as a tax on nominal assets. And it's one of the ways historically in which we have dealt with the sort of debt burden that we're running up right now. If you look at the history of the '50s and '60s, rapid nominal GDP growth, of which has attraction was inflation was a key element in the formula for managing post-World War II debt.

If inflation risk rises, will we be able to target a rate of price inflation? So I too would be happy with 4 to 5%. Yeah. But if it's either the status quo and what bond markets expect now, or you leap to 15 or 20%— because the velocity of money you maybe cannot predict or control in traditional ways— should we still be rooting for more inflation or not?

Well, I mean, these are very speculative scenarios that we're talking about. We, of course, in the advanced— It's a speculative world, really. Yeah, yeah, absolutely. But the advanced economies have not experienced those kind of inflation rates for a long time. And that's part of what defines them as advanced economies, right? There's a real circularity in the way in which we classify the economies of the world. Eric Lodrigan has a great piece where he says what defines an emerging market is that it has the kind of inflation dynamics you've just outlined. In other words, prices actually do respond to monetary shocks, and that has a social underpinning. And I think for me, one of the reasons I'm skeptical about a strong inflation scenario is it's not obvious to me that we have, as it were, the sociological guts that would— in, I don't mean like bravery, I mean in the sense the underpinnings of a wage-price spiral, which I think would be crucial to drive the kind of inflation that you're, you're talking about. If we were to be in 15-20% It seems to me that you would need the mechanics of a wage-price spiral and indexation of various types to be actually operating. And we stripped most of that out in a highly conflictual way, really, from the Volcker Shock onwards, if not before, through to the late 1980s. And in the absence of that, it's difficult for me to see the scenario in which we head towards spiraling inflation of the type you're talking about. Of course, it's an endogenous process. Much more attractive to join a trade union when you actually need to defend your wages against nominal price shocks. So that might be a mechanism that would work. I find it difficult to imagine that being something that happens in 2021, 2022.

What's the best way to think about which emerging economies are most vulnerable? And you're free to nominate some, but just conceptually, how do you approach the question?

Yeah, I mean, I think this is an absolutely crucial issue because I mean, I've been having an absolutely fascinating conversation online with Brad Setser at the Council on Foreign Relations that I'm sure you must have interviewed, and if you haven't, you should, and everyone who listens to this program should follow Brad and follow the money, his blog at the CFR and on Twitter. And he's coined this phrase saying, you know, there's not one emerging market crisis, there are several. Because there's a range of different pressures which are acting on them. I mean, starting with their relative exposure to the medical crisis, which we mustn't forget, is the fundamental driver here. And oil prices. And oil prices, and the degree of foreign ownership of their sovereign debt, even if it's denominated in their local currency, and the degree of their dependence on foreign borrowing in dollars, and potential macroprudential hazards, the balance sheets of really big quasi-state-owned companies. Pemex will be the absolutely classic one in Mexico, Petrobras in Brazil. Eskom, the electricity utility in South Africa, where you could see a kind of doom loop spiral between the credibility of sovereign debt and the imbalance in the private balance sheet. If you, if you use all of those different criteria, you can pick out a series of relatively vulnerable countries. And, you know, South Africa, I think, is top of most people's lists. Terrible health risks because of the large 7 million-plus people living with HIV, who we imagine are probably extremely vulnerable to COVID-19, longstanding huge unemployment problem, growth below population growth for a long time, just been downrated to junk for its sovereign bonds. Rand has suffered a huge collapse, which in due course might generate export growth. But anyway, that's a candidate. Algeria, I worry about as a European, 85% dependent on oil and gas exports, very fragile socially and politically. Turkey is high on most people's lists, not because it's a desperately poor country, but because of the political risk. Erdogan has made clear that he won't avail himself of IMF support, despite the fact that the credit default swaps on Turkish debt have blown out to the same extent as South Africa's have. That would be a portfolio of high-risk places. And I think Americans should be, North Americans should be profoundly concerned about the situation in Mexico, which has suffered a huge shock to the exchange rate. Pemex is an accident waiting to happen. It's hugely politically salient for the current administration. Because they have bold ambitions for national oil. We've seen how hard the Mexicans negotiated over OPEC, and it's our neighbor, and tens of millions of people living in the United States obviously are directly— their lives are directly entangled with Mexico. So I think that would be very high on my list. Somebody in Treasury is monitoring that situation very closely.

I'll just tell our listeners, we're having this chat on April 16th, But let's go back in time. Was Keynes right about the Treaty of Versailles? Was it as bad as Keynes said?

No, I think— I mean, I'm a confirmed liberal Keynesian in my broad politics and my understanding of politics and the way expertise ought to relate to it and the operations of modern democracy. I think his political writings in Essays in Persuasion are brilliant. But I regard The Economic Consequences of the Peace as a disastrous book because it essentially enhanced and gave arguments to the German nationalists who would say—

But that doesn't mean Keynes was wrong, right? It may have had bad effects, but he's writing at a time where the wealth-to-income ratio is especially low, so a given measure of debt burden is much worse for an economy than what we might be used to.

Absolutely, but the evidence of the 1920s is that with the right framework, the Weimarer Republic was in fact perfectly capable of bearing a reasonable burden of reparations. 2 to 3% were doable. The fact of the matter is, the German political class had no interest in accepting that responsibility, and was quite determined to do a variety of different things to escape that burden. And there is no doubt at all that the front-loading of the demands, which is very understandable from the point of view of the financial needs of the French in particular, caused a huge bottleneck, if you like, early on in the history of the Weimar Republic when it was most fragile. And that's, as it were, the moment when I think the critique is most valid. And that's why, for me, really the hidden agenda of the economic consequences of the peace is an appeal to the Brits, but a bubble to the Americans. For large-scale debt concessions, on which one can only agree with Keynes that this was in fact absolutely critical, that market economies have unspoken fundamental political preconditions, which in the aftermath of a massive war have been disrupted. And what you do not want to do is to port, if you like, the bitterness and the antagonism of politicized intergovernmental debt into the postwar period, or if you're gonna do that, you need to build a very, very solid framework around it. But to imagine as the decision makers in the '20s did, that you could combine a rapid return to essentially a sort of Edwardian free market model of capital flows, and entangle that with politicized public debt, that was a tragic mistake. What he's not saying in the economic consequences of the peace is what he said in many memos before he published that book, which is that America is key to the entire problem. And he was rejected at Versailles, and he knew that the basic anchor of the reasonableness of his position had been shot down and removed by the Wilson administration. And so the book itself is, as it were, the kind of the fragment that emerges that he can place in the public realm. But he, you know, despite the personal caricature of Wilson that he delivers in the book, which is, of course, very damning, he doesn't in fact go very far in his criticism of the US administration at that moment, which is— so he's playing political games in the structure of the book.

Was there a better alternative to the managed dirty floating exchange rates of the 1920s? Because at the time that was thought to have not been working well. The British revaluation of 1926 was a deflationary disaster. So what should we have done then with the international monetary order?

I think it's the— you cannot dissociate the the conditions of successful international law in the 1920s from politics. I mean, the question can't be posed from the position, the vantage point of some sort of abstract technocratic ideal. It has to be posed from the question of what's doable and who are the people with power who are likely to do the things that you're asking about. And that's in a sense for me, the problem also with some of Keynes's critique of the gold standard restoration is that he's just refusing what is evidently the rationale behind the position, say, of the British government, which returns to gold the pre-war parity. And the purpose of doing that is clearly to secure the high rating and the high standing of British sovereign debt. And that is the priority of the people making that decision. Keynes says it's not optimal for employment. He's right, a lower exchange rate for the pound would have been better. But if your aim of the game is basically to ensure that people who lent the British government money in 1914 don't do much worse than people who lent the American government money during World War I, then of course, the parity with the dollar has, you know, the aim of the game is to restore it to its pre-war level. And that is judged by the political elite of the 1920s in Britain to be the key criteria. Keynes is adducing, as it were, well, in fact, if you should, if you cared about unemployment, then of course, you would have a lower exchange rate, which everyone can agree with. It just wasn't the priority. 'Cause the other domestic priority of the group that is governing Britain in the 1920s is to restore class balance. And in the aftermath of World War I, apart from the flu, the thing that was going on that was really on everyone's mind most dramatic period of class struggle in European history, in West European history. It's the last moment of genuine revolutionary possibility in most countries. And Britain in particular faced a huge upsurge of labor militancy. And the restoration of the gold standard is part of a strategy of deflation, which is about undercutting the bargaining power of the British trade union movement, which had coalesced in the Triple Alliance, the fearsome alliance of railway workers, miners, and dockers, which can paralyze an early 20th century economy. Breaking that alliance is key to what they're doing. And so when Keynes makes his criticism, it's not simply what would be optimal from the point of view of maximizing some sort of welfare function. He's basically offering an alternative program for Britain, which is the program that also in his view might stabilize the long-run possibilities for a liberal party somewhere between Labour and the Conservatives to actually have a voice in British politics. And to do that, you need class conflict not to escalate in the way that the Tories were willing to allow it, the Conservatives were willing to see it escalate. And you need Labour not to be the only voice of progressive politics in Britain, which it threatens to become in this period. And those are the stakes which are involved in Keynes's alternative program, which would have been basically for an adjustment of pegs, an adjustment of exchange rates. Keynes in the '20s is not advocating floating exchange rates. He's arguing for a better managed fixed exchange rate system.

Why exactly did the Weimar Republic fail? Simple question, right?

Simple rapid-fire series of absolutely massive questions.

Just a bad system of proportional representation or cultural decay?

It's not. I say, if you want a one-line answer, it's the Weimar Republic's survival was dependent— certainly the argument I would make in Deluge, the distinctive argument that I'm making is it does depend critically on the ability of the United States to hold the ring in European politics. Because on the ability of the United States to hold the ring depends the viability of the sort of centrist moderate politics that anchored the Weimar Republic's survival in the '20s, but also you could say the best hopes of Japanese moderates in the 1920s, in the Taishō democracy period. In each case, what you see, and indeed even the relatively moderate phase of Mussolini's regime in the 1920s, when he was the darling of Wall Street. In each case, what you see is people, key actors, saying, you know, in this hierarchical global system that we're in, what are the best options available to us? And insofar as the United States is able to hold the ring, that is to moderate the aggression of, say, France within Europe, and to provide a steady rain of dollars down onto the economies of Europe and Japan, then locally, if you like, the optimal strategy is in fact to adopt a position of cooperative subordination within that system. And so you see quite remarkable things happening, like the Japanese coming to terms on naval rearmament, the British coming to terms on naval rearmament, because America looks like a hegemon. And it's really when that breaks in the early 1930s that, to my mind, the survival of the Weimar Republic is, you know, it becomes It's clear that something else is going to supersede the Weimar Republic. It's not obvious it'll be Nazi, the Nazi regime, but some alternative is likely to emerge. And not just in Germany, but we see in Japan the same sort of shift. We see a radicalization of Mussolini's regime.

It isn't, it is an actual democracy. So even if the United States has checked out, why don't German voters opt for something semi-sane? Instead, you get a hyperinflation. Well past an optimal rate of seniorage extraction, right? That just seems irrational by any standard. So culturally, what went wrong in Weimar that so many people made what seemed to be non-optimizing, non-rational decisions? That can't be the fault of the US.

Well, no, but in 1928, in 1928, in the last, as it were, pre-Great Depression elections of the Weimar Republic, Hitler's party gains, you know, 1.5% of the vote, the Communists are doing badly, and the centrist parties, the Social Democrats, the Christian Democrats, various shades of liberals, have a solid, vast majority of the German vote, and a center-left government is formed. So after the Weimar Republic had survived that initial shock that you're talking about, the hyperinflation of the early 1920s, exactly as you're suggesting, Germans can quite reasonably see that there is the prospect, if not for glory and national self-assertion, then at least for prosperity, and a functioning politics in the Weimar Republic of the late 1920s. What we've got to explain is, is, is why that is broken apart. And I don't by any means want to say that this is all down to the United States. Of course, German political elites have choices to make, and a large faction of them are obviously responsible for having made choices which turned out to be absolutely disastrous for their own country and for the rest of the world.. But if you're asking me, as it were, to say what I would argue, certainly what my own distinctive contribution to debate has been, is to show the way in which the collapse of the structures, the financial structures of the '20s, which did indeed pivot on the United States, in the early '30s shifted the terms of the debate within Germany and several other potential challenger, if you like, insurgent countries. So we don't just see this in Germany. So there is a factor which goes beyond the particularities of German politics, or Japanese politics, or Italian politics, or indeed even British politics, or Soviet politics, which is this broader question about the viability really of a liberal order. And when that liberal order becomes less plausible, it changes the parameters of everyone's decision-making. And then of course, it's up to local forces. And as you're stressing, of course, in Germany, there is a powerful militarist group, conservative group, which is willing to gamble on Hitler. To provide them with a democratic base. And that turns out to be an epic historical miscalculation.

Speaking of Hitler, was Hitler in fact a Keynesian?

No, I mean Hitler personally, absolutely not. Hitler's personal monetary ideas are very, very conservative. He's an anti-inflation hawk, has to be persuaded to engage in large-scale monetary financing. Somebody like Schacht is a contemporary of Keynes, and that's his Hitler's central banker, and an adventurous monetary thinker. And he'd learned to think outside the monetary box, if you like, in the efforts to stabilize Weimar's currency in 1923-24. And he's certainly an expansionary— he's not afraid of monetary finance and of using off-balance-sheet vehicles to provide liquidity and to provide credit for an underemployed economy. And quite reasonably, no one's worried about inflation in 1933 because Germany has massive unemployment. So in that sense, they are adventurous macroeconomic monetary economists. They're not Keynesians for the simple reasons that Keynesians— Keynesianism classically, of course, is a liberal economic politics. And so it believes in a multiplier, and the multiplier is the be-all and end-all really of Keynesian economics, because what it suggests is that small, intermittent, discretionary interventions by the state relatively small, will generate outside reactions from the economy, which will enable the state to serve a very positive role in stabilizing the economy, but doesn't require the state to permanently intrude and take over the economy. That's a post-1945 kind of vision of a mixed economy. Keynes himself, that's why, you know, he wants the multiplier to be 3, because if the multiplier is 3, then $1 of spending generates— government spending generates $3 of private economic activity. And you can think of government intervention as sporadic. It's emergency medicine. It's not not chronic care. And that, of course, is the antithesis of what the Nazis are doing, because they are ramping up government spending, and not across the board, highly focused on rearmament. Because what they're doing is not just creating jobs, though they do create jobs as a side effect, what they're doing is restructuring the economy towards building the foundation for rearmament and the war economy. And so what they're actually trying to do is systematically repress the multiplier, because they do not want people employed in armaments factories to go out and buy clothing and fancy food, which requires imports. They want the money to be circled straight back into the armaments effort, so forced saving, various types of financial repression are the order of the day. So for me, that makes them— they're macroeconomists, the Nazis. They're adventurous macroeconomists. They're doing massive intervention, but they're not Keynesian.

Robert Gordon, in his review of your book Wages of Destruction, argues that you've underestimated German prosperity in the 1930s. So he cites the Dennison Table base, which suggests Germany had maybe 70% of American per capita income, and you seem to think German per capita income then is much lower, maybe as low as a quarter of US per capita income.

What's your current take on that debate? So, so the, the, the, um, my interpretation of Nazi Germany really came out of, uh, confrontation, or, you know, reading in the 1990s the work above all of Angus Maddison and then Stephen Broadberry. And what they point to is a structural gap between the economies, not just of Germany, but of continental Europe in general, and two points of comparison, one the UK and the other the US. And And the gap consists of two different elements relative to the United States. The productivity in manufacturing per hour, per hour worked, or per man, per person in agriculture and manufacturing, and for all I know in services too. There is a huge gap transatlantically between all of the European economies and the United States. And there's an elaborate debate going back really all the way to the 19th century, but in the form of Chandler and so on about what constitutes the secret sauce that gives the United States this much higher per capita productivity across all sectors. And we can go into that. There's a whole variety of obvious factors that you might cite. And then between Germany and France and Italy on the one hand and Great Britain on the other, there is also a huge gap in terms of output per person, but that isn't to do with productivity difference within sectors. So German manufacturing and British manufacturing, you might not believe this, but in the 1930s were very similar in terms of output per hour worked. But the structure of British, of the British economy was far more advanced. By 1911, less than 10% of the British workforce is in agriculture, and in agriculture, very little of it is in peasant farming, and it's in big farms. By the 1930s, it's extremely rare for any women to work in farms in Britain, whereas in Germany in the 1930s, 4 or 5 million women are registered as working full-time in farms. So you have two different types of productivity difference. One is across all sectors, which is a transatlantic difference, and then a huge sexual difference between the German economy and that of Great Britain. And what Wages of Destruction was trying to do is to say, okay, let's write a history of the Third Reich on— against the backdrop of assuming that this makes a difference. What do we see if we assume that these structural differences are large? Let's not argue about the percentages of how large, but they're large by any measure. And furthermore, they are something that contemporaries know about and factor into their thinking. And what kind of a take, what kind of a read do we get on Nazi politics if we take these seriously? And so, and as I hope I demonstrate in Wages, in fact, it's profoundly illuminating to think about this double problem. On the one hand, the magic, if you like, of the United States, which is just more productive across the board, and dramatically so. And on the other hand, the structural disadvantage You could add in, of course, the fact that the United Kingdom commands a global empire, which Germany never does to any substantial extent. So the wager intellectually of The Wages of Destruction is to see what happens when we revisit history on the basis of this very different understanding. Different, I mean, because if you grew up in 1970s Britain, or between Britain and Germany, as I did, and you had the conventional industrial policy assumptions, say, of 1980s America, you would assume that Germany was an industrialized industrial powerhouse that dominated the world, bestrode the world, Forschung und Technik, Audi, Mercedes, BMW. Of course, they were an industrial powerhouse of the 1930s. It just isn't substantively true. That doesn't actually capture the reality of the interwar economy. So what Wages of Destruction was doing was trying to unpick those anachronistic assumptions about the obvious dominance of the German economy, and to, on the basis of that double comparison with the US and Great Britain, to reread the history of the Third Reich. And so what you see is the significance of the agrarian sector, the profound inferiority complex which drives Nazi planning, their relentless focus on agricultural expansion in the East, the very severe problems of labor shortage in agriculture, and the relatively modest scale of their industrial capacity compared to Britain and the United States. It's more or less level pegging with the Brits and hugely inferior to the US.

Given that partial economic backwardness, why then does Germany beat France so soundly at the beginning of World War II? France had a fair number of tanks, right?

Yes, yeah, yeah. So the other wager of the book is to say, okay, so what— so as I was saying, the aim of the game is to take those macroeconomic stylized facts and to say, what can we understand and what could we not understand? And having backed out what we can't understand, how do we explain the stuff we can't understand? And so Wages of Destruction is a sort of crash test of the ability of economics to explain history, and then an effort to make sense of the moments where economics fails. What do we need to add then? What does— what do we learn by virtue of our limited ability to explain? And there was a school of thought which said this all stacked up, right? There was a school of thought that said the blitzkrieg victory of the Germans in 1940 was the result of their technological industrial military superiority, which expressed itself on the battlefield in Stukas and tanks. And so the logic was quite simple, but if you take this alternative view, then as you're saying, in fact, comparing motorization, France is more motorized than Germany by a very large degree. Renault is a far more substantial motor car manufacturer than any car manufacturer in Germany. In fact, the only substantial motor car manufacturer in Germany in the 1930s is Opel, which is owned by GM, and it's only substantial on account of that, and Ford would be the other contender. So what that means is exactly as you're suggesting, that there are key moments in the history of the regime that can't be explained by economic factors in any simple sense of the word. And clearly, the battlefield events of 1940 are one such moment. But in general, the decision by Hitler to go to war against the kind of backdrop that I'm offering doesn't make sense from the point of view, if you like, of a correlation of forces, a material balance type argument. So the question then is, what sense do we make of the fact that the Germans are going to war without an evident material superiority? And that is where then, for me, the power of ideology comes into the picture, as an absolutely essential and irreducible element in any kind of meaningful history of the Third Reich, because we have to explain why they went to war, even against odds which really didn't look favorable at all.

Now, I've lived in Germany, and it seemed to me then they have plenty of farmland, and of course we're talking about a time when the country was much larger. So why then is Lebensraum portrayed as such a significant motive for Germany wanting to expand? They have plenty of farms, right? More than Great Britain does.

Well, I know, but Great Britain in the beginning of the 20th century is 50% dependent on imported food. In Germany, it wasn't as extreme as that, and I don't necessarily have the number at my fingertips right now, but I think it's something like a quarter of Germany's food supplies is imported. And by that, you don't just think of what the people eat at the end of the food chain, but crucially animal feed, which is vital to maintaining highly productive dairy herds. And what the Germans— the bitter lesson the Germans learned in World War I is that that kind of highly efficient international division of labor which is one of the keys to the higher productivity per capita of the overall British economy relative to the German economy, is its dependence on imported food, because better for somebody else to do the farming and you to do the services and manufacturing. In the case of a war, the total war, especially if you face an enemy like the British, who deploy the economic weapon as one of their key strategic tools, and have the Navy to do it, that dependence is a key vulnerability. And in Hitler's paranoid worldview, it's also, of course, where the world Jewish conspiracy brings its influence and its power to bear on modern Germany, and it's that dependence that has to be broken. In practice, what this means is that, though you're right, Germany has plenty of land, it is not able in the 1930s to feed itself up that, at the kind of levels and the standard of living that it's become accustomed to. On the terms of trade between industry and agriculture culture, which people have become accustomed to. And that's the problem. What they want the land for is to improve, if you like, the trade-off between the relative standard of living in the city and the countryside on the one hand, and the degree of self-sufficiency on the other. So the fantasy is really that you could have a Midwest, you could have a Canada, you could have an Australia bolted on to Germany. And that that would augment and it would provide Germany with the kind of balance that the United States, the continental US has, which makes continental United States a largely self-sufficient economic entity, or that the British Empire has with the complementarity between the manufacturing and service hub in Great Britain and the agricultural and raw material providers of the empire.

In most of these dialogues, there's a segment in the middle called overrated versus underrated. I'll toss out a name or an idea you tell me if it's overrated or underrated, okay?

I'll try.

Putting aside coronavirus issues, the economic future of Bulgaria, overrated or underrated?

Overrated or—

You're an expert on Bulgaria, yes?

I've written several articles. I wouldn't claim to be a— I've had a great collaborator in Marta Ivanova, who's now the Bulgarian ambassador to Finland of all things. I wish Bulgaria's economic future was brighter than it may be at this moment.

The German poet Rilke.

I quite like Rilke.

Right, you cite poetry a lot in your Twitter feed. What's the best German language or other poetry from the World War I, post-World War I era?

I mean, certainly he would be up there. Yeah, Gottfried Benn I quite like, despite his dubious politics.

Stanley Kubrick, overrated or underrated?

Slightly overrated, I would say. Not my favorite auteur.

Paths of Glory is a portrait of the World War I world, an alternative to Renoir's Grand Illusion, showing the elites were truly corrupt. Wasn't he completely on the mark there?

Yeah, I'm a revisionist on World War I, as is clear from Deluge, I think. So I understand the force of that argument, and, but yeah, no, Kubrick isn't my favorite director.

The Bretton Woods arrangements, overrated or underrated?

Very easily overrated, yeah. Why? Because we tend to think of them as it were as an order that, you know, overrated when you think of the Bretton Woods arrangement as something that existed between 1944 and say 1971, but that's just You know, that's one of the most common sort of clichéd errors that you could make in international political economy. No such thing, system ever existed. Agreed, attempted, and then broken by the British panic in '47, not then reinstituted until convertibility in '58. Immediately, now we know from all of the great recent work supported by various types of swap line arrangement, by '67 clearly almost dead in the water, and then in '71 just tossed overboard by the Nixon administration. Funny kind of regime, that, I would say. And altogether, that to me suggests the need to think of international economic history not in terms of big lumpy regimes which have a certain logic that governs them, but more as a sort of continuous, the improvised makeshift.

The League of Nations, overrated or underrated?

Hugely overrated. In the current scholarship.

Highly rated.

No, no, you should be surprised. You'd be— I'm sorry, I should say, yes, indeed, it deserves its common reputation as being a dead letter.

How today, how will Italy get through the current economic crisis with no Corona bonds? They've had no per capita income growth in 18 years. Lombardy's taken a huge hit.

Yeah, it's—

Why are they even solvent? Is the ECB going to buy everything?

I do think, to go back to an earlier conversation, one of the outcomes of this is likely to be the warehousing of huge quantities of government debt on central bank balance sheets, where we just hope it gets forgotten about. That's not the worst of all possible worlds. There are many alternatives which are worse than that, and that does appear to be the solution that the eurozone is drifting towards. Frankly, if the North European states will accept that, that would be, again, one of the more tolerable outcomes here. The tragedy of Italy's economic development over the last, as you say, the last 18 years is— along with many others, I have been campaigning and banging the drum for years to try and get the political elites in both Brussels and Berlin to recognize that this— they cannot expect political legitimacy to be maintained in the face of that kind of economic track record. And you don't need to be a nationalist populist, I think, in Italy to be resentful and furious the lack of hearing that they received for that position.

But isn't it better to bail Italy out non-transparently through ECB purchases rather than through a common fiscal union where the German voters would resent it more? Italy probably would behave irresponsibly, right? There's been a fracturing of cooperation with all nations. So isn't it better we haven't had a fiscal union?

I take the force of that point, and it's a kind of classically Keynesian argument for burying a problem you can't fix politically in some technocratic solution. It would be truly compelling if the German political class had managed to close ranks and, as say the French have, and basically silence and kill the issue. But they have failed to do that. And far too often the Bundesbank and quite mainstream conservatives in Germany engage in a monetary populism, essentially, which blames the ECB for low interest rates, which problematizes this de facto round-the-back sharing of risk by way of the ECB balance sheet. Hans-Werner Sinn, the notable Munich economist, can command the pages of serious German newspapers with his polemics against the so-called Target-2 balances, which are really just a reflection in the balance sheet of the ECB of movements within the European financial system. All of that makes for a very unstable brew. What I worry about is a spiral of delegitimation fundamentally, in which an unspoken, as you say, convenient technocratic fix to the problem doesn't in fact remain unspoken, then you have an insurgent economic nationalism against that, which is where the AfD, the right-wing party which has haunted German politics in recent years, comes from. It's not an anti-immigrant party in the first instance, it's an anti-Draghi party in the first instance, a party directed against Mario Draghi, and the Alternative für Deutschland, the alternative for Germany they want, is an alternative to the monetary fix that we're talking about, to activism on the part of the ECB. They then bring suits in front of the German Constitutional Court, which is an avenue favored by political activists. The German Constitutional Court is put in the embarrassing position of having basically to sign off on what everyone understands are legal fig leaves to avoid the embarrassment of blowing up Angela Merkel's Europe policy, or rather Angela Merkel's non-policy towards Europe.. And that's— if that channel was not there, I would say I'd be totally with you, bury this stuff, bury it deep, and let's never talk about it again. But unfortunately, that is not how the German political system works. Very striking contrast to France, which is in a sense, you know, essentially in exactly the same boat, also a risk sharer with Italy, and it's not even a subject of serious conversation. And Marine Le Pen, I mean, it's never been a serious subject of conversation there.. And that's the reason why I find I'm not sure that this status quo will hold, though de facto I think that's where we're headed.

Will Hungary simply persist as a truly autocratic regime within the European Union?

Very difficult to tell, I agree. It's flying under the radar right now. It's one of the places where financial discipline might actually help. I mean, Orbán has been incredibly fortunate in the macroeconomic conditions which he's enjoyed for his experiment. Financial markets have not punished him for his economic nationalism. And the current environment, which is much less friendly to emerging market borrowers, may be a lot tougher for him. Likewise, the massive downturn in the auto industry. I mean, Hungary is basically an extension of the German car plant system. And when global demand for German cars turns down, Hungary gets very badly hit. So it's not obvious to me that Hungary— that Orbán's formula will in fact work in a less friendly economic environment than the one he's enjoyed. That's kind of a wait-and-see kind of a response.

As of late, as you know, there's been a deal where Turkey essentially keeps many North African refugees bottled up, so to speak, and they're paid off by the European Union. There are signs that deal may be collapsing, possibly on both sides. If that deal collapses, how does the European Union respond, and what does that world then look like? What stops the massive flow of refugees coming up through Eastern Europe?

No, and especially because that then hits, you know, two of the very weak members of the Eurozone, Greece and Italy. One of the major sources of resentment in Italy is the sense that they were left on their own with the refugee problem, with this extraordinary Dublin agreement providing again the kind of fig leaf for various types of nationalist selfishness on the part of Northern European states, which were in a position to absorb migrants much more easily than Italy was. The Dublin rules are basically, if they come to your country, they stay there. There's no formula for redistribution within the EU. I agree, I think that is kind of part of a poly-crisis scenario, in which— and which is what we saw in '15, right? In '15, if you think back to 2015, it's this remarkable moment where we see the Chinese economy under pressure, we talked about that earlier, the Greek crisis blowing up, Ukraine crisis still very hot in '15, and the refugee crisis. And we know how explosive that combination was for European politics. We could indeed be heading back to a scenario which was every bit as bad as that. And that's one of the reasons why I say worry about Algeria, because that could produce a huge new flow of migrants from an economically distressed North African country, which France would be ill-equipped to deal with. And it's not obvious that we did anything more than stick a sticking plaster on it. And the Europeans will defend themselves, and I think quite reasonably, and say, you know, they move from crisis to crisis, and they do improvisations, and they move incrementally, and they move crabwise, and, you know, Europe is forged in crisis, all of those clichés of a kind of EU pragmatism And the question one has to ask, of course, is when do you reach the limit? When do you hit an obstacle which is too big, which is too difficult, and which exposes your fundamental failure to come to terms with the basic issues that need to be addressed, and the legacy of bitterness which has built up in the series of makeshifts that you've adopted? And what I worry about, many other people worry about, is whether we're at that point now on several different issues at once: COVID-19 itself, the longstanding and immiseration of the Italian economy, and as you say, a refugee crisis that might break up. And if Turkey is one of the fragile EMs, then of course, you know, all bets are off, if you like. Though there are again always possibilities for negotiation. Maybe a sweetheart deal for Erdoğan is precisely the thing that will open the door to some sort of refugee fix.

Let's say 5 years from now, when the immediacies of the coronavirus crisis probably have passed, How much cross-border mobility do you think there will be within the European Union?

I think Europe will move— I mean, you should take everything I say about Europe in a sense with a pinch of salt because, you know, it is my politics, it is one of the things that I'm most committed to, personal biography, all sorts of other reasons. I mean, I imagine that the EU will restore mobility on a similar level to the United States of America. I imagine Europe will move quite quickly towards the sort of regional deal that seems to be emerging between New York, Connecticut, Pennsylvania, and New Jersey. Those are the kind of blocks which could move, which could move relatively smoothly back towards a restoration of something like mobility. I would be very surprised if there wasn't a relatively free-flowing mobility regime within the EU. It's one of the core values. It's what the EU is for, and I don't think this crisis is going to blow that off course. Does that mean that there won't be various types of, you know, pandemic management structure in place? That's a different issue. Will there be, you know, electronic passports and temperature monitoring devices at most European countries? I wouldn't be surprised by that, nor would I think it terribly significant, to be honest. We don't discuss, like, you know, the airport security provisions of Italy versus Germany very much because they're not very interesting and they don't matter very much, and I think that might be the sort of place that we're in, the blanket bans on movement will not continue. That I think— they're just impractical, both at a national, regional, and an international level.

I have a series of questions about what I call the Adam Tooze production function. That's how you get things done. This is the final segment of our dialogue. Are you ready?

I'll try. Your questions are great.

You've written an enormous amount. Just this last week you had a major piece come out in The Guardian, one in London Review of Books. Your books are very long. What is your most unusual writing habit?

I'm not sure it's unusual, but I think it's the writing habit that many people have who do write a lot and regularly. I write every day, basically. I didn't find— I haven't always found writing easy at all. I've been to a lot of therapy of various types to stabilize myself emotionally and psychologically. I still— I still do, is very important for me in handling the stresses that arise in writing. And one of the things I realized in the course of that is that actually, rather than thinking it was something terrifying that I had to steel myself to do, the best way to think about it was as something I do every day. So it's like exercise. If I have the chance, I like to exercise. It's a puzzling activity. I just treat it as a kind of, almost as a game, rearranging the words, trying to fix things, and And then I say to all my grad students, like, you can do that for 10 minutes every single day regardless of what else is going on in your life. You can always find that 10-minute slot. So that is the thing that I, I make sure I do. And that means even big projects slowly move along because then when you get the big slice of time, the 3 or 4 hours at the weekend or something, you're actually at the top of stack. You know where to go because you've been puzzling away at it and chewing on it every day, even if it's only for 10 minutes.

I give the exact same answer, by the way, What is your most unusual habit for how you absorb and process information? Right, you read an enormous amount.

Yeah.

What's your trick?

I actually, I have to say, I mean, I mean, you mentioned Twitter early on. That's been transformative for me. I've yet to figure out like whether it enters into like note-taking in any kind of conventional form, but that has been— and the odd effect of that is that when I'm for whatever reason deprived of Twitter, I feel suddenly that I'm less motivated to read. So sharing has become like a key element in my reading, and trying to figure out what the interesting thing is that I want to share is a very good way of focusing your mind on what the core— you read a piece, you know, what are the 3 sentences here I want to cut and paste? Which is the graph that is really telling? And how do I nuggetize that into whatever it is, 28 characters? That's been a very— I found that at this stage of my life, I know, you know, this isn't necessarily the best way to read complicated philosophy of history, which I also spent a lot of time doing at various points in my career. But from the point of view of, you know, parsing the flow of macroeconomic news, which I know we're both kind of addicted to, this is a good way of doing it. It's a bit like sharing slides back and forth amongst, you know, wonky friends. Look at this graph, this is a really good one. And that has become for me, that metabolic system of reading and then reproducing and sharing has become a a key motivator of consumption. It's not just, as it were, production for its own sake. It's actually a way of structuring how you consume.

Here's a question from a reader. Feel free to pass on it if you wish, and I quote: "Your grandparents were nutritionists on top of everything else. Your grandmother wrote on the nutrition and health of the wives of coal miners. How did that affect your upbringing?" End quote.

Well, in fact, I was on— it was on the tip of my tongue. So if you asked me like where my reading habits come from, I would have said the breakfast table of my grandparents, who, if you care to inquire into their history, have a colored, checkered past and a very complex political history. But they were people of the world, and they subscribed to Le Monde, the French newspaper. They were multilingual, and their breakfast table would consist of a series of, "Oh, have you seen this article?" It was basically like kind of analog breakfast table Twitter. 'God, you should really check this out, like I'll save this for you.' They would cut things out and shove them across the breakfast table at you. And that experience for me was absolutely formative. And their engagement with the real world, I mean, they continued writing. My grandfather basically died over his word processor in his early 90s. And what they did a lot of was digesting and synthesis. So they would go to the Wellcome Medical Library in London and they would read all of the papers because they were multilingual, lots and German, French, Spanish, Russian, some Scandinavian languages, that they would try and synthesize the best and most recent work on key issues of concern for them, and they were materialists, originally Marxists, but they had become deeply concerned with issues of nutrition. You are what you eat, in the famous Fourier-Bachian phrase, and they took that and turned it into a politics which was around malnutrition ultimately, and ensuring that the majority of mothers, crucially, were well enough nourished during pregnancy to ensure that they progeny and the future population of the country were not stunted, didn't suffer from the damage of poverty before they were even born.

It says in one of your biographies, and I quote, he has worked in executive development with several major corporations. What kind of advice do you give them?

I had the privilege of working with BP during the John Brown, the earliest engagement of an oil major with the carbon problem in the late '90s. BP was— just chose to— it was part of its strategy for entering the US market was to differentiate itself from Exxon by embracing the climate problem. And so John Browne, who was a highly unusual CEO, decided to set up a bunch of boot camps for the leading 300 people in BP, which I guess had about 100,000 employees. So these were very senior, brilliant people who would spend a week in university campuses around the world, and one of the weeks they would spend was in Cambridge. So we worked through the entire leadership team of this oil major, and our job was to unsettle— certainly the Cambridge camp— our job was to unsettle their familiar frameworks. So, and this, you know, the questions were political, ethical, how do you think about your license to operate. So I used to run, just to give one example, a session which started with a series of slides which were American bombing aerial reconnaissance of a chemicals plant in Silesia. And I would fly them in still by still until they suddenly realized that we were looking at Auschwitz. And they were looking at a chemicals plant and they had recognized the chemicals plant first because they're chemical engineers. And then they realized they were looking at Auschwitz. And so the aim of the game was to confront them with the, you know, the way in which a company like IG Farben, which was a world-beating industrial firm, the best by a million miles, you know, hugely superior to DuPont in its technology, Nobel Prize winners on the board right, left, and center, how a totally cosmopolitan globalized company, so not by any means an obvious supporter of German economic nationalism, how it could end up building the largest chemicals plant in Europe at the time at Auschwitz. And that was the sort of challenge that I wanted to confront them with, because we have to take seriously the, you know, the historic responsibility of giant capitalist corporations. And most of the time, of course, their activities are quite innocuous, but not always. And their impact and their footprint is huge, and they can find themselves in situations which burden them with vast historic responsibility, as IG Farben did. And we happen to know a lot about IG Farben because of the Nuremberg Trials. And so I wanted to you know, it's kind of like a case study that would blow their minds permanently. And that it actually was hugely— I don't mean this at all cynically— it was an incredibly productive exercise to watch them struggle with this problem, for them to scan their own activities and think about where they might be engaged in various sites of bargains. Because we can get inside their heads. All of the IG Farben corporates wrote rather introspective accounts afterwards when they were in jail waiting trial.. So we can really quite— we can get quite deep inside the psychology of the decision-makers who've made those disastrous decisions. So that was one of the sort of thing that we were doing, and it was— it totally changed me. I mean, it turned me— turned me into a global historian, because I was a rather parochial Europeanist, and then I met these people who were operating this global company whose vision was far wider than mine— not academic, but like vastly wider— and that really shocked shocked me. Before COVID hit, I was working on a book on climate, and I will go back to that, but in so doing, I was really, for me, reconnecting with a set of questions that I first addressed 20 years ago under the impact of working with these people.

Let's say a good friend comes up to you and says, "I've never been to Germany. I have 2 free weeks. I want to go." Again, this is without coronavirus. "Where should I go?" What do you tell them? You know the country well.

Yeah, the first thing you'd say is it's an enormously varied place and it's very big, and you really want to get a range of experience. I mean, I grew up in beautiful, sunny, provincial Heidelberg, and it's pretty difficult to recommend anywhere more highly than that for tourism and to kind of get the dolce vita kind of sense of Germany. But it would also be, of course, crucial to visit a city like a Hamburg or an Essen or Berlin Berlin will be the city where, if the universities could offer, you know, the sorts of terms and conditions and facilities that American universities do, I would probably most like to live and work. That is not the situation, unfortunately, of the German university system, but it's an extraordinary city. So it would be a varied tour. My wife works in the travel business, and she has her own travel boutique, travel company. We were planning a trip that has has just been cancelled unfortunately, that goes from Berlin to Dresden to Prague to Vienna, so a sort of essential European tour with a historic theme and the best vineyards that we could find of Central Europe along the way. I would say travel, get on a train, unless you're a car nut and you want to experience the freedom of driving a Porsche at, you know, 200 miles an hour, which you can do if you do it at 2:00 a.m. The roads are clean enough and they're smooth enough. But other than that, ride the train, sit in a an ICE going at absolutely, no kidding, 200 miles an hour powered by solar power and watch your coffee not even vibrate. It's absolutely stunning. They have to put speedometers into the trains to make people aware of how fast they're going. You could watch the cars on the interstate, and these are unspeed-limited interstates, just zoom past them. I mean, you're going faster than a Ferrari or a Porsche flat out. And you can literally sit there and your coffee doesn't move, and then compare that, of course, with the experience of your average Amtrak ride. It's— the trains are the way to do it. Travel the country, see the countryside, do the extraordinary variety of landscape and culture, because it is— it's an incredibly heterogeneous place. One of the bizarre projects of German nationalism was to weld it into a uniform country, which it just doggedly refuses to be. It's Catholic and Protestant, It's both rural and intensely urban, so experience that diversity. It is one of the great underrated tourist destinations, certainly of Europe. Very hospitable, English-speaking.

What's your favorite item in German food?

So there's a lot of familiar ones. I love sauerkraut, but I grew up in the southwest, and one of the specialties there is a kind of ravioli called Maultaschen. So they're made with spinach meat filling and they look like giant overgrown somewhat inelegant ravioli. And you have them in a stock generally. And that is wonderful comfort food.

The salads in the area where you grew up I think are fantastic. You know the flour-based salads, the mushrooms. I mean you don't hear that much about them, but often better than French food I think.

Oh, well, the Rhine Valley, I mean, it's in, you know, the Alsace, you know, it's a merger. If you go to Alsace-Lorraine, of course, the local culture is actually, I mean, the French now call it Alemannic, but it's just German. I mean, German with a strong dialect. So that entire region of the Upper Rhine towards the Swiss boundary, that corner between France, Germany, and Switzerland, the standard of living there is just, I mean, it's delicious. That entire zone either side of the Alps really, northern Italy the same, the standard of living is unbelievably, unbelievably high. Yes, and the food and wine are wonderful.

And the final question, let's say you meet someone who might be a future historian, how do you spot excellence in that person? What do you look for?

Two things. The thing that you're really looking for is that you're looking for somebody who loves to read, and then you really want to know how they read, and you're looking for a combination of somebody who, you know, has an awareness above all, I think, because after all, history is— I'm not going to say it's not a social science, but it's more than a social science because it's also a literary discipline. So you're looking for somebody who can see— frankly, you know, our conversation has had the feel of a historian's conversation. We started out with economics and we've ended up in a very different place, but if you're kind of looking for that combination of an analysis on the one hand, but then also an awareness of the way in which arguments are made in language and how they're framed in writing, and an ability to read through and around that. So interpret— if you— if another way of putting that same point would be an awareness of the function, the active function of interpretation. So I'm looking for a student who can say, well, X's view of problem Y is Z. And that argument Z they're making is different from A's view of problem Y, because A's view of problem Y, you know, is whatever— I'm running out of W, right? So an ability to, as it were, triangulate between the subject matter that's being discussed, the point of view of the observer of that subject matter, and then the type of argument they're offering that connects the two. And that triangulation is crucial for sophisticated history writing, and the more self-consciously one can position oneself in that triangle, Who am I in relation to my object, and what is the nature of the type of argument that I'm making? Which is, of course, it's a, you know, one sense to say it's subjective, but in fact it's a repertoire of arguments that are available to everyone thinking about that problem. That's what you're really looking for in somebody who's interested and serious about history.

Adam Tooze, thank you very much. Take the best of care up in New York, and I hope we're able to meet sometime.

Yes, so do I. It would be a great pleasure. Thank you very much for the conversation.