WEBVTT - Summers Predicts U.S. Recession More Likely Than a Soft Landing

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<v Speaker 1>Hello, and welcome to Stephanomics, the podcast that brings the

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<v Speaker 1>global economy to you, and we're dedicating this week's episode

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<v Speaker 1>to a conversation I had the other day with the

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<v Speaker 1>economist and friend of Stephanomics, Larry Summers, former US Treasury secretary,

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<v Speaker 1>now a professor of economics at Harvard and an energetic

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<v Speaker 1>contributor to public policy debates. We spoke at an event

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<v Speaker 1>hosted by the Council and Foreign Relations about the economic

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<v Speaker 1>fallout from the war in Ukraine, future of the G twenty,

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<v Speaker 1>and of course inflation. Larry was one of the first

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<v Speaker 1>to predict You'll remember over a year ago the surge

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<v Speaker 1>in prices were now living through. Now the US Federal Reserve,

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<v Speaker 1>the Central Bank has belatedly accepted that interest rates will

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<v Speaker 1>need to go up quickly and often to get control

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<v Speaker 1>of prices, which in turn has some people worried about

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<v Speaker 1>the future of the recovery. So I started by asking

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<v Speaker 1>Larry whether he believed that the recession in the US

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<v Speaker 1>was now inevitable. I think it's the most likely thing.

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<v Speaker 1>If you look at history, there has never been a

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<v Speaker 1>moment when inflation was above four and unemployment was below five.

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<v Speaker 1>When we did not have a recession within the next

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<v Speaker 1>two years. So I think the odds are a hard

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<v Speaker 1>landing within the next two years are certainly better than half,

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<v Speaker 1>and quite possibly two thirds or more. I don't think

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<v Speaker 1>the idea that is still embodied in FED forecasts that

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<v Speaker 1>we could have continuing super tight labor markets at three

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<v Speaker 1>and a half percent unemployment and we could have inflation

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<v Speaker 1>come down rapidly is a terribly plausible one. That's a

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<v Speaker 1>resident two of team transitory. And the key fact one

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<v Speaker 1>has to recognize, I think to grasp the current situation

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<v Speaker 1>is that wage inflation is now running above six percent

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<v Speaker 1>on the best data, which is the Atlanta FED indicator.

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<v Speaker 1>And if wage inflation is running at six percent, that's

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<v Speaker 1>a kind of ultimate core inflation, pointing to price inflation

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<v Speaker 1>at four and a half or five. So I think

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<v Speaker 1>we're either gonna live with that for quite a while,

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<v Speaker 1>in which case we'll have an even bigger recession later,

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<v Speaker 1>or some set of events involving monetary policy and involving

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<v Speaker 1>what happens in the real economy are going to force

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<v Speaker 1>a hard landing. I'm much more agnostic on how high

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<v Speaker 1>interest rates are going to have to go to generate

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<v Speaker 1>a hard landing and disinflation. Then I am on the

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<v Speaker 1>likelihood that at the end of the day we're gonna

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<v Speaker 1>see a fairly hard land Just to dig in a

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<v Speaker 1>little bit in terms of what you think the mechanism

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<v Speaker 1>is going to be that will bring the US into

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<v Speaker 1>a recession, I mean, we we know, and in fact

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<v Speaker 1>was part of your argument that the stimulus that was

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<v Speaker 1>so large a year ago in the US, it left

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<v Speaker 1>household excess savings quite high, certainly by historical standards, even

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<v Speaker 1>in the lower half of the income distribution UM Debt

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<v Speaker 1>service from households is now at a forty year low.

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<v Speaker 1>They are looking they're coming into this with quite a

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<v Speaker 1>strong position, even with the inflation that we're seeing. So so,

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<v Speaker 1>what is the mechanism that's going to bring the US

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<v Speaker 1>into a recession? I think the two two classes of

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<v Speaker 1>mechanisms that are operative, and which one is going to

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<v Speaker 1>get their first and their relative timing is something where

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<v Speaker 1>I don't have a confident judgment. One class of mechanisms

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<v Speaker 1>is monetary policy. I think monetary policy is going to

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<v Speaker 1>have to keep going until we see disinflation, and we're

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<v Speaker 1>not going to see disinflation back towards the target range

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<v Speaker 1>until we see unemployment rise meaningfully. That's one source of

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<v Speaker 1>uncertainty monetary policy doing what it has to do. The

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<v Speaker 1>other is the countervailing mechanisms to what you described, the

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<v Speaker 1>fact that inflation has eroded real incomes and the value

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<v Speaker 1>of savings, the fact that there's significant fragility in financial markets,

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<v Speaker 1>the fact that mortgage rates have drought have risen by

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<v Speaker 1>two hundred basis points in UH the last four months,

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<v Speaker 1>and we're seeing for the first time in many years

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<v Speaker 1>that lots of people are starting the mortgage process and

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<v Speaker 1>not finishing the mortgage process. We're seeing evidence in certain

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<v Speaker 1>sectors of significantly reduced traffic. So I think it's hard

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<v Speaker 1>to know when, when, and to what extent the economy

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<v Speaker 1>is going to turn over itself, and to what extent

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<v Speaker 1>it is going to be induced by monetary policy. But

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<v Speaker 1>I think the judgment it's hard to escape is that

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<v Speaker 1>inflation is not going to get near reasonable levels if

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<v Speaker 1>the economy doesn't at least substantially slow. You talk about

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<v Speaker 1>potentially the need or necessity of unemployment to go up.

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<v Speaker 1>Some of your critics would say, we've got to an

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<v Speaker 1>amazing point in the US economy in which US workers

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<v Speaker 1>have been on the back foot for so long that

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<v Speaker 1>you have the unemployment rate that there's previously unheard of

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<v Speaker 1>three point six percent. We've got reported in Indiana where

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<v Speaker 1>there's less than one unemployment and workers in those places

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<v Speaker 1>have a position of power that they haven't had in

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<v Speaker 1>many years. What is wrong with having produced that situation? Look, Stephanie,

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<v Speaker 1>it's a it's a hugely important question. The first academic

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<v Speaker 1>work I did was on how important hype high pressure

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<v Speaker 1>labor markets were for the disadvantage. I showed what was

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<v Speaker 1>novel at that moment, that a one percent increase in

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<v Speaker 1>the employment ratio for white men was associated with a

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<v Speaker 1>six percent increase in the employment ratio for African American teenagers.

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<v Speaker 1>So I yield to no one in my belief in

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<v Speaker 1>the importance of helping the disadvantaged and in recognizing that

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<v Speaker 1>tight labor markets do benefit uh those who are action

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<v Speaker 1>lee left behind. But the three problems. The first is

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<v Speaker 1>that overall this higher inflation has gone with falling, not

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<v Speaker 1>increasing real wages. You know, if you look at a

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<v Speaker 1>graph of the nominal wage growth in the United States

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<v Speaker 1>on one axis, and real wage growth growth and purchasing

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<v Speaker 1>power on the other axis, it looks like a turned

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<v Speaker 1>over parabola. Living standards grow most rapidly with wages arising

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<v Speaker 1>at four percent, and then they fall off as you

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<v Speaker 1>start to see wage growth at five, six, seven, eight percent.

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<v Speaker 1>So the first thing to say is that what we're

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<v Speaker 1>doing is uh we're having lower real wage growth for

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<v Speaker 1>the vast majority of the populations and consequences. The second

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<v Speaker 1>is the core lesson we have learned is that there's

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<v Speaker 1>not a stable trade off between unemployment and inflation. There's

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<v Speaker 1>a stable trade off between unemployment and the acceleration of inflation.

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<v Speaker 1>And if we run an overheated economy, it's not that

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<v Speaker 1>we'll have to live with four percent inflation forever. It's

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<v Speaker 1>that will live with steadily rising inflation and set up

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<v Speaker 1>at ever greater price that we have to pay. Prudent

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<v Speaker 1>policy makers don't just pay attention to the current moment.

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<v Speaker 1>They pay attention to what happens over the longer term.

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<v Speaker 1>And the consequence of overheating is that it has to

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<v Speaker 1>be followed by something that ultimately stabilizes things. And the

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<v Speaker 1>history is that if you look at the overall path,

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<v Speaker 1>the poor are worse off once you go through that

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<v Speaker 1>whole process, then they would have been if you kept

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<v Speaker 1>things stay bole all along. That's why the fed's new

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<v Speaker 1>woke rhetoric in was so dangerously misguided. And I fear

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<v Speaker 1>that down the road, the people who they were most

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<v Speaker 1>concerned to help with that rhetoric are going to be

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<v Speaker 1>the victims if, as I expect, we have some kind

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<v Speaker 1>of hard landing. Even that you've started by saying you

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<v Speaker 1>think that's the most likely scenario and that you want

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<v Speaker 1>the FED to be looking down the track, I guess

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<v Speaker 1>the other inevitable question is how do you think they

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<v Speaker 1>should be responding to a recession. I think the FED

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<v Speaker 1>has to stay focused on bringing down the inflation rate

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<v Speaker 1>and bringing down the expected inflation rate. I don't think

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<v Speaker 1>there is any alternative that doesn't set a stage for

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<v Speaker 1>greater pain. We can have an argument about two versus

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<v Speaker 1>some number a bit greater UH than UH two, But

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<v Speaker 1>I think we need to recognize the think about this,

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<v Speaker 1>frankly in the old fashioned way, which is less in

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<v Speaker 1>terms of numerical targets, and that is price stability is

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<v Speaker 1>when people aren't talking all the time and focused on

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<v Speaker 1>the overall changes in the price level. By that definition,

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<v Speaker 1>we had about thirty five years of price stability between

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<v Speaker 1>the mid eighties and and by that definition, we have

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<v Speaker 1>lost price stability in the United States. UH. Inflation is

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<v Speaker 1>now the number one economic issue. It's driving vast erosion

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<v Speaker 1>in confidence in government, and the FED has to do

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<v Speaker 1>what's necessary to restore a sense of price stability. I

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<v Speaker 1>can't say exactly what that means in numerical terms, but

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<v Speaker 1>I know that we are well away from it UH

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<v Speaker 1>now in the judgment of the American UH people, I

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<v Speaker 1>think that's what's going to be necessary. UH. In terms

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<v Speaker 1>of UH monetary policy, I welcome the particularly the most

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<v Speaker 1>recent speech of Chairman Powell, which I think UH moved

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<v Speaker 1>a long way towards being in the right place. I'd

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<v Speaker 1>like to see the FED signal a commitment to raise

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<v Speaker 1>interest rates until real rates are clearly positive, or until

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<v Speaker 1>it's clear that price to reality has been restored. And

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<v Speaker 1>I think they've moved a long way in that direction.

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<v Speaker 1>That's good of late, but I think they've got UH

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<v Speaker 1>some distance to go before they achieve it. It has

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<v Speaker 1>become an extraordinarily salient issue politically inflation. I mean President

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<v Speaker 1>Biden did in his State of the Union he had

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<v Speaker 1>said this is going to be his number one goal

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<v Speaker 1>or one one of his primary objectives in the next

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<v Speaker 1>year and beyond bringing down inflation. And I think some

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<v Speaker 1>of us were left sort of scratching our heads, thinking,

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<v Speaker 1>we'll hang on, what can the administration do? Since it's

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<v Speaker 1>the FED job to be reducing inflation? What can the

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<v Speaker 1>administration do to reduce inflation? Look the net effect of

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<v Speaker 1>the things the administration talks about in terms of micro

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<v Speaker 1>policies to reduce inflation, this gouging talk is frivolous, non serious,

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<v Speaker 1>and utterly ineffectual. A guest price holiday would ultimately push

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<v Speaker 1>up prices uh by raising demand. The student loan relief

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<v Speaker 1>yesterday is injecting resources into the economy at a hundred

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<v Speaker 1>billion dollar a year annual rate when the economy needs

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<v Speaker 1>to be cooled off uh not uh heated up. The

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<v Speaker 1>administration could be much more constructive than it has been

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<v Speaker 1>with respect to energy supply. So I don't think the

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<v Speaker 1>administrations by America policies operate in the direction of raising prices,

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<v Speaker 1>as do various policies they pursue to raise small business.

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<v Speaker 1>So the micro economic policies of the administration are have

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<v Speaker 1>been a wash with respect to inflation at best, what

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<v Speaker 1>could they do? UH? The Peterson Institute just released a

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<v Speaker 1>study that I helped instigate and discussed. It's on their

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<v Speaker 1>website that estimates that a realistic program of trade liberalization

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<v Speaker 1>could take one point three off the cp I. Their

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<v Speaker 1>scope for regulates for UH policies to increase immigration that

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<v Speaker 1>we take substantial pressures off the labor market. But the

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<v Speaker 1>approaches UH that would work, our approaches that would emphasize

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<v Speaker 1>UM increasing the level of competition for American producers, not

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<v Speaker 1>seeking to protect American producers. That's the that's the element

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<v Speaker 1>U of micro economic policy that has a prospect for success.

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<v Speaker 1>And I fear that the more popular themes around corporate

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<v Speaker 1>gouging and the like are simply diversionary. The FED had

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<v Speaker 1>one job. It is monumentally failed on that job on

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<v Speaker 1>a consistent way for the last year and potentially into

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<v Speaker 1>the future with this strategy. If a fund made manager

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<v Speaker 1>made that kind of bad call for such a long time,

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<v Speaker 1>there would be pretty concrete consequences. If an elected politician

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<v Speaker 1>made that kind of mistake, they would almost certainly be consequences.

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<v Speaker 1>Do you do you think there should be greater accountability

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<v Speaker 1>for this particular failure and potentially for the forecasting system

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<v Speaker 1>that produced it, but even potentially individuals. I I think

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<v Speaker 1>the FED should be much more visibly acknowledging that it's

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<v Speaker 1>been wrong and seeking to understand and learn from its

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<v Speaker 1>errors than have been UH the case. And I think

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<v Speaker 1>the failure for there to be some institutional review, you know,

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<v Speaker 1>after bad battles, armies have after action reviews. The I

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<v Speaker 1>m F has blundered in various situations, and there have

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<v Speaker 1>been very thoughtful reviews of what in its culture and

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<v Speaker 1>what in its mode led to those errors, and I

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<v Speaker 1>think the FED should be engaged in more of that.

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<v Speaker 1>I think, in fairness to the FED UM, the views

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<v Speaker 1>they were expressing were relatively close two UH consensus views,

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<v Speaker 1>not frankly this last fall, when I think they were

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<v Speaker 1>behind the consensus and still sticking with their views, But

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<v Speaker 1>for much of last year their views were tracking consensus views.

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<v Speaker 1>And so I think the soul searching is less about

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<v Speaker 1>accountable individuals at the FED, and then about how those

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<v Speaker 1>consensus views UH were formed. And I guess I have

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<v Speaker 1>been struck by a certain UH blitheness with which some

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<v Speaker 1>of my UH friends in the economics community have kind

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<v Speaker 1>of pivoted two addressing the current moment without thinking about

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<v Speaker 1>what led them to be wrong in the past. Okay,

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<v Speaker 1>let's let's um, let's get onto Ukraine, Russia and the

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<v Speaker 1>fallout from the crisis. You were a senior Treasury official

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<v Speaker 1>throughout those two Clinton administrations in the nineties, which were

0:18:23.280 --> 0:18:26.159
<v Speaker 1>really kind of trying to think through after the end

0:18:26.200 --> 0:18:28.120
<v Speaker 1>of the Cold War, how Russia was going to fit

0:18:28.200 --> 0:18:33.040
<v Speaker 1>into the international economic system, decisions around whether it should

0:18:33.119 --> 0:18:36.000
<v Speaker 1>join the G seven, all of those things. Should we

0:18:36.040 --> 0:18:39.800
<v Speaker 1>be doing more to hurt Russia economically? Now? What what's

0:18:39.840 --> 0:18:43.879
<v Speaker 1>your take on the kind of coordinated sanctions that have

0:18:44.119 --> 0:18:46.040
<v Speaker 1>that have been achieved and the other actions that have

0:18:46.080 --> 0:18:53.040
<v Speaker 1>been taken. I think by the standards of history and tradition,

0:18:53.680 --> 0:18:56.879
<v Speaker 1>we've done a great deal. By the standards of the

0:18:56.920 --> 0:19:01.400
<v Speaker 1>magnitude of the problem, there's a lot more to do.

0:19:02.880 --> 0:19:08.320
<v Speaker 1>Understand this. The ruble is now trading at the same

0:19:08.359 --> 0:19:14.360
<v Speaker 1>exchange rate that it was before the war started. Russian

0:19:14.440 --> 0:19:22.920
<v Speaker 1>banks are not experiencing runs every day. Russia is getting

0:19:23.880 --> 0:19:29.080
<v Speaker 1>revenues from the export of its energy products that are

0:19:29.200 --> 0:19:35.120
<v Speaker 1>comparable to or greater than they were receiving before the war.

0:19:36.119 --> 0:19:44.000
<v Speaker 1>Because of increased energy prices, the limitation on the sale

0:19:44.080 --> 0:19:50.040
<v Speaker 1>of goods to Russia has not been nearly as comprehensive

0:19:50.960 --> 0:19:59.439
<v Speaker 1>as was imposed on Iran at earlier UH moments. The

0:19:59.520 --> 0:20:05.919
<v Speaker 1>truth is that, in a sense, and I strongly support this,

0:20:07.119 --> 0:20:15.680
<v Speaker 1>using economic tools is trying to fight a war without

0:20:17.440 --> 0:20:23.000
<v Speaker 1>costs and blood. That is the right thing, But in

0:20:23.119 --> 0:20:27.240
<v Speaker 1>important respects, we've been trying to fight an economic war

0:20:28.160 --> 0:20:35.520
<v Speaker 1>without costs two households from the first moment when the

0:20:35.560 --> 0:20:41.560
<v Speaker 1>sanctions were introduced, and as it was explained that simultaneously

0:20:41.640 --> 0:20:43.720
<v Speaker 1>we're gonna be doing everything we could to keep guest

0:20:43.800 --> 0:20:48.760
<v Speaker 1>prices under control, I have felt that there was a

0:20:48.800 --> 0:20:55.880
<v Speaker 1>moral failure. And if this is a unique and extraordinary

0:20:56.520 --> 0:21:03.159
<v Speaker 1>worst threat in seventy years of naked aggression, then we

0:21:03.240 --> 0:21:07.800
<v Speaker 1>need to be prepared to make sacrifices at the level

0:21:08.119 --> 0:21:16.560
<v Speaker 1>of accepting higher energy prices, wearing sweaters on days with

0:21:16.920 --> 0:21:23.119
<v Speaker 1>cool weather being a little hotter when UH we can't

0:21:23.280 --> 0:21:30.320
<v Speaker 1>run air conditioners as strongly as we did before, sacrificing

0:21:30.920 --> 0:21:40.639
<v Speaker 1>luxury exports UH to UH Russia, and sacrificing mercantile UH

0:21:40.920 --> 0:21:47.040
<v Speaker 1>commercial UH interests. I do not believe that enough has

0:21:47.080 --> 0:21:53.320
<v Speaker 1>been done. I believe that much more needs to be done.

0:21:53.920 --> 0:21:56.800
<v Speaker 1>I was glad to see the step that was taken

0:21:57.320 --> 0:22:00.879
<v Speaker 1>to stop the Russians from using their froe and reserves

0:22:01.119 --> 0:22:04.960
<v Speaker 1>to pay debt, but in a way, it was an

0:22:04.960 --> 0:22:09.360
<v Speaker 1>extraordinary and remarkable thing that for the six previous weeks

0:22:09.840 --> 0:22:13.840
<v Speaker 1>they had been allowed to use their frozen reserves to

0:22:14.040 --> 0:22:20.640
<v Speaker 1>prevent them UH from doing it. So I think that

0:22:21.040 --> 0:22:27.640
<v Speaker 1>we have a long way to go in raising the

0:22:27.680 --> 0:22:34.040
<v Speaker 1>pressure that we impose on sanctions, and frankly, I would

0:22:34.080 --> 0:22:43.400
<v Speaker 1>prefer less rhetoric about the war criminality of what's going on,

0:22:44.119 --> 0:22:48.600
<v Speaker 1>which it seems to me does not bring pressure to

0:22:49.440 --> 0:22:56.919
<v Speaker 1>produce peace, if anything, slightly the opposite, by meaning that

0:22:57.080 --> 0:23:03.280
<v Speaker 1>there's no exit strategy from this, less emphasis on that rhetoric,

0:23:04.000 --> 0:23:11.640
<v Speaker 1>and much more emphasis on the imposition of UH economic

0:23:12.680 --> 0:23:17.480
<v Speaker 1>pain we saw in the United States in two thousand

0:23:17.480 --> 0:23:24.000
<v Speaker 1>and eight. What cascading lack of confidence in finance can

0:23:24.080 --> 0:23:31.560
<v Speaker 1>do to destroy the performance of an economy. It's extraordinarily

0:23:31.640 --> 0:23:36.200
<v Speaker 1>counterintuitive for any financial person, but I think we need

0:23:36.240 --> 0:23:43.280
<v Speaker 1>to engage exactly those forces as forces of destruction with

0:23:43.320 --> 0:23:48.840
<v Speaker 1>respect to the Russian economy right now. Recognizing that that

0:23:49.000 --> 0:23:54.440
<v Speaker 1>may have some collateral implications for some few financial institutions

0:23:54.440 --> 0:23:58.440
<v Speaker 1>in the West and being provided being prepared to provide

0:23:58.960 --> 0:24:03.560
<v Speaker 1>the necessary UH kind of support. But I don't think

0:24:03.640 --> 0:24:09.040
<v Speaker 1>we have yet stepped up fully in terms of engaging

0:24:09.080 --> 0:24:14.800
<v Speaker 1>the tools of UH financial warfare. That's how I see

0:24:14.840 --> 0:24:19.240
<v Speaker 1>it from UH the outside. But what I have is

0:24:19.400 --> 0:24:24.520
<v Speaker 1>an outsider's view, and I've been an insider, and I

0:24:24.600 --> 0:24:31.440
<v Speaker 1>have seen outsiders with naive views making it sound simpler

0:24:31.480 --> 0:24:34.640
<v Speaker 1>than it is. And in fairness to those who are

0:24:34.640 --> 0:24:37.919
<v Speaker 1>making the decisions, it may be that there are a

0:24:37.920 --> 0:24:41.720
<v Speaker 1>whole set of collateral costs that they have thought through

0:24:42.680 --> 0:24:47.640
<v Speaker 1>very carefully. But my instinct is that there's a good

0:24:47.680 --> 0:24:50.840
<v Speaker 1>deal more that could be done, and I'd like to

0:24:50.920 --> 0:24:57.360
<v Speaker 1>see some long queues outside some Russian financial institutions. I'd

0:24:57.440 --> 0:25:01.520
<v Speaker 1>like to see some Russian defaults followed by the seizures

0:25:01.560 --> 0:25:05.720
<v Speaker 1>of key Russian assets, and I'd like to see the

0:25:05.800 --> 0:25:12.320
<v Speaker 1>ruble in free fall as part of judging the efficacy

0:25:12.440 --> 0:25:22.000
<v Speaker 1>of a sactions program. You know, one of the other

0:25:22.000 --> 0:25:25.480
<v Speaker 1>things that happened UM and that your watch the Treasury

0:25:25.520 --> 0:25:27.639
<v Speaker 1>when we're working together in the late ninety nineties was

0:25:27.720 --> 0:25:31.640
<v Speaker 1>the beginnings of the g twenty, which was pretty evident

0:25:32.040 --> 0:25:35.040
<v Speaker 1>in the global financial crisis in the global response to that,

0:25:35.359 --> 0:25:39.240
<v Speaker 1>but has been pretty absent in recent years, and certainly

0:25:39.600 --> 0:25:45.320
<v Speaker 1>in response to this crisis, or indeed the inflation crisis

0:25:45.680 --> 0:25:48.480
<v Speaker 1>that's now and cost of living crunch that's coming for

0:25:48.520 --> 0:25:51.720
<v Speaker 1>so many countries. Um, I wonder, do you think it's

0:25:51.760 --> 0:25:54.600
<v Speaker 1>the end of the G twenty. Look, I think the

0:25:54.680 --> 0:25:58.560
<v Speaker 1>G twenty had a premise. The premise of the G

0:25:58.720 --> 0:26:03.600
<v Speaker 1>twenty was that all countries wanted all other countries to

0:26:03.720 --> 0:26:09.159
<v Speaker 1>do better, that we all gained from a more open,

0:26:09.280 --> 0:26:13.639
<v Speaker 1>more rapidly growing economy, That the United States wanted China

0:26:13.720 --> 0:26:17.760
<v Speaker 1>to grow faster, that China wanted the US to grow faster,

0:26:18.640 --> 0:26:22.760
<v Speaker 1>That we all wanted to solve global problems together. And

0:26:22.840 --> 0:26:27.359
<v Speaker 1>that was the premise of the G twenty. And that

0:26:27.520 --> 0:26:32.480
<v Speaker 1>was basically true in the two thousand and eight financial crisis.

0:26:33.080 --> 0:26:37.119
<v Speaker 1>Everybody wanted the crisis to be successfully weathered and the

0:26:37.160 --> 0:26:45.040
<v Speaker 1>global economy to grow again. That is in very profound

0:26:45.200 --> 0:26:51.320
<v Speaker 1>questions today. Self Evidently, it is not the objective of

0:26:51.400 --> 0:26:53.359
<v Speaker 1>the other member, most of the other members of the

0:26:53.400 --> 0:26:59.080
<v Speaker 1>G twenty to support Russia's economic flourishing. It is a

0:26:59.160 --> 0:27:06.520
<v Speaker 1>substantial question whether we are hoping for the success of

0:27:06.560 --> 0:27:10.639
<v Speaker 1>the Chinese economy and whether China is hoping for the

0:27:10.760 --> 0:27:16.119
<v Speaker 1>success of our of our economy. So the premise of

0:27:16.160 --> 0:27:23.119
<v Speaker 1>the G twenty, which was a forum for devising means

0:27:23.160 --> 0:27:31.160
<v Speaker 1>to shared ends, is much less evidently true today. And

0:27:31.240 --> 0:27:35.679
<v Speaker 1>before one talks about what you should convene a G

0:27:35.840 --> 0:27:39.320
<v Speaker 1>twenty meeting to do and what kind of statement G

0:27:39.480 --> 0:27:43.560
<v Speaker 1>twenty should make, it seems to me one has to

0:27:43.640 --> 0:27:51.280
<v Speaker 1>get straight these questions about which communities have which shared ends.

0:27:51.880 --> 0:27:57.960
<v Speaker 1>Right now, I perceive a bit of a vacuum in

0:27:58.760 --> 0:28:03.679
<v Speaker 1>clear thinking on the is with some traditionalists wanting to

0:28:03.760 --> 0:28:05.639
<v Speaker 1>just kind of keep going with the G twenty and

0:28:05.720 --> 0:28:12.040
<v Speaker 1>have do stuff, and others have what seemed to me

0:28:12.200 --> 0:28:16.240
<v Speaker 1>to be rather naive given the world we live in,

0:28:17.000 --> 0:28:22.240
<v Speaker 1>conceptions of communities of democracy, which it seems to me

0:28:22.400 --> 0:28:27.439
<v Speaker 1>do so much to exclude so many major stakeholders in

0:28:28.160 --> 0:28:32.080
<v Speaker 1>the economic system that there's a real question as to

0:28:32.119 --> 0:28:35.960
<v Speaker 1>whether they can be meaningfully affective. So I think we

0:28:36.480 --> 0:28:46.000
<v Speaker 1>need some serious reflection on the mechanisms of international fora

0:28:46.200 --> 0:28:49.320
<v Speaker 1>and consultation. I don't know that we're in the right

0:28:49.520 --> 0:28:54.719
<v Speaker 1>place right now, but I think it takes a kind

0:28:54.800 --> 0:29:04.560
<v Speaker 1>of realism that balances sort of two cliches. Uh one,

0:29:05.000 --> 0:29:10.400
<v Speaker 1>some sharing of ends is a prerequisite to successful cooperation,

0:29:11.360 --> 0:29:14.720
<v Speaker 1>and the other is you don't make peace with your friends,

0:29:15.320 --> 0:29:19.560
<v Speaker 1>you make peace with your potential adversaries. And so I

0:29:19.640 --> 0:29:23.560
<v Speaker 1>suspect we need to use the European term some kind

0:29:23.600 --> 0:29:28.320
<v Speaker 1>of variable architecture, in which there are some faora where

0:29:28.400 --> 0:29:32.520
<v Speaker 1>there's more in common among the participants but less reach,

0:29:33.320 --> 0:29:39.000
<v Speaker 1>and other foura in which there is less in common

0:29:40.040 --> 0:29:46.920
<v Speaker 1>among the participants but more uh reach. Anyone who thinks

0:29:47.000 --> 0:29:52.040
<v Speaker 1>that these descriptions and that these kinds of issues and

0:29:52.760 --> 0:29:57.000
<v Speaker 1>this is a place where I've gone from naive and

0:29:57.600 --> 0:30:02.360
<v Speaker 1>stupid to less naive and stupid. I used to think

0:30:02.400 --> 0:30:07.160
<v Speaker 1>that serious people discuss serious things, and diplomats discussed the

0:30:07.200 --> 0:30:11.080
<v Speaker 1>shape of tables. And I think I've now come to

0:30:11.160 --> 0:30:15.640
<v Speaker 1>realize how important the shape and composition of groups could be.

0:30:16.480 --> 0:30:20.800
<v Speaker 1>And anyone who doubted that proposition needs to consider how

0:30:20.880 --> 0:30:25.640
<v Speaker 1>consequential the rather loose statements that were made about allowing

0:30:26.440 --> 0:30:31.280
<v Speaker 1>Ukraine into NATO UM proved to be in terms of

0:30:31.320 --> 0:30:36.120
<v Speaker 1>what they set off. Larry Thomas, thanks very much for

0:30:36.320 --> 0:30:39.640
<v Speaker 1>an excellent exchange on issues that I may will be

0:30:39.720 --> 0:30:46.680
<v Speaker 1>of great interest to all the people listening in. Thank you, Stephanie.

0:30:48.720 --> 0:30:51.680
<v Speaker 1>Well that's it for this episode. Thanks for listening. We'll

0:30:51.720 --> 0:30:53.560
<v Speaker 1>have more from around the world next week and in

0:30:53.560 --> 0:30:56.120
<v Speaker 1>the meantime, remember you can always find us on the

0:30:56.120 --> 0:30:59.800
<v Speaker 1>Bloomberg Terminal, website, app or wherever you get your podcasts,

0:31:00.080 --> 0:31:03.480
<v Speaker 1>and for more news and analysis from Bloomberg Economics, follow

0:31:03.560 --> 0:31:07.680
<v Speaker 1>our Economics on Twitter. This episode was produced by Magnus Henrickson,

0:31:07.960 --> 0:31:11.200
<v Speaker 1>with special thanks to Sommer Sadi, Larry Summers, and the

0:31:11.240 --> 0:31:14.760
<v Speaker 1>Council on Foreign Relations in New York. Mike Sasso is

0:31:14.760 --> 0:31:17.760
<v Speaker 1>the executive producer of Stephanomics and the head of Bloomberg

0:31:17.840 --> 0:31:31.800
<v Speaker 1>Podcast is Francesca Levy m