Speaker 1: This is Bloomberg Wall Street Week.
Speaker 2: The global push into infrastructure, breaking the IPO logjam in text.
Speaker 2: The financial stories that sheep are work cutting inflation without
Speaker 2: losing jobs. Do we need rate cuts and if so,
Speaker 2: how many? Investing in a time of geopolitical turmoil.
Speaker 1: Through the eyes of the most influential voices.
Speaker 2: Ten Rogueff Economists of Harvard, former FDIC had Shila Bert
Speaker 2: ge CEO, Larry Kulp, San Francisco FED President Mary Daily Bloomberg.
Speaker 1: Wall Street Week with David Weston from Bloomberg Radio.
Speaker 2: A big win for labor in Great Britain, the Biden
Speaker 2: presidency hangs in the balance, and France heads into the
Speaker 2: second round of elections. This is Bloomberg Wall Street Week.
Speaker 2: I'm David Weston. This week, Ken Jacobs of Lazard explains
Speaker 2: why the Supreme Court decisions in this term may not
Speaker 2: be as good for business as many people think.
Speaker 3: We shouldn't suddenly cheer this decision as pro business and.
Speaker 2: As the United States celebrates its Independence Day. The former
Speaker 2: head of Young and Rubacam tells the storyory of how
Speaker 2: he went from a boy in a labor camp in
Speaker 2: communists Romania to rise to the top of the advertising business.
Speaker 4: These idealistic views of America meant so much to me.
Speaker 2: We start with US jobs numbers that came out on
Speaker 2: Friday and what they tell us about the US economy
Speaker 2: with Stephanie Flanders, Bloomberg Senior Executive editor for Economics and Governments. So, Stephanie,
Speaker 2: thanks so much for being back with us. So it's
Speaker 2: an interesting set of jobs numbers. On one hand, they
Speaker 2: increased the non farm payrolls by a goodly amount, but
Speaker 2: they also took revisions taking them back down. So on
Speaker 2: net net, what did we learn?
Speaker 5: You know, I think we learned quite a lot from this,
Speaker 5: and I think one of it was that actually, something
Speaker 5: that our chief economist, Anna Wong has been talking about
Speaker 5: for a while is that there had been the rate
Speaker 5: of job growth that we've seen actually for the last
Speaker 5: year or so was being exaggerated by the way that
Speaker 5: there of label cysics is including those business failures and
Speaker 5: successes in their numbers. So she had estimated already that
Speaker 5: relative instead of the sort of two hundred thousand jobs
Speaker 5: additions every month that we've seen on average for some
Speaker 5: time now, it was actually going to be revised to
Speaker 5: half of that figure, more like one hundred thousand when
Speaker 5: you took business failures into account. And we haven't fully
Speaker 5: seen that revision yet, but I think that was one
Speaker 5: thing that certainly that bond market investors were focusing on
Speaker 5: in these numbers, that you had some big downward revisions
Speaker 5: in the past numbers. So even though the headline was
Speaker 5: pretty close to what we had forecast, but there was
Speaker 5: a bit lower than expected by others. Even though that
Speaker 5: headline looked healthy, I think we are starting to see
Speaker 5: that deterioration under the surface, which was emphasized also by
Speaker 5: the increase in the unemployment rate, which was again was
Speaker 5: higher than expected. So I think all of that points
Speaker 5: to a slightly more a more significant weakening, or a
Speaker 5: more advance weakening in the labor market than perhaps many
Speaker 5: had thought.
Speaker 2: Yeah, and that having is terribly important, as I understand it.
Speaker 2: Economists tell us that basically to sort of replicate the
Speaker 2: number of jobs you have now, it's around one hundred
Speaker 2: thousand a month. So if it's two hundred thousand, that's
Speaker 2: really a growing job market. If it's one hundred thousand,
Speaker 2: that's a lot closer to just break even flat.
Speaker 5: Yeah, and obviously you know we have seen we haven't
Speaker 5: seen the recession that the BlueBag economics had expected, and
Speaker 5: that's it's definitely been a stronger economy than we expected,
Speaker 5: you know, even six or six to nine months ago,
Speaker 5: but the sort beneath the surface weakening, and again pointing
Speaker 5: to that rising unemployment rate, I think all points to,
Speaker 5: you know, points as still towards rate cuts in September
Speaker 5: and then and maybe another one before the end of
Speaker 5: the year.
Speaker 6: I guess, you know, that's that's it. We were in
Speaker 6: normal times.
Speaker 5: But of course, you know, there's a few other things
Speaker 5: going on in the next six months, and those are
Speaker 5: things that the bond market and indeed the Federal Reserve
Speaker 5: are going to have to some attention to as well.
Speaker 2: Well. Let's talk about exactly that, Stephanie, because as you
Speaker 2: point out, there's sort of a push and pull going
Speaker 2: on here. On the one hand, there seems to be
Speaker 2: a slowing job market and as you say, the unemployment
Speaker 2: rate is ticking up slowly, which might indicate we really
Speaker 2: have to back off on the fiscal policy. On the
Speaker 2: other hand, we do have this little election coming up
Speaker 2: in November, and there have been some substantial developments this week,
Speaker 2: and that particularly about who the nominee is going to
Speaker 2: be for the Democrats. As President Biden is really going
Speaker 2: through a tough time. We've seen some reaction from the
Speaker 2: bond markets to that phenomenon.
Speaker 5: Yeah, a lot of talk about the Trump trade, and
Speaker 5: I think we saw that particularly in the immediate aftermath
Speaker 5: of that disastrous debate performance a week ago by President Biden.
Speaker 5: You know, we had perhaps been in a situation where
Speaker 5: many in the markets and certainly in the betting markets,
Speaker 5: thought it was more likely than not that President Trump
Speaker 5: would come into office in the November elections. But we
Speaker 5: sort of went from more likely than not to an
Speaker 5: apparently unstoppable over the last week or so. As a
Speaker 5: course of not us that just deteriorating sort of prospects
Speaker 5: potentially for President Biden on the back of that performance.
Speaker 5: But a lot of people, certainly a lot of people
Speaker 5: sitting in congressional seats and senators thinking on the Democrats side, wow,
Speaker 5: those not only is we not going to have cottails
Speaker 5: coming from an incoming, you know, a re elected president,
Speaker 5: we could seriously be in trouble and we could be
Speaker 5: looking at a clear, clean suite for the Republicans come November.
Speaker 5: If any of that it does come to pass, then
Speaker 5: I think people are looking down the track and saying, Okay,
Speaker 5: that's going to mean more unsustainable fiscal policies and are
Speaker 5: probably maybe good for the economy sort of short term
Speaker 5: in terms of growth, but it certainly points to higher
Speaker 5: interest rates for longer on the long end on the
Speaker 5: bond deal.
Speaker 2: Then, yeah, this is a terribly important point. I'm curious
Speaker 2: about your perspective, not only from your time in London.
Speaker 2: Also you spent some time in Washington in the administration.
Speaker 2: Actually you've been watching this for some time. Do the
Speaker 2: markets basically favor a divided government in the United States,
Speaker 2: that is to say, they don't like it when it's
Speaker 2: all Democrats or are Republicans in both houses of Congress
Speaker 2: plus the presidency, because a lot more can be done.
Speaker 5: I think there is a nervousness around that. And thank
Speaker 5: you for reminding me, David that actually the last time
Speaker 5: when I was in the Treasury, unfortunately I only had
Speaker 5: a junior job, but when I was in the US
Speaker 5: Treasury was the last time we had a budget surplus
Speaker 5: in the US on the federal side. It's been a
Speaker 5: very long time since we had one of those. But
Speaker 5: I think It's also there's a Trump specific factor here, right,
Speaker 5: but he's he's talking about across the board tariffs that
Speaker 5: would add to inflation at a time when yes, you
Speaker 5: want to also have increased defense spending. And we're already
Speaker 5: in an economy, you know, this is an economy that
Speaker 5: is probably you know, potentially at the peak of the cycles,
Speaker 5: certainly at full close to full capacity. That's been running
Speaker 5: at six or seven percent of GDP budget deficits year
Speaker 5: after year. And if that's only going to go up
Speaker 5: or at least stay at that level as the cost
Speaker 5: of servicing that debt goes up, that is looking very unsustainable.
Speaker 5: I guess the key question is, even if you have
Speaker 5: a strong equity market in that context, you're certainly going
Speaker 5: to have a sort of longer term sell off on
Speaker 5: bond from the bond market, and you're going to have
Speaker 5: trouble for the Fed, potentially pressure on the dollar for
Speaker 5: way down the road.
Speaker 2: Okay, it's in the books now, Stephanie, I think it's
Speaker 2: fair to say a landslide win for secure Starmer and
Speaker 2: the Labor Party. What do we think that may mean
Speaker 2: for economic policy going forward?
Speaker 5: If anything, Well, we do have a pretty we have
Speaker 5: a first female Chancellor of Exchequer almost certainly one called
Speaker 5: Rachel Reeves, who we're going to get to know. She
Speaker 5: is actually a former Bank of England economist and is
Speaker 5: considered to be very by the book, quite orthodox in
Speaker 5: her approach to economics. So at some level this is
Speaker 5: not a This is certainly not a corbyn Er Jeremy
Speaker 5: Corbyn style incoming Labor government, very more on the tradition
Speaker 5: of Blair. And that's what kir Starmer has done with
Speaker 5: the Labor Party. Has managed to sort of.
Speaker 6: Drag it back from that fringe period under.
Speaker 5: Jeremy Corbyn and make it an electable alternative to the Conservatives.
Speaker 5: And boy, the voters really wanted alternative to the Conservatives.
Speaker 5: They gave them an absolute kicking in this election, didn't
Speaker 5: really plant a lot more votes for Labor, but had
Speaker 5: a half of the votes for the Conservatives.
Speaker 6: The focus is going to be on growth.
Speaker 5: I think the big difference, if there is one, will
Speaker 5: be potentially the approach to Europe and the rigorous focus
Speaker 5: on house building and investments. You know, that is something
Speaker 5: where the previous government had not wanted to. You know,
Speaker 5: you get a lot of arguments from people Oh, I
Speaker 5: don't want to have that wind.
Speaker 6: Farm on my regret, you know, near me. I don't
Speaker 6: like it.
Speaker 5: I don't want to have this new housing estate near me.
Speaker 5: They have promised that they're going to push through that opposition,
Speaker 5: but I guess we'll wait and see.
Speaker 2: Oh, when you talk about the new chance with the checker,
Speaker 2: it's her job now to come up with the money
Speaker 2: for that investment. Where's that money going to come from?
Speaker 5: Well, so her answer to that is faster growth. But
Speaker 5: of course, you know, you have a chicken and egg problem.
Speaker 5: So if the UK had just grown at its long
Speaker 5: term average rate after the Globi Falantocrassis after two thousand
Speaker 5: and eight, the economy would be forty percent larger now
Speaker 5: and there will be a lot more tax revenues to
Speaker 5: fund a lot more of the demand for public services
Speaker 5: that is undeniably there.
Speaker 6: In the UK. Pent up demand we don't have.
Speaker 5: We've had much weaker growth than that, and it's hard
Speaker 5: to sort of immediately turn on the switch. But I
Speaker 5: think she will be looking for ways to get credit
Speaker 5: from the official, the independent fiscal watchdog for things that
Speaker 5: she's doing now affecting growth over the longer term. So
Speaker 5: if she does things that really convince that watchdog. Oh,
Speaker 5: actually growth could be a little bit higher over the
Speaker 5: next few years, while potential growth is going to go up. Well,
Speaker 5: that will also actually give her a bit more room
Speaker 5: on the spending side because it'll look more sustainable over time.
Speaker 2: So when you talk about the actual growth versus the
Speaker 2: potential growth for the British economy, some of us might
Speaker 2: think a question about Brexit and what effect it had
Speaker 2: on that differential. At the same time, I don't recall
Speaker 2: a lot of discussion Brexit at all in this election.
Speaker 2: It doesn't sound like Circuit Sharma is going to be
Speaker 2: saying let's get back into the European Union. So how
Speaker 2: are they going to bring back the actual growth without
Speaker 2: addressing the Brexit issues?
Speaker 5: You know, I think it's been it's been a controversial
Speaker 5: question and there's been a lot of pressure. When you
Speaker 5: look at polls, there is a large majority now, especially
Speaker 5: of many labor voters, wanting to potentially even go back
Speaker 5: in the EU, which I don't think is a practical suggestion,
Speaker 5: but certainly to have a closer relationship maybe in the
Speaker 5: Single Market, joined the Customs Union. He has ruled all
Speaker 5: of that out and has not wanted to talk about it.
Speaker 5: When we saw the results last night, we saw a
Speaker 5: little bit of why because the second place party in
Speaker 5: a lot of the seats that label was winning back
Speaker 5: were not the Conservatives but the Reform Party, which, as
Speaker 5: you'll remember, David, is a kind of an anti europe,
Speaker 5: anti immigrant party. That's the sort of remainder of the
Speaker 5: big campaigners for Brexit.
Speaker 6: So there's a still quite a.
Speaker 5: Many of the people who voted for Brexit, working class
Speaker 5: voters in northern constituencies, old industrial constituencies. They are still
Speaker 5: feeling aggrieved about Brexit, and I don't think Labour wants
Speaker 5: to go near it. They do want to unlock smaller
Speaker 5: deals that will reduce some of these obstacles. The red tape,
Speaker 5: which you're absolutely right, has hit growth, and I think
Speaker 5: even that could have an impact if they make it
Speaker 5: easier for importers and exporters who are now facing a
Speaker 5: lot more red tape, even without changing anything else, that
Speaker 5: could help trade at the margin and help growth.
Speaker 2: So Stephanie, let me push you here a little bit,
Speaker 2: because we have two big elections. We've just had the
Speaker 2: UK elections, now we're about to have the second and
Speaker 2: final round of the parliamentary elections in France, which seems
Speaker 2: to be a quite different story where actually you have
Speaker 2: one would to anticipate substantially to the right candidate in
Speaker 2: Marine Lapen, who looks like she'll do reasonably well there.
Speaker 2: The one constant seems to be anti incumbent. But is
Speaker 2: there any through line through those two elections.
Speaker 6: I think you've you've hit it, David.
Speaker 2: I'm not.
Speaker 5: Actually I'm on a bit of election road trip at
Speaker 5: the moment because I'm going to be going off to
Speaker 5: Paris and on Sunday to see those final results for myself.
Speaker 5: It's been quite the week, but it does look as
Speaker 5: though Marine le Penn's party Rassean Blemont Nationale is not
Speaker 5: going to win a majority, in part because they've been
Speaker 5: able to do the center, which is very weak. Mackerel's
Speaker 5: party have been able to do some deals on the
Speaker 5: sort of case by case basis with the left, who
Speaker 5: are way to the left of certainly of the Labor
Speaker 5: Party in the UK.
Speaker 2: Stephanie has always such a treat to have you on
Speaker 2: Wall Street Week. Thank you so much. That's Stephanie Flanders.
Speaker 2: She's Bloomberg Senior Executive editor for Economics, and government coming up.
Speaker 2: The Supreme Court thought it was helping business when an
Speaker 2: overruled Chevron, but was it right. We talked with Kenny
Speaker 2: Jacobs of Lazard. That's next time of Wall Street Week
Speaker 2: on Bloomberg.
Speaker 1: This is Bloomberg Wall Street Week with David Weston from Bloomberg.
Speaker 2: Great, this is Wall Street Week. I'm David Weston. Everyone
Speaker 2: is talking about the Supreme Court decision this week on
Speaker 2: presidential immunity. But for the business community, the more important
Speaker 2: ruling may have been the one a week ago that
Speaker 2: overturned the Chevron doctrine. To take us through what that
Speaker 2: may mean, we welcome back now, Ken Jacobs. He is
Speaker 2: executive chairman of Lazard, so Kent, welcome back. Almost two
Speaker 2: years exactly since we talked about this subject. You are
Speaker 2: ahead of your time on Chevron. Take us through exactly
Speaker 2: what the risks of overturning Chevron really are.
Speaker 3: Sure the potential exists contrary to conventional wisdom that Chevron
Speaker 3: turns out to be anti business. I think the knee
Speaker 3: jerk reaction, the immediate reaction is is that Chevron is
Speaker 3: a pro business decision.
Speaker 2: Because courts can overturn more than that.
Speaker 7: If you step back and you think about it.
Speaker 3: If the US has three competitive advantages that have endured
Speaker 3: for the last one hundred and fifty two hundred years.
Speaker 3: It has rule of law, it has actually favorable demographics,
Speaker 3: and it has one unified market. The risk in Chevron
Speaker 3: is twofold. First around unified market. Unified market means that
Speaker 3: when you have a product and you want to go
Speaker 3: to market, you've got a market of three hundred and
Speaker 3: thirty million people, second only to China, with one set
Speaker 3: of effectively one set of rules, with the exception of
Speaker 3: two or three industries financial.
Speaker 7: Services, utilities, healthcare services.
Speaker 3: With the exception of those industries, you essentially have one market,
Speaker 3: three hundred and thirty million people, one set of rules.
Speaker 3: As a startup company and an innovator, that's phenomenal. That's
Speaker 3: why this company attracts entrepreneurs innovators like no other country
Speaker 3: does in the world. The risk on Chevron is really twofold.
Speaker 3: One is that you end up with uncertainty related to
Speaker 3: the fact that there's just going to be a lot
Speaker 3: more litigation. This opens up the possibility of being much
Speaker 3: more litigation, so it creates unpredictability and uncertainty about what
Speaker 3: the rules really are and what they will really be.
Speaker 3: The second risk is around the fact that there just
Speaker 3: may not be as much rulemaking at the federal level
Speaker 3: for good reason. It's going to be more likely it'll
Speaker 3: be overturned or litigated in court. But what that means
Speaker 3: is there's a vacuum, and nature it abhors vacuums, and
Speaker 3: that tends to then end up being regulated at state level.
Speaker 3: And the risk of all this is you end up
Speaker 3: with a market that was unified fragmenting into ideological, partisan
Speaker 3: and procli interests. Now, I'm not suggesting that's taking place
Speaker 3: over overnight, and I think there are also some protections
Speaker 3: in place where that may not happen. But we shouldn't
Speaker 3: suddenly cheer this decision as pro business.
Speaker 7: It has a real risk of being the opposite.
Speaker 2: So can you've spent a distinguished career advising clients, thinking
Speaker 2: about doing M and A and things like that, What
Speaker 2: does it do to you as an advisor when a
Speaker 2: company comes to you and says, do I buy it?
Speaker 2: Do I not buy it? Do I do this deal?
Speaker 2: Not do this deal? What does it do if you're
Speaker 2: not exactly sure what the rules?
Speaker 7: Well, let's use real practical examples. You have a choice.
Speaker 3: You can buy a company in Europe that is primarily
Speaker 3: a European company, young company going to start up in
Speaker 3: Europe it's operations, or you can plant yourself or buy
Speaker 3: a company in the United States buying. If you think
Speaker 3: about a young company in the United States, you've got
Speaker 3: a market of three hundred and thirty million people. Accessing
Speaker 3: the market is easy in Europe. You know, the EU
Speaker 3: is better than the what existed before, but it's much
Speaker 3: more complex. You have rulemaking at the top level, but
Speaker 3: you still have enormous authority in the role of countries,
Speaker 3: so that market isn't as unified as the US. And
Speaker 3: as an innovator, you would always choose to be in
Speaker 3: the US. And as a company if you're buying an innovator,
Speaker 3: the same thing.
Speaker 2: Also, let's talk about the litigation costs, because, as you said,
Speaker 2: it looks like right now there'll be a big incentive
Speaker 2: for a lot of people to challenge rules, a lot
Speaker 2: of lawyer's money being generated. I'm not against that. I'm
Speaker 2: a lawyer. You know it's all fine, But what are
Speaker 2: the litigation costs, the friction costs they're being generated for this.
Speaker 3: Well, First, it just creates some predictability when you have
Speaker 3: decisions made by experts, which is, for better or worse,
Speaker 3: what we're dealing with.
Speaker 7: A lot of the time in agencies.
Speaker 3: I don't mean for worse, but you know, most of
Speaker 3: the agencies are people by civil servants who are really
Speaker 3: expert in their field. And when you have experts, you
Speaker 3: usually can predict what experts are going to do. I mean, yes,
Speaker 3: there's a lot of regulation that is imperfect, but you
Speaker 3: can generally guess what they're going to do. When it
Speaker 3: comes to courts, it's very different. You have ideology that
Speaker 3: gets involved. We can see that in some of the
Speaker 3: decisions coming out of Texas on abortion rights. We have
Speaker 3: deep social beliefs in the same way you have people's
Speaker 3: different views of the economy. Many of these trials could
Speaker 3: end up in the hands of juries, which become less predictable.
Speaker 3: So I think that's the real risk is you go
Speaker 3: from something that is not perfect really is not perfect.
Speaker 3: I'm a regulatory regime is not perfect at the federal level,
Speaker 3: but generally speaking, it's the same everywhere, and it's more
Speaker 3: predictable than it's likely to be under this new regime.
Speaker 2: So you have the Chevron decision, which is one of them,
Speaker 2: which really overturned the rule that regulatory agencies we defer
Speaker 2: to in the courts. Is this a pro business court?
Speaker 2: Supreme Court?
Speaker 7: I think this is a pro court court.
Speaker 3: That's how I describe it, because I'm not sure these
Speaker 3: decisions turn out to be pro business if you go
Speaker 3: from predictable to unpredictable, and I think the key to
Speaker 3: business is predictability. That is, uncertainty is the curse of
Speaker 3: business and the curse of markets. And you only really
Speaker 3: know that when things are really uncertain. That's when you
Speaker 3: crave the predictability. So I don't think we're going to
Speaker 3: see this overnight. But no, I don't think this is
Speaker 3: necessarily pro business. It may in the beginning feel like
Speaker 3: it is, but I think the real risk is the
Speaker 3: predictability issue.
Speaker 7: I think this is very pro courts.
Speaker 3: I think we're going to see a lot more litigation,
Speaker 3: a lot more intervention by courts and decisions which in
Speaker 3: the past sort of happened.
Speaker 2: As a business leader, how confident are you the Supreme
Speaker 2: Court understands the ramifications in the real world of what
Speaker 2: they're deciding.
Speaker 3: Look, I have huge respect for the people that are
Speaker 3: on the Supreme Court. I mean, these are all enormously
Speaker 3: accomplished people, and when you actually sit down and you
Speaker 3: read these decisions. I'm not a lawyer, they're impressive writing
Speaker 3: and they're very well argued and such. I think the
Speaker 3: risk at the Supreme Court, and I think generally if
Speaker 3: more power is going to the judiciary, is that I
Speaker 3: don't think any of these any of these judges have
Speaker 3: really ever managed a company. They've nearly They've never had
Speaker 3: to deal with a budget, They've never had to deal
Speaker 3: with a workforce, They've never had to deal with the
Speaker 3: board of directors or with shareholders, and so I think
Speaker 3: there's a little bit of ideology naivete at work here
Speaker 3: about not being in the real world. Now, maybe that's
Speaker 3: a curse of our system, that is it's next to impossible.
Speaker 3: I think something you and I talked about before, where
Speaker 3: it's next to impossible to get confirmed by a Congress
Speaker 3: if you have a record. But I think that's the
Speaker 3: real risk here.
Speaker 2: Ken, it's always great to have you this, Thank you
Speaker 2: so very much. That is Ken Jacobs of Blizard. This week,
Speaker 2: the United States celebrated its Independence Day, and Wall Street
Speaker 2: Week traveled across town to talk with one of the
Speaker 2: many who immigrated to America and helped Wall Street and
Speaker 2: the country become what it is today. We're here at
Speaker 2: the Museum of the City, New York, where a lot
Speaker 2: of the history of New York City is portrayed, and
Speaker 2: we are joined by Peter Georgescu, former head of Young
Speaker 2: In Rupham, who himself is part of that history.
Speaker 4: So Peter, it's great to be with you. David, what
Speaker 4: a thrill. Delighted to be with you.
Speaker 2: So it take us back to when you came to
Speaker 2: New York and made some history in nineteen fifty four war.
Speaker 4: Oh my goodness. Well, my story starts thousands of miles
Speaker 4: from here in Romania, born of Romanian parents, just at
Speaker 4: the eve of the Second World War. So my parents
Speaker 4: smelled that it was going to be trouble in the capital,
Speaker 4: so they shipped my brother five years old and I
Speaker 4: to Transylvania with my mother's parents, aging grandparents, wonderful people,
Speaker 4: and so the Second World War was with my grandparents
Speaker 4: in Romania, and we survived the war and it wasn't pleasant,
Speaker 4: but it wasn't horrific. And so my father, unfortunately was
Speaker 4: put in prison by the Germans because he worked for
Speaker 4: an American company exile and uh in the oil fields
Speaker 4: and uh Germans of course took an ally guy and
Speaker 4: threw him into prison. They almost killed him. But then
Speaker 4: the president of Romania decided that he better get some
Speaker 4: friends on the other side. What if the Germans don't
Speaker 4: win the war. So he literally faced the firing squad
Speaker 4: and they gave him a last minute reprieve close. But anyway,
Speaker 4: he worked for they. He they didn't know that he
Speaker 4: worked for the oss from prison. That's another story. So
Speaker 4: we reunited as a family in forty six in Romania,
Speaker 4: my brother, my m you know, the organic family. I
Speaker 4: learned how to bite from my father and that was
Speaker 4: the actually the longest time a year that I've ever
Speaker 4: spent with my parents. What happened was, uh, the beginning
Speaker 4: of forty nine. In January, my mother and father came
Speaker 4: to New York for a general manager's meeting at thirty
Speaker 4: Rock here in New York City for excellent for the
Speaker 4: exile worldwide Manager's meeting. He was at a time that
Speaker 4: the Communists took over Romania. The Aaron Curtain comes down,
Speaker 4: and little O me alright, uh, at that time was
Speaker 4: just over seven years old. Was there, Ah, the birth
Speaker 4: of communists, one of most powerful autocracy that the world
Speaker 4: has ever seen, and Romania was another one. It has
Speaker 4: a reputation that it was not so bad.
Speaker 2: It was the worst.
Speaker 4: Three hundred thousand people were killed and so then shortly
Speaker 4: thereafter they arrested my brother, myself and my grandmother were
Speaker 4: thrown close to the Russian border in a small town
Speaker 4: called Boshan. And Uh, that's always see the beginnings of
Speaker 4: what do you do people are funcible? Do you use
Speaker 4: people to do things?
Speaker 2: Uh?
Speaker 4: And I I I was a witness to what I
Speaker 4: learned and later learned to understand was totalitarianism, autocracy. And
Speaker 4: we were pawns. I never knew why they kept us alive,
Speaker 4: but we became pawns, as I mentioned in a minute.
Speaker 4: But anyway, in in this little town, we got up
Speaker 4: at six o'clock in the morning, We went to work
Speaker 4: six days a week, ten hours a day. Sundays you slept.
Speaker 2: And you were howled.
Speaker 4: And I was ten years old. No books, no learning,
Speaker 4: no nothing. You go into work six days a week,
Speaker 4: you slept on Sundays.
Speaker 2: That was life.
Speaker 4: And there was no hope. There was no discussion between us,
Speaker 4: my brother and I. But hey, how is it gonna
Speaker 4: be when we grow old or when we grow up
Speaker 4: or we're nothing? And then in New York they tried
Speaker 4: to give my father to spy for them, and that's
Speaker 4: why they had kept us alive to be debate. Wanted
Speaker 4: to see your children alive again, you're gonna spy for us.
Speaker 4: My father went home from the office where he met
Speaker 4: with this guy and my mother and he talked. The
Speaker 4: next morning he went to the FBI and said, this
Speaker 4: is what happened. Whether I do they say, become a
Speaker 4: double agent? My father said, uh, I've seen that play.
Speaker 4: It doesn't work well. Sooner or later they will kill
Speaker 4: the kids. Anyway, what do we do? Eventually they said,
Speaker 4: go public. The Russians wanted the world to think of
Speaker 4: Communism is friendly and nice and warm and fuzzy, and
Speaker 4: so maybe they'll tell the Romanians they can kill the kids.
Speaker 4: So that's what they did. Every little town in America
Speaker 4: had a story of the blackmail of uh parents about
Speaker 4: their kids.
Speaker 2: In Romania.
Speaker 4: A wonderful woman from Ohio, Francis Payne Bolton, she took
Speaker 4: over her husband's seat. She was in want to be
Speaker 4: a woman in Congress. Not only that she was head
Speaker 4: of the Congressional Foreign Relations committing in Congress, she had
Speaker 4: met Style and she knew this story close up. My
Speaker 4: father said, I get you boys out of Romania. Not
Speaker 4: a long story. But at the end of the day
Speaker 4: she calls her friend Eisenhower, whom she helped elect as president.
Speaker 4: So she had some chits on Ike. We got traded
Speaker 4: for a bunch of Russian spies.
Speaker 2: So the President United States intervened on your behalf to
Speaker 2: get you out of Romania, and so he did. When
Speaker 2: we come back, we continue our conversation with Peter georg
Speaker 2: Escu about his rise to the top of Young and Rubecamp,
Speaker 2: the opportunities he had, and whether he sees the same
Speaker 2: opportunities for those starting out today. That's next on Wall
Speaker 2: Street Week on Bloomberg.
Speaker 1: This is Bloomberg Wall Street Week with David Weston from
Speaker 1: Bloomberg Radio.
Speaker 2: This is Wall Street Week. I'm David Weston. Peter george
Speaker 2: Escu fled Communist Romania and climbed to the top of
Speaker 2: the average industry in New York. We talked with him
Speaker 2: about the opportunities he enjoyed, the strengths of the capitalist
Speaker 2: system he helped drive and what has changed over the
Speaker 2: course of his career.
Speaker 4: Right apprenticed in the research department at Yander Rubikam and
Speaker 4: I ended up running the company. It says, I was
Speaker 4: your first non American around the CEO to do that,
Speaker 4: to be CEO in America, they were not. The immigrants
Speaker 4: never got to run things in those days.
Speaker 2: The contrast between the system in Romania you came from
Speaker 2: and the one you found in nineteen fifty four, and
Speaker 2: it says, could not have been more overwhelming.
Speaker 4: It was a stunner. That was the biggest difference. Freedom,
Speaker 4: kindness of people who reached out. Even there in Romania,
Speaker 4: everybody was afraid of everything, because this is what totality
Speaker 4: Terranism is an insidious disease, you know, it's s uh,
Speaker 4: really strong people, cruel, inhumane who protect the interests of
Speaker 4: one minorities against the vast majority of the population. And
Speaker 4: that's what communists really was. It was not an ideology
Speaker 4: that was nonsense. There was just the people in power
Speaker 4: who took it all, who lived well, we got the
Speaker 4: money and they were determined and committed to just carry
Speaker 4: on for the next generation of communists, and so forth
Speaker 4: and so on, and there was no freedom, there was
Speaker 4: no there was no public good. And here there was democracy,
Speaker 4: this thing, as I learned way back.
Speaker 2: The Greeks played around with that.
Speaker 4: But democracy was about people. That's what it means. It's
Speaker 4: of the people, by the people, for the people. And
Speaker 4: we in America have been blessed by Gene our forefathers,
Speaker 4: who believed in a few critical principles that I so embraced.
Speaker 4: When I learned about them, I said, my God, old
Speaker 4: men are created equal. These idealistic viewers of America meant
Speaker 4: so much to me, and I believe I learned to
Speaker 4: believe and have faith that I'll be okay in this country.
Speaker 2: It does strike me coming to the United States in
Speaker 2: nineteen the fifties, there was a time of almost unlimited opportunity, at.
Speaker 4: Least for some. As you say, the equality question had
Speaker 4: a lot.
Speaker 2: Of work to be done on it, but unlimited opportunity
Speaker 2: and equality of opportunity at least was the goal. That
Speaker 2: always the goal people saw it. Do we have that
Speaker 2: same level of opportunity and equality of opportunity today the
Speaker 2: United States? As you saw in nineteen fifty four, You.
Speaker 4: Know, David, the magical thing is that, as you said,
Speaker 4: I got to the American dream importantly because of the
Speaker 4: time America during right after the war was probably for
Speaker 4: the next forty years, was the best of America. Was
Speaker 4: the most selfless that America or a country could be,
Speaker 4: that ever was.
Speaker 2: In the world.
Speaker 4: And then things began to change slowly in the eighties
Speaker 4: or so. Business became something else. Business was uh caring
Speaker 4: about workers and s shareholders and communities and the customer a
Speaker 4: lot four or five stakeholders. And then it all changed.
Speaker 4: It changed in the early nineteen eighties and the mantra
Speaker 4: became the the leaders of business and government. The Reagan
Speaker 4: administration decided, we're paying workers too much money, why do
Speaker 4: we need that. Let's kill the unions, which they did.
Speaker 4: Now unions had some problems, they'd be fixed. It became
Speaker 4: criminalized and so forth. So they're not angels. But the
Speaker 4: idea was listic advantage of everything that we can and
Speaker 4: maximize short term share of the values, and let's make
Speaker 4: the few of us again where it was moving towards we,
Speaker 4: the rich people who were going to take We'll have
Speaker 4: our kids well educated and all the rest of it.
Speaker 4: The hell of the rest of the people. And forty
Speaker 4: years of that and America became the most unequal nation
Speaker 4: in the world economically financial well being. Today, sixty percent
Speaker 4: of American people say I'm financially secure, I'm worried about
Speaker 4: my existence. In fact, sixty percent of American families can't
Speaker 4: put food on the table, so pay their rent most months,
Speaker 4: and they have to borrow money sometimes. And it's not
Speaker 4: the bank, it's private people. It's very expensive. It's tough
Speaker 4: out there. We have become the most socially inept the
Speaker 4: ability to move from one strato society the next compared
Speaker 4: to anybody else in the developed world. And even our education.
Speaker 4: We invented public education, and yet our kids today are
Speaker 4: the bottom of the developed world. So that's what happened
Speaker 4: in forty years, driven by business, and the government did
Speaker 4: not do enough to fix the.
Speaker 2: Problem well, and in some instances the government may have
Speaker 2: exacerbated some of that for its own reasons. And we've
Speaker 2: had a couple of major crises in this century, with
Speaker 2: the Great Financial Crisis in two thousand and eight two
Speaker 2: thousand and nine, for the government felt they had to
Speaker 2: come in and give support to the economy, and then
Speaker 2: we had the pandemic. Again, the government feld had to
Speaker 2: come in, and again there are reasons for that. At
Speaker 2: the same time, it did tend to enhance the wealthy
Speaker 2: and the people particularly owned capital, to the disadvantage the
Speaker 2: people who did not have capital.
Speaker 4: It's exactly right, because there's a fix here. And that's
Speaker 4: why I'm saying people don't understand that it was the
Speaker 4: business community that really helped drive this level of inequality
Speaker 4: in America, and it is business and capitalism that has
Speaker 4: to fix it. Capitalism is the right engine. Capitalism doesn't
Speaker 4: care who the beneficiary is, whether it's twenty or thirty
Speaker 4: percent of America or the vast majority of America. Capitalist
Speaker 4: works in China, and it's a machine. It's having access
Speaker 4: to access to resources, risk taking ability. That's what capitalism.
Speaker 4: It's not an ethical machine. The only thing he knows
Speaker 4: is produces wealth and well being. Now, who benefits from
Speaker 4: that is the governance. That's it, and we had the
Speaker 4: wrong version of it. Everything went to the shareholders by design,
Speaker 4: and it was kept that way. And now it's beginning
Speaker 4: to change because it has to.
Speaker 2: Well what about that beginning to change? Is it changing
Speaker 2: and what is causing him to change?
Speaker 4: Well, it has, you know, in many ways, I believe
Speaker 4: it really must change, because why am I saying that
Speaker 4: the precursor of totality Terranism that I sold in Romania
Speaker 4: is a large enough minority of people who are under educated.
Speaker 4: They don't have the confidence in the society will help them,
Speaker 4: They become desperate, they become anarchists. And now today we're
Speaker 4: seeing lots of those folks who don't believe that the
Speaker 4: current system will ever come to help them.
Speaker 2: Many thanks to Peter George Escu, former head of Young
Speaker 2: and Rubicam. Nearly two hundred years ago, in his epic
Speaker 2: Democracy in America, Alexei Diktkvil wrote that the position of
Speaker 2: Americans is quite exceptional, and it may be believed that
Speaker 2: no democratic people will ever replaced in a similar one.
Speaker 2: This week, the United States celebrated its two hundred and
Speaker 2: forty eighth birthday, still trying to live up to that potential.
Speaker 2: Jane Hartley, the US Ambassador to the Court of Saint James,
Speaker 2: at her annual Fourth of July celebration in central London
Speaker 2: this year, noted the irony in British elections being held
Speaker 2: on American Independence Day. If only King George the third
Speaker 2: had included the colonies and elections back in seventeen seventy six,
Speaker 2: things might have turned out very differently. These days, we
Speaker 2: have no shortage of politicians telling us that we're exceptional.
Speaker 4: I've always believed that one of the greatest trands of America.
Speaker 2: You've retired of hearing me say it is our diversity.
Speaker 8: We're going to make America great again. We're going to
Speaker 8: make it better than ever before November fifth. Remember, November
Speaker 8: fifth is the most important day in the history of
Speaker 8: our country.
Speaker 2: But Independence Day is always a good time to take
Speaker 2: stock of how we're doing. Sure, there are some ways
Speaker 2: that the United States is different from much or all
Speaker 2: of the rest of the world, like, for example, and
Speaker 2: the and barrage of TV ads for pricey prescription drugs
Speaker 2: up to and including the latest craze of shots to
Speaker 2: help us all lose weight. And America certainly has distinguished
Speaker 2: itself by demonstrating every Fourth of July ways to put
Speaker 2: on the weight we need to take off, like by
Speaker 2: holding contests to see how many hot dogs we can eat,
Speaker 2: though this year the perennial Coney Island favorite Joey Chestnut
Speaker 2: was disqualified by cheating on the traditional hot dog with
Speaker 2: a plant based alternative. But there are other more important
Speaker 2: ways in which the United States continues to lead, as
Speaker 2: in its having more developed, deeper capital markets than anywhere else.
Speaker 9: Most of our capital markets and the attraction globally to
Speaker 9: invest in our economy is based on the rule of law,
Speaker 9: and it's based on the independence and the capability of
Speaker 9: our institutions, even with all of the political challenges that
Speaker 9: we have to function in a way that can create certainty,
Speaker 9: certainty for employer, certainty for investors.
Speaker 2: And having an economy that, at least for the time being,
Speaker 2: is the envy of the world, attracting investment like never before.
Speaker 10: US exceptionalism or US dynamic investment is still going very,
Speaker 10: very strong. That's really for no reason except we have
Speaker 10: great innovation in the US, we have great technology AI
Speaker 10: and then of course rule of law when it comes
Speaker 10: to financial markets.
Speaker 2: And there is one other way that the United States
Speaker 2: continues to be exceptional, one that sometimes may seem like
Speaker 2: a problem, but that actually signals a strength. Everyone wants
Speaker 2: to come here, sometimes against the law, providing a constant
Speaker 2: source of political conflict and burdens on our cities.
Speaker 7: It looks like We have substantially increased immigration right.
Speaker 2: Now, but much of the immigration recently has been entirely
Speaker 2: legal and has helped spur our economic growth while controlling wages.
Speaker 4: Immigration is good, but a rational immigration policy would be better.
Speaker 2: One of those who came to the United States to
Speaker 2: pursue his dreams was the late great Peter Jennings, for
Speaker 2: many years anchor of ABC World News Tonight. Peter was
Speaker 2: proud of being a Canadian, and some question whether so
Speaker 2: much of America should be getting its news every night
Speaker 2: from a foreigner. Peter and I became quite close during
Speaker 2: our time working together at ABC News, including through his
Speaker 2: marathon anchoring of our twenty four hour Millennium program and
Speaker 2: then his NonStop nine to eleven coverage. We shared the
Speaker 2: same birthday and each year would exchange gifts. One day,
Speaker 2: he came to my office with my gift that year
Speaker 2: and told me, with tears in his eyes, that he
Speaker 2: had just become a US citizen. Peter never hesitated to
Speaker 2: question and even criticize his adopted country. He saw the
Speaker 2: ways in which we fell short, but he never lost
Speaker 2: sight of the potential for exceptionalism that Totolkville had seen,
Speaker 2: and he gave me my present that year, a pair
Speaker 2: of American flag cuflinks that I wear to this day.
Speaker 7: That does it.
Speaker 2: For this episode of Wall Street Week, I'm David Weston.
Speaker 2: This is Bloomberg. See you next week.