WEBVTT - Washington Talks, the World Listens 0:00:03.440 --> 0:00:06.680 Hello, and welcome to Stephanomics, the podcast that brings the 0:00:06.680 --> 0:00:15.319 global economy to you. Well, this time of year, the 0:00:15.320 --> 0:00:18.360 global economy goes to Washington for the annual meetings of 0:00:18.360 --> 0:00:21.320 the International Monetary Fund and the World Bank. A global 0:00:21.360 --> 0:00:23.920 governance is one of the big themes that next month's 0:00:23.920 --> 0:00:27.240 Bloomberg New Economy Forum in Beijing. So I had even 0:00:27.280 --> 0:00:29.680 more reason than usual to spend a few days at 0:00:29.720 --> 0:00:33.479 the meetings, testing the mood, talking to smart people, including 0:00:33.520 --> 0:00:36.879 a member of the Federal Reserves Interest Rate Committee, Robert Kaplan, 0:00:37.360 --> 0:00:40.559 and the former heads of the German and Indian Central Banks. 0:00:41.040 --> 0:00:43.640 You'll hear some of that later, but first we have 0:00:43.680 --> 0:00:47.199 a report from a country that's tested the Breton Woods institutions, 0:00:47.360 --> 0:00:49.239 the I m F, and the World Bank more than 0:00:49.360 --> 0:00:53.600 most Argentina. There are four kinds of country in the world, 0:00:53.800 --> 0:00:59.280 the economist Simon Kuznets once said, developed, undeveloped, Japan, and Argentina. 0:01:00.000 --> 0:01:03.320 Since nineteen fifty, the South American country has spent one 0:01:03.480 --> 0:01:06.640 third of its time in recession, second only to the 0:01:06.680 --> 0:01:10.559 Democratic Republic of Congo. Things were supposed to be different 0:01:10.880 --> 0:01:15.040 under President Maurizio Macri, who swept to power in promising 0:01:15.080 --> 0:01:18.840 structural reforms, but now the country's back in recession and 0:01:18.920 --> 0:01:22.920 dependent again on a massive bailout from the IMF. Macary 0:01:23.040 --> 0:01:27.240 lost badly in August primary elections to his left wing challenger, 0:01:27.480 --> 0:01:32.440 Alberto Fernandez. That shock result triggered panic in the country's 0:01:32.480 --> 0:01:37.440 financial markets and led to some familiar policy solutions capital controls, 0:01:37.760 --> 0:01:42.039 price freezes, and wage hikes. Now the general election is 0:01:42.160 --> 0:01:46.280 just around the corner. Bruce Douglas reports from Buenos Aires 0:01:46.280 --> 0:01:50.160 on what Argentines and the IMF may have learned from 0:01:50.200 --> 0:02:13.720 their latest entanglement. M In a busy neighborhood of downtown 0:02:13.760 --> 0:02:16.960 Buenos Aires, a stone's throw from the city court houses, 0:02:17.320 --> 0:02:20.440 the bar Los Galagos has catered to a mix of lawyers, 0:02:20.560 --> 0:02:25.280 professionals and tourists, but almost one hundred years, waitresses bottle 0:02:25.320 --> 0:02:28.640 behind the chrome counter as customers chatter with a thick 0:02:28.760 --> 0:02:39.120 steak and egg sandwiches in an oak lined room above 0:02:39.160 --> 0:02:42.880 the bar. I spoke to Julianas, the owner of Los Galagos, 0:02:43.040 --> 0:02:48.720 the bar opening nineteen thirty and it's a category of traditionals. 0:02:48.840 --> 0:02:54.000 Barrus goal balt No Dowlas was like a remarkable virus 0:02:54.080 --> 0:03:00.120 because he's important in cultural ratoris so this bar restaurant 0:03:00.160 --> 0:03:04.120 has been here since nine It survived a lot of 0:03:04.320 --> 0:03:08.120 ups and downs in the Argentina economy. How did it 0:03:08.200 --> 0:03:12.800 survive all these years? And in every crisis is a 0:03:12.800 --> 0:03:16.680 lot of places close and a lot of places change 0:03:16.960 --> 0:03:21.280 his policy or loose quality, or you can see in 0:03:21.480 --> 0:03:24.520 a lot of places who close in the big crisis 0:03:24.520 --> 0:03:27.320 of the end of the eighties or in the two 0:03:27.320 --> 0:03:30.360 thousand and one. And in every crisis there is we 0:03:30.480 --> 0:03:36.480 have a like like a scar like. But for us 0:03:37.000 --> 0:03:40.680 is the the idea is always changed and work with 0:03:40.720 --> 0:03:45.760 a lot of creativity. If if some ingredients are very expensive, 0:03:45.800 --> 0:03:49.760 we change the ingredients. One of the biggest challenges for 0:03:49.800 --> 0:03:52.320 any business in Argentina it is hard to cope with 0:03:52.360 --> 0:03:57.880 the runaway rates inflation, with price rises currently running like yes, 0:03:58.040 --> 0:04:01.960 it's impossible to under something to a foreign people. Coffee 0:04:02.120 --> 0:04:06.320 one month ago was seventy two. Three weeks ago was 0:04:06.640 --> 0:04:10.640 eighty two weeks ago. It's nettie and possibly the next 0:04:10.640 --> 0:04:14.240 week is a hundred business because the coffee is um 0:04:14.280 --> 0:04:16.440 it's an important actually thinking that doesn't product coffee and 0:04:16.440 --> 0:04:20.400 the coffee it's in dollars in the world in Argentina. 0:04:20.560 --> 0:04:24.520 But for us, the impact of the inflation, of the 0:04:24.560 --> 0:04:27.840 evolution of the fs in that kind of bro who 0:04:27.880 --> 0:04:35.279 are very popular here. Julian Diaz believes that the current 0:04:35.320 --> 0:04:38.800 crisis shows that the kind of open market economy Macrie 0:04:38.880 --> 0:04:42.400 hoped to foster just doesn't work in a country like Argentina. 0:04:43.720 --> 0:04:45.640 He doesn't have long to wait to make this point 0:04:45.680 --> 0:04:48.960 at the ballot box elections to DWO on Sunday, But 0:04:49.120 --> 0:04:52.440 with Macri losing by sixteen points Throughoutberto Fernandez and the 0:04:52.520 --> 0:04:56.240 primary vote in August, most analysts believe the result is 0:04:56.279 --> 0:05:01.200 a foregone conclusion. Fernandez and his running mate, former President 0:05:01.320 --> 0:05:04.599 Christina Kirchner, hail from the so called paranist wing of 0:05:04.720 --> 0:05:09.680 Argentine politics. Juan Domingo Perun army officer, three time president 0:05:09.880 --> 0:05:12.760 and husband of Vita, cast a long shadow over the 0:05:12.800 --> 0:05:16.520 country almost fifty years after his death. In her two 0:05:16.640 --> 0:05:19.839 terms of office, Kirchner implemented the kind of populist and 0:05:19.880 --> 0:05:24.760 protectionist measures peronists love, such as capital controls, trade barriers, 0:05:24.760 --> 0:05:29.080 and subsidies. It's not clear how much power Kirchner would 0:05:29.080 --> 0:05:32.240 wield in a Fernanda's administration, but the man who would 0:05:32.240 --> 0:05:35.320 be president, has hardly been transparent about his plans for 0:05:35.360 --> 0:05:40.560 economic policy either. Amid the uncertainty, many fear a repeat 0:05:40.720 --> 0:06:02.960 of the past. Okay, Marina Apo am an economists. I 0:06:02.960 --> 0:06:08.599 am consultant for enterprises and banks and other companies. We 0:06:08.680 --> 0:06:11.919 are here in the University of Buenos Aires. This is 0:06:11.960 --> 0:06:15.840 the faculty of economy. We are round here in the 0:06:16.320 --> 0:06:20.360 Museum of External Debt in Argentina, and so not many 0:06:20.400 --> 0:06:24.120 countries perhaps have a museum dedicated to external debt. Why 0:06:24.120 --> 0:06:27.880 does Argentina because of the long story with the debts 0:06:27.920 --> 0:06:31.360 and default. Let's go and I see the museum is open, 0:06:31.400 --> 0:06:40.560 So let's this is the first debt of Argentina and 0:06:40.640 --> 0:06:47.160 Brettito barring in eighteen four, that was the first. Argentina 0:06:47.240 --> 0:06:50.160 has defaulted no fewer than eight times on its foreign debt. 0:06:50.720 --> 0:06:53.760 While external events play their part in Argentina's history of 0:06:53.800 --> 0:06:56.760 woe fiscal and discipline, it is always part of the 0:06:56.760 --> 0:07:01.640 story for Marina the cat. The administration played a major 0:07:01.720 --> 0:07:05.240 role in today's mess, burning to a cash winfall from 0:07:05.240 --> 0:07:09.880 a commodities boom by subsidizing energy costs, expanding the state payroll, 0:07:10.160 --> 0:07:14.920 and even broadcasting soccer matches for free less government. They 0:07:14.960 --> 0:07:20.640 received surpluses and they create surplusses in deficit both physical 0:07:20.640 --> 0:07:26.920 and external. They destroyed the relative prices in trying to 0:07:27.120 --> 0:07:33.520 stabilize inflation while they push in guns and the public expenditures. 0:07:33.520 --> 0:07:37.040 But the economist does not exempt the Macri administration from blame. 0:07:37.800 --> 0:07:41.920 During the Macri administration, he used the debt in order 0:07:41.960 --> 0:07:46.360 to try to make a gradual policies to try to 0:07:46.360 --> 0:07:50.320 to to fix the problems that the curtinary is more. 0:07:51.720 --> 0:07:55.240 They made a lot of mistakes because the cenda was 0:07:55.480 --> 0:08:00.559 very difficult, but they tried to fix its problem without 0:08:00.640 --> 0:08:03.480 taking an account that they are connected. So if you 0:08:03.520 --> 0:08:07.800 increase energy prices, you will push up inflations. If you 0:08:07.880 --> 0:08:11.040 have it an expansive fiscal policy and a very restrict 0:08:11.160 --> 0:08:15.720 military policy, you will have a problem. To avoid big 0:08:15.760 --> 0:08:21.280 cuts in public spending, Macri tolerated big deficits. Creditors, hungry 0:08:21.280 --> 0:08:25.560 for juicy returns, gobbled up Argentina's dollar denominated debt like 0:08:25.680 --> 0:08:29.560 there was no tomorrow, or indeed no longer history of default. 0:08:30.920 --> 0:08:33.240 But when a loss of market confidence trigger a run 0:08:33.240 --> 0:08:35.680 on the pestle, the president was forced to turn to 0:08:35.720 --> 0:08:39.120 the I M. F, as so many Argentine presidents have before. 0:08:40.040 --> 0:08:44.040 All told, the fund pledged fifty six billion dollars, it's 0:08:44.160 --> 0:08:48.200 largest loan ever. Since Macu's defeat at the ballot box 0:08:48.200 --> 0:08:50.840 in August, the i m F has commented little about 0:08:50.880 --> 0:08:54.360 its plans for Argentina. In the fund's annual meeting in 0:08:54.400 --> 0:08:58.040 Washington this October, It's new managing director so that talks 0:08:58.040 --> 0:09:02.040 over Argentina's credit can continue once the funds knows the 0:09:02.080 --> 0:09:07.400 next government's policy framework. For one former Argentine I MF official, 0:09:07.840 --> 0:09:12.720 the organization's big mistake was being overly optimistic. Cloud your 0:09:12.800 --> 0:09:16.480 lossa former director of the i m F Western Hemisphere Department, 0:09:16.960 --> 0:09:19.839 told me that historically, the Latin American government had to 0:09:19.880 --> 0:09:23.880 be dragged kicking and screaming through I m F adjustment programs. 0:09:24.520 --> 0:09:28.120 When the Fund found an Argentine administration that shared its aims, 0:09:28.160 --> 0:09:33.480 it became overconfident, he said. For Monica Jibali, senior fellow 0:09:33.520 --> 0:09:37.040 at the Peterson Institute for International Economics, the fund's big 0:09:37.080 --> 0:09:39.400 mistake was to hand over too much of the money 0:09:39.600 --> 0:09:45.480 up front. The main lesson for the Fund in Argentina's 0:09:45.520 --> 0:09:48.480 case is really is it's a bit the size of 0:09:48.520 --> 0:09:51.880 the program, which was obviously too big and binds the 0:09:51.960 --> 0:09:56.120 fund to Argentine into resolving its situation. But also, in 0:09:56.200 --> 0:09:59.200 most importantly, the fact that a lot of the funds, 0:09:59.200 --> 0:10:01.319 a lot of the dis reishments were given up front, 0:10:01.760 --> 0:10:05.640 taking away the incentive for authorities to actually implement the 0:10:05.679 --> 0:10:08.280 measures that they had promised to implement under the program. 0:10:08.360 --> 0:10:11.559 So front loading was a big mistake. The i m 0:10:11.640 --> 0:10:15.520 f s optimistic assumptions about Argentina's growth prospects also had 0:10:15.600 --> 0:10:19.600 little basis in experience. After all, the fund has bailed 0:10:19.600 --> 0:10:22.199 out the South American country so often that this even 0:10:22.280 --> 0:10:27.440 inspired a local board game, Eternal Debt. The concept is 0:10:27.440 --> 0:10:30.240 not that different from monopoly, except the goal isn't to 0:10:30.280 --> 0:10:33.080 become a property mogul, but to defeat the i m F. 0:10:34.800 --> 0:10:38.400 The FUNT, however, is hardly the cause of the Argentine crisis, 0:10:38.440 --> 0:10:41.280 that lies in its government's tendencies to spend way more 0:10:41.320 --> 0:10:44.280 than it receives. Well. Brazil and some of the other 0:10:44.280 --> 0:10:46.720 countries in the region used the commodities boom of the 0:10:46.720 --> 0:10:50.559 two thousands to pay down debt and strengthen reserves. Argentina 0:10:50.679 --> 0:10:55.040 went on a spending spree. Claudio Lasser suggested that Argentines 0:10:55.120 --> 0:10:57.160 tend to believe they can live at a level that 0:10:57.280 --> 0:11:00.559 is much higher than they can actually afford. Back in 0:11:00.600 --> 0:11:04.160 the museum, Marina del Projecto said that this habit explains 0:11:04.160 --> 0:11:10.679 the country's perennial crisis. People only think on the short term. 0:11:10.800 --> 0:11:16.480 The big opportunity was during them, when other countries use 0:11:16.840 --> 0:11:20.360 the opportunity in order to try to stabilize and the 0:11:21.280 --> 0:11:24.680 macroeconomics and to create a currency. In the cause of Argentina, 0:11:24.760 --> 0:11:27.960 we decided to to maximize the short term in order 0:11:28.080 --> 0:11:32.200 to grow it. I don't know if it is the 0:11:32.920 --> 0:11:36.200 something that Argentina pot in the in the head or 0:11:37.000 --> 0:11:40.080 it is because of the history, now because of the history, 0:11:40.760 --> 0:11:46.760 but it is every every crisis is has a big cost, 0:11:46.960 --> 0:11:50.640 not only in terms of of the default, in terms 0:11:50.640 --> 0:11:57.520 of the society destruction. Whoever, when Sunday's elections faces a 0:11:57.559 --> 0:12:01.520 long road ahead, this is British lass for bloom Bakeneers. 0:12:17.760 --> 0:12:20.560 That's how the world looks from Buenos Aires. At the 0:12:20.559 --> 0:12:23.160 annual World Bank and i m F meetings in Washington, 0:12:23.360 --> 0:12:26.800 the focus was global and the mood, it's fair to say, 0:12:27.320 --> 0:12:30.480 was downbeat. When the i MS new Managing director Chris 0:12:30.559 --> 0:12:35.599 Dlina Gorgueva told the meetings that the global outlook was precarious. 0:12:35.920 --> 0:12:37.800 That was supposed to be a comment on the fragile 0:12:37.880 --> 0:12:41.120 state of the economic recovery, but you couldn't help thinking 0:12:41.400 --> 0:12:45.559 she was also talking about the fragile state of global institutions. 0:12:46.280 --> 0:12:50.120 The Trump administration's refusal to play by the usual rules 0:12:50.280 --> 0:12:54.439 in international affairs has a lot of people rattled. Some 0:12:54.520 --> 0:12:58.520 wonder whether the multilateral system can even survive. We got 0:12:58.559 --> 0:13:01.320 into some of that on a so called big think 0:13:01.360 --> 0:13:04.559 panel I took part in for the global banking organization, 0:13:04.600 --> 0:13:08.640 the Institute for International Finance. My fellow panelists were an 0:13:08.640 --> 0:13:12.240 illustrious bunch, the former chair of the President's Council of 0:13:12.240 --> 0:13:16.359 Economic Advisors under George W. Bush, Glenn Hubbard, the distinguished 0:13:16.360 --> 0:13:20.520 economist and former head of the Indian Central Bank Raam Rajan, 0:13:21.120 --> 0:13:25.600 and the former Bundesbank president Axel Weber, now president of UBS. 0:13:26.280 --> 0:13:29.320 And the moderator you'll hear asking the questions was the 0:13:29.400 --> 0:13:38.720 head of the i F, Tim Adams. Multilateralism. The commitment 0:13:38.760 --> 0:13:42.640 to multilateralism seems to be on the wayne, So Stephanie, 0:13:43.080 --> 0:13:46.000 are we worried should be worried. Are you worried about 0:13:46.280 --> 0:13:49.640 where we're going? Could we recreate those institutions again? Could 0:13:49.640 --> 0:13:52.360 we get John Maynard Keynes and Harry Dexter White and 0:13:52.360 --> 0:13:55.240 the other forties city in New Hampshire to come up 0:13:55.240 --> 0:13:58.880 with something similar? Would would it just crumble? And because 0:13:58.920 --> 0:14:01.400 we couldn't agree to even the size of the table, 0:14:01.720 --> 0:14:03.800 how do you see institutions? I wonder if there's anyone 0:14:03.840 --> 0:14:06.000 in this room who isn't worried about the direction we're 0:14:06.040 --> 0:14:09.800 going in, but certainly on the question of the institutions. 0:14:09.800 --> 0:14:13.960 I mean the question has been asked in different ways 0:14:14.000 --> 0:14:17.640 over the last couple of years, particularly in response to 0:14:17.679 --> 0:14:20.040 the trade wars, but actually in response to the general 0:14:20.080 --> 0:14:23.160 attitude of the US. So we say the US administration 0:14:23.200 --> 0:14:25.120 to the rest of the world, and the question is, 0:14:25.560 --> 0:14:31.680 can these institutions survive, let alone thrive without the US 0:14:31.720 --> 0:14:36.680 as a willing and active participant who can see the 0:14:36.720 --> 0:14:39.240 big picture and not just the national interest. And I 0:14:39.280 --> 0:14:41.840 think that's that is clearly a question that gets asked 0:14:42.280 --> 0:14:45.600 senior officials in the G twenty who are often sort 0:14:45.600 --> 0:14:49.320 of going into huddles at summits trying to have the 0:14:49.360 --> 0:14:52.400 kind of G twenty minus one meetings, and those meetings 0:14:52.440 --> 0:14:54.640 do happen, and I think there is a kind of 0:14:54.720 --> 0:14:58.600 underground operation to keep the wheels turning and to have 0:14:58.680 --> 0:15:01.440 when you can't do deals on a global basis, can 0:15:01.480 --> 0:15:04.040 you do a deal with with willing partners that maintain 0:15:04.200 --> 0:15:07.080 some of this sort of commitment to multilateralism. But you'll 0:15:07.080 --> 0:15:10.600 mention of Harry Dexter White and Kine's reminds us. You know, 0:15:10.960 --> 0:15:13.920 one of the reasons these institutions worked was that they 0:15:13.920 --> 0:15:16.840 weren't entirely fair and multilateral when it came to the 0:15:16.920 --> 0:15:19.800 US UM. Certainly from my experience in the U S. 0:15:19.840 --> 0:15:21.840 Treasury and everyone else has seen the same thing. You know, 0:15:22.000 --> 0:15:26.440 it started with a bare knuckle fight between the US 0:15:26.600 --> 0:15:29.600 and the UK, the US one, and that was the 0:15:29.640 --> 0:15:33.120 basis on which policy was done within those institutions. And 0:15:33.200 --> 0:15:35.840 you had to you know, if you're the US executive 0:15:35.880 --> 0:15:37.640 director of the I m F, everyone wants to know 0:15:37.720 --> 0:15:40.560 what your position is before you start the conversation. So 0:15:40.600 --> 0:15:43.360 we shouldn't sort of idealize the sort of come by 0:15:43.400 --> 0:15:47.480 our aspect of these institutions. But clearly they did produce 0:15:47.640 --> 0:15:50.520 there's a there's a public good aspect which has been 0:15:50.560 --> 0:15:55.400 incredibly important, and of course any of us worried, especially 0:15:55.400 --> 0:15:59.920 in the response to another global downturn, let alone find 0:16:00.000 --> 0:16:03.720 actual crisis, whether the wheels would still turn, whether you 0:16:03.800 --> 0:16:07.080 still have enough of that stock of shared trust and 0:16:07.240 --> 0:16:11.400 norms to respond. We've certainly seen and this is going 0:16:11.440 --> 0:16:14.400 back to the economics, you know, where it comes to trade. 0:16:15.040 --> 0:16:17.360 We could all people who can do their numbers about 0:16:17.440 --> 0:16:19.920 what the impact of a particular tariff is, and usually 0:16:19.960 --> 0:16:22.240 the numbers are quite small, just like the numbers are 0:16:22.240 --> 0:16:23.960 always quite small when you try to look at the 0:16:23.960 --> 0:16:26.800 direct effects of a trade deal, because we all knew 0:16:26.840 --> 0:16:29.160 that it was the kind of dynamic consequences that would 0:16:29.160 --> 0:16:32.560 be important. I think what we have underestimated and has 0:16:32.600 --> 0:16:35.240 been brought home by the last couple of years is 0:16:35.280 --> 0:16:41.200 how uncertainty about the whole system can really produce investment, 0:16:41.600 --> 0:16:44.960 have confidence and investment just grinding to a halt. And 0:16:45.040 --> 0:16:47.560 that's what worries me in generally, if you can have 0:16:47.680 --> 0:16:51.840 that kind of effect, uncertainty around the trading rules can 0:16:52.040 --> 0:16:54.920 really do short term damage to the supply side that 0:16:54.960 --> 0:16:59.400 we might have expected would take years to happen. What's 0:16:59.480 --> 0:17:02.640 the sort of wells the other side of that when 0:17:02.640 --> 0:17:05.600 you're talking about just the general way that countries deal 0:17:05.640 --> 0:17:07.920 with each other. So yeah, I'm pretty wide you raised 0:17:07.960 --> 0:17:11.280 a p and I assume we're all multilateralist, globalist internationalists 0:17:11.320 --> 0:17:14.520 aplete guilty to all those things. But Glenn, do we 0:17:14.600 --> 0:17:18.840 over and nostalgize what these institutions were before? I remember 0:17:18.880 --> 0:17:20.800 presidents we work for. What crazy about going to G 0:17:20.960 --> 0:17:23.720 twenty three seven meetings. I don't think Clinton or Obama 0:17:23.840 --> 0:17:26.440 was either. I think that's probably right. I mean, I'm 0:17:26.440 --> 0:17:29.320 gonna start off first by picking up on something Stephanie said. 0:17:29.320 --> 0:17:32.800 The risk premium now and business investment as a result 0:17:32.840 --> 0:17:35.199 of the policy uncertainty is probably large enough in the 0:17:35.320 --> 0:17:38.880 US to overwhelm the corporate tax change. So this has 0:17:38.920 --> 0:17:41.640 a very large effect. It's not the small direct effect 0:17:41.640 --> 0:17:44.560 of trade, but there's no audience of business people that 0:17:44.640 --> 0:17:47.560 doesn't focus on this, and the effect on investment and 0:17:47.640 --> 0:17:51.600 supply chains is real and pernicious. I mean, to your question, Tim, 0:17:51.640 --> 0:17:55.280 the Breton Woods institutions are probably not what we would 0:17:55.280 --> 0:17:59.359 design today if we were to have a discussion, assuming 0:17:59.359 --> 0:18:03.560 people would even meet to have that discussion. But multilateralism 0:18:03.560 --> 0:18:06.440 and what it represents remains absolutely critical and I would 0:18:06.440 --> 0:18:09.000 add to that not just the Breton Woods institutions, but 0:18:09.080 --> 0:18:12.720 the World Trade Organization. You know, we c d other 0:18:12.920 --> 0:18:15.840 venues for policy makers to come together. I think are 0:18:15.880 --> 0:18:21.080 still are still vital without American leadership. I'm incredibly skeptical 0:18:21.160 --> 0:18:24.400 that any of this has a future. I think it's 0:18:24.480 --> 0:18:27.159 naive to say that others will step into the breach 0:18:27.560 --> 0:18:31.080 and fulfill the promise of multilateralism without the United States. 0:18:31.080 --> 0:18:34.480 So I don't really think there is a G nineteen 0:18:34.800 --> 0:18:38.080 type solution. America is still the big kid on the 0:18:38.080 --> 0:18:40.840 block UH, and we need to we need to get 0:18:40.880 --> 0:18:44.600 at this. And we see this everything from the problems 0:18:44.640 --> 0:18:47.840 in China trade where a multilateral solution would have been 0:18:47.880 --> 0:18:51.160 more effective. We see this in the failure to get 0:18:51.200 --> 0:18:55.080 together on a variety of policy topics. And were we 0:18:55.160 --> 0:18:58.639 to have a significant global recession, I wonder where the 0:18:58.680 --> 0:19:01.920 coordinating mechanisms would be. So I would count myself as 0:19:02.240 --> 0:19:10.119 as very worried by the failure of American leadership. The 0:19:10.240 --> 0:19:13.160 g's all came out of crisises with the G five 0:19:13.200 --> 0:19:15.800 and G seven is a product of the UH, the 0:19:15.800 --> 0:19:18.480 long gas lines, the oil crisis the seventies. That G 0:19:18.640 --> 0:19:22.760 twenty was created Battalaritia and and and others. Response to 0:19:22.760 --> 0:19:25.560 Asia financial crisis was elevated to the heads of state 0:19:25.680 --> 0:19:28.080 in response to Great Financial Crisis? Do we need a 0:19:28.119 --> 0:19:31.000 crisis to rally around or create the new g or 0:19:31.240 --> 0:19:34.640 are just give he to the current Geese? I think 0:19:34.680 --> 0:19:36.879 we may need one, and it's for this reason. I 0:19:37.359 --> 0:19:41.000 think I'm gonna be a little naive and say, yes, 0:19:41.119 --> 0:19:44.840 we needed the United States. But if the United States 0:19:44.880 --> 0:19:46.800 doesn't come to the table, the world has to find 0:19:46.840 --> 0:19:50.240 an alternative solution. I mean, this is the house that 0:19:50.359 --> 0:19:53.760 the US built post World War Two, and it has 0:19:53.800 --> 0:19:56.000 a pole position for the United States. And that was 0:19:56.040 --> 0:19:58.640 a good thing because the United States often wasn't part 0:19:58.680 --> 0:20:02.160 of the comeback to but it was the one who 0:20:02.320 --> 0:20:05.800 ensured that there was generally peace. Now it's not only 0:20:05.840 --> 0:20:08.440 one of the combatants, but it's sort of breaking down 0:20:08.440 --> 0:20:12.520 the rules. And you know what's the alternative If the 0:20:12.600 --> 0:20:15.239 US doesn't come back and most people think, oh, this 0:20:15.320 --> 0:20:18.960 is just this administration, it's going to pass. Well, there's 0:20:18.960 --> 0:20:22.760 a deeper seated issue with China, the rise of China 0:20:22.840 --> 0:20:26.240 and who's going to be dominant, and my senses, the 0:20:26.240 --> 0:20:28.919 world has to move on from the old structure to 0:20:29.040 --> 0:20:31.600 one where we don't have twenty people at the table 0:20:31.640 --> 0:20:35.040 determining anything, but we have three or four people, three 0:20:35.119 --> 0:20:39.000 or four entities. So probably China, the US, the EU, 0:20:39.160 --> 0:20:43.560 maybe Japan who sit together and sort of uh, it's 0:20:43.560 --> 0:20:46.760 more adapted to a multipolar world. It may still be 0:20:46.840 --> 0:20:50.199 the case the US is dominant, but it can't be 0:20:50.280 --> 0:20:52.560 that it is privileged by the rules because that will 0:20:52.680 --> 0:20:55.760 ensure China doesn't participate. We need something that brings China 0:20:55.840 --> 0:20:58.520 in also. So my guess is we need change. But 0:20:58.720 --> 0:21:00.960 I think you're absolute right. It's not going to happen 0:21:01.880 --> 0:21:04.200 for two reasons. One, Washington is not going to give 0:21:04.280 --> 0:21:07.960 up the pole position, even if it doesn't really do 0:21:08.040 --> 0:21:11.639 what what it takes until, in a sense, there's a 0:21:11.720 --> 0:21:15.119 change in attitude in Washington, and that may take a 0:21:15.200 --> 0:21:17.640 long time. It may take China to be much bigger 0:21:17.920 --> 0:21:20.480 before Washington says we do need to bring them in. 0:21:20.960 --> 0:21:22.960 And the other is, you know, it may be that 0:21:23.080 --> 0:21:26.160 we need a full fledged crisis in order to say 0:21:26.160 --> 0:21:28.359 the system is broken, we need to build it up again. 0:21:28.840 --> 0:21:31.719 I hope we don't go there, but we do need change. Actually, 0:21:31.840 --> 0:21:34.480 too pessimistic if you'd we're in this town. Fifteen or 0:21:34.520 --> 0:21:37.199 twenty years ago during this week, the streets would have 0:21:37.200 --> 0:21:39.720 been full of riders. There were tear gas. Remember you 0:21:39.920 --> 0:21:43.720 couldn't you can get across down there's massive protests going on. 0:21:44.240 --> 0:21:46.280 We don't see that anymore. That Christine Lagard do have 0:21:46.440 --> 0:21:50.159 fantastic job in reshaping the profile the I m f 0:21:50.720 --> 0:21:53.320 why there there is no more? If the institution is 0:21:53.359 --> 0:21:55.920 now work and we're worried about globalization, you're worried about 0:21:55.920 --> 0:21:58.359 all these issues, why is there no protest going on? 0:21:58.480 --> 0:22:02.880 Why so? I think, like like rag who I firmly 0:22:02.920 --> 0:22:07.119 believed that the emergence of China and the integration of 0:22:07.200 --> 0:22:11.480 China into the international Breton Woods institutions was an absolutely 0:22:11.560 --> 0:22:14.600 needed thing to do, and we were slow. We were 0:22:14.640 --> 0:22:17.200 behind the curve, and even today I don't think where 0:22:17.200 --> 0:22:20.000 we should be. If you were to redesign the Breton 0:22:20.000 --> 0:22:22.840 Woods organization now with more than half of the world's 0:22:22.880 --> 0:22:26.120 population living in Asia, it would not be US centric, 0:22:26.240 --> 0:22:29.479 It would not be US centric. City reflected the outcome 0:22:29.520 --> 0:22:32.680 of the Second World War and how these organizations were created. 0:22:32.760 --> 0:22:35.800 Now they need to be more inclusive. And what you're 0:22:35.800 --> 0:22:38.000 seeing is when when I came to the official sector. 0:22:38.080 --> 0:22:41.359 It was in the early two thousands. We had discussions 0:22:41.359 --> 0:22:43.560 around the table. I remember we had the G twenty 0:22:43.560 --> 0:22:46.800 presidency in two thousand four. It was about creating local 0:22:46.960 --> 0:22:50.680 currency bond markets. We haven't progressed at all on that, 0:22:51.080 --> 0:22:54.800 and so many of the agenda items got delayed or 0:22:54.840 --> 0:22:57.720 washed out by the financial crisis. I think the Breton 0:22:57.720 --> 0:23:00.399 Woods organizations, to your question about CHRISTI in did a 0:23:00.400 --> 0:23:04.440 great job in helping overcome the financial crisis. I think 0:23:04.440 --> 0:23:07.159 we were very coordinated during the crisis because it was 0:23:07.240 --> 0:23:10.480 the interest of both the United States, Europe and most 0:23:10.520 --> 0:23:13.080 parts of Asia to get on top of this crisis. 0:23:13.160 --> 0:23:16.160 The central banks have been very coordinated. The IMF played 0:23:16.160 --> 0:23:19.240 a very strong facilitating role. And I remember a meeting 0:23:19.240 --> 0:23:22.679 in a basement in Korea where Tim Adams, Tim Guidner 0:23:22.760 --> 0:23:25.760 was still the Treasury Secretary, where the US was very 0:23:25.800 --> 0:23:28.320 clearly saying we will give up part of the seats 0:23:28.320 --> 0:23:31.720 at the IMF table uh in order to facilitate China 0:23:31.800 --> 0:23:34.680 coming in, and many of the Europeans put their constituencies 0:23:34.680 --> 0:23:37.239 together and gave up quota to bring them in. That 0:23:37.320 --> 0:23:39.960 hasn't really progressed to a new level where it should 0:23:39.960 --> 0:23:43.159 be now. So we started in the deep crisis, we 0:23:43.240 --> 0:23:45.879 made some programs, but we didn't go the full way. 0:23:46.040 --> 0:23:49.920 Going forward, these organizations need to reinvent themselves in order 0:23:49.920 --> 0:23:53.639 to be relevant because if, if really it takes another crisis, 0:23:54.720 --> 0:23:56.600 I don't think the crisis will come from the area 0:23:56.640 --> 0:24:00.520 where we're now prepared for and those organizations to play 0:24:00.600 --> 0:24:04.400 a new role in any next financial crisis. And if anything, 0:24:04.960 --> 0:24:07.840 the official sector, because of the bad experience on how 0:24:07.880 --> 0:24:11.359 we dealt with the last crisis, has less crisis fighting 0:24:11.400 --> 0:24:13.920 tools now available than they did before the last crisis. 0:24:14.040 --> 0:24:16.960 The FED has much less tools at their disposal that 0:24:17.000 --> 0:24:20.199 they can use fast without going to Capitol Hill. The 0:24:20.240 --> 0:24:22.439 same is pretty much true in Europe to a lesser extent, 0:24:22.480 --> 0:24:26.400 but it's true everywhere. And so I feel that we're 0:24:26.440 --> 0:24:29.880 not well prepared for the next crisis, and it's these 0:24:29.920 --> 0:24:33.439 international organizations that can help us get everyone aligned, and 0:24:33.680 --> 0:24:36.320 they don't. They they're not in the position to do 0:24:36.400 --> 0:24:38.800 that now because they lect some legitimacy. Can I give 0:24:38.840 --> 0:24:42.080 you a twist on that that all these institutions were 0:24:42.280 --> 0:24:45.959 designed to facilitate and we're built around the idea of globalization. 0:24:45.960 --> 0:24:50.480 Globalization it was good as globalization stopped. Are we deglobalizing 0:24:50.560 --> 0:24:53.080 and does that mean it's more difficult to solve some 0:24:53.200 --> 0:24:57.760 of these challenging transnational problems. Well, I do think that's 0:24:57.760 --> 0:25:01.520 the There is a deeper challenge inge to these institutions 0:25:01.560 --> 0:25:04.120 and the mindset that they represent. And it's not just 0:25:05.320 --> 0:25:08.160 it's not so much globalization, although we can certainly debate 0:25:08.200 --> 0:25:10.720 whether this might end up being kind of peak globalization, 0:25:11.560 --> 0:25:14.560 because there's there's clearly things moving in different directions there. 0:25:14.840 --> 0:25:20.000 But the currency of these institutions, the currency for international collaboration, 0:25:20.119 --> 0:25:22.800 is what's going to make your economy grow, and by 0:25:22.840 --> 0:25:24.400 and large that was in the latter of the last 0:25:24.400 --> 0:25:27.040