1 00:00:02,759 --> 00:00:14,400 Speaker 1: Bloomberg Audio Studios, Podcasts, Radio News. 2 00:00:18,920 --> 00:00:22,560 Speaker 2: Hello and welcome to another episode of the Odd Lots Podcast. 3 00:00:22,640 --> 00:00:24,360 Speaker 2: I'm Joe Wisenthal. 4 00:00:23,960 --> 00:00:25,040 Speaker 3: And I'm Tracy Alloway. 5 00:00:25,480 --> 00:00:31,639 Speaker 2: Tracy, we recently interviewed US Trade Representative Catherine Tie about, obviously, 6 00:00:32,120 --> 00:00:35,600 Speaker 2: the changing nature of our relationship with China on trade. 7 00:00:35,640 --> 00:00:39,040 Speaker 2: I feel like though we could this entire podcast could 8 00:00:39,159 --> 00:00:42,120 Speaker 2: just be about that. Really, there's an infinite number of 9 00:00:42,200 --> 00:00:43,239 Speaker 2: angles to explore. 10 00:00:43,280 --> 00:00:45,880 Speaker 3: Okay, we're a China trade podcast. Now it's done. 11 00:00:45,960 --> 00:00:46,760 Speaker 2: Yeah, it's done. 12 00:00:46,960 --> 00:00:50,360 Speaker 3: No, you're absolutely right. So one thing, this has been 13 00:00:50,440 --> 00:00:54,160 Speaker 3: hovering in the background all year basically, but you've been 14 00:00:54,200 --> 00:00:58,880 Speaker 3: hearing this mention of China over capacity, and I think 15 00:00:58,920 --> 00:01:02,200 Speaker 3: even President Joe was talking about this idea of China 16 00:01:02,360 --> 00:01:06,720 Speaker 3: flooding global markets with artificially low priced exports. And then 17 00:01:06,800 --> 00:01:10,240 Speaker 3: beyond that, a big narrative this year has been China's 18 00:01:10,319 --> 00:01:14,679 Speaker 3: economy slowing. And so I guess one question I have, 19 00:01:14,959 --> 00:01:17,680 Speaker 3: or one thing that seems very noteworthy to me that 20 00:01:17,720 --> 00:01:20,039 Speaker 3: I would love to dive into a little bit more, 21 00:01:20,120 --> 00:01:23,520 Speaker 3: is Chinese growth has been slowing. Yeah, the Redman bee 22 00:01:23,520 --> 00:01:27,679 Speaker 3: has been appreciating and there have been all these new 23 00:01:27,720 --> 00:01:31,560 Speaker 3: trade restrictions since the Trump administration and continuing into the 24 00:01:31,560 --> 00:01:36,880 Speaker 3: Biden administration as well, And yet China's current account surplus 25 00:01:36,959 --> 00:01:39,800 Speaker 3: and I know there's some discussion about how accurate the 26 00:01:39,840 --> 00:01:42,880 Speaker 3: official numbers might be, et cetera, et cetera, but the 27 00:01:42,920 --> 00:01:46,959 Speaker 3: surplus is going up again, which seems kind of remarkable. 28 00:01:47,560 --> 00:01:50,760 Speaker 2: Totally. It's a really weird moment because I'll look at 29 00:01:50,800 --> 00:01:53,880 Speaker 2: like images of some sort of like battery plant or 30 00:01:53,960 --> 00:01:57,680 Speaker 2: factory or some transportation, like, oh, this is the future. 31 00:01:57,720 --> 00:02:00,560 Speaker 2: There's extraordinary what's being built and the efficient and all that, 32 00:02:00,840 --> 00:02:03,680 Speaker 2: and then you read these headlines that basically talk about 33 00:02:03,960 --> 00:02:08,320 Speaker 2: an economy in crisis. We're facing their worst challenges since 34 00:02:08,639 --> 00:02:11,160 Speaker 2: dune shell paying or whatever is sort of slow down, 35 00:02:11,240 --> 00:02:14,079 Speaker 2: and it's hard to like they fit together in some way, 36 00:02:14,120 --> 00:02:17,080 Speaker 2: but on some level, like I still have a hard 37 00:02:17,160 --> 00:02:20,560 Speaker 2: time reconciling the dual China narratives right. 38 00:02:20,480 --> 00:02:24,320 Speaker 3: Now, absolutely, And then the other tension that I observe 39 00:02:24,400 --> 00:02:26,120 Speaker 3: all the time, and I have a lot of questions about, 40 00:02:26,200 --> 00:02:30,160 Speaker 3: is this idea that Okay, China seems committed to the 41 00:02:30,280 --> 00:02:35,520 Speaker 3: export driven economic model, even though again, as far as 42 00:02:35,520 --> 00:02:38,120 Speaker 3: I can tell, all the headwinds right now seem to 43 00:02:38,160 --> 00:02:42,280 Speaker 3: be coming on the export side, and yet like there's 44 00:02:42,400 --> 00:02:45,720 Speaker 3: still not that much effort as far as I can tell, 45 00:02:45,800 --> 00:02:49,000 Speaker 3: to increase consumption or to maybe I don't know, do 46 00:02:49,280 --> 00:02:53,560 Speaker 3: like consumer stimulus or something like that. So yeah, you're right, 47 00:02:53,600 --> 00:02:55,120 Speaker 3: it does feel like a strange moment. 48 00:02:55,240 --> 00:02:57,880 Speaker 2: And then I guess two other sort of dimensions of 49 00:02:57,880 --> 00:03:01,320 Speaker 2: this is like one of the points and Ambassador Tai 50 00:03:01,760 --> 00:03:04,800 Speaker 2: mentioned this is like this view that like China isn't 51 00:03:04,840 --> 00:03:08,000 Speaker 2: playing by the rules, or at least the rules that 52 00:03:08,360 --> 00:03:12,000 Speaker 2: you know, maybe the members of the WTO for many 53 00:03:12,040 --> 00:03:14,720 Speaker 2: of the last decades had accepted. And it always sort 54 00:03:14,720 --> 00:03:17,880 Speaker 2: of questions like why, you know, every country has a 55 00:03:17,919 --> 00:03:20,959 Speaker 2: different arrangement, right, you know, in the US, companies pay 56 00:03:21,000 --> 00:03:24,400 Speaker 2: the healthcare of their workers. In Europe the government pays 57 00:03:24,440 --> 00:03:27,840 Speaker 2: for health care. Like every country has different rules. So 58 00:03:28,040 --> 00:03:30,440 Speaker 2: like part of me wonders, like what is it about 59 00:03:30,560 --> 00:03:33,680 Speaker 2: China and the sort of state directed capitalism that they 60 00:03:33,680 --> 00:03:36,480 Speaker 2: have there that's like particularly like, oh no, this crosses 61 00:03:36,480 --> 00:03:38,560 Speaker 2: a line and the rules of trade don't really work 62 00:03:38,560 --> 00:03:41,120 Speaker 2: with them. And then two, you know, this idea of 63 00:03:41,120 --> 00:03:45,760 Speaker 2: like overcapacity and dumping, like I get that perhaps intuitively 64 00:03:45,920 --> 00:03:49,440 Speaker 2: in a pure commodity such as say steel, but when 65 00:03:49,480 --> 00:03:54,120 Speaker 2: it comes to some other things like solar or petrochemicals 66 00:03:54,400 --> 00:03:57,000 Speaker 2: or things that really you know, are very or cars 67 00:03:57,640 --> 00:04:01,800 Speaker 2: like I have I struggle with this that like it's 68 00:04:01,840 --> 00:04:03,520 Speaker 2: a useful concept, but maybe it is. 69 00:04:03,560 --> 00:04:07,480 Speaker 3: But anyway, rather than us wondering about all these questions 70 00:04:07,480 --> 00:04:09,640 Speaker 3: and thinking aloud, let's ask our guests. 71 00:04:09,680 --> 00:04:09,840 Speaker 1: Well. 72 00:04:09,880 --> 00:04:12,800 Speaker 2: I am thrilled to say that we are welcoming back 73 00:04:12,840 --> 00:04:15,560 Speaker 2: on the show multi time odd Lots guests. But it's 74 00:04:15,640 --> 00:04:18,400 Speaker 2: been a while since we've talked to him. But someone 75 00:04:18,400 --> 00:04:21,640 Speaker 2: who could help us understand all of these things, we're 76 00:04:21,640 --> 00:04:24,400 Speaker 2: going to be speaking with Adam Toos, professor at Columbia. 77 00:04:24,480 --> 00:04:27,599 Speaker 2: Here's the director of the European Institute and the chair 78 00:04:27,680 --> 00:04:30,840 Speaker 2: of the Committee for Global Thought. He travels all around 79 00:04:30,880 --> 00:04:34,200 Speaker 2: the world and he's actually in mainland China this summer. 80 00:04:34,360 --> 00:04:37,479 Speaker 2: So Adam, thank you so much for coming back on odlots. 81 00:04:37,480 --> 00:04:38,200 Speaker 2: It's been too long. 82 00:04:38,560 --> 00:04:39,960 Speaker 4: Yeah, it's a pleasure to be here. 83 00:04:40,000 --> 00:04:42,320 Speaker 2: Guess, thank you so much. You know, I just start 84 00:04:42,920 --> 00:04:46,320 Speaker 2: Chinese overcapacity. We just hear so much about it. Do 85 00:04:46,360 --> 00:04:48,840 Speaker 2: you think that's a useful frame? Like, do you find 86 00:04:48,880 --> 00:04:52,719 Speaker 2: that to be a useful sort of analytical concept over 87 00:04:52,800 --> 00:04:57,120 Speaker 2: capacity for understanding either China or a relationship with China. 88 00:04:57,200 --> 00:04:59,760 Speaker 4: Right now, I'm a little bit skeptical. I like the 89 00:05:00,160 --> 00:05:02,880 Speaker 4: tone of doubt in your own voice, Joe, as you 90 00:05:02,880 --> 00:05:05,240 Speaker 4: were introducing this. I don't get it. I mean, I 91 00:05:05,279 --> 00:05:09,279 Speaker 4: think maybe it's easier to define in sectors where the 92 00:05:09,400 --> 00:05:13,320 Speaker 4: technology is relatively static and where we have relatively straightforward 93 00:05:13,400 --> 00:05:18,800 Speaker 4: industrial economics models of trajeatory strategy that would involve building 94 00:05:18,920 --> 00:05:22,880 Speaker 4: massive amounts of capacity, maybe sliding down a cost curve, 95 00:05:23,000 --> 00:05:25,640 Speaker 4: or maybe just establishing some sort of credible threat where 96 00:05:25,720 --> 00:05:27,880 Speaker 4: folks will believe that you're going to fight for market 97 00:05:27,880 --> 00:05:30,920 Speaker 4: share because you've just got so much sunk cost. So 98 00:05:30,960 --> 00:05:34,039 Speaker 4: you could look at industries like steel and aluminium in 99 00:05:34,080 --> 00:05:37,800 Speaker 4: those terms, and I think the Chinese themselves would admit that, 100 00:05:38,120 --> 00:05:40,720 Speaker 4: you know, they went hard on urbanization and so they 101 00:05:40,800 --> 00:05:44,840 Speaker 4: built enormous capacities in steel, cement and so on. That's 102 00:05:44,880 --> 00:05:47,520 Speaker 4: one sort of sector I think where it gets I 103 00:05:47,640 --> 00:05:52,760 Speaker 4: just find kind of vaguely puzzling is in new sectors where, 104 00:05:52,839 --> 00:05:55,320 Speaker 4: thanks to the kind of new world that we're in 105 00:05:55,360 --> 00:05:58,480 Speaker 4: with climate planning, where we use that word advisedly and 106 00:05:58,600 --> 00:06:00,280 Speaker 4: we have an idea of what we need to do 107 00:06:00,320 --> 00:06:04,720 Speaker 4: to get to net zero, and that's apparently taken seriously 108 00:06:04,760 --> 00:06:07,520 Speaker 4: by Western governments. And we know that the demands in 109 00:06:07,640 --> 00:06:11,719 Speaker 4: terms of the buildout of green electricity capacity, transmission, and 110 00:06:11,760 --> 00:06:14,280 Speaker 4: then end use in the form of electric vehicles are 111 00:06:14,360 --> 00:06:18,119 Speaker 4: just huge, and for them all, we're pretty uncertain about 112 00:06:18,120 --> 00:06:20,520 Speaker 4: the technologies that are ultimately going to come and dominate 113 00:06:20,560 --> 00:06:24,360 Speaker 4: those sectors even over the medium term. And it's hard 114 00:06:24,400 --> 00:06:26,680 Speaker 4: for me to really kind of to say that the 115 00:06:26,680 --> 00:06:30,840 Speaker 4: world has got too many photovoltaic panels just seems, you know, 116 00:06:31,080 --> 00:06:35,560 Speaker 4: not for my daughter and granddaughter's future. I think the 117 00:06:35,640 --> 00:06:38,200 Speaker 4: more photovoltaics the better, to be honest. And the fact 118 00:06:38,240 --> 00:06:41,080 Speaker 4: that the price is crashed, you know, enables this this 119 00:06:41,160 --> 00:06:46,120 Speaker 4: extraordinary story about Pakistan importing thirteen gigawatts of photovoltaic capacity 120 00:06:46,120 --> 00:06:48,200 Speaker 4: in the first six months of this year, Pakistan which 121 00:06:48,240 --> 00:06:51,760 Speaker 4: is in real serious financial trouble, and that's because they're 122 00:06:51,760 --> 00:06:53,840 Speaker 4: so damn cheap, and that's because the Chinese have built 123 00:06:53,839 --> 00:06:56,640 Speaker 4: out this huge capacity. So those are the areas where 124 00:06:56,680 --> 00:06:59,760 Speaker 4: I find the story just a little hard to really 125 00:06:59,760 --> 00:07:05,080 Speaker 4: wrap my head around. And I think it's obvious tactical motivation. 126 00:07:05,200 --> 00:07:06,960 Speaker 4: You can see how the argument is being used by 127 00:07:06,960 --> 00:07:10,640 Speaker 4: Western politicians. But even when you look at the steel sector, 128 00:07:10,760 --> 00:07:12,920 Speaker 4: like you know, if you actually look at the share 129 00:07:13,040 --> 00:07:17,520 Speaker 4: of Chinese capacity that's being sold onto global markets, generally speaking, 130 00:07:17,560 --> 00:07:20,920 Speaker 4: it's a relatively small share of these absolutely immense industries 131 00:07:20,960 --> 00:07:23,520 Speaker 4: the Chinese have built, which are overwhelmingly directed towards their 132 00:07:23,560 --> 00:07:24,400 Speaker 4: own home markets. 133 00:07:25,080 --> 00:07:28,520 Speaker 3: So, just to ask Joe's question in a different way, 134 00:07:28,680 --> 00:07:30,920 Speaker 3: why do you think it seems like policy makers at 135 00:07:31,000 --> 00:07:34,600 Speaker 3: least in the US have landed on China over capacity 136 00:07:34,840 --> 00:07:37,880 Speaker 3: as this issue in trade that they seem to be 137 00:07:37,920 --> 00:07:39,960 Speaker 3: concerned about to the extent that it is one of 138 00:07:40,000 --> 00:07:44,120 Speaker 3: the very few areas of bipartisan consensus. 139 00:07:44,520 --> 00:07:47,600 Speaker 4: Well, I think China generally is an area of bipartisan 140 00:07:47,680 --> 00:07:50,480 Speaker 4: consensus in the US anyway, right, So I think this 141 00:07:50,640 --> 00:07:53,920 Speaker 4: is another instance of something that folks can agree on 142 00:07:54,000 --> 00:07:56,680 Speaker 4: in US politics, and it sounds good and it offers 143 00:07:56,680 --> 00:07:59,960 Speaker 4: a rationale for protectionism, which is very much on those 144 00:08:00,120 --> 00:08:03,120 Speaker 4: in an election year. And with this consensus, what's really interesting, 145 00:08:03,160 --> 00:08:05,720 Speaker 4: isn't it there's been this shift away. I mean, the 146 00:08:06,000 --> 00:08:08,200 Speaker 4: big thing in the background here is that there's been 147 00:08:08,240 --> 00:08:12,080 Speaker 4: such a powerful shift in American economic policy discourse away 148 00:08:12,160 --> 00:08:17,040 Speaker 4: from thinking in terms of consumer interest or holistically in 149 00:08:17,120 --> 00:08:20,640 Speaker 4: terms of the balancing of consumer and producer interest, towards 150 00:08:20,680 --> 00:08:25,520 Speaker 4: a really rather monolithic focus on producer interests. And you don't, 151 00:08:25,520 --> 00:08:28,200 Speaker 4: of course, generally talk about corporate profits in that context. 152 00:08:28,200 --> 00:08:32,200 Speaker 4: You talk about American workers, especially as what the Americans 153 00:08:32,240 --> 00:08:34,320 Speaker 4: called middle class, in other words, for the rest of 154 00:08:34,320 --> 00:08:38,200 Speaker 4: the world, working class, blue collar jobs, and that becomes 155 00:08:38,240 --> 00:08:41,680 Speaker 4: the center of policy discourse. And in that context then 156 00:08:42,160 --> 00:08:45,160 Speaker 4: you can kind of see how overcapacity begins to sound 157 00:08:45,200 --> 00:08:47,760 Speaker 4: like a looming threat as opposed to a free gift 158 00:08:47,760 --> 00:08:50,400 Speaker 4: to American consumers all of a sudden get to benefit 159 00:08:50,400 --> 00:08:54,560 Speaker 4: from whatever subsidies. Ultimately Chinese taxpayers are going to end 160 00:08:54,640 --> 00:08:57,360 Speaker 4: up footing the bill for so I think this shift 161 00:08:57,400 --> 00:09:01,200 Speaker 4: towards a worker centered vision, and this operates, you know, 162 00:09:01,240 --> 00:09:04,679 Speaker 4: in a purely nationalist mode, a rather masculinis mode on 163 00:09:04,760 --> 00:09:08,520 Speaker 4: the Donald Trump side, and it is a huge part 164 00:09:08,600 --> 00:09:12,280 Speaker 4: of the Biden folks interpretation of why they lost in 165 00:09:12,320 --> 00:09:15,160 Speaker 4: twenty sixteen and why the Democrats had to fashion this 166 00:09:15,240 --> 00:09:19,640 Speaker 4: new vision of economic policy which was essentially around restoring 167 00:09:19,880 --> 00:09:23,480 Speaker 4: the prospects of the American working class. And I think 168 00:09:23,480 --> 00:09:25,760 Speaker 4: that's where the sort of the work is being done 169 00:09:25,800 --> 00:09:27,680 Speaker 4: and the segues are being established. 170 00:09:28,000 --> 00:09:30,080 Speaker 2: Do you think there is a good pivot, like, I mean, 171 00:09:30,480 --> 00:09:34,559 Speaker 2: setting aside the actual implementation of the tactics, and it 172 00:09:34,640 --> 00:09:37,640 Speaker 2: is striking. People aren't talking about, oh, it's great that 173 00:09:37,720 --> 00:09:40,640 Speaker 2: we can get all these cheap goods by global trade. 174 00:09:40,720 --> 00:09:43,440 Speaker 2: We are not talking about the sort of consumer centric 175 00:09:43,520 --> 00:09:47,240 Speaker 2: frame where we overdo as this warranted, the sort of 176 00:09:47,320 --> 00:09:50,120 Speaker 2: worker centric frame on the effect of trade. 177 00:09:50,480 --> 00:09:52,560 Speaker 4: I mean, I'm a skeptic also when it comes to 178 00:09:52,600 --> 00:09:54,840 Speaker 4: the China shock. I mean I'm not not at the 179 00:09:54,880 --> 00:09:58,840 Speaker 4: detailed level. Obviously, there are industrial producer communities in the 180 00:09:58,880 --> 00:10:01,199 Speaker 4: US that were hit really high, and that's true all 181 00:10:01,200 --> 00:10:02,920 Speaker 4: the way around the world, and in many cases it's 182 00:10:02,960 --> 00:10:06,920 Speaker 4: preempted industrialization large parts of Africa, you know, there's just 183 00:10:07,000 --> 00:10:11,040 Speaker 4: no prospect of that industrialization any longer happening. So that's real. 184 00:10:11,480 --> 00:10:14,599 Speaker 4: But as a diagnosis of the malaise of American society, 185 00:10:14,640 --> 00:10:16,560 Speaker 4: I don't think it does work. In general, there are 186 00:10:16,559 --> 00:10:18,560 Speaker 4: a whole bunch of things wrong with the conditions of 187 00:10:18,600 --> 00:10:21,520 Speaker 4: life for working class of Americans that aren't reducible to 188 00:10:21,559 --> 00:10:25,240 Speaker 4: the availability of so called you know, good paying blue 189 00:10:25,240 --> 00:10:28,920 Speaker 4: collar jobs. And I think it's a mistake on the 190 00:10:28,960 --> 00:10:33,000 Speaker 4: part of Democratic Party in progressive politics to focus excessively 191 00:10:33,040 --> 00:10:35,600 Speaker 4: on this, because it distracts from what should have been 192 00:10:35,640 --> 00:10:39,200 Speaker 4: a much broader agenda of improving the conditions for the 193 00:10:39,240 --> 00:10:41,319 Speaker 4: service sector, which makes up the vast majority of the 194 00:10:41,400 --> 00:10:44,320 Speaker 4: US economy, and thinking hard about how to improve the 195 00:10:44,400 --> 00:10:47,120 Speaker 4: quality of life, conditions of work, and also to think, 196 00:10:47,160 --> 00:10:49,080 Speaker 4: you know, because the standard argument is it's always a 197 00:10:49,120 --> 00:10:51,760 Speaker 4: manufacturing that you get the productivity increases, Well, maybe it's 198 00:10:51,800 --> 00:10:54,760 Speaker 4: time to think harder about how we could think about 199 00:10:54,800 --> 00:10:57,360 Speaker 4: the service sector also as a driver of productivity and 200 00:10:57,400 --> 00:11:01,840 Speaker 4: improve quality of provision, quality workplace upskilled the workforce in 201 00:11:01,880 --> 00:11:04,600 Speaker 4: those sectors. So and there was a moment in the 202 00:11:04,640 --> 00:11:07,600 Speaker 4: early Biden administration with a Build Back Better agenda which 203 00:11:07,960 --> 00:11:10,520 Speaker 4: was more promising, and I think a lot of people 204 00:11:10,600 --> 00:11:12,960 Speaker 4: may be hoped that Kamala Harris might also be more 205 00:11:13,000 --> 00:11:16,160 Speaker 4: amenable to this. But once Manchin got to work on 206 00:11:16,200 --> 00:11:19,360 Speaker 4: the agenda, and Biden's I think just habits of mine 207 00:11:19,400 --> 00:11:21,240 Speaker 4: euas after all, the very old man. And so he 208 00:11:21,320 --> 00:11:23,719 Speaker 4: comes out of an era in which American industrialism was 209 00:11:23,760 --> 00:11:26,480 Speaker 4: really the trump card, and so we kind of regressed 210 00:11:26,559 --> 00:11:30,440 Speaker 4: into that mode of thinking about industrial policy. And then 211 00:11:30,480 --> 00:11:33,880 Speaker 4: in political terms, it's incredibly easy to sort of form 212 00:11:33,920 --> 00:11:36,640 Speaker 4: a segue where you have a strategic industrial sector that 213 00:11:36,760 --> 00:11:38,959 Speaker 4: China has sort of gobbled up. You have a crisis 214 00:11:38,960 --> 00:11:41,400 Speaker 4: of the American working class and deaths of despair and 215 00:11:41,440 --> 00:11:44,000 Speaker 4: Angus Deaton and Case and so on. Then you have 216 00:11:44,240 --> 00:11:47,040 Speaker 4: the working class voters for Trump, and then you have 217 00:11:47,120 --> 00:11:49,720 Speaker 4: the fentomyl epidemic. And you pile all of these things 218 00:11:49,760 --> 00:11:52,600 Speaker 4: together and you've got yourself a real stack there. And 219 00:11:52,640 --> 00:11:54,920 Speaker 4: the common problem in each case is in a sense 220 00:11:54,960 --> 00:11:59,280 Speaker 4: of China, and you know that's an overcapacity fits quite 221 00:11:59,360 --> 00:12:02,200 Speaker 4: nicely into that, because overcapacity is the result of the 222 00:12:02,280 --> 00:12:05,520 Speaker 4: you know, the unbalanced Chinese growth model that I mean 223 00:12:05,920 --> 00:12:09,160 Speaker 4: over capacity is. You could more charitably say, it's a 224 00:12:09,200 --> 00:12:14,360 Speaker 4: relatively neutral and technocratic way of describing an accusation against 225 00:12:14,480 --> 00:12:16,920 Speaker 4: China that could be put in more forceful than aggressive 226 00:12:17,000 --> 00:12:19,400 Speaker 4: terms along the lines of you stole our ip and 227 00:12:19,440 --> 00:12:22,360 Speaker 4: screwed us, and instead you say no, no, let us 228 00:12:22,400 --> 00:12:24,880 Speaker 4: explain to you, we think you have an overcapacity problem. 229 00:12:25,280 --> 00:12:27,400 Speaker 4: Let us help you think this through and figure out 230 00:12:27,400 --> 00:12:28,240 Speaker 4: how we deal with it. 231 00:12:43,360 --> 00:12:48,600 Speaker 3: You mentioned adam the importance of the services sector to 232 00:12:48,720 --> 00:12:51,520 Speaker 3: the US economy. And China, of course has a very 233 00:12:51,520 --> 00:12:55,600 Speaker 3: different economic model, and I alluded to this in the intro, 234 00:12:55,880 --> 00:12:59,400 Speaker 3: but it is still one that seems very much committed 235 00:12:59,480 --> 00:13:03,880 Speaker 3: to export driven growth. So I'm curious why you think 236 00:13:04,320 --> 00:13:10,600 Speaker 3: that is why, despite all the ostensible headwinds to manufacturing 237 00:13:10,640 --> 00:13:15,720 Speaker 3: and exports, China remains committed to growth coming from that. 238 00:13:15,800 --> 00:13:18,120 Speaker 3: And then I know there have been some rumblings about 239 00:13:18,200 --> 00:13:23,359 Speaker 3: maybe like increasing I think she called it domestic circulation 240 00:13:23,600 --> 00:13:25,600 Speaker 3: or something like that, but it doesn't seem like there's 241 00:13:25,640 --> 00:13:28,800 Speaker 3: been a real push to boost the services sector or 242 00:13:28,960 --> 00:13:29,840 Speaker 3: boost consumption. 243 00:13:30,480 --> 00:13:33,760 Speaker 4: Yeah, so this is a really interesting point. And as 244 00:13:33,800 --> 00:13:35,679 Speaker 4: I was listening to you Chaces you opened up, I 245 00:13:35,679 --> 00:13:38,120 Speaker 4: was thinking, Hm, I'm not sure. 246 00:13:38,120 --> 00:13:40,840 Speaker 3: If you don't agree, that's fine, Yeah. 247 00:13:40,400 --> 00:13:42,559 Speaker 4: I'm not sure. I'm not sure that I would agree 248 00:13:42,559 --> 00:13:46,080 Speaker 4: that the Chinese strategy is export led. I mean, and 249 00:13:46,120 --> 00:13:49,280 Speaker 4: we shouldn't confuse Germany in China because I think the Germans, 250 00:13:49,360 --> 00:13:52,120 Speaker 4: really you'd have a hard time actually putting a pin 251 00:13:52,160 --> 00:13:56,120 Speaker 4: in German strategy, but they celebrate exports per se as 252 00:13:56,160 --> 00:13:59,400 Speaker 4: a kind of national achievement, whereas I don't think that 253 00:13:59,559 --> 00:14:02,200 Speaker 4: is the same enter of Chinese policy discourse. I mean, 254 00:14:02,320 --> 00:14:04,960 Speaker 4: rather the opposite. They actually now have this dual circulation 255 00:14:05,080 --> 00:14:07,520 Speaker 4: model where they recognize there is an external sector, but 256 00:14:07,520 --> 00:14:10,079 Speaker 4: that's very vulnerable to external shocks, and the center is 257 00:14:10,600 --> 00:14:13,680 Speaker 4: really domestic production. You know, if you were to look 258 00:14:13,720 --> 00:14:16,200 Speaker 4: at steel, for instance, you know, in a good year 259 00:14:16,320 --> 00:14:19,200 Speaker 4: in China either too. And before they did the whole 260 00:14:19,200 --> 00:14:23,000 Speaker 4: gearshift with urbanization and construction and real estate, I mean 261 00:14:23,200 --> 00:14:26,840 Speaker 4: ninety five percent, certainly ninety two to ninety three percent 262 00:14:26,880 --> 00:14:30,440 Speaker 4: of Chinese immense steel production was consumed domestically. Right, They 263 00:14:30,440 --> 00:14:35,240 Speaker 4: produced a billion tons of steel and would explore sixty 264 00:14:35,280 --> 00:14:38,200 Speaker 4: to seventy million tons. The vast majority of it is 265 00:14:38,240 --> 00:14:40,680 Speaker 4: being consumed at home. If you look at Adam Wolfe's 266 00:14:40,720 --> 00:14:44,120 Speaker 4: amazing breakdowns of the Chinese motor vehicle industry, you see 267 00:14:44,120 --> 00:14:47,040 Speaker 4: exactly the same thing. Right, The vast majority of Chinese 268 00:14:47,040 --> 00:14:51,280 Speaker 4: motor vehicle production is domestic. The vast majority of their 269 00:14:51,320 --> 00:14:53,720 Speaker 4: ev the electric vehicles, the ones that everyone's up in 270 00:14:53,800 --> 00:14:56,520 Speaker 4: arms about, are also being consumed in China. And that's 271 00:14:56,560 --> 00:14:58,320 Speaker 4: one of the really impressive things you see on the 272 00:14:58,360 --> 00:15:01,440 Speaker 4: streets and the highways around Shanghai just one fancy ev 273 00:15:01,560 --> 00:15:04,640 Speaker 4: after another, stuff you've never seen before. Gull wings, it's 274 00:15:04,680 --> 00:15:08,600 Speaker 4: so futuristic, you know, it's over. The competent is extraordinary. 275 00:15:08,760 --> 00:15:13,000 Speaker 4: But so far it's really largely internal. The big surge 276 00:15:13,080 --> 00:15:16,600 Speaker 4: in Chinese motor vehicle exports which has made them all 277 00:15:16,600 --> 00:15:18,840 Speaker 4: of a sudden, this huge force in the industry, which 278 00:15:18,880 --> 00:15:23,160 Speaker 4: is hugely disruptive to the Europeans, notably is actually in 279 00:15:23,160 --> 00:15:27,000 Speaker 4: internal combustion engines, so as it were, lower tech Chinese manufacturing, 280 00:15:27,320 --> 00:15:29,800 Speaker 4: and a lot of it is joint ventures. In other words, 281 00:15:29,840 --> 00:15:32,880 Speaker 4: Western firms who can no longer find markets in China 282 00:15:33,040 --> 00:15:36,840 Speaker 4: for their now defunct and stigmatized You know, folks in 283 00:15:36,920 --> 00:15:39,600 Speaker 4: China really don't want to be driving, especially American badged 284 00:15:39,640 --> 00:15:42,760 Speaker 4: cars now, and so when what we see is the 285 00:15:42,800 --> 00:15:46,960 Speaker 4: export surge. But to attribute that to policy, I think 286 00:15:47,120 --> 00:15:49,720 Speaker 4: is a nonsecutar. There is an industrial policy in China 287 00:15:49,720 --> 00:15:53,800 Speaker 4: which is driving towards modernization. And then what mediates between 288 00:15:53,840 --> 00:15:55,880 Speaker 4: the two things, what hooks these two things up is 289 00:15:55,920 --> 00:15:59,920 Speaker 4: the Michael Pettis argument about macroeconomic imbalance. The real issue 290 00:16:00,200 --> 00:16:04,040 Speaker 4: is they have this very very heavy driven industrial policy 291 00:16:04,760 --> 00:16:08,400 Speaker 4: and they don't have the macro demand to sustain it, 292 00:16:08,440 --> 00:16:11,240 Speaker 4: and so it spills over as a result of corporate 293 00:16:11,280 --> 00:16:16,040 Speaker 4: strategies of desperation, basically gambling for salvation through looking in 294 00:16:16,160 --> 00:16:20,160 Speaker 4: foreign markets. That I think is a convincing overall picture. 295 00:16:20,160 --> 00:16:22,480 Speaker 4: When you look at there's one sector where I think 296 00:16:22,640 --> 00:16:24,640 Speaker 4: you could tell us slightly different stories and always have 297 00:16:24,680 --> 00:16:26,960 Speaker 4: been able to, which is fault voltaics. Because they're about 298 00:16:26,960 --> 00:16:30,480 Speaker 4: half of output is exported. They've so overbuilt in Fota 299 00:16:30,520 --> 00:16:34,160 Speaker 4: voltaics that that really is they basically decided we're going 300 00:16:34,240 --> 00:16:37,720 Speaker 4: to be the monopoly supplier to the entire energy transition worldwide. 301 00:16:37,960 --> 00:16:39,960 Speaker 4: There was already the case ten years ago when they 302 00:16:40,040 --> 00:16:43,680 Speaker 4: built out to meet European demand for photovoltaics. But across 303 00:16:43,680 --> 00:16:46,400 Speaker 4: the board in the Chinese economy, I think it's more 304 00:16:46,520 --> 00:16:49,400 Speaker 4: convincing to tell a story of industrial policy, which is 305 00:16:49,400 --> 00:16:55,920 Speaker 4: primarily domestically orientated, this huge Chinese innovative scrambling response to 306 00:16:55,960 --> 00:17:00,440 Speaker 4: that strategy, which then generates such fierce competition within China, 307 00:17:00,720 --> 00:17:04,240 Speaker 4: especially in light of the Michael pektis demand constrained situation 308 00:17:05,040 --> 00:17:08,720 Speaker 4: that then the firms go looking for foreign markets to 309 00:17:09,320 --> 00:17:11,600 Speaker 4: to find the demand. A story like that I think 310 00:17:11,720 --> 00:17:14,320 Speaker 4: is more convincing than to say Beijing is aiming at 311 00:17:14,760 --> 00:17:15,800 Speaker 4: export led growth. 312 00:17:16,600 --> 00:17:19,560 Speaker 2: You know, it raises a question and one of the 313 00:17:19,600 --> 00:17:24,000 Speaker 2: things again Tracy mentioned it, but why isn't China doing 314 00:17:24,040 --> 00:17:27,480 Speaker 2: more to boost its consumer and they have it. You know, 315 00:17:27,520 --> 00:17:32,600 Speaker 2: we have seen very sluggish growth. Objectively, consumption has been 316 00:17:32,680 --> 00:17:36,280 Speaker 2: very mediocre, particularly ever since the COVID lockdowns, and Matt 317 00:17:36,320 --> 00:17:40,080 Speaker 2: Klein had a really great piece in his sub stack recently. Basically, 318 00:17:40,119 --> 00:17:43,119 Speaker 2: no matter how you slice it, it looks like the 319 00:17:43,119 --> 00:17:45,119 Speaker 2: consumer has been very weak. And so if you just 320 00:17:45,160 --> 00:17:49,399 Speaker 2: look at like train miles traveled or restaurant bookings or 321 00:17:49,520 --> 00:17:52,600 Speaker 2: things like that, it still looks very mediocre. On the 322 00:17:52,680 --> 00:17:56,080 Speaker 2: other hand, despite the lack of sort of direct in 323 00:17:56,200 --> 00:18:00,520 Speaker 2: the pockets of consumer stimulus, I see convincing things from 324 00:18:00,520 --> 00:18:03,920 Speaker 2: time to time that, like the real goal of economic 325 00:18:03,920 --> 00:18:06,639 Speaker 2: policy improve everyone's standard of living is still going on, 326 00:18:06,720 --> 00:18:10,480 Speaker 2: that there's still growth and improvement in the standard of 327 00:18:10,560 --> 00:18:13,920 Speaker 2: living in Chinese society. I've never been to the mainland. 328 00:18:14,160 --> 00:18:16,639 Speaker 2: You were there this summer, and I assume it was 329 00:18:16,720 --> 00:18:19,679 Speaker 2: not your first time. When you're there and when you 330 00:18:19,760 --> 00:18:23,639 Speaker 2: talk to people, does it seem like overall that whether 331 00:18:23,960 --> 00:18:27,800 Speaker 2: it's clearly measurable in retail sales or whatever, that the 332 00:18:27,920 --> 00:18:30,880 Speaker 2: current model is continuing to lift people up. 333 00:18:31,359 --> 00:18:34,040 Speaker 4: I mean the overwhelming impression one has if you visit 334 00:18:34,040 --> 00:18:37,119 Speaker 4: a city like Shanghai, it's just it's absolutely awesome. I 335 00:18:37,119 --> 00:18:40,359 Speaker 4: mean it's in the sort of technical sense, you're just overawed. 336 00:18:40,400 --> 00:18:43,960 Speaker 4: It's so vast. I mean, it's twenty million plus people, 337 00:18:44,040 --> 00:18:47,440 Speaker 4: it's so well organized, it's so modern, it's so rich 338 00:18:47,520 --> 00:18:50,400 Speaker 4: the infrastructure, and you know, there's an upside about the capacity, 339 00:18:50,400 --> 00:18:53,480 Speaker 4: which is just like there's no limits on it. There's space, 340 00:18:53,560 --> 00:19:00,240 Speaker 4: there's ample room. It is incredibly impressive and clearly still 341 00:19:00,320 --> 00:19:03,040 Speaker 4: highly dynamic. It doesn't feel like a society which hasn't 342 00:19:03,080 --> 00:19:05,080 Speaker 4: been invested in the last five years of ten years, 343 00:19:05,160 --> 00:19:07,679 Speaker 4: like some bits of Europe feel at this point. So 344 00:19:07,760 --> 00:19:11,240 Speaker 4: the technological innovation continues. And after all, I mean, even 345 00:19:11,280 --> 00:19:14,280 Speaker 4: if we think the numbers have fudged, their growth rates 346 00:19:14,320 --> 00:19:16,359 Speaker 4: are higher or at least on a par with the 347 00:19:16,440 --> 00:19:19,080 Speaker 4: US and way above those of Europe and Japan. So 348 00:19:19,760 --> 00:19:23,359 Speaker 4: it's definitely still growing and still generating affluent and the 349 00:19:23,359 --> 00:19:26,320 Speaker 4: innovation and technological change. Yet there's really no there's no 350 00:19:26,400 --> 00:19:30,080 Speaker 4: question about that. But what you also hear really quite vocally, 351 00:19:30,359 --> 00:19:33,280 Speaker 4: and I was surprised this isn't North Korea or Stalinism 352 00:19:33,400 --> 00:19:35,520 Speaker 4: or something where everyone's worried about bugs in the walls 353 00:19:35,640 --> 00:19:39,080 Speaker 4: or something. People will tell you quite openly how miserable 354 00:19:39,080 --> 00:19:42,560 Speaker 4: they're feeling, and there is definitely a sense that something's broken. 355 00:19:42,800 --> 00:19:45,199 Speaker 4: The real estate markets headed in the wrong direction. The 356 00:19:45,240 --> 00:19:48,680 Speaker 4: regime is not friendly to go getting just simple wealth 357 00:19:48,680 --> 00:19:53,240 Speaker 4: accumulation anymore. The pressures of the intensely examined ri of 358 00:19:53,240 --> 00:19:56,119 Speaker 4: an education system on young people and the parents of 359 00:19:56,160 --> 00:20:00,840 Speaker 4: young people are relentless and brutal, and there is that 360 00:20:01,000 --> 00:20:04,240 Speaker 4: sense of like a system that is straining. It's not 361 00:20:04,359 --> 00:20:07,440 Speaker 4: obvious where the next seven to eight percent per annum 362 00:20:07,520 --> 00:20:09,760 Speaker 4: growth machine is going to come from, and it's always 363 00:20:09,800 --> 00:20:12,119 Speaker 4: an adjustment to go from seven eight per cent per 364 00:20:12,119 --> 00:20:14,280 Speaker 4: annum to three or four, even if three and four 365 00:20:14,359 --> 00:20:18,680 Speaker 4: is still very respectable and loads of economists. I don't 366 00:20:18,720 --> 00:20:22,080 Speaker 4: know whether you folks read the amazing blog Peakonology by 367 00:20:22,200 --> 00:20:24,600 Speaker 4: Zishen Wong, who's now actually a student at Princeton. I 368 00:20:24,600 --> 00:20:26,080 Speaker 4: don't know whether he'd agreed to be on the show. 369 00:20:25,960 --> 00:20:30,760 Speaker 2: We should have a Mine, yeah, meaning yeah. 370 00:20:30,520 --> 00:20:33,760 Speaker 4: He's like the top and does such a service to 371 00:20:33,800 --> 00:20:36,679 Speaker 4: the Anglo sphere and just translating document off to document, 372 00:20:36,680 --> 00:20:38,240 Speaker 4: and he's and you'll have seen it. He has this 373 00:20:38,320 --> 00:20:43,240 Speaker 4: roundup of eleven prominent and we're talking like vice ministerial 374 00:20:43,359 --> 00:20:46,919 Speaker 4: level voices from within the Chinese economic scene, who are 375 00:20:46,960 --> 00:20:49,080 Speaker 4: all saying exactly what you're saying, Joe, like, oh, where 376 00:20:49,160 --> 00:20:51,359 Speaker 4: this is? Why aren't we doing this? It's so obvious, Like, 377 00:20:51,560 --> 00:20:53,600 Speaker 4: here's another way we could do this. We could provide 378 00:20:53,640 --> 00:20:56,600 Speaker 4: better housing for rural to urban migrants. We could do 379 00:20:56,920 --> 00:21:00,280 Speaker 4: various types of discounts scheme for parents. We could the 380 00:21:00,320 --> 00:21:02,280 Speaker 4: tax system in a way it should be more beneficial. 381 00:21:02,320 --> 00:21:04,720 Speaker 4: We could build out a welfare system that will be 382 00:21:04,760 --> 00:21:08,120 Speaker 4: more supportive. What's really fascinating is that at the top 383 00:21:08,240 --> 00:21:10,960 Speaker 4: level there seems to be and this is what this 384 00:21:11,160 --> 00:21:14,880 Speaker 4: drum roll of expert opinion from within the Chinese hierarchy. 385 00:21:14,920 --> 00:21:18,359 Speaker 4: None of these people are remotely dissident. There does seem 386 00:21:18,359 --> 00:21:22,600 Speaker 4: to be almost a German style level of resistance around 387 00:21:22,680 --> 00:21:27,640 Speaker 4: a series of ideological ideas, crucially around wealth are dependence, 388 00:21:27,680 --> 00:21:30,800 Speaker 4: which basically say, no, we should create this really tough 389 00:21:30,920 --> 00:21:33,640 Speaker 4: environment in which Chinese families and households have to prove 390 00:21:33,680 --> 00:21:36,760 Speaker 4: themselves and no, we're not going to, you know, just 391 00:21:37,080 --> 00:21:40,920 Speaker 4: easily provide support. And it does seem to be something 392 00:21:40,960 --> 00:21:44,200 Speaker 4: of a hang up almost about a society. I guess 393 00:21:44,200 --> 00:21:48,320 Speaker 4: the regime fears that China will lose that incredible restless, 394 00:21:48,560 --> 00:21:51,880 Speaker 4: you know, hungry edge that drove it through the last 395 00:21:51,920 --> 00:21:54,800 Speaker 4: twenty to thirty years. It's I guess all I don't 396 00:21:54,840 --> 00:21:58,240 Speaker 4: have a good answer. What I'm saying is that within 397 00:21:58,400 --> 00:22:02,040 Speaker 4: the system itself, people are just during this perplexity, and 398 00:22:02,080 --> 00:22:05,320 Speaker 4: the answer you get back runs along the lines of, well, 399 00:22:05,359 --> 00:22:07,320 Speaker 4: the higher ups just don't think that would be a 400 00:22:07,320 --> 00:22:07,840 Speaker 4: good idea. 401 00:22:08,920 --> 00:22:13,600 Speaker 3: Since you mentioned Germany, my framework for the China German 402 00:22:13,720 --> 00:22:17,800 Speaker 3: economic relationship at least has always been sort of frenemies 403 00:22:17,920 --> 00:22:22,040 Speaker 3: where they both benefit in some way and they're quite 404 00:22:22,080 --> 00:22:26,320 Speaker 3: closely linked, but there are obviously tensions and points of 405 00:22:26,480 --> 00:22:30,760 Speaker 3: issue there. I'm wondering, how do you see the evolution 406 00:22:31,119 --> 00:22:35,360 Speaker 3: of the China German relationship right now? Like, how much 407 00:22:35,400 --> 00:22:39,040 Speaker 3: has it changed from say pre COVID to where we 408 00:22:39,080 --> 00:22:39,600 Speaker 3: are today. 409 00:22:40,040 --> 00:22:42,880 Speaker 4: Yeah, I mean we could start with the structural similarity. 410 00:22:43,080 --> 00:22:46,639 Speaker 4: I mean, they both are chronic trade surplus countries and 411 00:22:46,760 --> 00:22:48,800 Speaker 4: have kind of competed with each other to have the 412 00:22:48,880 --> 00:22:52,560 Speaker 4: largest not just trade imbalance, the current account surplus. So 413 00:22:52,600 --> 00:22:56,520 Speaker 4: they have that structural similarity. They were once complementary in 414 00:22:56,560 --> 00:23:01,680 Speaker 4: that China would produce with German equips the cheap manufactured 415 00:23:01,680 --> 00:23:05,040 Speaker 4: goods that American consumers would buy. Of course, American consumers 416 00:23:05,040 --> 00:23:08,480 Speaker 4: also bought high end German exports directly, as did the 417 00:23:08,560 --> 00:23:12,440 Speaker 4: Chinese upper middle class, but the direct link was the 418 00:23:12,480 --> 00:23:16,800 Speaker 4: American aggregate demand excess provided a market for both German 419 00:23:16,840 --> 00:23:20,560 Speaker 4: and Chinese exports, with Chinese industrialization providing a market for 420 00:23:20,640 --> 00:23:25,159 Speaker 4: German manufactured goods. And that still is a link, and 421 00:23:25,240 --> 00:23:29,160 Speaker 4: you see it in the commitment of capital goods industries 422 00:23:29,200 --> 00:23:33,600 Speaker 4: in Germany and industrial companies in Germany. Two ongoing direct 423 00:23:33,600 --> 00:23:36,040 Speaker 4: investment in China, which is still live. I saw this 424 00:23:36,080 --> 00:23:39,880 Speaker 4: when I was visiting, because I speak German and I'm 425 00:23:39,920 --> 00:23:43,280 Speaker 4: known there. I bump into German business people when I'm 426 00:23:43,280 --> 00:23:45,840 Speaker 4: in China and they will tell you flat out that 427 00:23:45,920 --> 00:23:48,640 Speaker 4: they have to be there for two reasons. Fundamentally, because 428 00:23:48,640 --> 00:23:50,840 Speaker 4: it's a big market and it's rapidly growing. If you're 429 00:23:50,840 --> 00:23:53,760 Speaker 4: saying heavy chemicals of your basf, you can't not be there. 430 00:23:54,160 --> 00:23:56,720 Speaker 4: But the other reason why a VW, for instance, can't 431 00:23:56,760 --> 00:23:59,240 Speaker 4: not be there is that if you're actually going to 432 00:23:59,280 --> 00:24:02,359 Speaker 4: compete in the global market in the next generation of 433 00:24:02,600 --> 00:24:06,000 Speaker 4: vehicles motor vehicles, you can't do what the US firms 434 00:24:06,000 --> 00:24:09,159 Speaker 4: are doing, which is basically retreating behind national protectionism. You 435 00:24:09,359 --> 00:24:12,919 Speaker 4: have to at least try and stay with the Chinese 436 00:24:12,960 --> 00:24:16,160 Speaker 4: manufacturers in the Chinese market, and so VW is doubling 437 00:24:16,240 --> 00:24:20,480 Speaker 4: down on its investments in China because they just see 438 00:24:20,520 --> 00:24:22,639 Speaker 4: it as the market it's already the biggest, but it's 439 00:24:22,680 --> 00:24:25,720 Speaker 4: also now at the qualitative at the technological frontier, and 440 00:24:25,800 --> 00:24:27,600 Speaker 4: unless you can compete there, and they've been having a 441 00:24:27,640 --> 00:24:31,160 Speaker 4: brutal period of the last eighteen months, you're basically done. 442 00:24:31,240 --> 00:24:34,400 Speaker 4: You're basically going to be a legacy manufacturer of sophisticated 443 00:24:34,440 --> 00:24:38,000 Speaker 4: internal combustion engines, not of the new cutting edge siemens. 444 00:24:38,000 --> 00:24:40,119 Speaker 4: I think the electrical engineering firm is kind of a 445 00:24:40,119 --> 00:24:42,880 Speaker 4: little bit in between the two. I think it also 446 00:24:42,880 --> 00:24:45,960 Speaker 4: sees especially in like process manufacturing, so the sort of 447 00:24:46,040 --> 00:24:51,679 Speaker 4: highly sophisticated, fully integrated electrollically controlled manufacturing lines which the 448 00:24:51,720 --> 00:24:54,720 Speaker 4: German firms specialize in, they feel they have to still 449 00:24:54,760 --> 00:25:00,479 Speaker 4: be there. So there is this substantial investment driven, market 450 00:25:00,560 --> 00:25:04,880 Speaker 4: orientated technologically you know, inspired link between Germany and China. 451 00:25:04,920 --> 00:25:07,120 Speaker 4: And you see it in the way the German government 452 00:25:07,359 --> 00:25:10,679 Speaker 4: maintains its relationships with China through thick and thin. And 453 00:25:10,720 --> 00:25:13,960 Speaker 4: when Schultz goes, he takes these large delegations of German 454 00:25:14,000 --> 00:25:17,560 Speaker 4: business leaders with him, and they're quite outspoken. That sort 455 00:25:17,560 --> 00:25:20,640 Speaker 4: of anti China consensus that you quite rightly pointed out 456 00:25:20,800 --> 00:25:22,960 Speaker 4: is prevailing in the US and which I really think 457 00:25:23,160 --> 00:25:28,159 Speaker 4: ways on American business leaders now doesn't prevent German business 458 00:25:28,240 --> 00:25:31,120 Speaker 4: leaders openly saying, if we're in the business of car making, 459 00:25:31,240 --> 00:25:32,800 Speaker 4: we need to be in China. I mean, they'll just 460 00:25:32,840 --> 00:25:36,920 Speaker 4: simply say that flat out. And BASF, who's played real 461 00:25:36,960 --> 00:25:39,520 Speaker 4: hard ball with the German government over the Ukraine War 462 00:25:39,600 --> 00:25:42,159 Speaker 4: and the energy costs issue, has openly said, you know, 463 00:25:42,760 --> 00:25:44,760 Speaker 4: basically it's you know, you either give us the support 464 00:25:44,800 --> 00:25:46,280 Speaker 4: we need or we're leaving for China. And in the 465 00:25:46,320 --> 00:25:49,159 Speaker 4: end they've left for China where they will get you know, 466 00:25:49,280 --> 00:25:51,760 Speaker 4: the power plant they need. This isn't dirty stuff. That 467 00:25:51,800 --> 00:25:55,199 Speaker 4: the BSF has this commitment to being carbon neutral in 468 00:25:55,240 --> 00:25:57,360 Speaker 4: the foreseeable future, and so what they said to their 469 00:25:57,440 --> 00:25:59,760 Speaker 4: Chinese the region where they're investing is, Hey, we need 470 00:25:59,800 --> 00:26:03,560 Speaker 4: to get walt of clean power. And guess what, the wind farm, 471 00:26:03,560 --> 00:26:06,560 Speaker 4: the offshore wind farm is already in the process of construction. 472 00:26:07,080 --> 00:26:10,639 Speaker 4: So yes, the German relationship is different, and it's based 473 00:26:10,680 --> 00:26:13,040 Speaker 4: on this division of labor industrial integration. 474 00:26:28,840 --> 00:26:32,280 Speaker 2: So since we pivoted to Germany, you know, there's just 475 00:26:32,320 --> 00:26:37,399 Speaker 2: a ton of stories these days about frailties within the 476 00:26:37,480 --> 00:26:41,000 Speaker 2: German model and the poor growth. And it feels like 477 00:26:41,040 --> 00:26:43,680 Speaker 2: a very flipped the script from the twenty tens when 478 00:26:43,840 --> 00:26:46,360 Speaker 2: Germany was booming and the periphery. 479 00:26:46,240 --> 00:26:46,840 Speaker 3: Was so weak. 480 00:26:47,560 --> 00:26:51,840 Speaker 2: And then of course early September we had the AfD party, 481 00:26:52,000 --> 00:26:55,640 Speaker 2: which is a right wing party, one big in regional elections. 482 00:26:55,680 --> 00:26:58,440 Speaker 2: So there's a lot of anxst right now about what's 483 00:26:58,480 --> 00:27:02,000 Speaker 2: going on in Germany, what is going on in Germany? 484 00:27:02,080 --> 00:27:05,479 Speaker 2: Even like how much of the concern is like, okay, 485 00:27:05,680 --> 00:27:10,440 Speaker 2: German legacy manufacturers are having trouble competing with Chinese manufacturers. 486 00:27:10,680 --> 00:27:15,159 Speaker 2: There's obviously the politics of immigration and so forth, Like 487 00:27:15,200 --> 00:27:18,440 Speaker 2: how much of a direct line can you draw between 488 00:27:18,680 --> 00:27:21,040 Speaker 2: what's going on with the economy and then sort of 489 00:27:21,080 --> 00:27:23,000 Speaker 2: what's going on in the political scene. 490 00:27:23,200 --> 00:27:25,880 Speaker 4: I think there's three issues in play that the extraordinary 491 00:27:25,920 --> 00:27:28,440 Speaker 4: election results that we saw into Engia and Saxony, two 492 00:27:28,480 --> 00:27:31,640 Speaker 4: states Germany's a federal system. Toingia and Saxony are two 493 00:27:31,640 --> 00:27:36,000 Speaker 4: states from the newly joined East German provinces. One element 494 00:27:36,040 --> 00:27:39,200 Speaker 4: of this is the legacy impact of German unification, which 495 00:27:39,680 --> 00:27:42,280 Speaker 4: I mean, if you've ever had the chance to travel 496 00:27:42,320 --> 00:27:45,879 Speaker 4: through East Germany was accomplished, you know, it's really a 497 00:27:46,000 --> 00:27:49,600 Speaker 4: gold plated regional policy program. In cities like Dresden are 498 00:27:49,680 --> 00:27:55,760 Speaker 4: absolutely gorgeous, hugely invested, wonderful places to live. But nevertheless, 499 00:27:55,840 --> 00:27:58,720 Speaker 4: there is this reasonably well founded understanding on the part 500 00:27:58,760 --> 00:28:01,679 Speaker 4: of East Germans that they are some level new to 501 00:28:01,720 --> 00:28:04,800 Speaker 4: the party. They were basically bolted onto the West German 502 00:28:04,840 --> 00:28:08,399 Speaker 4: experiment and had to largely accept its terms and for 503 00:28:08,480 --> 00:28:11,240 Speaker 4: a traumatic period in the nineties and the early two thousands. 504 00:28:11,920 --> 00:28:14,640 Speaker 4: This is largely the parents or the middle aged generation 505 00:28:14,760 --> 00:28:17,960 Speaker 4: of East Germans. There was huge unemployment and massive disruption 506 00:28:18,040 --> 00:28:20,920 Speaker 4: and the industrialization of a really shocking variety, and that 507 00:28:21,080 --> 00:28:25,280 Speaker 4: lingers in the political system. And if you ask the 508 00:28:25,600 --> 00:28:29,320 Speaker 4: voters for the two extreme formations, one is the AfD, 509 00:28:29,440 --> 00:28:34,040 Speaker 4: the Alternativa for deutschtand originally an anti Drages eurosceptic party, 510 00:28:34,119 --> 00:28:37,320 Speaker 4: and the other one is Sarah Wagan connect so truly 511 00:28:37,359 --> 00:28:41,040 Speaker 4: a Marxist philosopher who is also keen to make a 512 00:28:41,040 --> 00:28:43,760 Speaker 4: compromise with Putin over Ukraine. So there's a left and 513 00:28:43,760 --> 00:28:46,240 Speaker 4: a right wing extreme. And if you ask their voters 514 00:28:46,840 --> 00:28:49,280 Speaker 4: how they feel about their standing in German society, eighty 515 00:28:49,280 --> 00:28:51,560 Speaker 4: percent plus will say we feel that second class citizens. 516 00:28:51,560 --> 00:28:54,720 Speaker 4: So that's that's one key element. The second key element 517 00:28:55,000 --> 00:28:58,320 Speaker 4: is the migration issue. And the AfD didn't start as 518 00:28:58,320 --> 00:29:02,120 Speaker 4: an anti migrant, nphobia racist party. It started as the 519 00:29:02,200 --> 00:29:07,120 Speaker 4: alternative was to Qe to Dragi, but after the refugee 520 00:29:07,120 --> 00:29:11,560 Speaker 4: shock in Syria in fifteen sixteen, it became an openly racist, 521 00:29:11,680 --> 00:29:15,920 Speaker 4: openly in neo Nazi formation. Where I think the de 522 00:29:16,040 --> 00:29:20,360 Speaker 4: industrialization element of the story comes in is that that 523 00:29:20,480 --> 00:29:24,400 Speaker 4: removes the last best hope, if you like, of the mainstream, 524 00:29:24,480 --> 00:29:26,200 Speaker 4: which says, you know, the way we're going to address 525 00:29:26,240 --> 00:29:30,160 Speaker 4: these problems and as it were, integrate the ease more 526 00:29:30,200 --> 00:29:35,239 Speaker 4: successfully is by Germany's economic success story that's ultimately going 527 00:29:35,280 --> 00:29:38,040 Speaker 4: to take care of this problem, will achieve successful integration, 528 00:29:38,880 --> 00:29:43,200 Speaker 4: and they plowed money into Intel and the Taiwanese manufacturing 529 00:29:43,240 --> 00:29:46,640 Speaker 4: chips around Dresden. That hasn't brought off the East German voters. 530 00:29:47,080 --> 00:29:51,320 Speaker 4: And the real nightmare of the shift in the motor 531 00:29:51,400 --> 00:29:53,800 Speaker 4: vehicle industry, which is a huge piece of the German 532 00:29:53,840 --> 00:29:59,080 Speaker 4: industrial infrastructure still is that if that goes, then your antidote, 533 00:29:59,120 --> 00:30:02,479 Speaker 4: if you like, to what is essentially a politics of 534 00:30:02,800 --> 00:30:06,120 Speaker 4: racism and is Lamophobia, that is no longer plausible, and 535 00:30:06,280 --> 00:30:08,400 Speaker 4: it isn't. I don't think that, you know, folks in 536 00:30:08,680 --> 00:30:11,240 Speaker 4: Dresden or in Cheering Gear are voting AfD because they're 537 00:30:11,240 --> 00:30:14,200 Speaker 4: worried about jobs being lost in VW. It's more that 538 00:30:14,320 --> 00:30:17,160 Speaker 4: in Berlin there's total panic because if you haven't got 539 00:30:17,160 --> 00:30:20,320 Speaker 4: the VW model, it's not obvious that Germany really has 540 00:30:21,200 --> 00:30:23,520 Speaker 4: a growth model. And in part it's the same blind 541 00:30:23,520 --> 00:30:25,360 Speaker 4: spot as we were talking about with the US. In 542 00:30:25,400 --> 00:30:28,200 Speaker 4: other words, they aren't actually focused on what, even in 543 00:30:28,240 --> 00:30:31,280 Speaker 4: Germany is the main source of employment and GDP, which 544 00:30:31,320 --> 00:30:35,280 Speaker 4: is services and not the manufacturing base. But they have 545 00:30:35,440 --> 00:30:38,880 Speaker 4: been they've trapped themselves. They are trapped by powerful interest groups, 546 00:30:38,920 --> 00:30:41,680 Speaker 4: the very strong voice of organized labor in Germany, but 547 00:30:41,720 --> 00:30:44,720 Speaker 4: also the industrial lobby and a kind of lack of imagination. 548 00:30:44,840 --> 00:30:49,160 Speaker 4: They're kind of clinging to industrialism as really the last straw. 549 00:30:49,400 --> 00:30:52,240 Speaker 4: And yeah, that's why then the threat of China is 550 00:30:52,280 --> 00:30:52,960 Speaker 4: really ominous. 551 00:30:53,880 --> 00:30:57,320 Speaker 3: You alluded earlier to the idea that maybe both China 552 00:30:57,440 --> 00:31:00,600 Speaker 3: and Germany seem to be hoping for or I guess, 553 00:31:00,720 --> 00:31:06,120 Speaker 3: the immaculate emergence of supply side solutions to their problems 554 00:31:06,640 --> 00:31:10,160 Speaker 3: rather than having to do some sort of large scale stimulus. 555 00:31:11,240 --> 00:31:15,520 Speaker 3: How realistic is that, Like, where could relief actually come from? 556 00:31:15,880 --> 00:31:18,400 Speaker 4: I mean, in the Chinese case, it's pretty easy to see. 557 00:31:18,520 --> 00:31:20,360 Speaker 4: I mean, they could do. There's a whole series of 558 00:31:20,400 --> 00:31:23,680 Speaker 4: moves that they could make that would be it's hard 559 00:31:23,680 --> 00:31:26,080 Speaker 4: to see that they're just not straightforwardly win win win, 560 00:31:26,240 --> 00:31:30,520 Speaker 4: really and they would be an expansion of household demand 561 00:31:30,560 --> 00:31:33,600 Speaker 4: and expansion of high quality human services. There's a lot 562 00:31:33,640 --> 00:31:37,360 Speaker 4: of remedial stuff that actually needs doing to backfill the 563 00:31:37,480 --> 00:31:42,880 Speaker 4: China dream. The extraordinary sophistication of a city like Shanghai 564 00:31:42,920 --> 00:31:45,520 Speaker 4: is not matched in the Chinese hinterland, which is of 565 00:31:45,520 --> 00:31:48,200 Speaker 4: course vast and its contained hundreds of millions of people, 566 00:31:48,440 --> 00:31:51,880 Speaker 4: and even elementary stuff like schooling is really miserable in 567 00:31:51,960 --> 00:31:55,280 Speaker 4: provincial China. We of course, think of the huge success 568 00:31:55,320 --> 00:31:58,760 Speaker 4: of elite education in China, but that isn't the majority experience, 569 00:31:59,160 --> 00:32:01,280 Speaker 4: and so you know, you would very easily imagine a 570 00:32:01,400 --> 00:32:05,800 Speaker 4: kind of comprehensive upskilling upgrading strategy. Implementing it would be 571 00:32:05,800 --> 00:32:07,200 Speaker 4: a different thing, but that would be the way you 572 00:32:07,200 --> 00:32:10,240 Speaker 4: would go. First, economy as large as China's, it's a 573 00:32:10,280 --> 00:32:12,960 Speaker 4: domestics policy story in the end that will make the 574 00:32:13,000 --> 00:32:16,120 Speaker 4: difference for Germany. I think it has to be a 575 00:32:16,160 --> 00:32:19,200 Speaker 4: year wide that's the way to go. I mean, they 576 00:32:19,240 --> 00:32:22,000 Speaker 4: could break the impast domestically over the debt break and 577 00:32:22,120 --> 00:32:25,720 Speaker 4: invest and that would be one option, and that's certainly 578 00:32:25,840 --> 00:32:29,640 Speaker 4: a big priority. And there's some promising noises now mercifully 579 00:32:30,320 --> 00:32:33,920 Speaker 4: finally out of the SPD, out of the Social Democratic Party, Chancellor, 580 00:32:33,920 --> 00:32:37,560 Speaker 4: the Schultz Party about a frontal attack on this debt break. 581 00:32:37,560 --> 00:32:39,320 Speaker 4: So the debt break is the German version of the 582 00:32:39,360 --> 00:32:42,440 Speaker 4: European debt rules, or vice versa, the European rules, or 583 00:32:42,440 --> 00:32:46,160 Speaker 4: aversion of the German debt break, which limits the deficit 584 00:32:46,400 --> 00:32:50,320 Speaker 4: and constraints borrowing, even when Germany pays hardly any real 585 00:32:50,360 --> 00:32:53,240 Speaker 4: interest and is in need of several hundred billion euros 586 00:32:53,240 --> 00:32:57,640 Speaker 4: worth of investment in every area of public infrastructure of digitization. 587 00:32:58,320 --> 00:32:59,840 Speaker 4: So that would be one way out. The other one 588 00:32:59,840 --> 00:33:01,960 Speaker 4: I think has got to be Europe, and it may 589 00:33:01,960 --> 00:33:04,760 Speaker 4: be shocks which you know, deliver the opportunity to do this. 590 00:33:04,840 --> 00:33:09,360 Speaker 4: A Trump victory followed by disaster for the Ukrainians would 591 00:33:09,440 --> 00:33:15,000 Speaker 4: I think unleash a new europe level borrowing package, maybe 592 00:33:15,000 --> 00:33:19,400 Speaker 4: another half trillion years worth of borrowing, and that would 593 00:33:19,440 --> 00:33:22,720 Speaker 4: be the kind of structural stimulus that would benefit the 594 00:33:22,720 --> 00:33:24,200 Speaker 4: German economy quite considerably. 595 00:33:24,840 --> 00:33:27,960 Speaker 2: You know, I mentioned this in the intro, but one 596 00:33:27,960 --> 00:33:30,720 Speaker 2: of the arguments that you hear in the US about 597 00:33:30,840 --> 00:33:33,640 Speaker 2: why ramping up the trade restrictions with China is this 598 00:33:33,720 --> 00:33:37,040 Speaker 2: idea that they're cheating in some way, right, maybe over 599 00:33:37,160 --> 00:33:40,719 Speaker 2: whether it's a pure sort of industrial espionage. But then 600 00:33:40,800 --> 00:33:43,320 Speaker 2: there's this question like, well, there's all this state support 601 00:33:43,440 --> 00:33:46,000 Speaker 2: and these aren't the rules of global trade. Just from 602 00:33:46,040 --> 00:33:50,719 Speaker 2: like the historian perspective, Is this a novel argument or 603 00:33:50,800 --> 00:33:54,040 Speaker 2: has there always been this idea that like, no, you're 604 00:33:54,040 --> 00:33:55,920 Speaker 2: you're doing it the wrong way, or you've built up 605 00:33:55,920 --> 00:33:59,160 Speaker 2: this industrial capacity in a different way than we built 606 00:33:59,240 --> 00:34:00,760 Speaker 2: up and you know, again, and it strikes me that 607 00:34:00,840 --> 00:34:04,960 Speaker 2: like every country has different domestic rules and so forth. 608 00:34:05,000 --> 00:34:08,279 Speaker 2: You know, in the US we subsidize education to quite 609 00:34:08,360 --> 00:34:11,120 Speaker 2: a degree, and so that is a form of subsidizing 610 00:34:11,200 --> 00:34:15,480 Speaker 2: worker training that then corporations can take advantage. How novel 611 00:34:15,719 --> 00:34:18,120 Speaker 2: is this claim that like, we get to do these 612 00:34:18,160 --> 00:34:21,200 Speaker 2: things because we don't like the way you've developed. Has 613 00:34:21,280 --> 00:34:23,880 Speaker 2: that always been part of these global trade debates. 614 00:34:24,080 --> 00:34:26,560 Speaker 4: The first thing to say is that as far as 615 00:34:26,600 --> 00:34:29,440 Speaker 4: we're able to estimate, there've been a couple of fairly 616 00:34:29,600 --> 00:34:33,000 Speaker 4: serious minded efforts to estimate the scale of Chinese industrial 617 00:34:33,000 --> 00:34:36,160 Speaker 4: policy spending, and it's significant. I think the most widely 618 00:34:36,200 --> 00:34:39,000 Speaker 4: cited estimate puts in about one point seven percent of GDP, 619 00:34:39,800 --> 00:34:43,360 Speaker 4: which when you compare it to a similarly defined measure, 620 00:34:43,400 --> 00:34:45,040 Speaker 4: though I agree with Joe there's like lots of different 621 00:34:45,040 --> 00:34:47,520 Speaker 4: ways of defining, but if you player the same classification 622 00:34:47,600 --> 00:34:50,239 Speaker 4: to Europe and the US, that's about three times the 623 00:34:50,360 --> 00:34:53,640 Speaker 4: share that they spend. So that's one element of this 624 00:34:53,840 --> 00:34:58,560 Speaker 4: that's clearly for real. Another, I think horizon against which 625 00:34:58,719 --> 00:35:01,880 Speaker 4: to measure this like the regime that we had before, 626 00:35:01,920 --> 00:35:05,319 Speaker 4: And I think the ferocity of this argument has to 627 00:35:05,360 --> 00:35:09,640 Speaker 4: be judged against the assumption that somehow we had outgrown 628 00:35:09,840 --> 00:35:14,280 Speaker 4: that kind of era of state led and state subsidized support. 629 00:35:14,320 --> 00:35:17,120 Speaker 4: And in the European case, you'd have to say that 630 00:35:17,200 --> 00:35:19,960 Speaker 4: since the nineties they've taken that really quite seriously. In 631 00:35:20,000 --> 00:35:23,960 Speaker 4: other words, the Europeans do have rules that bite to 632 00:35:24,120 --> 00:35:28,160 Speaker 4: prevent national governments and regional governments from doing the kind 633 00:35:28,200 --> 00:35:31,320 Speaker 4: of subsidy that the Chinese take for granted. Why, because 634 00:35:31,360 --> 00:35:36,400 Speaker 4: the Europeans are balancing this really complicated multi European union, 635 00:35:36,520 --> 00:35:40,000 Speaker 4: and so to avoid just these crazy subsidy races and 636 00:35:40,040 --> 00:35:42,799 Speaker 4: Germany winning all of them, that have to be these 637 00:35:42,920 --> 00:35:45,560 Speaker 4: very tight rules. And the Europeans take this seriously to 638 00:35:45,600 --> 00:35:49,600 Speaker 4: an extent that is at times quite fascical. The argument 639 00:35:49,600 --> 00:35:51,680 Speaker 4: coming from the American side is a little less plausible, 640 00:35:51,680 --> 00:35:54,040 Speaker 4: because that kind of subsidy never really went away, and 641 00:35:54,080 --> 00:35:56,759 Speaker 4: the American states and cities have always competed in a 642 00:35:56,760 --> 00:36:00,000 Speaker 4: fairly brutal way for investment. But I think that's an 643 00:36:00,239 --> 00:36:02,840 Speaker 4: horizon against which sort of the point the finger is 644 00:36:02,880 --> 00:36:05,759 Speaker 4: pointed at China, which was okay in the nineties, we 645 00:36:05,880 --> 00:36:08,319 Speaker 4: expected you to do this because you were still poor then, 646 00:36:08,840 --> 00:36:11,320 Speaker 4: and then you did wto and then we were expecting 647 00:36:11,320 --> 00:36:12,960 Speaker 4: you to get rich and grow out of this, and 648 00:36:13,000 --> 00:36:15,719 Speaker 4: goddamn it, you haven't. No, in fact, you've somehow doubled down. 649 00:36:15,719 --> 00:36:17,400 Speaker 4: Since the twenty tens, you've been doing it more and 650 00:36:17,400 --> 00:36:21,040 Speaker 4: more intensely. And there's a new study of China which 651 00:36:21,040 --> 00:36:24,040 Speaker 4: suggests that, in fact, this was a policy learning on 652 00:36:24,120 --> 00:36:26,400 Speaker 4: the part of Beijing out of two thousand and eight. 653 00:36:26,520 --> 00:36:30,800 Speaker 4: So the Chinese imagine that after the great financial crisis 654 00:36:30,800 --> 00:36:34,760 Speaker 4: in the West, the Europeans and the Americans would realize 655 00:36:34,760 --> 00:36:37,279 Speaker 4: that finance centered growth was not a great thing, and 656 00:36:37,320 --> 00:36:39,680 Speaker 4: they would double the hub on industry and to get 657 00:36:39,719 --> 00:36:42,799 Speaker 4: ahead of the game, the Chinese thought they should. And 658 00:36:42,880 --> 00:36:44,719 Speaker 4: of course it turned out that no one else really 659 00:36:44,719 --> 00:36:47,719 Speaker 4: ever did quite make that move, and the Chinese really did. 660 00:36:47,760 --> 00:36:49,640 Speaker 4: And you know, by twenty fifteen they had made in 661 00:36:49,719 --> 00:36:52,240 Speaker 4: China twenty twenty five policies. So there was an asynchronicity 662 00:36:52,239 --> 00:36:55,000 Speaker 4: in which, as it were, European and American policy theory 663 00:36:55,120 --> 00:36:57,000 Speaker 4: thought we would get grow out of this, So the 664 00:36:57,080 --> 00:36:58,879 Speaker 4: Chinese suddenly in fact doubled down. 665 00:36:59,160 --> 00:37:01,439 Speaker 2: There's so funny because I always think, like all these 666 00:37:01,440 --> 00:37:04,200 Speaker 2: things chips act inflacial reduction act. I always have this idea. 667 00:37:04,200 --> 00:37:06,200 Speaker 2: It's like you know, two thousand and nine might have 668 00:37:06,239 --> 00:37:08,359 Speaker 2: been a good time to have done this, and there 669 00:37:08,400 --> 00:37:10,719 Speaker 2: was a lot of spare capacity and cheap labor and 670 00:37:10,760 --> 00:37:14,200 Speaker 2: all this stuff. Anyway, I just have one last question 671 00:37:14,440 --> 00:37:18,640 Speaker 2: for you, And you know you've been fairly critical of 672 00:37:18,680 --> 00:37:21,480 Speaker 2: the Biden administration. You know, we have had this turn right, 673 00:37:21,520 --> 00:37:25,160 Speaker 2: so the administration and maybe starting with Trump, but certain 674 00:37:25,280 --> 00:37:28,359 Speaker 2: the administration is like pivoted away from the sort of 675 00:37:28,880 --> 00:37:32,360 Speaker 2: I guess people call it neoliberal consensus of the decades 676 00:37:32,400 --> 00:37:36,759 Speaker 2: that preceded it, the worker centered approach to thinking about 677 00:37:36,760 --> 00:37:42,720 Speaker 2: our trade relationships, et cetera, domestic investment, maybe belatedly getting 678 00:37:42,800 --> 00:37:44,719 Speaker 2: to do some of the policies that maybe we should 679 00:37:44,760 --> 00:37:48,239 Speaker 2: have implemented fifteen years ago after the financial crisis. What 680 00:37:48,280 --> 00:37:51,880 Speaker 2: do you see as your role as I guess a 681 00:37:52,239 --> 00:37:56,200 Speaker 2: public intellectual, someone on the left. You know, you're someone 682 00:37:56,320 --> 00:37:59,440 Speaker 2: who people in the Democratic Party might read and listen to. 683 00:37:59,520 --> 00:38:01,239 Speaker 2: What do you what do you see is sort of 684 00:38:01,880 --> 00:38:05,480 Speaker 2: what you trying to accomplish with your writing and your 685 00:38:05,520 --> 00:38:06,200 Speaker 2: public work. 686 00:38:07,040 --> 00:38:09,879 Speaker 4: Yeah, it's been it's been quite a shock, actually. I mean, 687 00:38:09,920 --> 00:38:11,520 Speaker 4: on the one hand, we were listened to and I'll 688 00:38:11,560 --> 00:38:15,000 Speaker 4: say weird advisedly, but it's the bit of Biden economics 689 00:38:15,000 --> 00:38:18,400 Speaker 4: which is now buried and they prefer to forget, which 690 00:38:18,440 --> 00:38:22,359 Speaker 4: is my team. I was one of the leading spokespeople 691 00:38:22,360 --> 00:38:25,040 Speaker 4: of the team that basically said Obama didn't go big 692 00:38:25,120 --> 00:38:27,120 Speaker 4: enough with the stimulus in two thousand and nine, and 693 00:38:27,160 --> 00:38:29,920 Speaker 4: we needed to go really big, you know, this time. 694 00:38:30,360 --> 00:38:32,359 Speaker 4: And we were listened to, like you know, I know 695 00:38:32,560 --> 00:38:36,880 Speaker 4: from Schumer's people that absolutely that argument that they missed 696 00:38:36,880 --> 00:38:39,839 Speaker 4: a trick in two thousand and nine. It really that 697 00:38:40,000 --> 00:38:43,040 Speaker 4: actually got through. After all, they did the huge stimulus 698 00:38:43,120 --> 00:38:45,279 Speaker 4: early in the Biden administration, and I would argue that 699 00:38:45,320 --> 00:38:49,720 Speaker 4: it delivered a miraculous macroeconomic record, right. But the funny 700 00:38:49,719 --> 00:38:52,000 Speaker 4: thing is that that's the bit of Biden economics that 701 00:38:52,040 --> 00:38:56,040 Speaker 4: everyone wants to forget because of the Larry Summer's invasion argument, right, 702 00:38:56,080 --> 00:39:00,520 Speaker 4: because that was anathematized almost as it was happening. Instead, 703 00:39:00,560 --> 00:39:03,920 Speaker 4: the entire team have swarmed around this industrial policy element, 704 00:39:04,000 --> 00:39:06,319 Speaker 4: and I think there I've discovered a new role. So 705 00:39:06,320 --> 00:39:08,960 Speaker 4: I think in the first phase I felt okay, there 706 00:39:08,960 --> 00:39:11,680 Speaker 4: was policy learning that was going on, and the kind 707 00:39:11,680 --> 00:39:13,920 Speaker 4: of left critique of the Obama administration was making a 708 00:39:14,000 --> 00:39:17,600 Speaker 4: very positive contribution in feeding that. Then we came to 709 00:39:17,719 --> 00:39:20,360 Speaker 4: what actually emerged in the industrial policy, and I have 710 00:39:20,480 --> 00:39:22,600 Speaker 4: to say that a lot of folks that I would 711 00:39:22,640 --> 00:39:27,760 Speaker 4: you know, consider allies, friends, whatever, shifted roles to essentially 712 00:39:27,760 --> 00:39:30,319 Speaker 4: the role of a kind of cheerleading around the Biden administration. 713 00:39:30,520 --> 00:39:32,480 Speaker 4: And I get it right, they're Americans. I'm not an 714 00:39:32,480 --> 00:39:35,640 Speaker 4: American non American citizen. For them, this is life and 715 00:39:35,680 --> 00:39:39,000 Speaker 4: death fate of the Republic. We have to rally behind 716 00:39:39,040 --> 00:39:42,279 Speaker 4: our team. And by joke, they did, like the Biden administration, 717 00:39:42,360 --> 00:39:45,760 Speaker 4: if nothing else, was brilliant at message management and worked 718 00:39:46,440 --> 00:39:49,200 Speaker 4: you know the usual suspects in the finance twitter space, 719 00:39:49,280 --> 00:39:51,840 Speaker 4: incredibly hard to get everyone on side and keep pushing. 720 00:39:51,880 --> 00:39:53,800 Speaker 4: And at that point I have to say I'd discovered 721 00:39:53,800 --> 00:39:56,920 Speaker 4: a slightly different role, which was more that it's a 722 00:39:57,000 --> 00:40:00,440 Speaker 4: less attractive role. It's a less it's less comfortable, which 723 00:40:00,480 --> 00:40:04,480 Speaker 4: is really that sort of inside critic or just simply 724 00:40:04,480 --> 00:40:08,080 Speaker 4: somebody who wasn't necessarily drinking the kool aid and was saying, well, 725 00:40:08,080 --> 00:40:11,200 Speaker 4: by what metric, by what scale is this really adequate? 726 00:40:11,320 --> 00:40:13,920 Speaker 4: And so that was on the IRA side, the Inflation 727 00:40:13,960 --> 00:40:16,960 Speaker 4: Reduction Act, where this was turned into this gigantic epic 728 00:40:17,000 --> 00:40:18,920 Speaker 4: of industrial policy, and I just don't see it. I 729 00:40:18,920 --> 00:40:20,360 Speaker 4: don't see it in the data. I don't see it 730 00:40:20,400 --> 00:40:22,440 Speaker 4: in the scale. I don't see it if you run 731 00:40:22,480 --> 00:40:24,840 Speaker 4: any kind of counterfaction on what we would have expected 732 00:40:24,880 --> 00:40:27,719 Speaker 4: anyway to have happened. I think there's been a real 733 00:40:27,920 --> 00:40:30,520 Speaker 4: sort of soft kid glove treatment of this. And much 734 00:40:30,600 --> 00:40:34,879 Speaker 4: more seriously, however, is the is the question of war, 735 00:40:35,000 --> 00:40:37,640 Speaker 4: is the question of warm peace and the way in 736 00:40:37,640 --> 00:40:41,040 Speaker 4: which natural security has come to form an essential part 737 00:40:41,160 --> 00:40:45,200 Speaker 4: of even of a progressive economic policy in the United States. 738 00:40:45,200 --> 00:40:48,120 Speaker 4: And I come from the generation of Europeans whose childhood 739 00:40:48,120 --> 00:40:50,279 Speaker 4: and youth was entirely dominated by the prospect that we 740 00:40:50,280 --> 00:40:52,680 Speaker 4: were all going to end our lives in a nuclear incineration. 741 00:40:53,560 --> 00:40:58,600 Speaker 4: And I find that turned towards a hawkish, anti China 742 00:40:59,320 --> 00:41:05,040 Speaker 4: synthesis of industrial, economic and military policy profoundly troubling, and 743 00:41:05,080 --> 00:41:07,720 Speaker 4: at the very least, I think the role of folks 744 00:41:08,760 --> 00:41:10,920 Speaker 4: with you my kind of biography, I will become an 745 00:41:10,920 --> 00:41:13,200 Speaker 4: American citizen. But nevertheless, I feel like our role at 746 00:41:13,239 --> 00:41:15,160 Speaker 4: this point is to push back because there's an element 747 00:41:15,360 --> 00:41:20,080 Speaker 4: of flag waving, a kind of left American exceptionalism that 748 00:41:20,160 --> 00:41:22,520 Speaker 4: comes very rapidly to the foe in moments like that, 749 00:41:22,560 --> 00:41:24,920 Speaker 4: and there is a willingness to believe that, yes, you know, 750 00:41:25,000 --> 00:41:27,080 Speaker 4: I don't know America can do a Green Marshall Plan 751 00:41:27,239 --> 00:41:30,200 Speaker 4: or that whole rhetoric they're very familiar with. And I've 752 00:41:30,239 --> 00:41:33,160 Speaker 4: discovered a different role for myself than I really imagined 753 00:41:33,320 --> 00:41:36,400 Speaker 4: in I don't know whether I've anchored anything, but that's 754 00:41:36,480 --> 00:41:40,120 Speaker 4: just consistently asking the question is this And it's not 755 00:41:40,160 --> 00:41:44,279 Speaker 4: a skepticism about, you know, the potentially beneficial role of 756 00:41:44,400 --> 00:41:47,520 Speaker 4: US leadership. It's just actually, more often than not, a 757 00:41:47,640 --> 00:41:50,040 Speaker 4: kind of asking, are you actually serious at all? Because 758 00:41:50,080 --> 00:41:53,399 Speaker 4: I see hundreds of millions and single digit billions when 759 00:41:53,440 --> 00:41:55,759 Speaker 4: we all know that the problems we're talking about, if 760 00:41:55,760 --> 00:41:58,120 Speaker 4: you're serious and if you actually want to compete with China, 761 00:41:58,880 --> 00:42:01,880 Speaker 4: ask one hundreds of billions, if not trillions of dollars 762 00:42:01,920 --> 00:42:05,000 Speaker 4: that need mobilizing. And what I definitely don't think we 763 00:42:05,000 --> 00:42:07,879 Speaker 4: should buy is the kind of weak soup of a 764 00:42:07,960 --> 00:42:11,200 Speaker 4: promise of giant and dramatic action which we all kind 765 00:42:11,200 --> 00:42:13,120 Speaker 4: of you know, can get excited about, when in fact 766 00:42:13,160 --> 00:42:15,200 Speaker 4: what's being delivered is something far less than that. 767 00:42:16,400 --> 00:42:19,520 Speaker 2: Adam joos so great at having you back on odd lot. 768 00:42:19,520 --> 00:42:23,319 Speaker 2: It's fantastic conversation and looking forward to the next time. 769 00:42:23,840 --> 00:42:26,200 Speaker 4: Thank you really appreciate the way you guys do. It's 770 00:42:26,239 --> 00:42:29,960 Speaker 4: such a such an essential list and together. I can't 771 00:42:30,000 --> 00:42:32,640 Speaker 4: tell you how many like, Oh my god, I can't 772 00:42:32,640 --> 00:42:34,759 Speaker 4: stand this airport moment, you know what I mean, listened 773 00:42:34,760 --> 00:42:39,719 Speaker 4: to odd lots everything can keep that seriously, I kid 774 00:42:39,760 --> 00:42:41,600 Speaker 4: you not. Just in he throwed three days ago. It 775 00:42:41,680 --> 00:42:43,759 Speaker 4: was like a nightmare of security line. I just put 776 00:42:43,760 --> 00:42:45,879 Speaker 4: them on great stuff from Johnson Whole. 777 00:42:46,200 --> 00:42:47,319 Speaker 2: Oh, thank you so much. 778 00:42:47,480 --> 00:42:50,240 Speaker 4: Like you know, it's really it's really a huge. 779 00:42:50,000 --> 00:42:52,799 Speaker 3: Sence and it warms my cynical heart to know that 780 00:42:52,840 --> 00:42:56,080 Speaker 3: we make the experience of Heathrow Airport a little bit better. 781 00:42:56,800 --> 00:42:57,360 Speaker 3: That's great. 782 00:42:57,480 --> 00:42:59,560 Speaker 4: I mean there are other also better moments. I could 783 00:42:59,600 --> 00:43:03,240 Speaker 4: just go, but yeah, it's really. 784 00:43:04,040 --> 00:43:06,080 Speaker 2: Well, thank you so much and take care and hope 785 00:43:06,120 --> 00:43:06,799 Speaker 2: to see around soon. 786 00:43:06,880 --> 00:43:07,680 Speaker 4: Yeah you too. 787 00:43:20,480 --> 00:43:22,799 Speaker 2: I love talking to Adam. It really had been too long, 788 00:43:22,840 --> 00:43:24,480 Speaker 2: but you know, I love talking to people. You just 789 00:43:24,520 --> 00:43:27,239 Speaker 2: throw out anything and they'll have something interesting to say. 790 00:43:27,400 --> 00:43:28,160 Speaker 2: That's a great guest. 791 00:43:28,600 --> 00:43:31,719 Speaker 3: Yeah, he definitely makes it easy, that's for sure. I 792 00:43:31,760 --> 00:43:35,600 Speaker 3: did like his point about the sort of etymological point 793 00:43:35,840 --> 00:43:41,160 Speaker 3: about the word over capacity and this idea that like, okay, 794 00:43:41,200 --> 00:43:44,480 Speaker 3: well you have a grievance with China that basically boils 795 00:43:44,560 --> 00:43:47,000 Speaker 3: down to while they're not playing fair. But if you 796 00:43:47,000 --> 00:43:51,600 Speaker 3: can put this sort of seemingly neutral, technocratic, almost it 797 00:43:51,800 --> 00:43:56,120 Speaker 3: sounds scientific term onto it, and maybe you can use 798 00:43:56,160 --> 00:44:00,759 Speaker 3: that as the basis for like adding specific number or 799 00:44:01,080 --> 00:44:05,600 Speaker 3: just giving it this veneer of like scientific feeling. I 800 00:44:05,680 --> 00:44:07,560 Speaker 3: thought that was really interesting because it does seem to 801 00:44:07,560 --> 00:44:10,239 Speaker 3: be like maybe that has happened over the past year 802 00:44:10,360 --> 00:44:10,520 Speaker 3: or so. 803 00:44:10,920 --> 00:44:13,480 Speaker 2: You know what I've found to be a very interesting point. 804 00:44:13,560 --> 00:44:16,280 Speaker 2: And actually something else made me think about this recently 805 00:44:16,320 --> 00:44:19,080 Speaker 2: and maybe we should talk about it more is the 806 00:44:19,239 --> 00:44:23,200 Speaker 2: sort of acceptance that we have that if we want 807 00:44:23,280 --> 00:44:27,560 Speaker 2: productivity growth, we can't get that in the service sector, right, 808 00:44:27,600 --> 00:44:30,400 Speaker 2: And so like you know, you see, you know, health 809 00:44:30,440 --> 00:44:33,759 Speaker 2: care costs. I think that actually the cost curve has 810 00:44:33,800 --> 00:44:35,799 Speaker 2: been bent a little bit in recent years, but like 811 00:44:35,840 --> 00:44:40,640 Speaker 2: there's a growing growing like health care costs, housing services 812 00:44:40,880 --> 00:44:44,839 Speaker 2: continuing to be a major source of strain. We all 813 00:44:44,920 --> 00:44:47,920 Speaker 2: know the frustrations that people have with like university costs, 814 00:44:48,040 --> 00:44:51,520 Speaker 2: or childcare costs or elder care costs, things like that. 815 00:44:51,640 --> 00:44:54,200 Speaker 2: And so when we think about like economic growth and 816 00:44:54,239 --> 00:44:57,400 Speaker 2: where productivity gains are going to come from, we default 817 00:44:57,520 --> 00:45:02,080 Speaker 2: to the manufacturing sector. Mean, while there's this huge swath 818 00:45:02,200 --> 00:45:06,400 Speaker 2: of our economy that I think many people intuitively feel 819 00:45:06,400 --> 00:45:09,480 Speaker 2: like we're losing ground on that we're getting the same thing, 820 00:45:09,600 --> 00:45:13,080 Speaker 2: but it's more expensive every year, and that perhaps the 821 00:45:13,200 --> 00:45:16,400 Speaker 2: sort of big challenge or a task that we should 822 00:45:16,560 --> 00:45:18,480 Speaker 2: take up at some point is like, why do we 823 00:45:18,520 --> 00:45:20,320 Speaker 2: make our services cheaper? 824 00:45:20,560 --> 00:45:22,680 Speaker 3: Well, I think it's true, and you see that's a 825 00:45:22,760 --> 00:45:25,200 Speaker 3: totally that's a great point, and you see it born 826 00:45:25,280 --> 00:45:27,200 Speaker 3: out in the inflation statistics. 827 00:45:27,440 --> 00:45:27,600 Speaker 4: Right. 828 00:45:27,680 --> 00:45:31,440 Speaker 3: I sometimes think, Okay, the cost of things is going down, 829 00:45:31,680 --> 00:45:34,880 Speaker 3: but the cost of living is going up, and you 830 00:45:34,920 --> 00:45:38,880 Speaker 3: see that delineated very clearly in the statistics where like, okay, 831 00:45:38,920 --> 00:45:42,200 Speaker 3: TVs have become more sophisticated and more advanced than they're 832 00:45:42,280 --> 00:45:49,000 Speaker 3: cheaper than ever, but rents, home ownership, insurance, medical costs, 833 00:45:49,160 --> 00:45:53,840 Speaker 3: college education, childcare, food prices to some extent, all of 834 00:45:53,840 --> 00:45:56,680 Speaker 3: those have gone up phenomenally. So yeah, I think it's 835 00:45:56,680 --> 00:45:57,200 Speaker 3: a great. 836 00:45:57,040 --> 00:46:00,440 Speaker 2: Point totally, and I'm glad dam brought that up. Another 837 00:46:00,560 --> 00:46:03,040 Speaker 2: interesting thing that he said was just this idea that 838 00:46:03,160 --> 00:46:06,360 Speaker 2: like there is a lot of dissatisfaction in China. I mean, 839 00:46:06,400 --> 00:46:09,560 Speaker 2: there's a lot of dissatisfaction in the United States. And 840 00:46:09,719 --> 00:46:13,160 Speaker 2: you hear this from multiple people when you talk to them, 841 00:46:13,320 --> 00:46:16,600 Speaker 2: that like there really is this sort of like deeply 842 00:46:17,160 --> 00:46:20,200 Speaker 2: negative vibe. And maybe it's just because you know, GDP 843 00:46:20,360 --> 00:46:23,479 Speaker 2: growth has been weak, but it feels like, at least 844 00:46:23,480 --> 00:46:25,759 Speaker 2: again there's all secondhand for me that there is like 845 00:46:26,160 --> 00:46:30,040 Speaker 2: something something wrong going on there with the way the 846 00:46:30,120 --> 00:46:33,840 Speaker 2: domestic population perceives how the economy is unfolding. 847 00:46:34,360 --> 00:46:37,359 Speaker 3: Well, one thing I was thinking, you know, we talked about, well, 848 00:46:37,360 --> 00:46:41,160 Speaker 3: why didn't the US maybe have bigger stimulus post two 849 00:46:41,239 --> 00:46:43,359 Speaker 3: thousand and eight, And again, I think that's a really 850 00:46:43,440 --> 00:46:45,680 Speaker 3: valid point that has been brought up by a number 851 00:46:45,680 --> 00:46:49,359 Speaker 3: of people at this point. But conversely, if you look 852 00:46:49,400 --> 00:46:54,359 Speaker 3: at China, China had massive stimulus posts two thousand and eight, 853 00:46:54,480 --> 00:46:57,680 Speaker 3: and people have even described China as saving the global 854 00:46:57,760 --> 00:47:02,160 Speaker 3: economy in that time period, And I think you kind 855 00:47:02,160 --> 00:47:04,680 Speaker 3: of have to wonder like if that stimulus had been 856 00:47:04,840 --> 00:47:09,120 Speaker 3: somewhat scaled down, would that have made I guess the 857 00:47:09,320 --> 00:47:14,680 Speaker 3: transition or the post two thousand sort of twelve years 858 00:47:14,800 --> 00:47:17,399 Speaker 3: a little bit easier like the US, if we had 859 00:47:17,440 --> 00:47:21,000 Speaker 3: scaled up fiscal sooner post two thousand and eight, maybe 860 00:47:21,000 --> 00:47:23,200 Speaker 3: things would have been better. But conversely, if China had 861 00:47:23,200 --> 00:47:25,600 Speaker 3: maybe scaled some of it down post two thousand and eight, 862 00:47:25,640 --> 00:47:27,800 Speaker 3: would it have been better for the economy. It maybe 863 00:47:28,160 --> 00:47:31,800 Speaker 3: enabled it to move more to you know, market driven 864 00:47:32,040 --> 00:47:33,880 Speaker 3: consumer demands. That's interesting. 865 00:47:34,000 --> 00:47:36,600 Speaker 4: I don't know, no, but it's so funny. 866 00:47:36,680 --> 00:47:40,520 Speaker 2: I had not realized that this idea that like, after 867 00:47:40,840 --> 00:47:43,880 Speaker 2: the financial system in the US collapsed, that the Chinese 868 00:47:44,000 --> 00:47:46,440 Speaker 2: may have thought, oh, the West is going to give 869 00:47:46,520 --> 00:47:50,239 Speaker 2: up on their financialized economy, and then we basically just 870 00:47:50,280 --> 00:47:54,200 Speaker 2: went right back to the same approach. So much to 871 00:47:54,480 --> 00:47:55,160 Speaker 2: pull from that convery. 872 00:47:55,320 --> 00:47:57,560 Speaker 3: Yeah, always great catching up with Adam. Shall we leave 873 00:47:57,560 --> 00:47:57,799 Speaker 3: it there? 874 00:47:57,880 --> 00:47:58,600 Speaker 2: Let's leave it there. 875 00:47:58,800 --> 00:48:01,640 Speaker 3: This has been another episodisode of the All Thoughts podcast. 876 00:48:01,760 --> 00:48:05,080 Speaker 3: I'm Tracy Alloway. You can follow me at Tracy Alloway. 877 00:48:04,680 --> 00:48:07,680 Speaker 2: And I'm Jill Wisenthal. You can follow me at The Stalwart. 878 00:48:08,000 --> 00:48:12,239 Speaker 2: Follow our guest Adam Twos He's at Adam Underscore two is. 879 00:48:12,320 --> 00:48:15,279 Speaker 2: Also check out his podcast ones and twos, and also 880 00:48:15,400 --> 00:48:19,280 Speaker 2: check out his fantastic newsletter chartbook. Follow our producers Carmen 881 00:48:19,360 --> 00:48:22,600 Speaker 2: Rodriguez at Carman armand dash Ol Bennett at dashbod and 882 00:48:22,719 --> 00:48:26,520 Speaker 2: Kelbrooks at Kelbrooks. And thank you to our producer Moses Onam. 883 00:48:26,760 --> 00:48:29,560 Speaker 2: For more Oddlots content, go to Bloomberg dot com slash 884 00:48:29,560 --> 00:48:32,240 Speaker 2: od lots, where you have transcripts, a blog, and a newsletter 885 00:48:32,520 --> 00:48:34,560 Speaker 2: and you can chat about all of these topics in 886 00:48:34,600 --> 00:48:37,640 Speaker 2: our discord. In fact, there is an Adam twos channel 887 00:48:37,760 --> 00:48:40,319 Speaker 2: in there because people are so interested in Adam that 888 00:48:40,360 --> 00:48:43,160 Speaker 2: there's a separate place where people chat about Adam in 889 00:48:43,239 --> 00:48:46,160 Speaker 2: our discord Discord dot gg slash odd Lots. 890 00:48:46,520 --> 00:48:49,360 Speaker 3: And if you enjoy odd Lots, if you too like 891 00:48:49,440 --> 00:48:52,760 Speaker 3: to listen to episodes while waiting in airports, then please 892 00:48:52,880 --> 00:48:56,200 Speaker 3: leave us a positive review on your favorite podcast platform. 893 00:48:56,560 --> 00:48:59,279 Speaker 3: And remember, if you are a Bloomberg subscriber, you can 894 00:48:59,280 --> 00:49:02,520 Speaker 3: listen to all of our episodes absolutely ad free. All 895 00:49:02,560 --> 00:49:04,840 Speaker 3: you need to do is connect your Bloomberg account with 896 00:49:04,960 --> 00:49:07,640 Speaker 3: Apple Podcasts. In order to do that, just find the 897 00:49:07,640 --> 00:49:11,120 Speaker 3: Bloomberg channel on the platform and follow the instructions there. 898 00:49:11,320 --> 00:49:12,160 Speaker 3: Thanks for listening.