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Speaker 1: Hello, Stephanomics, here the podcast that brings you the global economy,

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Speaker 1: and for this special holiday episode, we're sticking to our

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Speaker 1: tradition of giving you a single conversation with someone who

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Speaker 1: has interesting things to say about the world, food for

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Speaker 1: thought over the holiday season, or maybe just a refuge

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Speaker 1: from all that family fun. As Jerry Seinfeld famously said,

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Speaker 1: there's no such thing as fun for all the family.

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Speaker 1: Whatever the reason, I do know a surprisingly large number

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Speaker 1: of people tend to tune into Stephanomics at Christmas, even

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Speaker 1: on Christmas Day. My guest this Christmas is to Paul Tucker,

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Speaker 1: former Deputy Head of the Bank of England, with a

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Speaker 1: long career at the Central Bank of the UK, and

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Speaker 1: now a respective author and teacher as a resident research

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Speaker 1: fellow at Harvard Kennedy School. Paul, Sir Paul, thank you

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Speaker 1: very much for joining us on Stephanomics. End of the year.

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Speaker 1: I got to know you as a central banker. You

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Speaker 1: had a whole career as a central banker, a technocrat

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Speaker 1: at the Bank of England, running, among other things, the

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Speaker 1: Markets division at the Bank of England and the thick

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Speaker 1: of the global financial crisis. But since leaving the bank

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Speaker 1: you've been teaching at Harvard and writing, writing less and

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Speaker 1: less about economics and more and more about politics and philosophy.

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Speaker 1: So have you changed or has the world changed around us? Well,

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Speaker 1: first of all, thank you very much for having me here.

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Speaker 1: It's it's great to join Stephanomics. I think both. Actually,

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Speaker 1: in one sense, having a new life nearly a decade

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Speaker 1: into my new life, it was an opportunity to go

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Speaker 1: back and live an alternative life. That's that's fun. And secondly,

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Speaker 1: the world has changed so much that you can't take

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Speaker 1: economic policy away from politics and the really big issues.

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Speaker 1: It It throws up that I think I served as

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Speaker 1: a staff for and a policy maker in a much

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Speaker 1: simpler world where monetary policy could be siloed away from

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Speaker 1: trade policy, and both could be siloed away from security

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Speaker 1: policy and human rights policy. I don't actually think any

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Speaker 1: of those things are true anymore. You're preaching to the

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Speaker 1: choir on that one, because I think that even the

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Speaker 1: silos at Bloomberg need to come together. We talk a

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Speaker 1: bit about that. So your your new book, Global Discord,

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Speaker 1: Values and Power in a Fractured World order, what's a

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Speaker 1: one line description of what it's about, Whether or not

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Speaker 1: all the things that international cooperation relies on, whether it

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Speaker 1: in trade, monetary, staff, environmental, human rights, etcetera, etcetera, etcetera.

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Speaker 1: The law of the Sea can possibly survive now that

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Speaker 1: there is potentially an existential contest between the People's Republic

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Speaker 1: of China and the West. And this is an enormous change.

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Speaker 1: I see in Your Your, the promotional material that the

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Speaker 1: publisher says in Global Discord, Paul Tucker lays out principles

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Speaker 1: for how democracies can approach relations with China and other

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Speaker 1: illiberal states without sacrificing their deepest political values or jeopardizing

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Speaker 1: their safety. I have to say, when I was reading

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Speaker 1: the book, it feels like it's about how the international system,

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Speaker 1: or I guess what we call the world order as

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Speaker 1: we know it, is going to survive an era in

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Speaker 1: which China is just a much, much bigger player. That's

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Speaker 1: exactly right, and a bigger player with a completely different history,

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Speaker 1: a completely different government system, completely different deep values. Something

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Speaker 1: why I promote the book. Something I go and asking

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Speaker 1: people is have you heard of Document number nine? And

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Speaker 1: most people say no. It was leaked in two thousand

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Speaker 1: and thirteen, and it is a litany of seven knows

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Speaker 1: and six of those knows are basically objecting to liberal

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Speaker 1: and democratic values and a repress and everything else. And

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Speaker 1: it is a fact of the world that China is

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Speaker 1: very powerful, and it's going to in my view, it's

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Speaker 1: going to remain very powerful for a very long time.

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Speaker 1: And yet it comes to international organizations, regimes cooperation with

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Speaker 1: a completely different way of thinking about the world than

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Speaker 1: anything that is familiar to us in our recent history,

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Speaker 1: by which I mean the last two d and fifty years.

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Speaker 1: One early line in your book did shine with me

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Speaker 1: right from the start, because you say, when more or

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Speaker 1: less any public policy instrument can be weaponized, geoeconomics becomes

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Speaker 1: integral to foreign policy. And we have been thinking about

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Speaker 1: that a lot at Bloomberg, and I recently created a

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Speaker 1: geoeconomics squad, combining the economics and the politics reporters with

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Speaker 1: lots of people around the world who are focused on technology, energy,

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Speaker 1: international trade, because it feels like all of those things

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Speaker 1: are coming together and we can't, even as reporters, put

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Speaker 1: them into boxes anymore. You do. Quite a lot of

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Speaker 1: your book is addressed to that, isn't it? Yes, it is,

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Speaker 1: it is. And you know, the common theme for all

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Speaker 1: of that is that partly because of the new technology,

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Speaker 1: but not only because of that, almost any part of

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Speaker 1: economic policy can be weaponized and therefore is an adjunct

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Speaker 1: of security policy. And then when the Ukraine War broke

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Speaker 1: out and Russia's foreign exchange reserves were seized around the world,

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Speaker 1: a lot of people responded with surprise. My response was,

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Speaker 1: I wondered what the threshold was for that. It was

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Speaker 1: completely obvious to be given my background, that that could

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Speaker 1: be done, and that was serious enough to do it.

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Speaker 1: And I guess now, or a decade ago, the swift

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Speaker 1: payment system doesn't matter what that is a then that

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Speaker 1: it's a mechanism for sending payment messages across the world

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Speaker 1: that was used in sanks against Iran. Prime ministers and

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Speaker 1: presidents thought this was a fantastic thing to do. Um

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Speaker 1: central Bank has thought, oh, that's that's quite a Pandora's box.

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Speaker 1: So once it becomes obvious that you can use these

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Speaker 1: instruments for security policy, then they will be. And that's

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Speaker 1: that merely returns us to the past. In the nineteenth

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Speaker 1: century and the eighteenth century, economic policy was a regular

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Speaker 1: part of security policy. That debt collection m was was

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Speaker 1: was grounds for war you talk about the reaction to

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Speaker 1: the Russia's invasion of Ukraine, and and some people did

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Speaker 1: wonder whether we were facing this Pandora's box issue with

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Speaker 1: some of the things that have been done this year.

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Speaker 1: I mean, you talk about foreign exchange reserves. Of course,

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Speaker 1: once you've done it, once you've sent a message about

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Speaker 1: what you might do in the future, for example, if

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Speaker 1: China invaded Taiwan but also given people an incentive to

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Speaker 1: find ways around it. So do you think balance it's

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Speaker 1: been positive or negative for the kind of future that

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Speaker 1: you're hoping to. So I think this is why the

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Speaker 1: question of threshold is important, because it does exactly that.

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Speaker 1: So you mustn't you mustn't do something like spending foreign

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Speaker 1: exchange reserves except where you think it's really necessary to

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Speaker 1: prosecute your your case. And I think what's interesting about

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Speaker 1: the Ukraine War in many respects is that it's kind

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Speaker 1: of the first proxy war of the new superpower struggle.

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Speaker 1: I don't think Putin would have been able to to

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Speaker 1: prosecute it in quite the way has been able to

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Speaker 1: if if Beijing hadn't at least acquiesced. Something else I'd

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Speaker 1: say about that is that my prediction changed this in

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Speaker 1: the book right towards the end, had been that Putin

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Speaker 1: would move against eastern Europe if and when China moved

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Speaker 1: against Taiwan so as to stretch an unprepared West on

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Speaker 1: two fronts. And I think that put In a sense

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Speaker 1: is even away that optionality. The West is now going

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Speaker 1: to be prepared on both fronts. But in answer to

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Speaker 1: your question, yes, this wealth, this will simply intensify the

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Speaker 1: efforts in Russia and China a few other places to

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Speaker 1: try to manage their part of the world economy without

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Speaker 1: the dollar. I mean, the dollar is absolutely integral two

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Speaker 1: to the Western security system. Somewhere in the book I

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Speaker 1: can't remember exactly where I say if if if the

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Speaker 1: American hegemon has an unknowing headquarters, it's the Federal Reserve building.

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Speaker 1: People listening may start to think that this is another

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Speaker 1: book about the coming war between the US and China.

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Speaker 1: And I've got my sort of personal listeners. They all

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Speaker 1: seem to talk there's an accidental conflict, and the avoidable conflict,

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Speaker 1: and the coming conflict, and the conflict that's already upon us.

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Speaker 1: I think we're even going to get another author of

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Speaker 1: another book along those lines. In the new year. And

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Speaker 1: obviously your book is somewhat about that. You said yourself,

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Speaker 1: kind of intensified rivalry with a rising superpower. But you're

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Speaker 1: coming at it from a particular perspective, which is the

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Speaker 1: sort of interplay between that kind of raw power, that

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Speaker 1: rivalry of of two superpowers, and the systems we have

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Speaker 1: for organizing global affairs. Because, as you point out, you

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Speaker 1: can have great powers emerge. We've had the EU become

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Speaker 1: a much a very equivalent force in many ways to

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Speaker 1: the US, at least in terms of people and economically

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Speaker 1: over the last eight years, without upsetting the global system

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Speaker 1: at all. So it's not necessarily about having a new power.

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Speaker 1: It's about the kind of power they are now. That's

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Speaker 1: exactly right. That's exactly right. So history is littered with

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Speaker 1: the story of rising powers, and the big question for

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Speaker 1: any of them is how do they feel about the

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Speaker 1: prevailing order? And they wouldn't want to change it a

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Speaker 1: bit because they want to be more important however they are,

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Speaker 1: But are they basically buy into the structure of the

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Speaker 1: order and the way that gets reflected in international cooperation.

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Speaker 1: We live in a world where all the international organizations

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Speaker 1: bear the thumb print of the United States and somewhat

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Speaker 1: Europe as the second most important region of the world

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Speaker 1: are over the past seventy odd years, and China is

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Speaker 1: different in that respect. And it's when people are talking

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Speaker 1: about the security element of this, the war element of this.

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Speaker 1: Lots of people compare this with the second German Reich

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Speaker 1: Britain at the end of the turn of the twentieth century.

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Speaker 1: I don't think that's the most um instructive comparison, even

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Speaker 1: though it was a dreadful, dreadful epoch changing struggle. I

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Speaker 1: think much more instructive is this is that between France

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Speaker 1: and Britain over the long eighteenth century, from round six

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Speaker 1: around eighteen fifteen. And that was because it wasn't just

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Speaker 1: about where do you stand in the pecking order, It

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Speaker 1: was about different conceptions of power. Our country. We're sitting

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Speaker 1: in Britain talking about this our country. We're resisting an

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Speaker 1: authoritarian universal monarchy at the beginning of the eighteenth century

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Speaker 1: and universal revolutionary movement at the end of the eighteenth century.

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Speaker 1: And Burke said somewhere the problem isn't France's powers, that

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Speaker 1: it's the wrong kind of power exactly, And that's I

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Speaker 1: think captures the challenge for the West with Chinese power,

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Speaker 1: and that will China will therefore understandably want in some

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Speaker 1: degree to have all of the great international organizations reshaped

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Speaker 1: somewhat in its own image. And we're not going to

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Speaker 1: want to do that very much. So reshaping it in

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Speaker 1: its own image. Just going back to that, that means

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Speaker 1: rejecting quite a lot of what you might call the

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Speaker 1: principles of the liberal international system. Yeah, I mean, it

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Speaker 1: certainly involves rejecting representative democracy, but it involves rejecting a

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Speaker 1: free press. It involves rejecting what they call universal values,

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Speaker 1: which they say in Document nine values that supposedly apply

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Speaker 1: in all places and at all times. They just don't

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Speaker 1: recognize that. Now, in some senses, I think it's important

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Speaker 1: to put oneself in their shoes, which is I mean,

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Speaker 1: I'm not a great fan of the universalist m claims

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Speaker 1: of Western values. I think countries and different people have

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Speaker 1: to find their own way to to liberty. So I'm

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Speaker 1: a kind of pluralist liberal in that in that sense.

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Speaker 1: But they're beyond that. I mean, they're just saying no, no, no, no,

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Speaker 1: we have we have a a party lead country. And

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Speaker 1: that's that infects inflects how we want international organizations to

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Speaker 1: be struct by the way. I think this is a

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Speaker 1: really important thing to say, so I want to say

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Speaker 1: it now if I may, that none of this is

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Speaker 1: to criticize the Chinese people or Chinese history in any

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Speaker 1: way at all. I mean, this is kind of remarkable civilization.

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Speaker 1: And what's more, I think I came to think while

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Speaker 1: writing the book that countries like South Korea and Japan

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Speaker 1: are incredibly important because they show that you can be

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Speaker 1: a Confucian heritage state and still live by that part

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Speaker 1: of your traditions and be a constitutional democracy. Well, that

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Speaker 1: is just simply not true of the People's Republic. People's Republic.

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Speaker 1: It's not so much that it's Confucianist, it's that it

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Speaker 1: is kind of authoritarian and always entirely about preserving the

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Speaker 1: power of the party. Yes, entirely about that. I think

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Speaker 1: that captures it perfectly. The comparison with the UK and

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Speaker 1: France is fascinating. But people do tend to talk about

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Speaker 1: how this is a new Cold War, and in many

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Speaker 1: ways it feels like we're a new Cold War precisely

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Speaker 1: for some of the reasons that you say that, it

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Speaker 1: feels we are the rivalry. The tension is with a

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Speaker 1: system that is rejecting a lot of our basic principles

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Speaker 1: and wanting to run along very different kinds of tracks.

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Speaker 1: So I guess it's worthwhile just pausing to say, how

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Speaker 1: what are the differences with the Cold War? What makes

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Speaker 1: this situation in many ways harder than the Cold War?

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Speaker 1: That we touch each other everywhere, in everything, and whereas

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Speaker 1: the there's a passage about the Cold War towards the

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Speaker 1: beginning of the book, and essentially these were two kind

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Speaker 1: of self contained blocks with a tube between them, and

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Speaker 1: the tube had two little bits oil went in one

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Speaker 1: direction and dollars in another. The Soviet block had eventually

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Speaker 1: had banks in London, Vienna, Paris. I think lots of spies,

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Speaker 1: lots of spies. It's quite simple in a sense, whereas

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Speaker 1: I think this really is more like eighteenth century France

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Speaker 1: and in Britain. They struggled in famously, in the United States,

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Speaker 1: on the coast of India, on the coast of Africa,

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Speaker 1: on the Southeast Asia, I mean, in other words, everywhere,

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Speaker 1: And that's what this is going to be like. China

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Speaker 1: is an absolutely integral part of the world economy, biggest

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Speaker 1: trading country in the in the world huge manufacturing power.

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Speaker 1: Our economy and their's are intimately connected. Um and therefore

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Speaker 1: this goes back to you the weaponization point. Weaponization can

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Speaker 1: be both both geographically pervasive and field pervasive. Now this

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Speaker 1: creates the possibility, it's only one possible scenario that that

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Speaker 1: we will disengage to the point that we retreat into

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Speaker 1: a kind of new cold water order. But but but

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Speaker 1: that would take some doing. I mean, there would be

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Speaker 1: a lot of unraveling to be done to get to

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Speaker 1: that point. And actually, as as the economist Richard Bolden

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Speaker 1: pointed out WI booked him earlier this year, it's not

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Speaker 1: just the sort of sexy high tech ways in which

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Speaker 1: there involved in our economy. They also produce all of

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Speaker 1: our socks. So if so, unscrambling that omelet would require,

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Speaker 1: I don't know that we have to get a lot

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Speaker 1: better at knitting, among other things. You mentioned the scenarios,

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Speaker 1: I mean, you do sketch out for scenarios that you

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Speaker 1: come back to several times during the book ways that

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Speaker 1: this could play out. Because I guess your time at

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Speaker 1: the Bank of England has taught you not to make forecasts.

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Speaker 1: What what are those for? The first is lingering status quo,

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Speaker 1: the second is superpower struggle, the third is new Cold War.

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Speaker 1: The fourth is reshaped world order. I think just dispatching fourth,

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Speaker 1: I think that won't happen for some decades until other

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Speaker 1: rising states reached to the top table, most obviously India,

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Speaker 1: conceivably Indonesia. And I think for foreign policymakers they need

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Speaker 1: to be thinking about who are going to be the

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Speaker 1: other big powers in a few decades time, and that

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Speaker 1: would be almost like a new Breton Woods any very

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Speaker 1: different from there would be a whole reshaped system. It

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Speaker 1: would be like a kind of nineteenth century concert concept

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Speaker 1: of Europe. But for the world and the international organizations

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Speaker 1: would find they had to be completely reconfigured because the

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Speaker 1: great powers weren't a few European states in the United

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Speaker 1: States and Japan, but the United States, EU, India, China,

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Speaker 1: maybe some others, and they were and if order was

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Speaker 1: maintained in that world, it would be maintained through some

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Speaker 1: kind of balance about among them. In the mean time,

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Speaker 1: which is going to be quite a long meantime. In

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Speaker 1: my view, I think I ended up thinking that we're

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Speaker 1: going to live through a kind of lingering status quo

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Speaker 1: in monetary affairs and financial affairs. The dollar will remain

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Speaker 1: the world's premier reserve currency for a while. That helps

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Speaker 1: American banks be the most powerful banks in the world,

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Speaker 1: and so on and so forth. So I think monetary

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Speaker 1: of the monetary of finance field will be a lingering

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Speaker 1: status quo for a while. But everything else, I think trade,

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Speaker 1: most obviously cross border investment will live between superpower struggle

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Speaker 1: and and Cold War. Just how much to decouple, how

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Speaker 1: much to disengage and with I mean, I wrote the

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Speaker 1: book before all this started happening, but we're already seeing

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Speaker 1: it in powerful states in both directions don't want to

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Speaker 1: be overdependent in critical things, whether it be medical stuff

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Speaker 1: or energy or chips or whatever um And I think,

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Speaker 1: I think it's impossible to predict how far that will go,

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Speaker 1: but I think that would go on for a long while.

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Speaker 1: And I wouldn't be surprised to see the West reinvent

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Speaker 1: the equivalent of the Cold War what was it called

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Speaker 1: cocombe where the kind of controls that the US and

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Speaker 1: all the big European states had on importing and exporting

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Speaker 1: from the Soviet block they needed to be coordinated. No

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Speaker 1: good for for America to put a block on something

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Speaker 1: if it was flowing into France and Britain and vice versa.

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Speaker 1: And so at the moment, I think we're at the

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Speaker 1: stage where the main Western capitals are thinking about how

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Speaker 1: they want to protect themselves. I think eventually this will

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Speaker 1: lead to coordination amongst the capitals. So I just wondered,

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Speaker 1: what does what does the US need to do to

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Speaker 1: lengthen the period where it can continue to have sort

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Speaker 1: of be dominant or at least be top doc and

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Speaker 1: and how is President Biden doing on that front? So,

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Speaker 1: first of all, in terms of how important this is,

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Speaker 1: it's not just important for them, but it's important for us. Again,

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Speaker 1: we're sitting in London. We live in a part of

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Speaker 1: the world the Big picture outsourced its defense to the

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Speaker 1: United States. The capacity of the United States to provide

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Speaker 1: a security umbrella for our part of the world and

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Speaker 1: parts of East Asia depends to some significant degree on

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Speaker 1: the dollar, because the dollar enables them to borrow more

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Speaker 1: cheaply than otherwise. It provides them with a cushion in

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Speaker 1: bad states of the world. A remarkable thing about the

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Speaker 1: financial crisis is American finances so weak and so incompetently

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Speaker 1: regulated that it collapses and blows up the whole world economy.

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Speaker 1: Any other country you would expect to run away from

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Speaker 1: their government bonds and their currency. Instead, there is a

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Speaker 1: run into treasury bills and all term treasury bonds. So

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Speaker 1: one way of thinking about this, an important way, I think,

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Speaker 1: is that Beijing a bound to want to for the

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Speaker 1: renmimb to be a significant reserve currency. When you see

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Speaker 1: that even the US at its weakest ben is supported

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Speaker 1: fortified by runs into the dollar, it's fantastic. But you

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Speaker 1: touched on the debt ceiling debate. I think this is

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Speaker 1: a really useful way in to what the United States

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Speaker 1: should should do and avoid doing. It cannot afford to

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Speaker 1: make big mistakes and um and because the breakdown of silos,

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Speaker 1: people may not understand this. This is a belt when

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Speaker 1: within the Beltway game about Republican democratic politics. What came

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Speaker 1: the Republicans extract in order to to raise the debt ceiling?

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Speaker 1: But there's some tangible probability that the debt ceiling won't

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Speaker 1: get raised. This is a gift to Beijing, a gift. Um.

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Speaker 1: I didn't talk about that in the book, but something similar.

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Speaker 1: There's a debate about how the fragilities in banking have

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Speaker 1: moved into the number of the financial system, the shadow

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Speaker 1: banking sector, and I I mean actually shadow banking is

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Speaker 1: a national security issue. That sounds a quite an exaggerated

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Speaker 1: thing to say. Maybe put in another way, the West

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Speaker 1: cannot afford another big financial crisis, so the stakes get changed.

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Speaker 1: It's in a in a world where you think, while

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Speaker 1: actually the global order depends on the American hegemon and

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Speaker 1: its European friends, we can't afford another crisis. I think

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Speaker 1: the Biden administration has done well in reviving, reinforcing signaling

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Speaker 1: that it cares about allies and friends, that the United

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Speaker 1: States isn't isolationist. The to be blunt, the silliest thing

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Speaker 1: I've heard occasionally in Harvard and Washington, well, you know

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Speaker 1: this China thing, and we'll be able to see the

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Speaker 1: see that off on our own. We don't. We don't.

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Speaker 1: You know, Europe's very irritating or whatever, and that basically

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Speaker 1: that maybe that's true if China makes loads of mistakes,

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Speaker 1: but policies should be based on an assumption that China

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Speaker 1: won't be make mistakes. I think China's policy, by the way,

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Speaker 1: it should be based on the possibility that they will

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Speaker 1: make mistakes, but Western policy should be based on them

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Speaker 1: not making mistakes and continuing to grow rapidly. And I

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Speaker 1: think the Biden administration has done a pretty good job

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Speaker 1: at signaling that it cares about the international order, that

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Speaker 1: its predecessors created many Republicans as Democrats, that it knows

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Speaker 1: it needs friends and allies, It knows that involves awkward,

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Speaker 1: sometimes distasteful choices, But I am not sure so that

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Speaker 1: has filtered through into domestic policy making to the extent

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Speaker 1: that it could. And I think the debt ceiling, that

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Speaker 1: if the debt ceiling goes wrong, umthing else just looks

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Speaker 1: makes the US look like it's sort of endangering the

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Speaker 1: stability of the international financial system because of its own

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Speaker 1: domestic political squabbles. So, just to be clear, it would

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Speaker 1: be arguments in Congress preventing the US government from continuing

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Speaker 1: to issue debt. And so in those circumstances, you'd make

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Speaker 1: a decision either to reduce the proportion of your foreign

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Speaker 1: exchange reserves that were in dollars or if you didn't

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Speaker 1: do that, probably you're another country. If you're another country,

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Speaker 1: to shorten the maturity of your dollar holdings rather than

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Speaker 1: And it wouldn't be that you'd go to meeting and

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Speaker 1: say what the US has had it, That would be

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Speaker 1: a crazy thought. It would be what they do seem

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Speaker 1: to be capable of self inflicted harm, and that may

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Speaker 1: get worse, and therefore we should be just a little

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Speaker 1: bit less reliant on the United States being m the

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Speaker 1: the great power in the world for the next thirty years.

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Speaker 1: And I think they can avoid mistakes, but only if

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Speaker 1: they're domestic politics takes seriously that the world is changing.

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Speaker 1: I think, in a sense the state of US domestic

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Speaker 1: politics as a product of two things. One is a

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Speaker 1: whole series of really big problems about living standards and

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Speaker 1: frustrations and respect and so on. But the other is

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Speaker 1: the luxury of thinking that their position in the world

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Speaker 1: is secure and therefore they can play these games, and

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Speaker 1: to which I would say, you can't afford to play

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Speaker 1: the games anymore. It's it's this is for grown ups only. Now.

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Speaker 1: As you said earlier, there's plenty about this which is

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Speaker 1: quite reasonable objectives that any rising power would have. And

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Speaker 1: there's every reason in the world why the China, for example,

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Speaker 1: might want to have the rem and be me a

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Speaker 1: major reserve currency, I might want to develop advanced technology,

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Speaker 1: and I guess I just wonder, how do you how

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Speaker 1: do you think the US or the West should strike

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Speaker 1: that balance between just investing in your own strength and

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Speaker 1: the strength of your example, avoiding the debt ceiling and

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Speaker 1: making it a good thing to be part of the

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Speaker 1: U S system, and on the one hand, or trying

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Speaker 1: actively to retard the progress of the other. Because I

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Speaker 1: was sort of struck by something the Commerce sectary said

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Speaker 1: a year and a half ago, Gina Romando. She said,

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Speaker 1: we have to work with our European allies to deny

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Speaker 1: China the most advanced technology so they can't catch up

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Speaker 1: in critical areas like semiconductors. I mean, even a few

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Speaker 1: years ago, that would have seemed incredibly antagonistic and kind

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Speaker 1: of unfair to be trying to slow down China's progress,

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Speaker 1: But we're now seems we're going quite firmly down that route.

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Speaker 1: Do you think it's dangerous to be signaling quite directly,

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Speaker 1: we just don't want you to develop. I think there

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Speaker 1: will be phases like that, and there will be phases

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Speaker 1: when it's relaxed, and I think that will go on

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Speaker 1: for a long time. I think the big thing is

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Speaker 1: China is too powerful for us to to be capable

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Speaker 1: of telling them how to reorder their society and how

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Speaker 1: to live. But we can think, and I think it's

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Speaker 1: reasonable for us to think, and I have in mind Xinjiang,

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Speaker 1: Hong Kong, elsewhere. But if they treat their own people

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Speaker 1: like that, how would they treat us if they could.

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Speaker 1: I think that's a and that requires a judgment. Actually,

432
00:27:38,560 --> 00:27:41,840
Speaker 1: it's not that that leads to an inexorable conclusion. We

433
00:27:41,920 --> 00:27:43,919
Speaker 1: could say, you and I are old enough to know

434
00:27:44,080 --> 00:27:48,639
Speaker 1: that for many decades, people in Europe were uncomfortable with

435
00:27:48,640 --> 00:27:53,199
Speaker 1: with parts of the US society's treatment of black Americans,

436
00:27:53,359 --> 00:27:57,520
Speaker 1: but we didn't feel threatened by them. I think that

437
00:27:57,600 --> 00:28:00,800
Speaker 1: the combination of the way China read some of its

438
00:28:01,000 --> 00:28:06,359
Speaker 1: own people and its attitude towards not only Taiwan, but

439
00:28:06,520 --> 00:28:11,760
Speaker 1: other states in in the South China see the northern

440
00:28:11,800 --> 00:28:14,760
Speaker 1: parts of East Asia as well, means that we do

441
00:28:14,920 --> 00:28:19,960
Speaker 1: have to be careful not to be overly dependent and

442
00:28:20,080 --> 00:28:22,640
Speaker 1: build our security. But it also means we should find

443
00:28:22,640 --> 00:28:26,120
Speaker 1: common cause where we can. It's it's summer, I say

444
00:28:26,160 --> 00:28:29,440
Speaker 1: in the book, No, it's no good treating someone is

445
00:28:29,440 --> 00:28:33,560
Speaker 1: beyond the pale unless you can keep them there. We

446
00:28:33,960 --> 00:28:38,920
Speaker 1: you know, it's it's we can't to work with them

447
00:28:38,920 --> 00:28:40,400
Speaker 1: on climate chan. We need to work with them on

448
00:28:40,480 --> 00:28:43,120
Speaker 1: climate change. We need to work with them on anything

449
00:28:43,360 --> 00:28:47,520
Speaker 1: that's an existential threat to the planet. And we need

450
00:28:47,600 --> 00:28:52,320
Speaker 1: to strive and strive to do that, both because it's

451
00:28:52,440 --> 00:28:55,880
Speaker 1: necessary in itself and because it's a way of sibling

452
00:28:55,920 --> 00:28:58,400
Speaker 1: to them. Yeah, we completely accept that your power in

453
00:28:58,400 --> 00:29:00,880
Speaker 1: the world, and we need to do some things with you.

454
00:29:01,280 --> 00:29:04,440
Speaker 1: Yet there needs to be attempts. I think something that's

455
00:29:04,440 --> 00:29:08,959
Speaker 1: tremendously important for them to do Washington and Beijing, this

456
00:29:09,080 --> 00:29:12,440
Speaker 1: is just for them, is to somehow agreed de escalation

457
00:29:12,560 --> 00:29:16,320
Speaker 1: protocols of the kind that existed maybe after the Cuban

458
00:29:16,400 --> 00:29:19,880
Speaker 1: missile crisis, I'm not sure, but certainly existed between understanding

459
00:29:21,680 --> 00:29:23,440
Speaker 1: and that you don't you know if your planes get

460
00:29:23,440 --> 00:29:26,520
Speaker 1: too close to or ships get too close or something

461
00:29:26,640 --> 00:29:29,600
Speaker 1: that you and it's an accident, rather than deliberate that

462
00:29:29,680 --> 00:29:32,760
Speaker 1: you have a way of signaling actually that was an accident.

463
00:29:32,840 --> 00:29:35,440
Speaker 1: I thought when there was this business about possibly a

464
00:29:35,520 --> 00:29:40,560
Speaker 1: Russian missile landing in Poland that Putin's response to that

465
00:29:40,640 --> 00:29:44,440
Speaker 1: was so moderate. His words in public are all of

466
00:29:44,480 --> 00:29:46,560
Speaker 1: that may be kicking in in the background that does

467
00:29:46,600 --> 00:29:52,400
Speaker 1: not exist um with with Beijing at the moment. So

468
00:29:52,480 --> 00:29:55,400
Speaker 1: these are things where there need to be summits. I

469
00:29:55,440 --> 00:29:59,880
Speaker 1: thought that G twenty showed its usefulness earned Biden and

470
00:30:00,080 --> 00:30:04,360
Speaker 1: She having a bilateral. Imagine that G twenty didn't exist.

471
00:30:05,280 --> 00:30:09,240
Speaker 1: So they've then got to agree to have a special

472
00:30:09,280 --> 00:30:13,640
Speaker 1: meeting and go to it. That's much harder than we're

473
00:30:13,640 --> 00:30:16,280
Speaker 1: all going to be at at the G twenty. It's

474
00:30:16,600 --> 00:30:20,840
Speaker 1: pretty awkward to not go without sending a hostile signal

475
00:30:20,880 --> 00:30:25,480
Speaker 1: to everybody. Since we're there, it will be very It's

476
00:30:25,480 --> 00:30:28,120
Speaker 1: a big thing. If we don't meet, we are going

477
00:30:28,160 --> 00:30:30,600
Speaker 1: to meet, And I think what places like the U

478
00:30:30,720 --> 00:30:35,400
Speaker 1: N and the G twenty can do. It's just kind

479
00:30:35,400 --> 00:30:38,160
Speaker 1: of things that appear small but which actually are a

480
00:30:38,160 --> 00:30:41,200
Speaker 1: big deal. And if we just take it a little

481
00:30:41,200 --> 00:30:43,760
Speaker 1: bit more up to current day and some of the

482
00:30:43,800 --> 00:30:45,720
Speaker 1: things that we talk a bit more often about on

483
00:30:45,720 --> 00:30:50,360
Speaker 1: on Stephanomics, it is often observed that on China, at

484
00:30:50,440 --> 00:30:54,120
Speaker 1: least the Trump and the Biden administrations don't look so different,

485
00:30:54,200 --> 00:30:56,200
Speaker 1: or at least many of the Trump here tariffs have

486
00:30:56,280 --> 00:31:01,160
Speaker 1: been maintained under President Biden, and we've seen you could imagine, um,

487
00:31:01,280 --> 00:31:04,840
Speaker 1: something along the lines of the action on semiconductor chips

488
00:31:04,960 --> 00:31:08,760
Speaker 1: might have been done at least by a Trump era official.

489
00:31:09,520 --> 00:31:13,719
Speaker 1: Do the odds on a particular scenario change significantly if

490
00:31:13,760 --> 00:31:18,080
Speaker 1: President Trump were re elected. I think so. I think

491
00:31:18,200 --> 00:31:24,000
Speaker 1: the the if you like, the the direct bilateral relationship

492
00:31:24,080 --> 00:31:29,920
Speaker 1: between Washington and Beijing not hugely different between Trump and

493
00:31:29,600 --> 00:31:33,240
Speaker 1: and Biden, exactly as you say. But something else is

494
00:31:33,560 --> 00:31:36,560
Speaker 1: very very different, could hardly be more different, which is

495
00:31:36,560 --> 00:31:40,000
Speaker 1: the attitude to allies. A policy if you like, towards

496
00:31:40,120 --> 00:31:44,520
Speaker 1: China is a policy towards the world. You need friends,

497
00:31:44,960 --> 00:31:51,880
Speaker 1: especially in today's world with the extraordinary destructiveness of weapons. Um,

498
00:31:51,960 --> 00:31:54,280
Speaker 1: it's it's it's having lots of friends that will make

499
00:31:54,320 --> 00:31:58,040
Speaker 1: conflict less likely and will make some kind of peaceful

500
00:31:58,080 --> 00:32:04,560
Speaker 1: reconfiguration of the international order more likely and so ave

501
00:32:05,120 --> 00:32:10,160
Speaker 1: A huge own goal by the Trump administration was pulling

502
00:32:10,200 --> 00:32:14,480
Speaker 1: out of the Transpacific Trade Partnership, which both addressed a

503
00:32:14,560 --> 00:32:19,920
Speaker 1: particular problem in trade policy between China and the West,

504
00:32:19,960 --> 00:32:22,160
Speaker 1: when I talk about at some length and one of

505
00:32:22,160 --> 00:32:24,960
Speaker 1: the chapters in the book, which is absolutely amazing, to

506
00:32:25,000 --> 00:32:27,920
Speaker 1: back out of it and now now I think it

507
00:32:27,960 --> 00:32:31,040
Speaker 1: will be. I suspect it would be quite difficult and

508
00:32:31,120 --> 00:32:34,040
Speaker 1: ought to be quite difficult for both the US and

509
00:32:34,320 --> 00:32:37,640
Speaker 1: China to join, because if if, if the members of

510
00:32:37,680 --> 00:32:41,000
Speaker 1: the Transpacific Partnership allow one, and how can they not

511
00:32:41,120 --> 00:32:43,760
Speaker 1: allow the other in? And then they've just rep you know,

512
00:32:43,760 --> 00:32:47,120
Speaker 1: they'll just recreate all the problems of the w t O. So,

513
00:32:47,280 --> 00:32:49,400
Speaker 1: just in practical terms, if you are more of a

514
00:32:49,480 --> 00:32:52,720
Speaker 1: sort of President Biden time administration, and you're you're responding

515
00:32:52,760 --> 00:32:54,240
Speaker 1: to some of the things you said at the beginning

516
00:32:54,280 --> 00:33:00,520
Speaker 1: about building up sort of security of supply chain means

517
00:33:00,600 --> 00:33:07,920
Speaker 1: and not being as reliant tom Chinese and other other goods.

518
00:33:09,080 --> 00:33:12,120
Speaker 1: If you're outside the US, how do you tell the

519
00:33:12,160 --> 00:33:17,160
Speaker 1: difference between the US defending the global world order by

520
00:33:17,240 --> 00:33:21,840
Speaker 1: having an alternative to China and just straightforward US protectionism

521
00:33:21,840 --> 00:33:24,040
Speaker 1: Because you've got something like the Inflation Reduction Act, which

522
00:33:24,080 --> 00:33:26,600
Speaker 1: is causing no end of grief in the Europe people

523
00:33:26,600 --> 00:33:29,280
Speaker 1: are very cross at what they consider to be the

524
00:33:29,320 --> 00:33:32,200
Speaker 1: quite protectionist measures in that which involved, you know, only

525
00:33:32,320 --> 00:33:37,600
Speaker 1: using US producers to create different forms of renewable energy

526
00:33:37,640 --> 00:33:41,640
Speaker 1: and other things, it's quite tricky to walk that line.

527
00:33:41,640 --> 00:33:43,800
Speaker 1: And for everyone to think that you're acting on behalf

528
00:33:43,800 --> 00:33:47,600
Speaker 1: of the world order and not just the US. Yeah. Actually,

529
00:33:47,600 --> 00:33:49,880
Speaker 1: I don't think that example's tricky. I think that's just

530
00:33:49,920 --> 00:33:55,520
Speaker 1: a mistake. It's it's it's quite ali an eate um

531
00:33:55,360 --> 00:33:58,480
Speaker 1: um europe over that. I think the way to avoid

532
00:33:58,760 --> 00:34:03,160
Speaker 1: the trap that you write identify is precisely to avoid

533
00:34:03,840 --> 00:34:08,560
Speaker 1: kind of on shoring everything except where you really really

534
00:34:08,600 --> 00:34:11,200
Speaker 1: need to. And there are only very few things for that.

535
00:34:11,320 --> 00:34:15,000
Speaker 1: So the words friend shoring, um, it's quite it is

536
00:34:15,080 --> 00:34:19,200
Speaker 1: quite good. Actually, because friendship is weaker than alliance. Alliance

537
00:34:19,320 --> 00:34:22,440
Speaker 1: is a strong thing, we will come to your defense.

538
00:34:23,400 --> 00:34:26,600
Speaker 1: Friendship is much weaker than that. I'm sure your friends

539
00:34:26,600 --> 00:34:32,359
Speaker 1: would love to hear that. I'm not a state. Fortunately,

540
00:34:33,040 --> 00:34:37,160
Speaker 1: friendship is the best I can do. All right, So

541
00:34:37,640 --> 00:34:41,920
Speaker 1: you have had this alternative life, you've said at the start,

542
00:34:41,960 --> 00:34:46,239
Speaker 1: almost it was taken up this politics and political philosophy,

543
00:34:46,280 --> 00:34:49,320
Speaker 1: almost as some people take up watercolors when they step

544
00:34:49,360 --> 00:34:52,880
Speaker 1: back from the step back from the front line of policymaking.

545
00:34:54,280 --> 00:34:57,520
Speaker 1: We're not we're sitting in blueberg offices. Now that if

546
00:34:57,520 --> 00:34:59,600
Speaker 1: you're reasonably good at throwing stones, you can throw a

547
00:34:59,600 --> 00:35:03,200
Speaker 1: stone at your old employer the Bank of England. Um,

548
00:35:03,200 --> 00:35:05,360
Speaker 1: with all of this analysis under your belt, do you

549
00:35:05,400 --> 00:35:08,279
Speaker 1: feel lucky not to be in your old job. I

550
00:35:08,320 --> 00:35:11,160
Speaker 1: feel really, really lucky to have had the opportunity to

551
00:35:11,280 --> 00:35:15,480
Speaker 1: do something else. I mean, the greatest limitation. I felt

552
00:35:15,480 --> 00:35:17,279
Speaker 1: this at a number of times during my career as

553
00:35:17,280 --> 00:35:21,160
Speaker 1: a public servant for thirty three years. And it's a marvelous,

554
00:35:21,200 --> 00:35:24,319
Speaker 1: marvelous thing to do. I feel immensely lucky to have

555
00:35:24,360 --> 00:35:28,279
Speaker 1: done it. And that one downside is that if you

556
00:35:28,320 --> 00:35:30,239
Speaker 1: do it right to the end, then that abslut the

557
00:35:30,280 --> 00:35:32,600
Speaker 1: only thing you get to do, and it's the new

558
00:35:33,880 --> 00:35:37,320
Speaker 1: working for the state. You do it in your own country.

559
00:35:37,640 --> 00:35:42,120
Speaker 1: I had been seconded, thankfully to Hong Kong in the

560
00:35:42,200 --> 00:35:44,520
Speaker 1: late eighties. That was a marvelous experience. But I hadn't

561
00:35:44,560 --> 00:35:47,000
Speaker 1: lived out quite apart from Harvard and political philosophy and

562
00:35:47,400 --> 00:35:50,880
Speaker 1: politics makes economics, I hadn't lived outside this country except

563
00:35:50,960 --> 00:35:54,880
Speaker 1: for nine months. So just going to live there was

564
00:35:54,920 --> 00:36:00,680
Speaker 1: an adventure for for us and you know, just made

565
00:36:00,680 --> 00:36:04,920
Speaker 1: by life really good. Actually we make everyone very jealous

566
00:36:04,960 --> 00:36:07,280
Speaker 1: at the end of the year. And Okay, your book,

567
00:36:07,320 --> 00:36:08,759
Speaker 1: which is all of I don't know what is it?

568
00:36:08,800 --> 00:36:11,640
Speaker 1: Fifty four not that I counted, but something like that

569
00:36:11,640 --> 00:36:16,160
Speaker 1: five pages. What's the key takeaway from that? And I

570
00:36:16,160 --> 00:36:19,640
Speaker 1: guess all the thinking you've done all this time at

571
00:36:19,680 --> 00:36:23,640
Speaker 1: Harvard and reflection that you've had time to do, what

572
00:36:23,719 --> 00:36:26,280
Speaker 1: do you think is the big takeaway for economic policy

573
00:36:26,320 --> 00:36:29,880
Speaker 1: makers at the bank or at the federal US Federal Reserve,

574
00:36:30,400 --> 00:36:33,040
Speaker 1: finance ministries on both sides of the Atlantic. What are

575
00:36:33,080 --> 00:36:36,719
Speaker 1: they missing your former colleagues, and how does their worldview

576
00:36:36,760 --> 00:36:39,719
Speaker 1: need to change. I'm going to say something that will

577
00:36:39,719 --> 00:36:43,439
Speaker 1: almost sound contradictory that on the one hand, they need

578
00:36:43,480 --> 00:36:46,440
Speaker 1: to be aware that precisely because the weaponization stuff that

579
00:36:46,480 --> 00:36:51,040
Speaker 1: you rightly raised, that they aren't siloed away from higher

580
00:36:51,120 --> 00:36:54,840
Speaker 1: level issues. I tell a story at the beginning of

581
00:36:54,840 --> 00:36:56,880
Speaker 1: the book about someone walking into my office when I

582
00:36:56,920 --> 00:37:00,000
Speaker 1: was deputy Government saying, the Federal Reserve has refused Indie

583
00:37:00,080 --> 00:37:02,040
Speaker 1: or a swap line does no matter what a swap

584
00:37:02,080 --> 00:37:04,640
Speaker 1: line is, it's a line of credit. And my response was,

585
00:37:04,680 --> 00:37:06,720
Speaker 1: don't they realize India is going to be a power?

586
00:37:07,600 --> 00:37:09,839
Speaker 1: And you know, I was saying, that's above the pay

587
00:37:09,880 --> 00:37:13,719
Speaker 1: grade of the central bankers. And yet I also want

588
00:37:13,760 --> 00:37:16,640
Speaker 1: to say something that will sound completely different. They have

589
00:37:16,800 --> 00:37:19,200
Speaker 1: just got to stick to the basics, which is delivering

590
00:37:19,239 --> 00:37:25,240
Speaker 1: price stability and delivering banking systems stability, and the broadest sense.

591
00:37:25,440 --> 00:37:28,359
Speaker 1: I don't They've got involved, not just here in the UK,

592
00:37:28,560 --> 00:37:32,040
Speaker 1: but very much and continentally Europe, very much in the

593
00:37:32,160 --> 00:37:34,920
Speaker 1: United States. They've got involved in climate change, They've got

594
00:37:34,960 --> 00:37:40,640
Speaker 1: involved in social justice, inclusive growth. Those things may be

595
00:37:41,440 --> 00:37:47,200
Speaker 1: more important for society as a whole. But they must

596
00:37:47,280 --> 00:37:52,080
Speaker 1: do the thing that only they can do for those

597
00:37:52,120 --> 00:37:55,320
Speaker 1: people listening in America and in Britain. Sorry, Eddie George

598
00:37:55,360 --> 00:37:57,319
Speaker 1: was a very great governor of the Bank Havingngland. They

599
00:37:57,400 --> 00:38:01,920
Speaker 1: used to say to us stability, stability, stability. Every time

600
00:38:02,080 --> 00:38:05,919
Speaker 1: they I mean, I wrote my own speeches, as most

601
00:38:05,960 --> 00:38:09,000
Speaker 1: of them do. It's a tremendously time consuming, difficult thing.

602
00:38:09,480 --> 00:38:12,000
Speaker 1: Every time they speak about something else, they are not

603
00:38:12,080 --> 00:38:15,360
Speaker 1: thinking about the thing that only they can do. My

604
00:38:15,400 --> 00:38:19,040
Speaker 1: main targets are in the United States and and in

605
00:38:19,120 --> 00:38:24,320
Speaker 1: continental Europe. But so they somehow need to be aware

606
00:38:24,360 --> 00:38:28,319
Speaker 1: that they're part of a bigger thing security policy, and

607
00:38:28,440 --> 00:38:37,520
Speaker 1: yet narrow themselves down to this narrow but vital um mandate.

608
00:38:37,800 --> 00:38:42,080
Speaker 1: And you know, lucky people like me can roam more

609
00:38:42,120 --> 00:38:45,440
Speaker 1: widely so they should read lots of important books, but

610
00:38:45,480 --> 00:38:49,880
Speaker 1: not get any big ideas you sound like. You mentioned

611
00:38:49,880 --> 00:38:53,000
Speaker 1: that you're teaching with my old friend and boss, Larry Summers,

612
00:38:53,000 --> 00:38:54,960
Speaker 1: and he, of course is exactly the same thing about

613
00:38:55,640 --> 00:38:59,359
Speaker 1: Central banks who stray too far from lane. Yeah. Yeah,

614
00:38:59,480 --> 00:39:01,479
Speaker 1: We've talked about that a lot, and it is really

615
00:39:01,480 --> 00:39:05,760
Speaker 1: what we each genuinely think. And actually, as an striking

616
00:39:05,800 --> 00:39:08,920
Speaker 1: thing is that I would say, to the extent that

617
00:39:08,960 --> 00:39:11,560
Speaker 1: I can kind of informally come as opinion in my head,

618
00:39:11,920 --> 00:39:14,840
Speaker 1: I would say most former top Central banquets think that,

619
00:39:15,960 --> 00:39:19,160
Speaker 1: which actually means that we have obviously been spared, as

620
00:39:19,560 --> 00:39:22,520
Speaker 1: we were up, obviously spared a set of pressures that

621
00:39:22,600 --> 00:39:27,399
Speaker 1: the current generation is subject to. And as you say,

622
00:39:27,440 --> 00:39:29,920
Speaker 1: there is this tension. Because there is, you have to

623
00:39:29,960 --> 00:39:34,000
Speaker 1: be more conscious of being silent. Well, Sir Paul Tucker,

624
00:39:34,360 --> 00:39:36,280
Speaker 1: thank you so much for joining us on our Happy

625
00:39:36,360 --> 00:39:39,759
Speaker 1: Christmas episode. You have indeed given us a lot of

626
00:39:39,760 --> 00:39:41,920
Speaker 1: food for thought. Thanks for having me, Stephanie, it's been

627
00:39:41,920 --> 00:39:48,799
Speaker 1: a real pleasure. Well, thanks for listening to Stephanomics. We'll

628
00:39:48,840 --> 00:39:51,399
Speaker 1: be back with the last episode of the year, our

629
00:39:51,640 --> 00:39:56,200
Speaker 1: famous look Ahead with Bloomberg Correspondence and Invited guests. In

630
00:39:56,200 --> 00:39:59,520
Speaker 1: the meantime, You can find us on the Bloomberg Terminal, website, apple,

631
00:39:59,600 --> 00:40:03,160
Speaker 1: wherever you get your podcasts. For more news and analysis

632
00:40:03,200 --> 00:40:06,440
Speaker 1: from Bloomberg Economics, you can also follow as Economics on Twitter,

633
00:40:06,800 --> 00:40:10,239
Speaker 1: and you can find me on at my Steponomics. This

634
00:40:10,320 --> 00:40:13,160
Speaker 1: episode was produced by the man As Hendrickson, Summer Sadi,

635
00:40:13,280 --> 00:40:16,360
Speaker 1: and Yang Yang, with special thanks to Sup Paul Tucker.

636
00:40:17,080 --> 00:40:26,680
Speaker 1: Mike Sasso is our executive producer. M