Speaker 1: Bloomberg Audio Studios, Podcasts, Radio News.
Speaker 2: All Right, we're going to stay on global relationships the
Speaker 2: economies that drive them, and turn on over to doctor
Speaker 2: Adam Posen. He's president of the Peterson Institute for International Economics.
Speaker 3: He joins us from I believe.
Speaker 2: The Nation's capital on this Tuesday, Yes, Washington, DC, Doctor Posen,
Speaker 2: good to have you back here on Bloomberg and on
Speaker 2: Bloomberg BusinessWeek Daily. These relationships. I first got to ask you,
Speaker 2: you know, watching the relationship what seems to be a
Speaker 2: very close relationship between the United States and Saudi Arabia,
Speaker 2: and I think about their economies.
Speaker 3: How do you see it? What's significant for you here
Speaker 3: in watching this?
Speaker 4: Thank you Carol for having me back on Bloomberg BusinessWeek Daily.
Speaker 4: I want to pick up on some things you discussed
Speaker 4: with your previous guests, which is there is a huge
Speaker 4: economic leaving aside the national security incentive for Saudi to
Speaker 4: behave in this way in that MBS, the Crown Prince
Speaker 4: has very definitely been seeing part of his agenda to
Speaker 4: try to transition Saudi away from over dependence on export
Speaker 4: of fossil fuels, and it's the right thing for them
Speaker 4: to do. From the economic perspective, and obviously Saudi for
Speaker 4: many decades has been accumulating surpluses of cash and trying
Speaker 4: to invest them. They've been trying to diversify. I wouldn't
Speaker 4: go quite as far as your previous guests did in
Speaker 4: extolling how much a RAM cost first five, but they've
Speaker 4: been trying. I think the deeper integration with the US
Speaker 4: is a path towards that, and it is a credible
Speaker 4: path towards that. That's not to say they haven't been
Speaker 4: doing a lot of good things in terms of domestic
Speaker 4: investment and on the economic front on liberalization. They have,
Speaker 4: and I know a lot of very serious money investors
Speaker 4: who are very excited by this, but just to say
Speaker 4: this puts them on the path for the US, However,
Speaker 4: I think it's less important economically. It is more about
Speaker 4: the security relationship, or at least it should be. There's
Speaker 4: never been a shortage of people willing to invest in
Speaker 4: the US, or at least except with the exception of
Speaker 4: a few years in the late seventies and early eighties,
Speaker 4: not since nineteen hundred. And that remains the case, even
Speaker 4: though things are happening to make the US a little
Speaker 4: less attractive. So for the US, I think there has
Speaker 4: to be more of the security, diplomatic conditionality. Just simply
Speaker 4: getting Saudi investment in the US is not that big
Speaker 4: a game.
Speaker 1: What type of conditionality, especially in exchange for fter thirty
Speaker 1: five state of the r jets.
Speaker 4: Well, Tim, I think that's the right question, And I
Speaker 4: would not say it necessarily needs to be tied to
Speaker 4: Israel recognition in the abraham A courts, but it needs
Speaker 4: to be tied to something of that caliber. So maybe
Speaker 4: it's something about how they're relating to Iran, or something
Speaker 4: about the Saudi mutual guarantees with Pakistan, some sort of
Speaker 4: agreement on how the Saudis will influence Pakistan, or maybe
Speaker 4: it's about the investment which the Saudis have indicated they're
Speaker 4: willing to do in rebuilding Gaza and dealing with what
Speaker 4: will be refugee issues there. All I'm saying is that
Speaker 4: it has to be something substantial. But I also think
Speaker 4: you want the f thirty fives, of course are a
Speaker 4: big carot, but you also want to think of it
Speaker 4: in terms of the relationship. And this is what is key,
Speaker 4: whether it's UK or Saudi or Japan.
Speaker 2: Adam Adam you talk about relationships, and I think about
Speaker 2: something that came up questioning by reporters of the President
Speaker 2: and MBS while at the White House, and that is
Speaker 2: about kind of the relationships that the Trump organization has
Speaker 2: with Saudi Arabia on business deals. And we have a
Speaker 2: story in the Bloomberg about the Trump organization planning a
Speaker 2: luxury resort in the Maldives with a Saudi Arabian partner.
Speaker 3: It's just one case. I'm just curious.
Speaker 2: You've watched, you've talked about, you've analyzed different administrations, this
Speaker 2: kind of what seems to be a mixing melding. I
Speaker 2: know the President answered the question, he said, I have
Speaker 2: nothing to do with family business, but how do you
Speaker 2: see this?
Speaker 4: No, I appreciate your asking that, Carol, and I don't
Speaker 4: want to be mean, but it doesn't matter whether the
Speaker 4: president literally in the narrow sense, has nothing to do
Speaker 4: with it or not. We had laws, and what more importantly,
Speaker 4: we had norms, and we had expectations from the press,
Speaker 4: from the public, from the markets that the US did
Speaker 4: not deal in family enrichment when you're in public office,
Speaker 4: let alone when you're the president. Some of your viewers
Speaker 4: might remember the old John Adams miniseries in which John
Speaker 4: Adams alienated both his daughter and his son in law
Speaker 4: or one of his sons and his son in law
Speaker 4: because he wouldn't advance them while he was in the
Speaker 4: White House. And what matters is this very strong perception
Speaker 4: which is obvious in cutter in the United Arab ben
Speaker 4: where it's in Saudi, but even with the gold that
Speaker 4: was offered just the other day to the President, that
Speaker 4: there is this perception that you link things. Now, I
Speaker 4: don't want to overdramatize this. There are a lot of
Speaker 4: countries in the world, including Saudi, including Turkey, including China,
Speaker 4: where this kind of ties go on between the leaders,
Speaker 4: families and chosen friends and foreign policy and other governments.
Speaker 4: It's not good, it's not fair, it's wasteful and distortionary.
Speaker 4: But it's also not the end of the world. Businesses
Speaker 4: and investors can proceed. But for the US, this is
Speaker 4: going back to your original question, this is a huge
Speaker 4: step change. We've not seen anything like this the least
Speaker 4: since Teddy Roosevelt, meaning one hundred and twenty years.
Speaker 2: So just to be fair, because we certainly get feedback
Speaker 2: from our audience, and to say that the president says
Speaker 2: I'm not involved, though, you know, and we've had you know,
Speaker 2: any president that walks into the White House, Republican or Democrat,
Speaker 2: you know, certainly has allegiances to industries or so on.
Speaker 4: So I agree. I agree, it's never going to be absolute.
Speaker 4: And we all know the stories of people going back
Speaker 4: to Jimmy Carter's brother selling beer, that there's always relatives
Speaker 4: who try to profit on these things. But the so again,
Speaker 4: this isn't about ascribing the levolent intent. But you want
Speaker 4: to have a system in place where people expect and feel,
Speaker 4: particularly investors, but also average citizens expect and feel that
Speaker 4: this is an exception, not the rule that you occasionally
Speaker 4: have the rogue family member, but that on the one hand,
Speaker 4: policy choices are not being driven and being perceived and
Speaker 4: by these things, and on the other hand, the economic
Speaker 4: choices are being made on a commercial basis. And that's why,
Speaker 4: no matter how many times people of different parties and
Speaker 4: different administrations or appointments fail on this front, you want
Speaker 4: to have a system of scrutiny and rules and presumptions
Speaker 4: that it discourages our elected officials from being so overt
Speaker 4: about it. I think, to be fair, you know, the
Speaker 4: Trump administration and the sons of President Trump and Secretary
Speaker 4: Lutnik and the Middle East negotiator Guy and all these people.
Speaker 4: You know, they're being very open, and I think that
Speaker 4: in one sense does matter, like they are with Crypto,
Speaker 4: But in another sense that doesn't solve the problem because
Speaker 4: then the perception is still people are being favored, decisions
Speaker 4: are being made on a bad basis. You have to
Speaker 4: offer gold, crown or hotel deals to make things happen, and.
Speaker 2: Transparency doesn't necessarily negain actions, right.
Speaker 1: Yeah, Doctor Wilson, Doctor Posen, you said it's not the
Speaker 1: end of the world if we're in a situation such
Speaker 1: as this or in a society.
Speaker 4: Such a sist But it's not the end of the world.
Speaker 1: But I'm wondering if there are potentially long term economic
Speaker 1: repercussions that happen in societies that don't necessarily have the
Speaker 1: same rules in place, if we can look to history
Speaker 1: or modern history to get an understanding of what the
Speaker 1: implications of that could be in the US.
Speaker 4: In your view, oh, I think they're enormous. I think
Speaker 4: then because it's the US, which, as I've argued to him,
Speaker 4: has been the lynchpin of the rules based, law based
Speaker 4: system of economy since World War Two. It has repercussions
Speaker 4: around the world because it means the US is not
Speaker 4: only enforcing the norms against this kind of corruption or
Speaker 4: perceived corruption or tied political choice making. It means that
Speaker 4: the US is setting an example that you can get
Speaker 4: away with it, and other people should get away with it,
Speaker 4: and it breaks down the regimes and the operating principles
Speaker 4: we have to attorney thinks. So when I say it's
Speaker 4: not the end of the world, I don't mean to
Speaker 4: suggest it's not very harmful. It will reduce the returns
Speaker 4: on capital. It will reduce the ability of average people
Speaker 4: and normal businesses to get access to opportunities. It will
Speaker 4: divide the world. It will increase in stability and investment markets.
Speaker 4: It will waste public money. It's bad in a lot
Speaker 4: of ways. I just merely want to be very clear
Speaker 4: that though it's unusual for the US in the last
Speaker 4: one hundred plus years to behave this way, in our
Speaker 4: long ago history and in other countries around the world,
Speaker 4: this has taken place, and that there have been much
Speaker 4: small or much less overt examples of this by you,
Speaker 4: a previous US administration, and you.
Speaker 2: Know, just thinking about all you've just said, doctor Posen,
Speaker 2: and then kind of squaring that with the recent government
Speaker 2: shut down and the domestic issues that kind of came
Speaker 2: to the forefront. You know, the one in eight Americans
Speaker 2: who are on some kind of food assistance or food stamps.
Speaker 2: You know, the amount of Americans that are just struggling
Speaker 2: to put food on their table, a roof over their head.
Speaker 3: I want to bring it down.
Speaker 2: Then, with so much focus on global issues, and some
Speaker 2: would say when you're president, you have to look beyond the.
Speaker 3: US borders as well as within the US borders.
Speaker 2: But having said that, what is it that you know
Speaker 2: is being maybe being ignored in your view domestically, that's
Speaker 2: really got to be.
Speaker 4: Addressed, and you're asking very profound questions. I'll just say
Speaker 4: that in an enlightened administration, the reason you get involved
Speaker 4: in the rest of the world is because it ultimately
Speaker 4: is if you've set up a rest of the world
Speaker 4: that feels safer and less corrupt and more stable and
Speaker 4: less subject to disease and refugee flows and wars, that's
Speaker 4: ultimately to the benefit of the average American. And if
Speaker 4: you have open and free commerce on a rules based
Speaker 4: basis that raises American opportunities and American citizens purchasing power.
Speaker 4: So I agree with you, there's a question of how
Speaker 4: you prioritize. And this goes to the point with Saudi.
Speaker 4: I'm not sure that that should be the biggest priority
Speaker 4: of an American administration right now. It's fine, you can
Speaker 4: walk into gum. It can be one of the things.
Speaker 4: So when you say what's in the domestic front, I
Speaker 4: think the removal of health care support subsidies and access
Speaker 4: to Medicaid and to all these Obamacare related things is
Speaker 4: going to materially affect the health and well being of
Speaker 4: millions of human beings in the and that is bad economically,
Speaker 4: but it's bad in human terms. I think the reduction
Speaker 4: of options through the anti migration policies, through other policies
Speaker 4: that make it so more people, mostly women in late
Speaker 4: middle age, have to stay home to be caregivers to
Speaker 4: elders and to children and to disabled people, is materially
Speaker 4: bad for humans and is a huge pressure on people.
Speaker 4: And I think the combination of anti migration policy, attacks
Speaker 4: on the Fed tariffs deal making, some of which looks corrupt,
Speaker 4: all adds to a more inflationary environment, which reduces real
Speaker 4: incomes for people. So there's a whole bunch of things
Speaker 4: on the domestic front. But I just want to say
Speaker 4: that it's not about choosing the global versus domestic. It's
Speaker 4: about choosing the self interested versus the public welfare.
Speaker 2: I think we need to leave it there, but I
Speaker 2: gotta say sometimes I'm in all of our guests, and
Speaker 2: I certainly am on this Tuesday, Doctor Posin, thank you
Speaker 2: so much.
Speaker 3: Really appreciate all the kids for having me same here.
Speaker 3: Thank you for joining us.
Speaker 2: Doctor Adam Posen, President of the Peterson Institute for International Economics,