WEBVTT - 2018 is Ripe for a Big Unexpected Crisis, Eurasia's Ian Bremmer Says 0:00:00.080 --> 0:00:13.040 Yea. Welcome to the Bloomberg Surveillance Podcast. I'm Tom Keene 0:00:13.480 --> 0:00:17.560 Jay Ley. We bring you insight from the best in economics, finance, investment, 0:00:18.000 --> 0:00:23.520 and international relations. Find Bloomberg Surveillance on Apple Podcasts, SoundCloud, 0:00:23.600 --> 0:00:33.640 Bloomberg dot Com, and of course on the Bloomberg And 0:00:33.720 --> 0:00:37.120 we now join on Bloomberg Radio and I'm Bloomberg Television. 0:00:37.320 --> 0:00:40.160 Our conversation with Ian Bremer. Have you raised your group? 0:00:40.479 --> 0:00:43.240 His top risk for two thousand and eighteen, and we're 0:00:43.320 --> 0:00:45.360 honored to have with us in this hour the seventies 0:00:45.360 --> 0:00:48.680 six uh Secretary of the Treasury of the United States, 0:00:48.840 --> 0:00:52.440 someone you will know his service with President Obama. Yes, 0:00:52.920 --> 0:00:57.040 a Massachusetts Democrat, Jacob Blue joins us the morning. Jack 0:00:57.080 --> 0:00:59.279 Blue as well Ian Bremer. I want you to give 0:00:59.320 --> 0:01:01.920 the first question to Jack lu There's too much to 0:01:01.960 --> 0:01:04.440 talk about now. What is How would you frame the 0:01:04.560 --> 0:01:08.200 nation's challenges our risks this year? As you speak to 0:01:08.280 --> 0:01:10.759 Jack Luke, Well, we were talking a little bit before 0:01:10.800 --> 0:01:14.280 the show started about the chaos, about how much it 0:01:14.560 --> 0:01:17.479 is the It takes a very long time to make 0:01:17.520 --> 0:01:19.840 things work, it takes a much shorter time to break them. 0:01:20.000 --> 0:01:22.600 You know, Jack's very worried about, you know, as someone 0:01:22.640 --> 0:01:25.960 who was Secuary Treasury and and spent so much time 0:01:26.000 --> 0:01:29.680 working so hard right to and and finding that Washington 0:01:29.800 --> 0:01:32.440 is sclerotic and you can't make policies happen. You can't 0:01:32.440 --> 0:01:35.119 move the needle for people. Right. But if you now 0:01:35.200 --> 0:01:39.720 have a geopolitical order where the principal actors are trying 0:01:39.760 --> 0:01:42.039 to break it. The Russians want to break the geopolitical order, 0:01:42.040 --> 0:01:44.880 the Chinese wanted new geopolitical order that goes towards them. 0:01:44.959 --> 0:01:47.160 The United States is not interested in providing support for 0:01:47.160 --> 0:01:51.920 the old giopolitical or how much does that chaos worry Jack? 0:01:52.080 --> 0:01:53.520 I mean, I want to go back to something calm 0:01:53.600 --> 0:01:56.320 John Farroll like Brexit is sort of a calmer discussion. 0:01:56.840 --> 0:02:01.680 But Mr Secretary, I want to get that. Please go ahead, 0:02:04.080 --> 0:02:06.400 excuse me. If you look at the risks facing the world, 0:02:06.440 --> 0:02:09.320 and I read you know, the Eurasia Report, I think 0:02:09.360 --> 0:02:12.360 it identifies many of the of the key risks. The 0:02:12.360 --> 0:02:15.200 thing that underlies so much of it is chaos. Um 0:02:15.240 --> 0:02:18.120 It's the unpredictability of key leaders. It's the lack of 0:02:18.120 --> 0:02:20.680 a north star with the United States stepping back in 0:02:20.760 --> 0:02:24.440 so many ways, and it's this kind of destructive policy 0:02:24.520 --> 0:02:27.919 without anything constructive to take its place. And that's true 0:02:27.960 --> 0:02:30.320 on issue after issue here in the United States. I 0:02:30.639 --> 0:02:32.280 think that you know, you look at markets over the 0:02:32.360 --> 0:02:36.200 last year, the calmness of markets, the enthusiasm of Marcus 0:02:36.560 --> 0:02:39.200 almost suggests that there's been a decision to look beyond 0:02:39.280 --> 0:02:41.480 all of this chaos and uncertainty, because what can we 0:02:41.480 --> 0:02:43.760 do about it? But then when the moment comes, when 0:02:43.840 --> 0:02:47.800 something happens that is a surprise, it shouldn't be a surprise. 0:02:48.040 --> 0:02:50.800 I worry about binary kind of changes. I want to 0:02:50.840 --> 0:02:54.320 cut to the January Chase greg values report this morning 0:02:54.480 --> 0:02:57.560 was shocking of how compressed this month is in Washington. 0:02:57.840 --> 0:02:59.440 I want to go back to the beginning of your 0:02:59.480 --> 0:03:02.440 career with Joe Mowkley of Massachusetts, who is the most 0:03:02.600 --> 0:03:07.279 basic of politicians from another time. What does your Democratic 0:03:07.320 --> 0:03:12.760 Party need to do to provide leadership within this chaos? 0:03:13.000 --> 0:03:16.359 What do you wish from Mr Schumer from Miss Pelosi 0:03:16.400 --> 0:03:19.480 and others? Look, fundamentally, Democrats are not in charge right now, 0:03:19.520 --> 0:03:23.200 so I don't think it's fair or or realistic to 0:03:23.280 --> 0:03:25.440 look to Democrats to lead the way out of this. 0:03:25.880 --> 0:03:29.880 You have an administration that chose to make policy in 0:03:29.919 --> 0:03:33.440 a very, very one party way, did not include Democrats 0:03:33.480 --> 0:03:36.520 in any of the conversation. Now they can't probably rally 0:03:36.560 --> 0:03:39.040 their own troops to do the basic business of running 0:03:39.040 --> 0:03:41.320 the government, making sure we don't default on the debt, 0:03:41.600 --> 0:03:44.000 making sure children don't get thrown off of health insurance, 0:03:44.120 --> 0:03:46.040 all kinds of things. They're gonna be looking to Democrats 0:03:46.040 --> 0:03:48.200 to help. I think the challenge is going to be 0:03:48.280 --> 0:03:51.040 to truly work together. And truly working together doesn't mean 0:03:51.120 --> 0:03:53.360 coming with a fatal company and saying we need your vote. 0:03:53.920 --> 0:03:56.280 Truly working together means going back and doing things that 0:03:56.280 --> 0:03:59.240 you wouldn't have otherwise done to reach a consensus around 0:03:59.240 --> 0:04:02.360 some kind of a reason. Will compromise. Reasonable compromise is 0:04:02.400 --> 0:04:04.520 the basis for working together. We're not seeing any of 0:04:04.520 --> 0:04:06.400 that coming out of the White House. Sexually. You've called 0:04:06.400 --> 0:04:09.960 this legislation dangerous, this tax bill. What is this dangerous? Look? 0:04:10.000 --> 0:04:12.000 I think what if you look at the tax bill um, 0:04:12.880 --> 0:04:15.600 what it does is almost the exact opposite of what 0:04:15.960 --> 0:04:18.599 anxious and angry voters were calling for in an election 0:04:18.680 --> 0:04:21.359 just a year ago. You have people who are worried 0:04:21.400 --> 0:04:25.320 about where did they fit in an economy where technology 0:04:25.360 --> 0:04:28.120 and trade and globalization seem to be changing all the 0:04:28.240 --> 0:04:31.760 rules that they grew up with. And what we need 0:04:32.200 --> 0:04:35.279 is we need training, We need education, we need infrastructure. 0:04:35.279 --> 0:04:37.200 We need to invest in the kind of workforce of 0:04:37.200 --> 0:04:39.120 the future that gives people the confidence that they have 0:04:39.120 --> 0:04:41.400 a place in it. What we've seen is a tax 0:04:41.440 --> 0:04:44.839 cut that spends money we don't have to have very 0:04:44.880 --> 0:04:48.960 concentrated benefits for global corporations and the top one percent, 0:04:49.279 --> 0:04:51.640 and it's leaving us broke so that we cannot deal 0:04:51.720 --> 0:04:55.200 with these fundamental problems. So we're farther behind in actually 0:04:55.240 --> 0:04:58.200 making progress. And I fear that the next shooter drop 0:04:58.440 --> 0:04:59.760 is going to be an attack on the most of 0:04:59.800 --> 0:05:01.880 all horrible in our society. How are we going to 0:05:01.920 --> 0:05:04.040 pay for the deficit caused by the tax cut. You're 0:05:04.080 --> 0:05:06.679 going to see proposals to cut health insurance from poor people, 0:05:06.839 --> 0:05:10.719 to take basic food support away from poor people, to 0:05:10.760 --> 0:05:13.880 attack medicare and social security. One could not have made 0:05:13.960 --> 0:05:17.279 up a more cynical strategy. And the people are going 0:05:17.520 --> 0:05:21.359 to reject things that otherwise are good when they don't 0:05:21.400 --> 0:05:25.200 work for them. So, you know, free trade good thing 0:05:25.320 --> 0:05:27.760 for the world, for global growth, but people rejected if 0:05:27.760 --> 0:05:30.719 they think it doesn't work for them. Technology obviously a 0:05:30.800 --> 0:05:33.279 good thing, but they rejected when they see the governor's 0:05:33.320 --> 0:05:35.320 work for them. And what Jack is saying now is 0:05:35.320 --> 0:05:38.440 that on the back of this extraordinary tax bill, if 0:05:38.480 --> 0:05:40.800 you're going to see cuts for the average people, their 0:05:40.839 --> 0:05:43.919 response is going to be vastly greater rejectionism of the 0:05:44.000 --> 0:05:47.040 establishment and political polarization, and the Democrats and Republicans are 0:05:47.040 --> 0:05:50.080 both gonna happening issues. These issues sextually did not arrive 0:05:50.080 --> 0:05:51.919 o a night with the election of President Donald Trump. 0:05:51.960 --> 0:05:54.000 They've existed for a long long time. The United States 0:05:54.080 --> 0:05:56.800 has been spending money it hasn't had for a long 0:05:57.160 --> 0:05:59.400 long time. I guess my question is why is they 0:05:59.400 --> 0:06:01.440 sendy different and what we've seen before. First of all, 0:06:01.720 --> 0:06:04.400 you know, I've been in office in several different periods, 0:06:04.400 --> 0:06:07.679 and I've spent three years running the Office of Management Budget. 0:06:07.720 --> 0:06:10.120 In the Clinton administration, we run a surplus. We fixed 0:06:10.120 --> 0:06:13.359 a problem. When I came into the Office of Management Budget. 0:06:13.400 --> 0:06:15.919 In the Obama administration, we went from a deficit of 0:06:16.000 --> 0:06:18.479 almost ten percent of GDP to three percent of GDP. 0:06:18.880 --> 0:06:22.640 We've now consciously, intentionally as a government, made a decision 0:06:22.839 --> 0:06:25.800 to add substantial amounts of debt at a time when 0:06:25.800 --> 0:06:28.200 the economy doesn't need fiscal stimulus. What it needs is 0:06:28.240 --> 0:06:30.640 targeted investment and the things that people need for a 0:06:30.640 --> 0:06:35.240 better future. You know, the the risk of this tax 0:06:35.279 --> 0:06:39.440 bill is both a further disenchantment with institutions and if 0:06:39.480 --> 0:06:41.880 you look at what the report gets to this, the 0:06:42.000 --> 0:06:46.159 kind of rejection of institutions. How are people going to 0:06:46.240 --> 0:06:49.279 respect institutions more when they realize what this tax payer 0:06:50.839 --> 0:06:52.839 with And if you're just joining us now on Bloomberg 0:06:52.880 --> 0:06:56.760 Radio and Bloomberg Television, Jeck lou and Ian Bremer, let 0:06:56.800 --> 0:06:58.680 me set it up in terms of Boston, where it's 0:06:58.680 --> 0:07:01.760 going to be thirteen below zero in Brockton, I think 0:07:01.800 --> 0:07:06.040 on Saturday. Ian Bremer, you grew up tough in Chelsea, 0:07:06.360 --> 0:07:09.800 and when you're living fat large in Weston or Wellesley Hills, 0:07:10.080 --> 0:07:13.280 you know where Chelsea is. How would your mother do 0:07:13.360 --> 0:07:17.040 it today in this environment in Chelsea? Could you have 0:07:17.160 --> 0:07:20.320 gotten to tulane in this mill you today? I didn't. 0:07:20.560 --> 0:07:22.080 Let's be clear, I didn't grow up top. I grew 0:07:22.120 --> 0:07:25.080 up getting my askt h and Chelsea is slightly different. 0:07:25.320 --> 0:07:27.240 If you look at me, you understand why. But I'm 0:07:27.240 --> 0:07:31.520 good for radio. I I think that today my mother 0:07:31.720 --> 0:07:34.280 would have voted for Trump, or she would have maybe 0:07:34.360 --> 0:07:36.640 voted for Bernie Sanders. There's absolutely no way she would 0:07:36.640 --> 0:07:38.680 have voted for a mainstream Democrat Republic and my brother 0:07:38.760 --> 0:07:42.120 voted for Trump. Um, there there ain't nobody else from 0:07:42.120 --> 0:07:45.240 my neighborhood that got out of the Chelsea projects that 0:07:45.400 --> 0:07:48.840 you know is now talking on Bloomberger Global And I 0:07:48.880 --> 0:07:51.960 think that it's precisely that environment environments like it all 0:07:52.000 --> 0:07:55.280 over the country that are saying this isn't working. Then 0:07:55.320 --> 0:07:58.640 what does your party need to do to gain dominance 0:07:58.960 --> 0:08:02.120 in the Chelsea's a Wisconsin or Minnesota where you lost 0:08:02.120 --> 0:08:04.480 the election. Look that that is a good question. Um, 0:08:04.720 --> 0:08:06.120 what you're talking about used to be the base of 0:08:06.160 --> 0:08:09.560 the Democratic Party, and we need to find a way 0:08:09.600 --> 0:08:12.760 to communicate with people talking about the things that I'm 0:08:12.760 --> 0:08:15.000 talking about. I think he is right. You can't win 0:08:15.160 --> 0:08:18.400 by saying trade is the whole problem when that's not 0:08:18.480 --> 0:08:20.760 the whole problem. You have to talk to people respectfully 0:08:20.760 --> 0:08:22.960 and explain to them what it is you're gonna do 0:08:23.200 --> 0:08:25.560 so that they can have a piece of the economic 0:08:25.600 --> 0:08:27.920 pie going forward. You know, Look, we have a lot 0:08:27.960 --> 0:08:30.520 of problems that if we didn't have dysfunctional government we 0:08:30.520 --> 0:08:32.760 could have made more progress on over the last couple 0:08:32.800 --> 0:08:35.400 of decades. I mean, it's not as if any of 0:08:35.440 --> 0:08:37.160 the things that I'm saying we need to do are 0:08:37.280 --> 0:08:41.120 either rocket science or particularly part of the ideas. We've 0:08:41.120 --> 0:08:44.719 had a government that's been incapable of working together, and 0:08:44.880 --> 0:08:47.800 that dysfunction is really a problem. It attacks the core 0:08:47.840 --> 0:08:49.800 of our democracy. We look at the top Risks of 0:08:49.800 --> 0:08:52.720 two thousand eighteen with Dr Bremer, and we're honored to 0:08:52.720 --> 0:08:56.599 have with us the Secretary of Treasury, Department of the 0:08:56.679 --> 0:09:00.840 United States, of course, Jack lou with us. Uh Jack, 0:09:00.920 --> 0:09:03.880 I want to talk about eighties six. You were with 0:09:04.080 --> 0:09:07.960 Speaker uh Tip O'Neill at the time as we crafted 0:09:08.000 --> 0:09:12.640 bipartisan legislation. We're nowhere near that now. Paul Krugman, in 0:09:12.720 --> 0:09:14.520 my Chart of the Year in the New York Times 0:09:14.760 --> 0:09:17.520 talks about how different it is now because we're a 0:09:17.520 --> 0:09:20.920 more open economy, subject to the whims of all that 0:09:20.960 --> 0:09:25.160 money coming in from abroad. Can this tax reform or 0:09:25.280 --> 0:09:27.880 tax cuts, whatever you want to call it, can it 0:09:28.120 --> 0:09:32.840 work in a modern international fiscal system and financial system. Well, 0:09:32.880 --> 0:09:35.920 there's almost no way to compare to what happened at 0:09:35.920 --> 0:09:39.200 the end of UM. They're just they're just so different. 0:09:39.240 --> 0:09:41.880 First of all, the economy is different. UM. You know, 0:09:42.080 --> 0:09:44.480 we're we're right now at a period where we're nine 0:09:44.520 --> 0:09:47.400 years into a recovery and we don't need fiscal stimulus, 0:09:47.440 --> 0:09:49.840 and instead of paying for the tax bill, we're creating 0:09:49.880 --> 0:09:53.800 huge deficits. So that means that whatever macroeconomic benefit we 0:09:53.880 --> 0:09:56.040 get out of a little bit of stimulus, it will 0:09:56.040 --> 0:09:59.280 probably speed the pace of monetary policy change and take 0:09:59.280 --> 0:10:01.720 away to benefit over time. I think if you look 0:10:01.720 --> 0:10:04.960 at the content of the bill, in the basic rule 0:10:05.160 --> 0:10:08.559 was do no harm, don't make the system any less progressive, 0:10:08.600 --> 0:10:10.080 and if there's going to be a change, make it 0:10:10.120 --> 0:10:12.760 more progressive. This bill went the other way. It makes 0:10:12.760 --> 0:10:15.560 the system more regressive. I think if you look even 0:10:15.640 --> 0:10:18.640 at the things that are within this bill, the cynicism 0:10:18.960 --> 0:10:22.840 is so in contrast to the way it's being described. 0:10:23.240 --> 0:10:26.920 You know, the corporate rate cuts do very little, if anything, 0:10:27.000 --> 0:10:32.120 to encourage investment. The rapid depreciation the expensing of investment 0:10:32.200 --> 0:10:35.000 expires after four or five years. So the provision that 0:10:35.040 --> 0:10:37.360 they put in for business that actually could lead to 0:10:37.400 --> 0:10:40.760 some more investment is temporary, which means if it's extended, 0:10:40.800 --> 0:10:43.560 the bill is even more expensive. The tax cuts for 0:10:43.559 --> 0:10:48.000 individual fade away over time. This is it's a taking 0:10:48.040 --> 0:10:51.680 time bomb in terms of the debt because it costs 0:10:51.920 --> 0:10:54.000 one and a half two two trillion dollars on its face. 0:10:54.320 --> 0:10:57.120 But if the provisions that could potentially do some things 0:10:57.120 --> 0:11:00.360 to help middle class people or stimulate investment or ended, 0:11:00.520 --> 0:11:03.920 the cost goes way up. You cannot run a fiscal 0:11:03.960 --> 0:11:07.079 policy by spending trillions of dollars you don't have at 0:11:07.080 --> 0:11:09.920 a time when the economy is doing well. That's when 0:11:09.960 --> 0:11:13.960 you need to do some fiscal repair, not harm. And 0:11:14.120 --> 0:11:16.160 when you speak to its companies on a diving BSIS 0:11:16.200 --> 0:11:18.480 and like you do here in the United States, and 0:11:18.559 --> 0:11:20.600 they worried about the tax bill or they celebrate in it, 0:11:20.640 --> 0:11:23.120 because I sense they're probably quite pleased with what they say. 0:11:23.559 --> 0:11:25.920 They like the markets, they like the global economy, they 0:11:26.000 --> 0:11:28.359 like the tax bill. They may not like Trump personally, 0:11:28.440 --> 0:11:31.200 but I would say that unbalanced. They're reasonably happy with 0:11:31.240 --> 0:11:34.240 most of what the Trump administration is doing domestically. They're 0:11:34.280 --> 0:11:36.760 not happy with what Trump's doing internationally. They're not happy 0:11:36.800 --> 0:11:40.440 about the potential protectionism and trade issues. They're not happy 0:11:40.480 --> 0:11:42.680 with the likelihood that the United States is going to 0:11:42.679 --> 0:11:46.800 get in bigger fights uh internationally, and they also want 0:11:46.840 --> 0:11:49.600 a consistent message, right, so the idea that they can 0:11:49.880 --> 0:11:52.440 they kind of know what they can count. They love access, 0:11:52.920 --> 0:11:54.280 So I mean, you know, there was a lot of 0:11:54.320 --> 0:11:56.439 complaints in the early days of the Obama administration. The 0:11:56.480 --> 0:11:58.360 CEOs felt like they gave a lot of money and 0:11:58.400 --> 0:12:00.520 they weren't getting a lot of the FaceTime, the paper 0:12:00.559 --> 0:12:03.840 play that is traditional American system. They certainly feel like 0:12:03.840 --> 0:12:05.800 they're getting a bunch of that with this White House. 0:12:06.000 --> 0:12:08.920 But I do think that the CEOs are starting to 0:12:08.960 --> 0:12:12.920 get unnerved about a global order that is not as 0:12:13.040 --> 0:12:18.280 likely to benefit Western multinational corporations. And that's not something 0:12:18.360 --> 0:12:22.840 they necessarily blame Trump for. In fact, to the extent 0:12:22.880 --> 0:12:26.840 that in we see that Trump is out there pushing 0:12:26.960 --> 0:12:29.520 much harder on China, I don't think it will work 0:12:29.520 --> 0:12:30.920 well because if you do that, you want to be 0:12:30.960 --> 0:12:33.200 doing it with your allies, not by yourself. But the 0:12:33.280 --> 0:12:36.240 average American corporate has been kind of itching for a 0:12:36.320 --> 0:12:39.600 tougher line policy against the Chinese for a while because 0:12:39.600 --> 0:12:42.160 they all feel like it's becoming harder and harder for 0:12:42.200 --> 0:12:45.120 them to compete in the Chinese marketplace against Chinese state 0:12:45.240 --> 0:12:47.800 supported corporations. The heart of your pace today is this 0:12:47.920 --> 0:12:50.600 vacuum that's being left by the United States reluctant had 0:12:50.679 --> 0:12:52.440 him on and the way that China would like to 0:12:52.480 --> 0:12:55.680 fill it for you, Secretary Lou, the message that Ian 0:12:55.800 --> 0:12:57.880 just spills out the Corporate America, Actually, this is what 0:12:57.920 --> 0:13:00.199 they've wanted for a long time. They've wanted a hot line, 0:13:00.200 --> 0:13:02.680 a tougher line on the Chinese and the barriers to 0:13:02.760 --> 0:13:05.320 entry that they say in Chinese markets. Is this a 0:13:05.320 --> 0:13:07.840 good approach? If this is what Corporate America ultimately wants 0:13:07.840 --> 0:13:11.439 on the international stage. In Shanna more specifically, First, Corporate 0:13:11.440 --> 0:13:15.920 America has had a kind of division within itself about 0:13:15.920 --> 0:13:18.600 how to deal with this issue. We used to beg 0:13:18.720 --> 0:13:22.439 companies to confront the Chinese government directly, so that we 0:13:22.440 --> 0:13:25.200 weren't just making the case on their behalf, but they'd 0:13:25.240 --> 0:13:27.760 be there validating it. They wouldn't do it because they 0:13:27.800 --> 0:13:29.920 were afraid if they went to the Chinese government and 0:13:29.960 --> 0:13:33.520 said we're being blocked by the things you're doing, that 0:13:33.600 --> 0:13:36.160 there would be actions taken against them will be punitive. 0:13:36.480 --> 0:13:38.640 So it makes it harder for the government to make 0:13:38.679 --> 0:13:41.280 your case if you won't make it for yourself. That 0:13:41.360 --> 0:13:45.360 was a constant challenge. Um. I think this vacuum is 0:13:45.440 --> 0:13:48.640 something that corporate America ought to be worried about, and frankly, 0:13:48.679 --> 0:13:51.480 all of us who care deeply about liberal democracy and 0:13:51.520 --> 0:13:54.679 free market capitalism ought to care about. The two go together. 0:13:54.920 --> 0:13:58.320 If you start to see free you know, the pillars 0:13:58.440 --> 0:14:02.600 of liberal democracy start to erode. The world does not 0:14:02.679 --> 0:14:07.240 have better place for free market economics. And that's a risk. 0:14:07.320 --> 0:14:09.720 It's a risk right now because if we create a vacuum, 0:14:09.760 --> 0:14:13.000 others are stepping in. I actually don't blame China for 0:14:13.080 --> 0:14:16.440 seeing an opportunity. I think that China's aggressive use of 0:14:16.440 --> 0:14:20.280 the opportunity will probably limit its success because it scares 0:14:20.440 --> 0:14:23.000 some of its neighbors, like in Australia, which right now 0:14:23.080 --> 0:14:26.000 is torn between an economic poll to China and a 0:14:26.080 --> 0:14:29.880 political poll to stay with a hundred plus year old alliance. 0:14:30.440 --> 0:14:33.600 The tragedy is that friends have to go through that calculation. 0:14:34.440 --> 0:14:36.760 That shouldn't even be. It shouldn't be that a country 0:14:36.760 --> 0:14:39.400 like Australia has to think about is the United States 0:14:39.440 --> 0:14:43.480 my stable friend. That's the scary part. Just like a 0:14:43.520 --> 0:14:47.600 big national security of you precisely on the decision the Juckulu. 0:14:47.720 --> 0:14:50.320 Thank you so much for joining us today. Greatly appreciate it. 0:14:50.320 --> 0:14:52.080 Look forward to speaking to you through the year. He's 0:14:52.120 --> 0:15:11.840 a former Secretary Treasury of the United States. We're looking, 0:15:11.880 --> 0:15:13.880 of course at talking to Dominic Barton. He is the 0:15:13.880 --> 0:15:17.360 global managing partner of mckenzy and he leads the firm's 0:15:17.400 --> 0:15:23.280 focus not just on the Montreal maple leafs. I'm winding 0:15:23.280 --> 0:15:25.800 you up, Come on, guys. He leads the firm's focus 0:15:25.880 --> 0:15:28.760 on the future of capitalism. We joined, of course by 0:15:28.840 --> 0:15:31.000 darm As. We sit here at the URAGA headquarters on 0:15:31.040 --> 0:15:33.000 Fifth Avenue and dom I want to pick out one 0:15:33.040 --> 0:15:35.840 of the themes from URAGA groups report and it's protection 0:15:35.920 --> 0:15:40.280 is um to point zero. What does protectionism two point 0:15:40.360 --> 0:15:43.120 zero mean to you, DM? Well, I think that that 0:15:43.320 --> 0:15:45.880 risk that they've pointed out as a very key one 0:15:45.960 --> 0:15:48.400 for us to be thinking about this year. And I 0:15:48.440 --> 0:15:51.440 think about NAFTA. What's going to happen with NAFTA and March, 0:15:52.240 --> 0:15:56.160 Whether you know we get a revised NAFTA, I'm not 0:15:56.200 --> 0:16:01.000 sure We've got Brexit that's sort of trundling along um. 0:16:01.120 --> 0:16:04.000 These the problem with trade deals is when they go 0:16:04.400 --> 0:16:07.760 the wrong way, it's a race to the bottom. Everyone 0:16:07.840 --> 0:16:10.680 then sort of looks inward. And that's the thing that 0:16:11.000 --> 0:16:14.200 worries me the most. Um So, it's NAFTA is the 0:16:14.240 --> 0:16:16.840 big factor on the horizon in the in the next 0:16:16.840 --> 0:16:19.320 three months. But the other things that worry mere the 0:16:19.440 --> 0:16:23.520 non tariff trade barriers, which which Ian Bremner and the 0:16:23.560 --> 0:16:28.280 others point out in the report. This is the localization requirements, 0:16:28.400 --> 0:16:32.400 the labeling that's put in place, these these non tariff 0:16:32.400 --> 0:16:35.640 barriers which make it more difficult to be able to 0:16:35.640 --> 0:16:38.680 have global supply chains and have trade DOHM. Last year, 0:16:39.080 --> 0:16:42.280 the investor community was consumed by these kind of conversations 0:16:42.280 --> 0:16:44.080 at the beginning of this year, at the beginning of 0:16:44.120 --> 0:16:46.120 the year, they did not get paid to worry about them. 0:16:46.120 --> 0:16:47.960 In fact, they got paid not to worry about them. 0:16:47.960 --> 0:16:50.880 With the performance of emerging markets, etcetera. Do you worry 0:16:50.920 --> 0:16:54.640 that as we come into people are conditioned to ignore 0:16:55.080 --> 0:16:58.240 these risks because focusing too much on them last year 0:16:58.840 --> 0:17:01.240 was not a rewarding exercise. That So as we come 0:17:01.240 --> 0:17:04.080 into is that a risk? Yeah, I think it is. 0:17:04.119 --> 0:17:06.960 I mean I do think that as as Jack Lewis 0:17:07.000 --> 0:17:10.600 saying earlier on a program that you know, the markets 0:17:10.680 --> 0:17:13.080 or businesses have to sort of just keep forging ahead 0:17:13.119 --> 0:17:15.919 despite sort of chaos. If you will, you have to 0:17:15.960 --> 0:17:19.159 keep forging ahead. The problem is if if one of 0:17:19.200 --> 0:17:23.160 the underlying assumptions doesn't work, then you can have a 0:17:23.280 --> 0:17:26.080 big problem. It's it's the binary notion. It's one or zero. 0:17:26.160 --> 0:17:28.480 It's not a smooth probability curve. And that's the part. 0:17:28.520 --> 0:17:29.919 I don't know what else you can do. I think 0:17:29.960 --> 0:17:31.800 you have to keep just forging ahead. You have to 0:17:31.880 --> 0:17:34.240 keep driving it. But you you better also have a 0:17:34.280 --> 0:17:38.760 resiliency plan in place to say if uh this, if 0:17:39.320 --> 0:17:42.440 trade is actually going to be stopped in some particular 0:17:42.480 --> 0:17:45.480 way or brought backwards, A am I prepared to deal 0:17:45.520 --> 0:17:47.760 with that? Yeah, And we can tell with the accents 0:17:47.760 --> 0:17:51.639 that you're decidedly Canadian. I believe of a British Columbian persuasion. 0:17:52.480 --> 0:17:56.320 But but I look at where we are, and we're 0:17:56.359 --> 0:18:00.159 mentioning earlier leadership like an ice hockey and that and 0:18:00.200 --> 0:18:02.520 we can take the Trudeau's there was Trudeau senior, and 0:18:02.560 --> 0:18:05.200 you and I remember the emotion in the day to 0:18:05.280 --> 0:18:08.359 day tobacco of that maybe the calmness that Trudeau the 0:18:08.440 --> 0:18:12.240 younger has brought to Canada. And it comes down to people, 0:18:12.560 --> 0:18:17.280 what does business want from President Trump? I think, you 0:18:17.320 --> 0:18:21.120 know what, what I think business leadership looks for as stability, 0:18:21.720 --> 0:18:24.480 a set of policies that are going to actually help 0:18:24.600 --> 0:18:27.720 deal with issues. It's a something Tom You've you've talked 0:18:27.760 --> 0:18:30.880 about before adult conversations which I really liked. The fright 0:18:30.960 --> 0:18:33.520 Just here's what's happening, Here's how we're going to try 0:18:33.560 --> 0:18:36.639 and deal with this, and let's be honest about the 0:18:36.720 --> 0:18:39.600 real challenges that are there, because there's a lot of them. Um, 0:18:39.640 --> 0:18:43.119 And that's what businesses. You know what, what what frightens 0:18:43.160 --> 0:18:47.480 I think business, if I might say that is, is chaos, uncertainty, 0:18:47.800 --> 0:18:50.959 things that we were not expected. I think telling the 0:18:51.000 --> 0:18:53.960 truth about what's going on. What are the things we 0:18:54.000 --> 0:18:58.040 need to be prepared for. What are the downsides we 0:18:58.080 --> 0:19:01.240 need more of that? Do you believe And I'm saying 0:19:01.240 --> 0:19:04.520 this from your academics as a Rhodes scholar, and I'm 0:19:04.560 --> 0:19:08.120 also saying this from all the research and business dealings 0:19:08.119 --> 0:19:11.800 of transactions, the daily communication of McKinsey group. Do you 0:19:11.880 --> 0:19:16.679 believe in trickle down economics? That's a deep that's a 0:19:16.800 --> 0:19:19.520 very deep, deep question. I mean that when the temperature 0:19:19.520 --> 0:19:22.840 goes that's what they have to get some more coffee 0:19:22.880 --> 0:19:26.720 here on that. But but I you know, I am 0:19:26.760 --> 0:19:30.200 I have to I think there's some elements have trickled down, 0:19:30.240 --> 0:19:33.320 but there is nowhere near enough trickle down to deal 0:19:33.400 --> 0:19:34.680 with an issue. And I one thing I just want 0:19:34.680 --> 0:19:36.720 to put on the table. Over the last thirty years, 0:19:37.160 --> 0:19:41.880 the top point one percent of US households have increased 0:19:41.880 --> 0:19:46.560 their wealth by fifty point one percent increase by that 0:19:46.560 --> 0:19:49.240 means the top point one percent of households have more 0:19:49.680 --> 0:19:54.119 wealth in the bottom that in a time of that 0:19:54.200 --> 0:19:56.680 time of change. When you get that amount of inequality 0:19:56.800 --> 0:20:01.480 that's going on, trickle down isn't happening. It is trickled down. 0:20:01.800 --> 0:20:05.920 Part of the debate, the discourse in the United Kingdom, absolutely, 0:20:06.280 --> 0:20:08.920 I mean it's part of a shot of the political 0:20:09.000 --> 0:20:11.920 debate worldwide. I think at this point the economic disparity 0:20:11.960 --> 0:20:15.240 between the haves and the haves not you focus on 0:20:15.280 --> 0:20:19.360 the future of capitalism. What's the future of capitalism When 0:20:19.359 --> 0:20:23.639 the focus increasingly is own wealth inequality zone, Well, the 0:20:23.680 --> 0:20:25.879 capitalism is going to have to morph because we know 0:20:26.160 --> 0:20:29.600 in from history when the system revolts against it as 0:20:29.640 --> 0:20:34.040 a pretty ugly demise, right, and pitchforks. And I'm not 0:20:34.080 --> 0:20:38.840 suggesting that that's going to happen in but the trends 0:20:38.920 --> 0:20:42.679 of increased inequality are are there, and technology, which I'm 0:20:42.720 --> 0:20:45.760 a huge fan of, is actually a driver of that. 0:20:45.800 --> 0:20:49.000 You've got increasing returns to scale, right, a very few 0:20:49.359 --> 0:20:52.879 number of people can create massive amounts of wealth. You 0:20:52.960 --> 0:20:56.800 get this, as I said, the the what technology does 0:20:56.880 --> 0:20:58.640 is you know you've got you can have a consumer 0:20:58.680 --> 0:21:01.600 base of over two point seven billion people in your 0:21:01.640 --> 0:21:04.760 in your consumer base. What we have to start thinking 0:21:04.800 --> 0:21:08.680 about is our traditional institutions that we have to help 0:21:08.720 --> 0:21:12.440 people have the chance to enter that system because capital 0:21:12.520 --> 0:21:16.320 and has never been equal. I don't apologize for inequality. 0:21:16.880 --> 0:21:20.600 What I apologize for is inequality of opportunity. Is the 0:21:20.640 --> 0:21:23.800 conveyor belt there for people to have the chance to 0:21:23.840 --> 0:21:27.560 be able to participate should they desire to build the 0:21:27.600 --> 0:21:30.560 skills to do it. And that's what's happening. With the 0:21:30.600 --> 0:21:36.000