WEBVTT - A Nobelist on the Future of Work 0:00:03.560 --> 0:00:06.280 Hello, and welcome to Stephanomics, the podcast that brings the 0:00:06.280 --> 0:00:15.360 global economy to you. Well, we're doing something different this 0:00:15.400 --> 0:00:18.079 week because I'm sitting here in the Bloomberg offices in 0:00:18.160 --> 0:00:21.799 London in the presence of greatness the Nobel Prize winning 0:00:21.800 --> 0:00:26.000 economists Christopher Pisides, who's the regious Professor of Economics at 0:00:26.000 --> 0:00:28.840 London School of Economics and the joint winner of the 0:00:28.880 --> 0:00:32.800 Nobel Prize for Economics in twenty eleven for his work 0:00:32.880 --> 0:00:37.360 on labor markets and a theory of unemployment. Now, Stephonomics, 0:00:37.360 --> 0:00:39.560 we do have to pay some attention to the daily news, 0:00:39.640 --> 0:00:41.080 and I'm going to have a chat later with one 0:00:41.120 --> 0:00:44.199 of our reporters on the latest developments in Donald Trump's 0:00:44.240 --> 0:00:47.720 trade wars. But first I get to ask Professor Pister 0:00:47.800 --> 0:00:49.920 reid Is what he thinks about the state of the world, 0:00:50.120 --> 0:00:53.160 the state of economics, and pretty much anything else I want. 0:00:53.280 --> 0:00:56.720 So Professor of Pisides, Chris, welcome, Thank you very much, 0:00:56.760 --> 0:00:59.560 and thank you for those kind of works. Well we 0:01:00.000 --> 0:01:02.080 know that you justify them. Look, there are lots of 0:01:02.080 --> 0:01:04.000 things I'd like to talk to you about, but maybe 0:01:04.120 --> 0:01:07.600 start with the most recent research that I've seen from you, 0:01:07.760 --> 0:01:11.520 which has been about this hot topic of automation and 0:01:11.560 --> 0:01:14.840 the impact of technology on all of our lives, and 0:01:15.080 --> 0:01:17.200 a lot of people focus on the fear of lost 0:01:17.280 --> 0:01:20.560 jobs from technology. But I was interested to see that 0:01:20.640 --> 0:01:24.840 you took a broader approach which in some ways made 0:01:24.840 --> 0:01:27.600 it should make us feel better about the impact of technology, 0:01:27.640 --> 0:01:30.880 because you were asking how it's improved our welfare in 0:01:30.880 --> 0:01:33.560 ways beyond GDP. Can you can you tell us a 0:01:33.560 --> 0:01:35.800 bit about that? Yes, I mean, I think we should 0:01:35.840 --> 0:01:40.200 broaden our concept of well being and even growth, that 0:01:40.240 --> 0:01:42.800 we're looking at the quality of life, what we do 0:01:42.920 --> 0:01:45.520 to the environment, to how much leisure time we get, 0:01:45.560 --> 0:01:48.440 the quality of service as we get, how we spend 0:01:48.440 --> 0:01:52.240 our free time, and especially how we deal with poverty 0:01:52.400 --> 0:01:55.040 and finding ways to improve what these things could really 0:01:55.080 --> 0:01:58.120 make a difference to our society at whole. And I 0:01:58.160 --> 0:02:01.400 was struck that you mentioned in the paper that actually 0:02:01.880 --> 0:02:04.360 could make Europeans feel a bit better about themselves, because 0:02:04.360 --> 0:02:09.000 actually you were suggesting that overall welfare had actually grown 0:02:09.160 --> 0:02:12.840 faster in Europe at least until until the last few years, 0:02:12.880 --> 0:02:15.560 because they were sort of taking more advantage of technology, 0:02:15.600 --> 0:02:17.440 at least when it comes to having more leisure time 0:02:17.919 --> 0:02:21.080 where they are. That's what you find in the statistics 0:02:21.120 --> 0:02:24.639 when you look at it. The countries in the O 0:02:24.880 --> 0:02:28.520 c D, you know, the club of wealthy nations basically 0:02:28.639 --> 0:02:32.760 that work the least number of hours through the year 0:02:32.800 --> 0:02:35.880 a German in the Netherlands, the countries that have the 0:02:36.000 --> 0:02:39.600 highest stants of living And that's because they take longer 0:02:39.680 --> 0:02:43.040 AnGR breaks as which means that you have more time 0:02:43.080 --> 0:02:48.240 to enjoy life. You don't just work four seven and 0:02:48.280 --> 0:02:49.720 then at the end you say, oh, look how much 0:02:49.760 --> 0:02:53.120 money I made. Um. The other thing that makes you 0:02:53.160 --> 0:02:56.520 feel a little bit better about what better about Europe 0:02:56.560 --> 0:03:00.120 is that I think we do have better policy is 0:03:00.160 --> 0:03:07.960 about about the environment, and about protection of privacy, human rights, 0:03:09.480 --> 0:03:15.760 competition policy. So in general, the prospects on these on 0:03:15.840 --> 0:03:19.480 these dimensions are good in Europe. And that's why I'm 0:03:19.520 --> 0:03:22.360 not too worried that our rates of growth and are 0:03:22.400 --> 0:03:25.839 productively they are not matching those of China, even those 0:03:25.840 --> 0:03:28.400 of the United States, you know, I mean, it's interesting. 0:03:28.440 --> 0:03:30.280 I suspect a couple of the things that you said 0:03:30.320 --> 0:03:32.000 will go down very well with a lot of listeners, 0:03:32.040 --> 0:03:34.240 because one of the things people often say to me 0:03:34.320 --> 0:03:37.200 is why do you just focus on GDP, we should 0:03:37.240 --> 0:03:41.640 have broader measures and to have your research kind of 0:03:41.760 --> 0:03:44.920 take that on board in a really explicit way, particularly 0:03:44.960 --> 0:03:47.520 in this paper I think people will like. Of course, 0:03:47.520 --> 0:03:50.400 the other thing that plays certainly to European sense of 0:03:50.920 --> 0:03:54.640 UM sort of superiority, should we say, against some other 0:03:54.960 --> 0:03:57.320 models and maybe even the Americans, is that we like 0:03:57.440 --> 0:04:00.720 to feel like we have higher quality lives UM and 0:04:00.760 --> 0:04:03.000 you're kind of finding that in the data, but only 0:04:03.360 --> 0:04:07.280 I mean looking ahead, thinking about the big trends coming 0:04:07.280 --> 0:04:11.960 down the track for Europe of everybody else, automation but 0:04:12.080 --> 0:04:14.560 also demographic change, all the things that we talk about 0:04:14.560 --> 0:04:17.839 all the time. Do you think Europe is actually better 0:04:17.960 --> 0:04:21.440 placed to respond to those because of their history of 0:04:22.400 --> 0:04:26.400 government intervention and social contract And I think that's what 0:04:26.480 --> 0:04:28.760 Americans might find a little bit hard to swallow, that 0:04:28.839 --> 0:04:31.360 Europe is actually in a better place. I do think 0:04:31.360 --> 0:04:35.760 we're not doing enough as yet to embracing new technology 0:04:35.800 --> 0:04:39.280 and especially to protect UM workers who are going to 0:04:39.320 --> 0:04:43.000 lose their jobs in the sense of helping them through 0:04:43.080 --> 0:04:46.600 government to get the to move to the new sectors 0:04:46.600 --> 0:04:51.240 to get the new jobs. UM countries like Sweden, Denmark, 0:04:51.600 --> 0:04:54.839 the other analoagues are doing more than the rest. German 0:04:54.960 --> 0:04:57.720 is doing quite a lot. We need to broaden this 0:04:57.839 --> 0:05:02.120 out throughout Europe lot more. But we are doing much 0:05:02.200 --> 0:05:08.240 more than than the United States. And like very rightly 0:05:08.240 --> 0:05:10.919 you said, it's because we have a tradition with the 0:05:10.960 --> 0:05:14.679 government helping the market. If we live the market alone, 0:05:14.720 --> 0:05:19.040 it's going to give outcomes that they have many undesirables in. 0:05:19.120 --> 0:05:21.320 It is going to give us more equality that we 0:05:21.480 --> 0:05:24.720 like to take. It's going to give us more poverty, um, 0:05:24.720 --> 0:05:28.760 probably more unemployment contributing that probably in the sense of 0:05:28.800 --> 0:05:31.640 moving in ow the jobs at much faster rates than 0:05:31.680 --> 0:05:34.760 if you have a good sort of support network that 0:05:34.839 --> 0:05:38.800 helps work as retrain look for jobs that there will 0:05:38.880 --> 0:05:43.279 match too. And and we are moving in that direction. 0:05:43.520 --> 0:05:46.640 You know, I hear many encouraging sounds coming out of 0:05:47.960 --> 0:05:52.279 politicians and institutions. There still a lot to do, especially 0:05:52.320 --> 0:05:57.000 on longer term things like reform utucational system. Um. But 0:05:57.480 --> 0:05:59.359 we're on the right track. I mean, I think a 0:05:59.360 --> 0:06:02.680 lot of America because might listen to you. Certainly critics 0:06:02.720 --> 0:06:06.040 of Europeans would list of the European approach. We'll listen 0:06:06.040 --> 0:06:08.440 to this and say it's hopelessly complacent because if you 0:06:08.440 --> 0:06:12.240 look at you can't entirely ignore GDP. And if you 0:06:12.240 --> 0:06:14.480 look at Europe's growth rate, and if you look at 0:06:14.520 --> 0:06:18.640 the dynamism of their industries relative to the US leadership 0:06:18.640 --> 0:06:22.280 of some of these key sectors lacking um, they would say, 0:06:22.279 --> 0:06:24.000 it's all very well, You've got a nice social contract 0:06:24.040 --> 0:06:25.839 and it's going to take you right to the graveyard, 0:06:26.040 --> 0:06:27.960 or at least to it turn you into a sort 0:06:27.960 --> 0:06:32.080 of museum as the global economy moves forward. How would 0:06:32.120 --> 0:06:34.359 you respond to that? I mean growth doesn't matter. I 0:06:34.360 --> 0:06:38.599 mean growth matters. I'm not saying that ignore GDP. Well, 0:06:38.640 --> 0:06:41.760 I don't know. I mean I go to China frequently, 0:06:41.800 --> 0:06:45.080 and I tell the walks in there, amazing shopping malls. 0:06:45.120 --> 0:06:47.640 I see a lot more European names there than American, 0:06:47.720 --> 0:06:49.560 I can tell you. In fact, you can hardly find 0:06:49.560 --> 0:06:54.000 an American names there. It's completely European. Go into any 0:06:54.320 --> 0:06:56.840 grow in the in the streets, you know, when you've 0:06:57.120 --> 0:06:58.800 sent you a car to pick your up, it's always 0:06:58.800 --> 0:07:02.960 the European cars. America. And going to people's homes, washing 0:07:03.000 --> 0:07:07.440 machines and vacuum community and that they use nine other 0:07:07.520 --> 0:07:15.440 things European. All right, Well, so we're sticking with the 0:07:15.520 --> 0:07:17.920 kind of what would be considered considered to be the 0:07:17.960 --> 0:07:23.600 slightly smug European approach. But that's fine. We you talk 0:07:23.640 --> 0:07:29.200 about needing to have political responses and interventions to make 0:07:29.280 --> 0:07:32.760 this process for automation and technology go better for people. 0:07:33.280 --> 0:07:36.120 And because you one other thing you would say looking 0:07:36.120 --> 0:07:38.200 at Europe at the moment is people don't like politicians 0:07:38.280 --> 0:07:42.560 very much. That the the main the system that had 0:07:42.600 --> 0:07:47.600 delivered these policies that often have helped to sort of 0:07:47.640 --> 0:07:50.239 shield people from the worst of the market, is also 0:07:50.280 --> 0:07:52.320 a system that people seem to be voting out of 0:07:52.320 --> 0:07:57.400 office with this big surge of populism. Are you how 0:07:57.440 --> 0:08:01.560 are politicians going to make these right choices if they're 0:08:01.600 --> 0:08:06.240 all being thrown out and replaced with maybe more irresponsible characters. 0:08:07.000 --> 0:08:10.000 Well that that that that's the development that worries the 0:08:10.000 --> 0:08:14.800 most actually Europe. I was looking recently at some statistics 0:08:14.960 --> 0:08:18.400 of not only Europeans, but generally the o c D 0:08:18.920 --> 0:08:21.160 in the G seven. They're looking at their government and 0:08:21.280 --> 0:08:23.800 more more than half the people are dissatisfied with the 0:08:23.840 --> 0:08:28.600 way that their government is running the country. Um, most 0:08:28.720 --> 0:08:30.600 think that we're going to be worse off in the 0:08:30.680 --> 0:08:34.679 next twenty years that their countries on their own track 0:08:35.960 --> 0:08:39.720 all these needs. It needs to be reversed. It's easier 0:08:39.800 --> 0:08:45.320 said than done. Um, I do think something that's going 0:08:45.360 --> 0:08:47.720 to maybe would make me I'm popular with some of 0:08:47.720 --> 0:08:51.840 your bridge the sense, but I do think that central 0:08:51.880 --> 0:08:56.320 European institutions can do more that would apply to the 0:08:56.320 --> 0:08:59.319 whole of Europe where you see these developments taking place 0:08:59.400 --> 0:09:01.920 or other that that's we've done enough about that. In fact, 0:09:03.280 --> 0:09:06.320 some at least some of the political extremists that we're 0:09:06.320 --> 0:09:09.840 seeing is due to the policies that were followed within 0:09:09.920 --> 0:09:12.720 Europe during the financial crisis and the Dead crisis, after 0:09:12.960 --> 0:09:16.520 being a critical the way that Greece and other countries 0:09:16.559 --> 0:09:20.400 were dealt with, for example, And um, we we do 0:09:20.520 --> 0:09:22.800 need to work out than that, because we shouldn't just 0:09:22.840 --> 0:09:25.079 take it lightly and say, oh, well, you know it's politicians, 0:09:25.120 --> 0:09:27.360 ignore them. But then you know that's that was one 0:09:27.400 --> 0:09:30.360 of the famous comment that Chancellor Angela Merkel made the 0:09:30.400 --> 0:09:32.560 German Chancellor about you know, the answer to a lot 0:09:32.600 --> 0:09:34.120 of these problems if you look at how that what 0:09:34.200 --> 0:09:37.160 happened in the crisis sort of more Europe, you know, 0:09:37.280 --> 0:09:40.960 more cooperation and what people are saying in the ballot 0:09:41.000 --> 0:09:45.920 box is less Europe. So how do we reconcile Whenever, 0:09:46.040 --> 0:09:48.080 whenever there's a ballot in fact, not only in Britain 0:09:48.120 --> 0:09:50.320 but anywhere in Europe has the word Europe in it, 0:09:50.440 --> 0:09:55.000 the vote is always in the other direction. It's it's 0:09:55.040 --> 0:09:58.240 difficult to explain that where there's this reaction. I think 0:09:58.240 --> 0:10:00.560 we do need more Europe, but we need to Europe 0:10:00.559 --> 0:10:04.440 as well. We need a more collaborative Europe. The way 0:10:04.440 --> 0:10:08.240 the Dead Crisis was, for example, I think that I 0:10:08.280 --> 0:10:11.760 think like that left very bad legacy of the way 0:10:11.920 --> 0:10:16.200 Europe deals with its problems because it wasn't really a 0:10:16.280 --> 0:10:20.520 policy that European leaders sat together and agreed something that 0:10:20.520 --> 0:10:23.200 there was consensus throughout. It was more like, you know, 0:10:23.280 --> 0:10:25.680 Germany for example, which is which has a very different 0:10:25.679 --> 0:10:30.840 requirement from the Southern Europeans took the lead and basically said, 0:10:30.880 --> 0:10:33.920 you know, you should be like more like us, rather 0:10:34.000 --> 0:10:39.680 than converging. Fiscal policies did not well coordinated. Some of 0:10:39.720 --> 0:10:43.400 the populist backlash has been in response to to the 0:10:43.800 --> 0:10:46.960 to the response to the crisis, In response to Concert 0:10:47.000 --> 0:10:49.000 of Easing, people feel like it just gave a lot 0:10:49.040 --> 0:10:50.680 of money printed a lot of money and gave it 0:10:50.720 --> 0:10:52.280 to people who already had it, you know, in the 0:10:52.320 --> 0:10:56.719 stock market. Um, if we are basically going to be 0:10:56.840 --> 0:11:01.240 using the same tools to respond to the next crisis, Um, 0:11:01.280 --> 0:11:04.280 do you think we need to be? Is that going 0:11:04.320 --> 0:11:07.960 to create even more of a political backlash and maybe 0:11:08.040 --> 0:11:11.920 more economic problems down the road from the political backlash, 0:11:11.960 --> 0:11:14.280 just as we're dealing with now in the UK and elsewhere. 0:11:15.000 --> 0:11:19.199 I think we need to bring fiscal policy there if 0:11:19.200 --> 0:11:21.960 we get into another crisis like the one we had before, 0:11:22.720 --> 0:11:26.440 because I mean, QUEI has done well aking for for markets, 0:11:26.440 --> 0:11:30.920 but it did increase, it did contribute to this increasing inequality, 0:11:30.960 --> 0:11:35.600 and that it increased stock prices, which which came together 0:11:35.679 --> 0:11:39.440 with the bigger rises in the incomes of the labor 0:11:39.480 --> 0:11:43.360 incomes of top earners and reinforce them. And that's where 0:11:43.360 --> 0:11:46.240 you need fiscal policy to come in to support the 0:11:46.280 --> 0:11:50.200 lower incomes and those who don't have stocks to benefit 0:11:50.240 --> 0:11:52.520 from the big rises. In fact, on the contrary, those 0:11:52.520 --> 0:11:55.040 who have debt because most of the lower inca is 0:11:55.080 --> 0:11:59.920 not dead. So we need a better coordination of fiscal 0:12:00.000 --> 0:12:04.079 and monetary policy at European level. And that's where I've 0:12:04.120 --> 0:12:07.360 been most critical of the German policies for examined during 0:12:07.400 --> 0:12:10.839 crisis that they didn't want to use fiscal policy at 0:12:10.880 --> 0:12:15.120 all at the European level. I heard short play talk 0:12:15.480 --> 0:12:18.800 the German finance minister at the time, talking the world 0:12:18.840 --> 0:12:22.199 the Comment Forum for example, many times and saying, you know, 0:12:22.240 --> 0:12:24.840 in front of the cameras and saying I know how 0:12:24.920 --> 0:12:28.120 to do German fiscal policy, and then and and that's good, 0:12:28.240 --> 0:12:29.960 good for Germany, and that's what I'm going to do. 0:12:30.360 --> 0:12:33.040 Where it was it was how we handle fiscal policy 0:12:33.040 --> 0:12:36.360 at the time, but it needs to come along with 0:12:36.440 --> 0:12:40.240 monetary policy and be used in combination to avoid the 0:12:40.280 --> 0:12:43.520 problems that you were just pointing. And does that also 0:12:43.600 --> 0:12:45.440 mean that central banks? I mean, we've had a big 0:12:45.440 --> 0:12:48.120 debate in the last few months and a sort of 0:12:48.160 --> 0:12:52.000 a panic that Donald Trump is tweeting about the Fed 0:12:52.200 --> 0:12:56.480 and central banks independences are being is under threat from 0:12:56.520 --> 0:13:00.240 all these leaders? Should it? Is it maybe a good 0:13:00.280 --> 0:13:03.880 thing if if central banks are a bit less independent 0:13:03.960 --> 0:13:06.480 or a bit more at least more political in how 0:13:07.120 --> 0:13:10.600 they look at their lives. Well, I think so, actually, 0:13:10.679 --> 0:13:14.280 as they should. They should get away from the complete 0:13:14.280 --> 0:13:17.760 independence from everything and just look at inflation and nothing else. 0:13:18.559 --> 0:13:21.400 We pointed out one very important issue that they should 0:13:21.400 --> 0:13:29.880 be looking at, how their policies affect relative pay inequality. Basically, 0:13:29.920 --> 0:13:32.920 there are other things they should be looking at, see 0:13:32.960 --> 0:13:38.960 if lending is done properly to productive activities, because with 0:13:39.040 --> 0:13:43.040 all the supervision they're doing, maybe their acting is this incentive. 0:13:43.880 --> 0:13:45.880 But what I'd say is that we also need a 0:13:45.920 --> 0:13:49.400 more independent fiscal policy than we have now, So maybe 0:13:49.400 --> 0:13:53.760 a little bit less dependent, less independent monetary policy, more 0:13:53.800 --> 0:13:57.800 independent fiscal policy, and the two work together around the economy. 0:13:58.760 --> 0:14:01.520 It's funny because I remember years ago looking into how 0:14:01.559 --> 0:14:04.280 independent the European Central Bank was. As far as I 0:14:04.320 --> 0:14:07.400 can see, it's the most independent central bank of any 0:14:07.480 --> 0:14:10.840 in the world because politicians can't even ask, can't even 0:14:10.960 --> 0:14:15.200 change its target, or they can they can appoint the 0:14:15.240 --> 0:14:17.480 people in charge, but that is it, and I think 0:14:17.640 --> 0:14:19.520 there's I think it's unique in the world. Are certainly 0:14:19.520 --> 0:14:22.920 among the major ones that politics elected politicians are not 0:14:23.040 --> 0:14:27.240 able to even change the target that it then independently pursues, 0:14:27.800 --> 0:14:30.800 and maybe that's one thing that Europeans haven't necessarily got right. 0:14:38.680 --> 0:14:40.880 I've got one final question, which was a is a 0:14:40.920 --> 0:14:42.280 sort of big one, but you don't have to give 0:14:42.320 --> 0:14:46.720 a complete answer. There is in this in the populism 0:14:46.720 --> 0:14:49.320 you see, whether it's Donald Trump or many of the 0:14:49.320 --> 0:14:52.800 different movements in Europe. There's sort of a critique of 0:14:52.880 --> 0:14:57.160 mainstream economics embedded in there, the kind of economics um 0:14:57.400 --> 0:15:00.960 that was followed in the policies before the cris. It's 0:15:01.000 --> 0:15:03.960 about less so fair, but it's not just about leaving 0:15:04.000 --> 0:15:08.000 the market alone. Do you think you're sitting in London 0:15:08.000 --> 0:15:11.320 School of Economics do you think economists as as a 0:15:11.400 --> 0:15:16.200 profession have responded to that critique? Do you see enough 0:15:16.360 --> 0:15:21.520 change in the way economists view themselves relative to say 0:15:21.560 --> 0:15:26.480 ten years ago. We we we've responded by emphasizing more 0:15:27.640 --> 0:15:30.640 things that might go wrong. Of course that's always been 0:15:30.680 --> 0:15:35.080 my research. And labor markets some I never I started 0:15:35.120 --> 0:15:39.440 my research asking why is an employment rising? And the 0:15:39.440 --> 0:15:44.160 conclusion was that because labor markets done operate very well, 0:15:44.160 --> 0:15:47.440 there's completely free markets and they need government help their 0:15:47.560 --> 0:15:50.040 frictions in the labor markets. That was the citation. That's 0:15:50.080 --> 0:15:53.280 what you got the price for us. And now ecurremys 0:15:53.320 --> 0:15:55.480 are looking at these frictions in other markets as well, 0:15:55.560 --> 0:15:57.880 especially if fin action markets. They've been applying many on 0:15:57.920 --> 0:16:00.400 the techniques that we had in labor market to look 0:16:00.400 --> 0:16:03.240 at frictions. Now, the other thing I should say, though, 0:16:03.840 --> 0:16:10.320 is that they criticize economist for say, getting wrong before 0:16:10.600 --> 0:16:14.040 or whatever, but in fact it's those who use economic 0:16:14.080 --> 0:16:16.240 theory that should be criticized. You know, if you step 0:16:16.280 --> 0:16:19.960 with me academia, the LS or elsewhere, you will see 0:16:19.960 --> 0:16:23.520 that the alternatives are there, or what we're doing there 0:16:23.520 --> 0:16:28.440 where there hidden in research. You know, maybe academic croomics 0:16:28.480 --> 0:16:32.080 should should have come out more out of universities trying 0:16:32.080 --> 0:16:36.320 to influence all that, but it's not the way it happens. 0:16:36.320 --> 0:16:40.280 So that I mean policymakers outside and those who operate 0:16:40.440 --> 0:16:44.040 outside in the market, they will have their own views 0:16:44.080 --> 0:16:47.840 about how they see the market working, and then they 0:16:47.840 --> 0:16:52.680 will look through the many alternative economic theories. There might 0:16:52.720 --> 0:16:54.600 be a theory of the pure market, the theory of 0:16:54.760 --> 0:16:57.520 market with frictions, the theory of Marxist theory of the 0:16:57.560 --> 0:17:01.360 complete breakdown, and then they will take the that's closest 0:17:01.360 --> 0:17:05.560 to that believes and applied not thinking that maybe the 0:17:05.880 --> 0:17:10.080 markets out there has features of those markets with frictions 0:17:10.119 --> 0:17:13.000 and we should take especially information, you know, he cancel 0:17:13.080 --> 0:17:17.399 information frictions and markets. They're normals. I like that. So 0:17:17.440 --> 0:17:20.240 that's the basically guns guns don't kill people. People kill 0:17:20.320 --> 0:17:23.160 people kind of approach it so you you can blame 0:17:23.160 --> 0:17:25.840 it on the on the users of the tools. I 0:17:25.880 --> 0:17:28.040 don't think that there is a sense in which economists 0:17:28.040 --> 0:17:32.160 have um lost a bit of their awareness of political 0:17:32.160 --> 0:17:35.920 economy that they had mainstream economics would have had a 0:17:36.000 --> 0:17:39.040 hundred or two hundred years ago, and there was something there. 0:17:39.119 --> 0:17:41.400 Someone and a very senior officials said to me once 0:17:41.440 --> 0:17:44.760 that he thought it's true that politicians often ignore the 0:17:44.840 --> 0:17:47.840 rules of act like the rules of economics and arithmetic 0:17:47.880 --> 0:17:50.399 don't operate, and that causes lots of problems when they 0:17:50.440 --> 0:17:53.639 ignore that. But actually economists also sometimes act like the 0:17:53.720 --> 0:17:57.360 rules of politics don't operate, and that's a big problem 0:17:57.480 --> 0:18:00.160 where they where they're now taking more and more into 0:18:00.160 --> 0:18:02.960 accounting fact that political economy and the influence of politics. 0:18:03.000 --> 0:18:07.280 So I can predict with fairly certainty that there will 0:18:07.320 --> 0:18:10.800 be a Nobel Prize for a political economy. But I'm 0:18:10.840 --> 0:18:14.479 not going to venture to professors, thank you very much 0:18:14.480 --> 0:18:16.840 for coming on, thank you, thank you for thanking me. 0:18:23.200 --> 0:18:25.760 So there was plenty to chew on there, but I 0:18:25.800 --> 0:18:28.080 did also promise you a quit report from the front 0:18:28.080 --> 0:18:31.399 lines of the US China trade wars. And our senior 0:18:31.440 --> 0:18:35.240 trade reporter frequent contributor to this podcast, Sean Donan, is 0:18:35.320 --> 0:18:39.080 just back from China. Sean, the Chinese are looking certainly 0:18:39.119 --> 0:18:43.120 less conciliatory at this point. We've had a white paper 0:18:43.200 --> 0:18:47.800 out complaining about US tactics. We've had also some announcement 0:18:47.800 --> 0:18:51.960 of investigation into the US company FedEx. Has Donald Trump 0:18:52.000 --> 0:18:54.320 pushed them too far? Well, I think that's the big 0:18:54.400 --> 0:18:58.440 question here. And there's a real sense in China right 0:18:58.480 --> 0:19:02.639 now that people are are looking at this trade conflict 0:19:02.680 --> 0:19:06.320 and actually preparing for it to last into the longer term. 0:19:06.400 --> 0:19:10.520 This is no longer a short term aberration. Uh. This 0:19:10.640 --> 0:19:15.920 is something that businesses and officialdom and the think tanks 0:19:16.359 --> 0:19:19.480 are all adapting to right now. You really get the 0:19:19.520 --> 0:19:23.639 sense of people already playing a longer game. J And 0:19:23.680 --> 0:19:27.840 Ping famously invoked the Long March. Said China needed to prepare, 0:19:28.000 --> 0:19:31.480 be prepared to to engage in in this long march 0:19:32.200 --> 0:19:34.960 as it approached this economic conflict. And what you really 0:19:35.000 --> 0:19:36.879 pick up on the ground is that march is already 0:19:36.920 --> 0:19:39.720 underway and it's well underway. Does that mean that they 0:19:39.720 --> 0:19:42.680 have basically given up on trying to conclude a deal 0:19:43.080 --> 0:19:45.600 with the US administration and they're just sort of trying 0:19:45.640 --> 0:19:49.199 to hoping that it won't get any worse. I I 0:19:49.240 --> 0:19:51.679 think what what you really pick up is not that 0:19:51.720 --> 0:19:53.960 they've given up on a deal, but that they're not 0:19:54.040 --> 0:19:56.880 going to do a deal on Donald Trump's terms, uh, 0:19:56.920 --> 0:19:59.440 and that they feel that they are in a position 0:20:00.000 --> 0:20:03.840 of strength that Donald Trump doesn't necessarily see. And of course, 0:20:03.840 --> 0:20:05.639 you know, the worst thing you can get in a 0:20:05.720 --> 0:20:08.879 trade war or in any negotiation is both sides thinking 0:20:09.200 --> 0:20:11.640 they're the stronger party at the table and not being 0:20:11.640 --> 0:20:14.760 ready to compromise. Well. And it's interesting because of course 0:20:14.760 --> 0:20:17.720 with the Donald Trump and those who support the use 0:20:17.760 --> 0:20:20.960 of tariffs would say, well, America's got the upper hand 0:20:20.960 --> 0:20:23.760 because America is the place that's receiving all these imports, 0:20:23.960 --> 0:20:26.679 and the very fact that China is not getting a 0:20:26.680 --> 0:20:29.160 lot of imports from the US means there's there's less 0:20:29.240 --> 0:20:31.800 room for for China to retaliate. But I guess what 0:20:32.280 --> 0:20:34.119 do we see this in the last few days that 0:20:34.200 --> 0:20:37.080 seemed just it was a reminder that China have other 0:20:37.119 --> 0:20:40.119 ways that they could do a sort of tip for 0:20:40.160 --> 0:20:42.560 tat here. Yeah. Absolutely, I think if you just think 0:20:42.560 --> 0:20:44.840 about it in the narrow kind of tit for tat 0:20:44.880 --> 0:20:47.480 Tariff's world, the US has the upper hand. But what 0:20:47.520 --> 0:20:51.000 we forget is that China has an important role as 0:20:51.040 --> 0:20:54.800 a supplier of a number of commodities like rare earths, 0:20:54.800 --> 0:20:56.600 and we've seen them. These are these kind of rare 0:20:56.680 --> 0:21:00.280 minerals that are key elements in all sorts of new 0:21:00.320 --> 0:21:05.080 technologies UH and vital to kind of twenty one century life, 0:21:05.080 --> 0:21:07.879 and China really controls a big chunk of the supply 0:21:07.920 --> 0:21:10.400 of those to the fact that it is an enormous 0:21:10.440 --> 0:21:13.920 market and that it has the ability to to harass 0:21:14.440 --> 0:21:18.240 American companies in different ways that want to do business 0:21:18.800 --> 0:21:22.080 in that market, and that's a powerful lever that the 0:21:22.160 --> 0:21:25.720 Chinese can pull. We've seen that. We've seen the Chinese 0:21:25.720 --> 0:21:28.840 start to pull. That day when Huawei, the big Chinese 0:21:28.840 --> 0:21:32.919 telecommunications company, was was placed on a Commerce Department Entity 0:21:33.119 --> 0:21:38.640 list UH, the US effectively was banning or potentially banning 0:21:38.920 --> 0:21:42.520 US suppliers from doing business with Huawei, this big company. 0:21:42.600 --> 0:21:47.639 The Chinese have responded by announcing their own Unreliable Entities list, 0:21:47.680 --> 0:21:51.320 and that effectively is aimed at any US company that 0:21:51.960 --> 0:21:55.800 for non commercial reasons refuses to do business with a 0:21:55.880 --> 0:21:59.600 Chinese company, and that means shutting them out of that 0:22:00.040 --> 0:22:04.920 potentially enormous Chinese market. We've also UH seen an investigation 0:22:05.000 --> 0:22:08.840 into UH Forward, one of its UH and and and 0:22:08.920 --> 0:22:13.200 its joint venture over some potential monopoly behavior. We've seen 0:22:13.359 --> 0:22:17.119 this FedEx investigation that you've talked about. So there's all 0:22:17.160 --> 0:22:19.040 of these other ways that they can that they can 0:22:19.080 --> 0:22:21.960 apply pressure on US companies, and at the same time 0:22:21.960 --> 0:22:25.040 they're also just kind of planning for the longer term. 0:22:25.080 --> 0:22:28.280 We had an interview with Ye Gang, the PBOC Government 0:22:28.320 --> 0:22:30.440 People Bank People's Bank of China governor a few days 0:22:30.480 --> 0:22:32.840 ago in which he just pointed to all the different 0:22:32.880 --> 0:22:36.520 ways they had to to bolster the economy, from monetary 0:22:36.600 --> 0:22:41.080 policy UH to some kind of fiscal UH tax credit 0:22:41.160 --> 0:22:43.159 policy that they that they could roll out, and in 0:22:43.200 --> 0:22:47.200 fact they've already given a big tax holiday to semiconductor 0:22:47.240 --> 0:22:50.480 producers and software companies and so on. There's a much 0:22:50.600 --> 0:22:55.920 bigger array of policy tools that the Chinese have other 0:22:56.000 --> 0:23:00.280 than tariffs. And you said you talked to US business 0:23:00.359 --> 0:23:03.080 people operating. There are people with joint ventures with the 0:23:03.200 --> 0:23:07.840 US in the tech world in particular, are they looking 0:23:07.880 --> 0:23:11.359 at their relationship with China being permanently changed by this? 0:23:11.480 --> 0:23:13.240 And of course the fear is that China is going 0:23:13.280 --> 0:23:17.160 to say, Okay, we're dependent on American semiconductors now, and 0:23:17.520 --> 0:23:21.919 Jnald Trump has that potential leverage over us, but we 0:23:22.240 --> 0:23:25.240 don't intend to be very long. Yeah, I mean, that's 0:23:25.240 --> 0:23:27.199 already that fear is already being realized. I think we 0:23:27.200 --> 0:23:28.800 need to be clear about that. Where I was at 0:23:28.840 --> 0:23:31.080 Huawei as part of this this visit and you talk 0:23:31.160 --> 0:23:33.200