Okay. Welcome back to Gary's Economics.

Today we are going to talk about

why Labour and Trump will both fail.

Okay.

So we are in a situation now

where we have new governments

in both the UK and the US.

And on the face of it, you have two very different

political parties, two very different leaders.

We have one

center left party, one right

wing party with a very right wing leader,

and they both have very different

sets of economic policies.

What we're going to explain today

is how both of these parties, despite

having very different sets of policies, will fail.

And we're going to talk about what

that teaches us about economics

and the left and the right of politics today.

So I think it's important to recognise

that both of these governments have come into power

at a situation where the economy has weakened a lot.

There have been significant falls in living standards,

and there has been a real significant loss of faith

from the general public in the economic status

quo and politics in general.

This means that both of these parties,

both of these leaders, have come into power

needing to offer something new, a kind of new idea

on economics and a new idea on politics.

And what we can learn from

these two parties is basically

what the main new pitches are,

and where the economy needs to go.

Okay, let's start with Labour.

Now, the Labour economic policy,

I think of it as a kind of managed centrism

or a managed sensible-ism.

And when I say sensible-ism,

I don't mean to say that I think it is actually

a good or a sensible policy.

In reality,

I think Labour’s economic policy will fail quite badly.

I think it will lead to significantly

falling living standards.

But I call it a sensible-ism

because it's important to understand

that it is basically rooted in

what is kind of considered

the sensible economic policy

of mainstream modern economists.

Economists love this kind of policy,

but also the way that it’s implemented

and the way that it's presented

seems to be really rooted in this idea that Labour,

and Keir Starmer and Rachel Reeves view themselves

as extremely sensible economically.

So let's talk about what the actual policy is.

So this managed sensible-ism

is basically the idea that you do

everything but a little bit more of it.

So you borrow a bit more,

you tax a bit more,

you spend a bit more and crucially,

you use that money to invest a little bit more.

So I think you can already see how sensible-ism

is, like a very key part of how this idea views itself.

And this managed sensible-ism

is rooted

in this idea that has been popular

amongst economists for a long time,

that there is a productivity puzzle

or a productivity problem

in Western economies, but in particular the UK economy.

I might do a video specifically about that puzzle

because I think it's kind of nonsense.

But to make it clear,

this basically comes down to the UK economy,

like a lot of Western economies,

but in particular the UK economy has really not grown

very much for a long time.

And economists

and the Labour Party

basically say, you want to grow more,

what you need is to invest more.

So our plan is to borrow a bit more, tax a bit more,

use that money to invest,

and we're going to grow the economy.

And this kind of ties into the idea

that we've had a conservative government for 14 years.

They were largely an austerity government.

They tried to save a lot of money.

They didn't really invest in the country.

So there's this idea going around

that we have crumbling infrastructure.

So we need to raise a bit of money

and use that money to invest

in growing our infrastructure.

So this policy, it sounds really sensible, right.

We're going to raise a little bit of money.

We're going to invest.

Investment is great.

Economists love investment.

We're going to grow, we're going to grow the economy.

And we're going to fix all of our problems this way.

So if it's so great sounding, if it's so sensible,

why is it going to fail?

Well, I think the first and most obvious way

that we can see

this policy is probably going to fail is because

America, and in fact recently Germany,

already tried it.

They already tried this policy and did it work?

Did it work in those countries.

So obviously in the US,

we had the Democrats under Joe Biden in power

for the last four years,

and they basically went pretty aggressively

into this kind of policy.

In particular they borrowed a lot of money,

they spent a lot of money,

and they tried to do a lot of investment.

Did it work?

On the one hand,

the US has had higher levels of GDP growth,

much higher than the UK,

significantly higher than most Western countries

in the last four years.

In the...

On the other hand,

they got pretty badly beaten in the election,

which gives a good sense

that the general public is not happy

with the policy or with the government.

This kind of raises like an interesting question.

There's

this idea that has been going around,

in particular in the American media

a lot in the last couple of years.

There's a phrase which is the vibes are off.

I don't think I've spoken

about this phrase on the channel.

I kind of love this phrase

because it tells you kind of everything

about modern economics today.

So the vibes are off.

Is an idea popular

in American economics, the economic press,

which is that

the economy is actually really, really strong.

And because of the strength of the economy,

it doesn't make any sense

that the public are so unhappy.

And the actual problem is just that

the public is somehow picking up on

some, like, negative vibes.

And the reason for this is something

which I speak about a lot on this channel, which is

economists,

they love to look at these kind of big

macro aggregate measures of the economy.

So in the last few years,

GDP growth has been quite good in the US.

Unemployment has been quite low

and inflation has been falling.

So from the perspective of an economist,

they're looking at this

and they're saying oh the economy's good.

The economy is good.

What you need to understand is most economists,

especially most influential

economists,

are rich people from rich families

with elite degrees and well-paid jobs.

So what these guys are seeing

is, you know,

good top level numbers,

GDP growth, inflation, unemployment,

they themselves, their personal financial position,

their family's financial position, their community’s

financial position is doing really well.

And they don't really see the fact

that increasingly in the last three,

four years,

your average American,

just like your average English or British person,

is increasingly struggling

to pay the rent, pay the bills,

in many cases even pay for things

like food and heating.

And this basically

is the same problem

that I talk about a lot on this channel.

Economists just look at the big picture numbers.

They themselves are rich.

They don't see that as inequality rises quickly,

it is possible for the rich to do very well,

whilst the poor

fall deeper and deeper and deeper into poverty.

And Labour are making this exact

same mistake, basically.

They will focus exclusively on the economy

and growth, GDP,

all of these large big picture numbers.

But we are sitting here in 2025

just after Covid,

which saw an absolutely unbelievable,

enormous increase in wealth inequality.

If you don't deal with that, then living standards

will continue to fall for the poor

and for ordinary people.

You simply have to deal

with the growing inequality of wealth.

You know,

living standards were falling for ordinary people

even before Covid

because they were increasingly unable

to compete with the rich for resources.

Since Covid, inequality is much worse.

This is what I've made my money on.

This is what I made my history on.

The situation is much worse now.

If Labour don't look at it,

they will make the exact same mistake that Biden made,

that the Democrats made,

which is essentially

you are in a situation now

where the rich are much, much, much richer.

They are sucking wealth out

like a black hole of the middle class

and the government extremely quickly.

This will lead to falling living standards.

The second thing to say is that,

you know, there is a kind of a naive assumption here

that the government can simply invest.

And you see this idea often in media coverage

that says the government should just build houses,

the government should just build houses.

The resources which your government needs to invest,

the resources

which your government needs to build houses,

are already owned by rich people.

You cannot build those houses,

you cannot make those investments

unless you get those resources.

Now we have a government here in the UK,

which is unfortunately very, very resistant

to the taxation of rich people,

which means their whole plan

is to either borrow from the rich,

which, as we saw last month,

could potentially be very, very difficult,

or to raise taxes on you.

So the government has raised taxes slightly,

but the main tax they raised

was tax National insurance,

which is a tax on working people.

They haven't done really anything at all

significantly to raise taxes on the rich.

So what you see here is a government

that is faced with a massive,

massive increase

in inequality, a massive, massive loss of resources

for working people, for the government,

and rather than addressing

tax policy

to get the resources back,

they're trying to borrow it back, which in many cases

it looks like they possibly can't do,

and they're taxing you instead.

The UK government is in a

much weaker position than the US government

when it comes to borrowing.

This means that they are not able

to do the same amount of borrowing,

investing that Joe Biden did,

and even that led to him

really significantly losing the next election.

So essentially, Labour are extremely blind

to the problem of inequality and distribution,

and they are kind of rehashing a policy

that they've already seen fail in America,

only they're doing it with much, much less money.

Unfortunately, this will fail.

Okay, now on to Donald Trump.

The first thing I want to say

is, it's

actually not easy to know

exactly what Donald Trump will do

when it comes to the economy.

For the reason that I explained in my recent video,

Truth, Lies & Gains,

which is basically that

what Donald Trump says he is going to do is often not

particularly connected to what Donald Trump wants to do

or what Donald Trump intends to do.

But obviously,

we should look at and consider

and talk about the two economic policies

which he speaks about most,

which are tariffs and reducing immigration.

Now, both of these policies are really popular

because they sound very America first.

Now, we’re obviously living in a time

when the economy is very weak for ordinary people.

People are worried,

people are scared,

and people want their leaders to protect them.

And for that reason,

these kind of anti-immigration policies

are increasingly very popular all over the world

because they make people feel like at last,

our leaders are coming here to protect me,

our leaders are coming here to protect us.

They're not worrying about foreigners.

How do I know it's not going to work on the economy?

Well, we can do a similar thing here

to what we just did when analysing Labour.

So when Labour came in, they’re

kind of replicating the economic plans of

the American government that were going out,

and Trump is doing a similar thing

with regards to his rhetoric on immigration,

that the Conservative government did for a long time.

So the Conservative government really,

really aggressively spoke

about wanting to reduce immigration.

They made it kind of one of their flagship policies.

They leant really heavily into Brexit,

which was, of course, to a significant...

to a significant degree about reducing immigration.

And yet when they came in,

they actually didn't reduce immigration at all.

In fact, they significantly increased immigration.

So why does this happen?

You know,

I think it's pretty clear to see why this happens.

This is a very popular rhetoric.

It's very,

very popular to say we're going to reduce immigration.

Lots of people want immigration to be reduced.

But when the Conservatives actually come into power,

you know,

I’d love to have them on, if you want to discuss it,

but I think what happens is you sit down,

you look at it and you realise

actually some pretty important sections of our economy

have basically

been built

at this point to be extremely dependent on immigration.

So in the UK you have three sectors of the economy

which are like really, really,

really extremely depend on immigration,

which are the NHS,

care for elderly people and the universities.

And all of these sectors

are basically completely depends

on immigrants at the moment.

So I think the Conservatives come in,

they kind of sell,

we've really, really sold ourselves

on reducing immigration.

We've done Brexit,

but actually

these three really important sectors of the economy

basically won't work if we reduce immigration.

So then they end up in this kind of situation

where they need to play this game of really,

really, really aggressively

acting like and saying they want to reduce immigration

whilst not actually reducing immigration

because it would damage these sectors of the economy.

I don't want to say you can't reduce immigration,

but you need to be really careful

and strategic about how you do it.

So in the US,

there are also a lot of sectors of the economy

which have become very dependent on migrant labour.

I think in the US it's

things like agriculture, a lot of...

a lot of low paid work,

and you could reduce immigration and try and replace

these workers with domestic workers.

But you need to do the prep work

beforehand to make sure

that you have the workers available.

And I'm not sure Donald Trump has done that prep work.

I think he's going to find himself in a very,

very similar situation to the Conservatives, basically.

Where he finds that

what you need to say to get into power

is very, very difficult

to what you need to do to keep the economy running.

And he is probably going to be forced

into a similar situation

of talking very hard on immigration,

whilst not actually doing a lot on it,

because he hasn't done the prep work

to make sure that the workers are there

for the sectors

that have become dependent on these workers.

And tariffs are essentially the same thing.

You know,

I think tariffs are actually potentially

an interesting policy.

And if you

go back through history,

you will see that a lot of countries

have had a lot of success in the past with tariffs.

Countries like Japan and South Korea

and Taiwan successfully built themselves up

in the 20th century

by using tariffs to protect certain industries.

Even countries like the UK

and the US themselves have used tariffs

a lot at points in their history.

And when you live in a world where you are competing

with extremely unequal countries

like China, like India,

China is still much more unequal than the West,

that have much lower levels of wages.

Tariffs can be used to protect your domestic economy,

to protect your domestic worker.

But again, you have

just like with immigration, you have this problem.

Do we have the industries

ready here

to produce the products which we're going to lose

when we bring the tariffs in?

And I think tariffs can work

when they are targeted at specific industries

where you are being outcompeted by

foreign companies with cheaper labour.

I don't think they work when they're applied

really broadly to basically everything.

If you apply them across the board,

even in spaces

where you don't have the domestic industry

available to replace those tariffed imports,

all you end up doing is really increasing prices,

really increasing costs.

This ends up hitting the poorest the most

because they spend a much

higher percentage of their money

on basic goods and services.

And it would actually really,

if it was not targeted,

and if it was not carefully done,

it would really, really,

actually hurt living standards.

So I think Trump is going to find himself

basically just like the Conservatives

in this situation

where he knows that

these policies, he's shouted loudly for,

reducing immigration, increasing tariffs, are basically

not really workable from an economic perspective,

and he will have to constantly back down

from them in certain ways.

And I suspect in the end,

he probably won't go through with really implementing

either of these policies in a very...

in the kind of large scale he's promised.

But if he's simply not going to do the policies

which he says he's going to do,

how can I say the economy will fail?

The answer is, quite simply, tax policy.

There is one area

where I think I can confidently predict

what Trump will do,

because he did it last time

and he looks convinced to do it again.

And it's very in the interests

of both himself and Elon Musk,

who appears to be backing him financially.

He will significantly reduce taxes on rich people,

and he will fund that probably by

slashing government spending in some cases,

which will often cause

a lot people to lose their jobs, cause

a lot of people to lose support.

And he will fund it by raising taxes

on ordinary working people.

Let's assume even if he

didn't raise taxes on working people.

Is it a problem if Donald Trump massively

slashes taxes on rich people?

How does that affect ordinary

people's living standards?

Okay, I've said this a million times on the channel,

but I am going to go through it

really clearly for you again,

because it is really, really important

when you are considering Donald Trump's policy

to slash taxes on the rich.

When rich people get an enormous amount of money

that is bad for you,

that is bad for your living standards,

I'll explain why.

Money is not a real resource, okay? Money is not food.

Money is not housing.

Money is a competitive resource.

Money is a distributional resource.

Money is the resource that we use to determine

the allocation of the real resources.

If rich people get an enormous amount of money,

they will use that money to buy the things you need.

They will outcompete you and your children for housing.

House prices will go up.

Your kids will not be able to afford a house.

That means they will rent for longer.

That means they will have to borrow money

from the rich to buy houses,

they will pay more interest, okay.

Once the rich have more assets,

inequality will be higher

and they will start to use more of the consumption

goods.

They will use more land, they will use more food,

they will use more energy,

they will use more goods and services.

And you will get less of these things.

Listen, I know inequality...

I know economists don't talk about inequality much.

That's the reason why I am a multi-millionaire.

And most economists are not because I made my money

by understanding that inequality hurts the economy.

If you've not watched it yet

and you don't understand the argument

I've been making for a long time,

that inequality hurts your living standards,

I really recommend

you watch the first video on this channel.

I opened this channel

because I saw at the beginning of Covid

that governments were going to give out

enormous amounts of money.

That money would go to the rich,

and that would cause a collapse

in your living standards. That has happened.

I predicted that in June 2020

because I understand

that inequality affects living standards.

Of course, the distribution affects living standards.

Donald Trump

will oversee a massive cut in the tax of rich people,

and that will make your living standards worse.

That is how I know

that Donald Trump will fail in the economy

for the same reason I know

that Keir Starmer and Labour will fail in the economy.

Because both of these governments,

both of these leaders, despite in theory

sitting on opposite

sides of the political spectrum,

will oversee a continued increase in inequality,

which will lead to a continued decrease

in living standards,

just like Obama did,

just like David

Cameron did, just like Boris Johnson did,

just like George Bush did

all of these presidents

and prime ministers, be they red or blue,

all of your leaders

have overseen a rise in inequality,

and that is why your living standards are falling.

And that is why your kids

and your grandkids will be poor.

The message that I want to give here

is stop worrying about all of this

red blue, red blue bull***t, okay?

It's red blue, red blue, red, blue.

And every single time

you get poorer and your kids get poorer,

and the politicians

and the wealthy people who fund them

get richer and richer and richer and richer.

Stop arguing about the right left

bull***t and start protecting your resources.

Start protecting your wealth.

Follow the money.

Follow the money.

Who is getting richer? Who is getting poorer?

Whose taxes are going up?

Whose taxes are going down?

Who is finding it harder to buy a house?

Who is buying 10 or 20 houses?

Follow the money. Look at the distribution.

This is what matters to protect

the financial position of your kids and your grandkids.

Listen, you are losing your wealth.

What you have

here is a massive boat with a hole in the bottom,

and one group of people

is telling you to row more sensibly

and another group is telling you

to kick out the foreigners

while you and your family

and your community are hemorrhaging your wealth

to those people and the people that fund them,

you're bleeding to death here.

Donald Trump is an extremely wealthy

man, funded by the richest man in the world.

Keir Starmer is a rich man

funded by a very wealthy man.

These guys are getting richer, okay.

It’s you guys who are getting poorer.

You need to protect your position.

I want to end this by addressing a question

that I've gotten a lot in the last couple of weeks.

I spent the last couple of weeks

traveling up and down the UK a couple of times,

talking to groups of people all around the country.

And a lot of people asked me,

if you were Chancellor, what would you do?

And when I hear that,

what I

hear is people who are worried about what is happening

and they want me to fix this quickly.

I want to make this clear to you,

we're not going to fix this quickly.

It's not that easy. It's not going to be easy.

The richest

and most powerful people

in my country, in your country, wherever you are,

are going to try and stop this, okay?

They are getting richer from it.

The politicians,

the economists,

they are getting richer year after year.

They're going to attack me, they’re

going to attack the things that I'm saying.

Even if I was to get into power,

these guys would try and lobby

to put holes in the rules.

They would try and get the newspapers

to say it was nonsense.

They try and stop it. It's not going to be easy.

It's not going to be easy.

Look, your grandparents

and your great grandparents lived in poverty

and they fought for generations

and generations and generations.

And that is the reason why

you don't have to live

in the kind of poverty that they lived in.

Because they came back from the war

and they demanded food,

housing, education, health care.

And they got it, and they got it by taxing the rich.

They understood that

the only way to protect working

people was to tax work less and wealth more.

You need to fight that same fight.

There's a quote by the old politician,

British politician Tony Benn that I like,

he said, there’s no final victory

and there's no final defeat.

There's only the same fight to be fought again

and again and again.

So toughen up.

Listen,

I don't do this work because I think I'm going to win.

And I don't do this work because I think it's easy.

I do it because I know if we don't fight this fight,

if you don't fight this fight,

this economic situation gets worse

and worse and worse and worse.

But we've done it before.

Your grandparents,

your great grandparents did it before.

They demanded that

instead of the rich getting richer and richer,

every generation, wealth

flowed back to the working classes.

And they recognised you do that by taxing the rich.

Listen, the government in my country,

the government in your country is going to fail.

The only people who can protect

ordinary working people is you.

You can do this.

You have to do this.

One last thing.

If you're wondering

why there's a bouquet of flowers over my shoulder.

That's from Penguin, the publishing corporation,

for the book being number one.

Thanks for your support.

You can do this. We can do this. Good luck.