WEBVTT - How the White House Thinks About Economic Security 0:00:03.120 --> 0:00:18.560 Bloomberg Audio Studios, Podcasts, radio News. 0:00:20.120 --> 0:00:23.560 Hello and welcome to another episode of the Old Blots podcast. 0:00:23.680 --> 0:00:25.040 I'm Tracy Allaway. 0:00:24.760 --> 0:00:26.720 And I'm Joe. Why isn't thal Joe? 0:00:26.760 --> 0:00:31.200 We are recording this in August twenty twenty four, which 0:00:31.240 --> 0:00:34.800 means there's only six years to go. Six years to 0:00:34.840 --> 0:00:39.600 what six years until? According to John Maynard Keynes, we 0:00:39.680 --> 0:00:42.159 will have an era of abundance. 0:00:42.680 --> 0:00:42.839 Right. 0:00:42.920 --> 0:00:47.880 He wrote in nineteen thirty that he thought technological development 0:00:47.880 --> 0:00:51.000 would mean in one hundred years, which would be twenty thirty, 0:00:51.440 --> 0:00:54.960 that we would have a plethora of goods and elevated 0:00:55.120 --> 0:00:59.040 living standards and reduced working times and everything will be great. 0:00:59.320 --> 0:00:59.960 So I'm excited. 0:01:00.320 --> 0:01:02.560 Yeah, I think I can hang on with the sort 0:01:02.560 --> 0:01:06.679 of charge and toil scarcity mindset for another six years. 0:01:06.840 --> 0:01:08.960 Then we were reached nirvana here on earth. 0:01:09.280 --> 0:01:12.240 I mean, to be fair, he did sort of caveat. 0:01:11.840 --> 0:01:13.399 It, and I say, I have no idea where you're 0:01:13.440 --> 0:01:13.880 going with this. 0:01:14.040 --> 0:01:16.319 Yeah, okay, I promise I have a point and you're 0:01:16.360 --> 0:01:19.000 actually going to remember it in a second. But first 0:01:19.000 --> 0:01:22.720 I'm going to say that Caines did caveat his forecast, 0:01:22.760 --> 0:01:24.520 and he basically said, as long as there are no 0:01:25.000 --> 0:01:28.000 big wars or population booms. And that was in nineteen 0:01:28.080 --> 0:01:31.280 thirty so, you know, bad timing for both wars and 0:01:31.520 --> 0:01:32.319 population boos. 0:01:32.480 --> 0:01:34.040 So yeah, a few things happened. Maybe we've got to 0:01:34.120 --> 0:01:35.440 kick it back another fifty. 0:01:35.280 --> 0:01:39.280 Years, okay, But my point is, you know, in twenty 0:01:39.400 --> 0:01:43.520 twenty four, it feels like instead of abundance, there is 0:01:43.720 --> 0:01:46.319 very much And you touched on it just then this 0:01:46.400 --> 0:01:50.240 focus on scarcity. So maybe we have like, yeah. 0:01:50.040 --> 0:01:51.480 We love done here, Tracy, thank you. 0:01:51.880 --> 0:01:52.520 So maybe we. 0:01:52.560 --> 0:01:55.720 Have a lot of different types of goods that are 0:01:55.840 --> 0:01:58.320 available to us now, you know, I can go buy 0:01:58.560 --> 0:02:01.920 a pretty cool TV for not that much money. But 0:02:02.520 --> 0:02:05.520 in the past four years or so, we have seen 0:02:05.640 --> 0:02:09.959 shortages of very important items that have emerged. 0:02:10.400 --> 0:02:13.480 Yeah, and I would classify this into sort of two 0:02:13.639 --> 0:02:18.200 categories in my head, which is that there was sort 0:02:18.240 --> 0:02:22.120 of the acute scarcity of specific things that we saw 0:02:22.360 --> 0:02:25.560 during the COVID shock, and so you know, there were 0:02:25.560 --> 0:02:28.359 things like oh, suddenly we have a scarcity of protective 0:02:28.400 --> 0:02:32.320 equipment for doctors, or a certain type of lagging edge 0:02:32.400 --> 0:02:35.080 chip that went into automobiles, certain things like that that 0:02:35.240 --> 0:02:39.200 really became like scarce in that moment. But then I 0:02:39.240 --> 0:02:43.880 would say that maybe awakened a consciousness that we have 0:02:44.000 --> 0:02:48.720 these long term scarcities that are strategic in nature. So 0:02:48.760 --> 0:02:51.839 suddenly people worried about, well, do we have the minerals 0:02:52.240 --> 0:02:55.120 that we need in order to build out a domestic 0:02:55.280 --> 0:03:00.640 electric vehicle supply chain, do we have the industrial to 0:03:00.680 --> 0:03:05.040 build out things like semiconductors, concerns about the medical supply chain. 0:03:05.280 --> 0:03:09.320 And these are like long term strategic questions that aren't 0:03:09.480 --> 0:03:12.240 just related to sort of that exogenous shock that we 0:03:12.280 --> 0:03:13.400 got in March twenty twenty. 0:03:13.560 --> 0:03:17.280 Absolutely, and you just mentioned industrial capacity there. It does 0:03:17.400 --> 0:03:20.639 feel like governments around the world, and certainly the US, 0:03:20.880 --> 0:03:24.680 have become more active in how they manage some of 0:03:24.720 --> 0:03:27.720 these concerns. And I don't know if you remember, but 0:03:28.200 --> 0:03:31.040 back in twenty twenty, I think I frame this as 0:03:31.120 --> 0:03:35.680 like the choke point economy, where people become more concerned 0:03:35.680 --> 0:03:38.480 about the relative flow of goods and the idea of 0:03:38.880 --> 0:03:42.520 choke points in specific supply chains that sort of cascade 0:03:42.920 --> 0:03:45.400 through the rest of the economy. That was before we 0:03:45.440 --> 0:03:49.240 all started talking about the resurgence of industrial policy, but like, 0:03:49.320 --> 0:03:51.040 this is kind of what we're talking about. 0:03:51.120 --> 0:03:53.640 And then I think the other really important dimension here, 0:03:53.640 --> 0:03:55.720 and it fits right into what you're saying, is that 0:03:55.760 --> 0:03:59.160 we're seeing when it comes to things like industrial policy 0:03:59.200 --> 0:04:02.840 or reindustrialization, or this effort to build up semiconductor capacity. 0:04:03.040 --> 0:04:05.360 Part of it is sort of like pure economics, but 0:04:05.640 --> 0:04:09.440 is where you get this real intersection of economics and 0:04:09.760 --> 0:04:13.920 international security geopolitical anxiety, because a lot of this stuff 0:04:13.960 --> 0:04:18.919 is like building up capacity domestically in areas in which 0:04:19.400 --> 0:04:22.560 possible strategic rivals are independence of our. 0:04:22.720 --> 0:04:25.680 Right, and then of course how do you balance strategic 0:04:25.800 --> 0:04:28.200 independence with the risk of autarchy? 0:04:28.360 --> 0:04:29.119 Right, that's right. 0:04:29.279 --> 0:04:32.560 So I'm very pleased to say that we're getting back 0:04:32.600 --> 0:04:35.640 to our CIRCU twenty twenty roots. We're going to be 0:04:35.640 --> 0:04:38.880 talking about supply chains and a lot of other interesting things. 0:04:38.880 --> 0:04:41.880 But we really do have the perfect guest. We are 0:04:41.880 --> 0:04:44.359 going to be speaking with Deleep Seeingh. He is, of 0:04:44.400 --> 0:04:49.159 course the Deputy National Security Advisor for International Economics in 0:04:49.200 --> 0:04:52.560 the Biden administration. He's also the Deputy Director of the 0:04:52.720 --> 0:04:57.039 National Economic Council. He previously worked at Treasury and the 0:04:57.080 --> 0:05:00.320 New York Fed and Goldman and p Jim. So truly 0:05:00.720 --> 0:05:04.360 the perfect lots guest. Delip, thanks so much for coming 0:05:04.440 --> 0:05:04.880 on the show. 0:05:05.800 --> 0:05:07.599 Nice to be with you, Tracy and Joe. 0:05:07.920 --> 0:05:10.119 I think you are also the first all lots guests 0:05:10.120 --> 0:05:14.600 that might be coming to us from a secured, confidential 0:05:14.800 --> 0:05:17.400 room in the White House. So that's why the audio 0:05:17.640 --> 0:05:19.120 sounds a little bit different. 0:05:19.400 --> 0:05:21.880 Glad to be a pioneer. Yeah, you can, you can 0:05:21.920 --> 0:05:23.280 rest assured the line of secure. 0:05:24.480 --> 0:05:28.440 Okay, So I mentioned your career summary and it is 0:05:28.640 --> 0:05:30.440 very long. I just want to make sure did I 0:05:30.680 --> 0:05:33.600 hit all the important talking points? What have you been 0:05:33.600 --> 0:05:35.520 doing up until this particular moment. 0:05:36.000 --> 0:05:38.599 Yeah, I mean it's kind of a nonlinear career path. 0:05:38.680 --> 0:05:41.880 Some might say an incoherent one. But yes, I've spent 0:05:41.960 --> 0:05:45.040 roughly half of my career in the private sector, first 0:05:45.040 --> 0:05:47.760 in the tech boom during the nineties, then in financial 0:05:47.800 --> 0:05:51.800 markets at Goldman as the world hyper globalized during the 0:05:51.839 --> 0:05:54.920 two thousands, and then after the Financial Crisis of eight 0:05:55.400 --> 0:05:58.599 I've mostly been in government service at the Treasury, FED 0:05:58.839 --> 0:06:01.480 and now at the White House, excluding a year and 0:06:01.520 --> 0:06:04.120 a half at PGM as the Global Chief Economist and 0:06:04.279 --> 0:06:06.600 a similar type of role during the early Trump years. 0:06:06.680 --> 0:06:09.920 But really, the way I make sense of it is 0:06:09.960 --> 0:06:13.560 I've just my careers lived at the intersection of economics, geopolitics, 0:06:13.680 --> 0:06:17.240 and markets. It's essentially what I studied as an undergrad. 0:06:17.360 --> 0:06:20.279 Also in grad school. I actually thought, coming out of 0:06:20.279 --> 0:06:22.800 grad school, I might start a company in a developing 0:06:22.839 --> 0:06:25.000 country that could do well and maybe do some good. 0:06:25.600 --> 0:06:28.440 But my timing was pretty terrible. I was coming out 0:06:28.440 --> 0:06:31.000 of grad school in two thousand and three just after 0:06:31.040 --> 0:06:33.840 the dot com bubble had burst, and the moment wasn't 0:06:33.880 --> 0:06:36.719 exactly right for someone like me to get funded. And 0:06:36.760 --> 0:06:38.600 I also had hundreds of the hundreds of thousands of 0:06:38.680 --> 0:06:41.360 dollars in debt, so I grambled and took the only 0:06:41.400 --> 0:06:43.800 offer that was made to me, which was at Goldman Sachs. 0:06:44.279 --> 0:06:46.279 But you know, it gave me a particular lens through 0:06:46.279 --> 0:06:49.960 which to view the world, and over time I realized 0:06:50.000 --> 0:06:52.720 that sometimes you can see the world most clearly through 0:06:52.720 --> 0:06:55.600 the lens of markets, but I wanted to have I mean, 0:06:55.640 --> 0:06:59.480 I recognize that sometimes that lens can get distorted, and 0:06:59.560 --> 0:07:01.559 at other time it's better to look at the world 0:07:01.600 --> 0:07:05.159 through the lens of geopolitics or economics or technology. And 0:07:05.839 --> 0:07:08.960 my aspiration was to acquire as many lenses as possible. 0:07:09.480 --> 0:07:10.760 You know, if you want to make a push on 0:07:10.800 --> 0:07:12.600 the world, towards what it should be. You first have 0:07:12.640 --> 0:07:13.520 to see it for what it is. 0:07:14.480 --> 0:07:16.880 Joe, this is how I ended up at Bloomberg for 0:07:16.960 --> 0:07:20.320 my first job. They were the only news organization in 0:07:20.360 --> 0:07:23.840 London that was actually paying their interns, and so there 0:07:23.880 --> 0:07:27.640 you go, I realized I needed money. 0:07:27.880 --> 0:07:31.040 No, but the way you describe your career, you know, 0:07:31.080 --> 0:07:32.920 if you want to change the world, you first have 0:07:33.000 --> 0:07:36.800 to understand it. I think is like a like Tracy said, 0:07:36.840 --> 0:07:40.600 the perfect odd lots guests, especially given your private sector roles, 0:07:40.640 --> 0:07:45.440 public sector roles, economics, politics and markets, economics, geopolitics and markets, 0:07:45.840 --> 0:07:48.280 all the things that were interested. What does a Deputy 0:07:48.400 --> 0:07:51.680 National Security Advisor for international economics do? 0:07:51.880 --> 0:07:52.680 What is that role? 0:07:53.240 --> 0:07:56.400 Yeah, So basically it's to take on challenges that are 0:07:56.400 --> 0:07:59.360 at the intersection of economics and national security, whether they're 0:07:59.400 --> 0:08:02.840 domestic or or international. And the premise is that economic 0:08:02.840 --> 0:08:06.880 security is national security and vice versa. So if we're 0:08:06.880 --> 0:08:09.200 going to have strength at home, then we need to 0:08:09.240 --> 0:08:12.920 heal our divisions and revitalize our economy. That's what allows 0:08:12.960 --> 0:08:15.040 us to lead abroad. And if we can lead abroad 0:08:15.120 --> 0:08:18.520 from a position of strength, we'll create a safer, more 0:08:18.520 --> 0:08:21.520 prosperous world that reinforces all of our efforts at home. 0:08:21.640 --> 0:08:24.120 So I mean to bring it to life. Yeah, let 0:08:24.200 --> 0:08:26.480 me just give you an example of a few examples 0:08:26.480 --> 0:08:29.360 of what I do and no particular order. How can 0:08:29.400 --> 0:08:33.640 we launch a positive democratic alternative to the belt Road initiative? 0:08:34.200 --> 0:08:37.200 Can we design sanctions that change the calculus of Putin 0:08:37.559 --> 0:08:40.599 on prosecuting his war in Ukraine? Can we unlock the 0:08:40.679 --> 0:08:43.320 value of the Russian Central Bank reserves that we froze 0:08:43.559 --> 0:08:46.160 for the benefit of Ukraine as it fights for freedom. 0:08:46.720 --> 0:08:49.720 Can we design export controls in a way that don't 0:08:49.840 --> 0:08:52.400 dull the incentive for innovation You were talking about this 0:08:52.480 --> 0:08:56.480 in your opening, without seeding our crown technological jewels to 0:08:56.520 --> 0:08:59.679 a strategic adversary. Can we help to break the dead 0:08:59.679 --> 0:09:03.360 impact in the developing world to showcase our value proposition 0:09:03.400 --> 0:09:07.760 to countries that might be skeptical about our intentions? And 0:09:07.800 --> 0:09:11.040 then the passion project for me really is, can we reimagine, 0:09:11.400 --> 0:09:16.480 invent or revitalize the tools and institutions of American financial firepower? 0:09:16.880 --> 0:09:19.280 Because I mean, my view is we're living in the 0:09:19.280 --> 0:09:23.120 most intense period of geopolitical competition, at least since the 0:09:23.160 --> 0:09:27.640 Cold War ended. Maybe going much further back, and since 0:09:27.679 --> 0:09:30.960 the great powers of today are also nuclear powers, you know, 0:09:31.040 --> 0:09:37.120 barring catastrophic miscalculation, the logic of mutually assured destruction probably 0:09:37.160 --> 0:09:41.440 suggests that when confrontation occurs, it's less likely to play 0:09:41.480 --> 0:09:44.480 out on the military battlefield than it will in the 0:09:44.480 --> 0:09:47.520 theater of economics and technology. So we'd better go into 0:09:47.559 --> 0:09:51.080 this competition well armed, and we need to actually think 0:09:51.120 --> 0:09:52.079 really hard about how to. 0:09:52.000 --> 0:09:54.480 Do that cracy. We might get to this later, but 0:09:54.600 --> 0:09:56.880 one area that it might play out as in the 0:09:56.960 --> 0:09:57.640 Arctic circle. 0:09:58.200 --> 0:10:00.760 Oh yes, well, we should definitely talk about that. I'm 0:10:00.760 --> 0:10:04.480 trying to think of an elegant seg from mutually assured 0:10:04.520 --> 0:10:08.800 destruction back to supply chains, but I'll just do it, okay. 0:10:09.160 --> 0:10:12.680 So in twenty twenty, during the pandemic, we kind of 0:10:12.720 --> 0:10:15.840 woke up to the risk of supply chain disruptions and 0:10:15.880 --> 0:10:19.880 we saw a variety of things both big and small 0:10:20.000 --> 0:10:23.560 in terms of importance. So everything from I guess gatorade 0:10:23.679 --> 0:10:27.720 to the needles needed for vaccines and things like that. 0:10:28.280 --> 0:10:32.000 Suddenly there was a shortage. How do you in your 0:10:32.200 --> 0:10:39.520 position even begin to identify potential risks in the supply chain, 0:10:39.600 --> 0:10:44.560 and how do you go about evaluating their relative strategic importance. 0:10:45.440 --> 0:10:47.760 Yeah, so I mean this term, this phrase that gets 0:10:47.760 --> 0:10:51.640 thrown around supply chain resilience. I really think our task 0:10:51.720 --> 0:10:55.040 is to go beyond the abstractions and try to get 0:10:55.040 --> 0:10:58.160 into what it means in practice. And the context really matters, 0:10:58.200 --> 0:11:02.920 because the effort to revitalize our supply chain resilience, it's 0:11:02.960 --> 0:11:08.160 happening in the context of a multiplayer, multi stage geopolitical 0:11:08.160 --> 0:11:11.079 competition that's playing out across the world. So let me 0:11:11.120 --> 0:11:13.679 try to explain what I mean. So when people use 0:11:13.720 --> 0:11:16.240 this term supply chain resilience, the first question that we 0:11:16.400 --> 0:11:21.360 ask is resilience against what kind of shocks? Because they 0:11:21.440 --> 0:11:25.520 could be economic shocks, they could be geopolitical, climate health, 0:11:25.880 --> 0:11:29.120 all of the above. And each of these shocks, if 0:11:29.160 --> 0:11:32.720 they occur individually or collectively, they impose different kinds of 0:11:32.760 --> 0:11:37.120 stress on supply chains. So first, resilience against what? And 0:11:37.160 --> 0:11:39.520 then the second question is how do you define resilience. 0:11:39.679 --> 0:11:43.239 It comes in many different forms. It could be production capacity, 0:11:43.880 --> 0:11:47.840 It could be diversification of suppliers and buyers, you know, 0:11:47.880 --> 0:11:51.680 it could be having sufficient stockpiles that could plausibly absorb 0:11:52.040 --> 0:11:55.160 an exogenant shock, or it could be supply chain agreements 0:11:55.200 --> 0:11:58.000 with trusted partners that can surge capacity when the good 0:11:58.080 --> 0:12:01.560 or technology is scarce at home. And so, you know, 0:12:01.600 --> 0:12:03.959 what we have to evaluate now is should we think 0:12:04.000 --> 0:12:08.240 of these forms of resilience as economically equivalent or politically equivalent? 0:12:09.160 --> 0:12:12.440 And then is it really resilience that we're after? You know, 0:12:12.480 --> 0:12:16.040 maybe resilience is appropriate for certain supply chains, like you 0:12:16.080 --> 0:12:20.200 mentioned masks. In that category of good, you could argue 0:12:20.280 --> 0:12:23.720 we have no comparative advantage and margins are quite low, 0:12:24.480 --> 0:12:26.760 and so maybe resilience is the right word. But maybe 0:12:26.840 --> 0:12:29.520 resilience isn't really enough for a supply chain in which 0:12:29.559 --> 0:12:33.559 we have a clear national security nexus, like leading edge semiconductors, 0:12:33.600 --> 0:12:36.960 where the barriers to entry are very high, the economies 0:12:36.960 --> 0:12:39.319 of scale are very large, and you really want dominance. 0:12:39.960 --> 0:12:42.720 So I think there's a continuum between resilience and dominance, 0:12:42.720 --> 0:12:44.520 and you have to decide where do you want to 0:12:44.520 --> 0:12:47.360 be on that continuum. And then the fourth step is 0:12:47.440 --> 0:12:50.600 once once we define what we mean by resilience and 0:12:50.640 --> 0:12:53.319 we clarify with ourselves and our partners, is it really 0:12:53.400 --> 0:12:56.200 resilience we're after in this supply chain? What are the 0:12:56.200 --> 0:12:58.840 tools that we have and that we can deploy. Some 0:12:58.880 --> 0:13:01.240 of them are regulatory, that could be procurement, could be 0:13:01.320 --> 0:13:04.520 multilateral agreements, could be stockpiles. You know, it could be 0:13:04.600 --> 0:13:07.920 changed to our immigration policy. And then the last question, 0:13:07.960 --> 0:13:10.320 this is the hardest one, and this is where we 0:13:10.320 --> 0:13:13.319 really have to build our analytical muscles within the US government, 0:13:14.200 --> 0:13:16.959 is can we stress test and simulate if we use 0:13:16.960 --> 0:13:19.400 our tools in the way that's optimal for the United States, 0:13:20.040 --> 0:13:22.960 and we make assumptions about what our adversaries do, and 0:13:22.960 --> 0:13:26.199 then also non aligned countries and allies and partners, if 0:13:26.200 --> 0:13:28.760 we make assumptions about how that plays out over the 0:13:28.800 --> 0:13:31.200 course of five or ten years, are we net better 0:13:31.240 --> 0:13:34.640 off in equilibrium? That's the framework that I think we're 0:13:34.640 --> 0:13:36.959 trying to apply in every supply chain, and every supply 0:13:37.040 --> 0:13:38.920 chains a different story. I mean, there's some kind of 0:13:39.480 --> 0:13:43.040 Tolstoy logic behind it. And so pick a supply chain 0:13:43.040 --> 0:13:58.360 and we can get into the details. 0:14:00.559 --> 0:14:03.280 I'm really looking forward to getting into details and specific 0:14:03.360 --> 0:14:04.199 mechanisms and. 0:14:04.200 --> 0:14:05.000 Tools you have. 0:14:05.120 --> 0:14:06.679 I just want to you know, when you think about 0:14:06.679 --> 0:14:10.000 these like long term, we don't make five year plans 0:14:10.080 --> 0:14:12.800 in the US, in part because we don't know who's 0:14:12.840 --> 0:14:15.280 going to be in power in a year from now, 0:14:15.280 --> 0:14:18.440 and there's always changing. How do you think about at 0:14:18.480 --> 0:14:21.880 the abstract level or the big picture level, how do 0:14:21.920 --> 0:14:25.320 you think about the challenge of long term planning for 0:14:25.400 --> 0:14:28.440 some of these areas in a political system that is 0:14:28.480 --> 0:14:30.880 inherently by design, very volatile. 0:14:31.360 --> 0:14:34.800 It's very hard. About four decades have passed since we 0:14:34.880 --> 0:14:39.760 really practiced industrial policy in the United States, and some 0:14:39.880 --> 0:14:42.119 of those muscles that we used to have they've atrophied. 0:14:42.640 --> 0:14:44.480 And so that's what I was referencing when I said, 0:14:44.520 --> 0:14:48.400 we really do need to build an analytical infrastructure that's 0:14:48.400 --> 0:14:51.240 fit for purpose. Now it may be that the political 0:14:51.360 --> 0:14:54.920 judgments that are made, even with the best analysis, are 0:14:54.960 --> 0:14:56.680 going to take us in a very different place than 0:14:56.760 --> 0:15:01.040 the analysis would suggest we should. But we first have 0:15:01.080 --> 0:15:03.320 to do our homework. If we have tools that can 0:15:03.360 --> 0:15:07.360 boost our supply chain resilience, really you can apply the 0:15:07.480 --> 0:15:10.240 use of tools to any kind of geopolitical objective, not 0:15:10.280 --> 0:15:13.400 just supply chain resilience. Can we take inventory of all 0:15:13.440 --> 0:15:16.840 of those tools, When have they worked well when they're 0:15:16.920 --> 0:15:21.000 used alone or in tandem, when they're used unilaterally versus 0:15:21.080 --> 0:15:25.040 multilaterally with allies and partners. What are the limitations of 0:15:25.160 --> 0:15:27.360 using those tools, What are the trade offs? What are 0:15:27.360 --> 0:15:30.760 the spillovers? And then I don't think we have good 0:15:30.840 --> 0:15:34.800 models yet for thinking about how we're left in a 0:15:35.280 --> 0:15:36.880 if you want to think about it in a general 0:15:36.920 --> 0:15:40.000 equilibrium sense, if we deploy the tools that we have 0:15:40.720 --> 0:15:43.200 and they play out in the manner that we expect, 0:15:43.720 --> 0:15:46.160 how do we think about whether we're not better off 0:15:46.200 --> 0:15:49.440 when we consider how our adversaries might respond, or allies 0:15:49.520 --> 0:15:53.040 or partners or not aligned countries. Those models don't exist. 0:15:53.120 --> 0:15:54.720 I mean, I don't think you can use the fed's 0:15:54.800 --> 0:15:58.680 large scale general equilibrium models to find an answer. We 0:15:58.720 --> 0:16:01.920 have to invent those. So that's just the analysis part. 0:16:02.040 --> 0:16:05.520 And I think we have to build, my mind, a 0:16:05.600 --> 0:16:10.040 multidisciplinary swat team of sorts, with different kinds of expertise 0:16:10.080 --> 0:16:15.240 and a variety of disciplines I mean microeconomics, macro financial forensics, 0:16:15.280 --> 0:16:20.160 trade finance, diplomacy, international law, domestic law. And that's going 0:16:20.200 --> 0:16:22.880 to take time to build. Ultimately, though, I mean, you're 0:16:22.920 --> 0:16:25.960 asking the question of what happens if you have an 0:16:26.000 --> 0:16:30.880 abrupt political shift and we no longer stick to the 0:16:30.880 --> 0:16:34.040 plan that might have been imagined by a previous administration. 0:16:34.200 --> 0:16:36.520 That is a feature of democracy. You can look at 0:16:36.520 --> 0:16:39.120 it as a bug because we can't make long term 0:16:39.160 --> 0:16:42.240 plans in the way that an autocracy can. But it 0:16:42.280 --> 0:16:44.960 also prevents us from making big mistakes. You could argue, 0:16:45.120 --> 0:16:47.320 we have these checks and balances and we have to convince. 0:16:47.360 --> 0:16:48.720 I mean, a lot of the work that I think 0:16:48.760 --> 0:16:52.840 I do our team performs it should have bipartisan appeal. 0:16:53.560 --> 0:16:55.360 We think all the time about how do we sustain 0:16:55.400 --> 0:16:58.800 our technological pre eminence, how do we ensure that we 0:16:58.840 --> 0:17:02.080 have energy security, how can we shore up our resilience 0:17:02.080 --> 0:17:05.160 and critical supply chains. I don't think of those as 0:17:05.160 --> 0:17:08.720 being inherently partisan issues. Of course, they become part of 0:17:08.760 --> 0:17:11.680 the theater, but in their essence, we're just trying to 0:17:11.680 --> 0:17:13.960 think about what are the long term strategic objectives of 0:17:14.000 --> 0:17:16.120 this country, putting aside the politics of the day. 0:17:17.320 --> 0:17:21.720 Okay, So, in the spirit of moving away from abstraction 0:17:22.160 --> 0:17:25.960 about you know, catchphrases like supply chain, resilience and things 0:17:26.040 --> 0:17:29.399 like that, can you maybe give us a specific example 0:17:29.800 --> 0:17:34.720 of what you've done to shore up a specific thing 0:17:35.280 --> 0:17:39.840 or even service, walk us through the process of identifying 0:17:39.880 --> 0:17:43.199 it as something that is worth the government's time and 0:17:43.359 --> 0:17:48.359 effort to coming up with particular solutions and evaluating those 0:17:48.400 --> 0:17:50.840 different solutions versus the problem. 0:17:51.880 --> 0:17:53.760 Yeah. Sure, I mean, I'll give you a recent example 0:17:54.080 --> 0:17:57.320 from actually from last month. It's the polar Icebreaker deal. 0:17:57.800 --> 0:18:01.320 So on the sidelines of the NATO summit, the deal 0:18:01.400 --> 0:18:04.360 was President Biden and his counterparts in Finland and Canada. 0:18:05.080 --> 0:18:07.040 They announced the deal called the ice Pack, the ice 0:18:07.080 --> 0:18:11.760 Breaker Collaboration Effort. And here's the backdrop. I mean, the 0:18:11.800 --> 0:18:16.159 North Pole is warming rapidly. It's warming four times faster 0:18:16.280 --> 0:18:18.960 than the rest of the world. That means the Arctic 0:18:19.040 --> 0:18:22.560 ice is melting, and the melting accelerates the warming because 0:18:22.600 --> 0:18:27.080 the sea absorbs the heat from sunlight, whereas ice reflects it. 0:18:27.720 --> 0:18:31.160 And less ice means more Arctic shipping lanes that have 0:18:31.320 --> 0:18:35.679 shorter transits that bypass choke points in the Suez or 0:18:35.720 --> 0:18:40.199 Panama Canal. And less ice also means more commercial opportunity 0:18:40.200 --> 0:18:44.280 if you want to extract critical minerals or lay undersea 0:18:44.440 --> 0:18:47.760 data cables in the Arctic. And then it also creates 0:18:48.080 --> 0:18:50.119 and this is where my role at the intersection of 0:18:50.119 --> 0:18:53.959 economics and national security comes in. It creates geopolitical space 0:18:54.480 --> 0:18:58.359 to project military power, and Russia and China both have 0:18:58.480 --> 0:19:02.040 high ambitions in the Arctic. With a larger surface fleet 0:19:02.160 --> 0:19:04.360 that will be able to navigate the Arctic in ways 0:19:04.359 --> 0:19:06.840 that it couldn't when there was more ice. But for 0:19:06.920 --> 0:19:11.000 any of those opportunities to be realized, you need ice breakers. 0:19:11.560 --> 0:19:13.840 We only have two of them. Both of those ice 0:19:13.840 --> 0:19:16.879 breakers were built in the nineteen seventies. They're both past 0:19:16.960 --> 0:19:20.200 their service life, and it's taking a long time and 0:19:20.240 --> 0:19:23.239 a lot of money to replace these ice breakers and 0:19:23.359 --> 0:19:26.240 build a full US fleet to take advantage of the 0:19:26.280 --> 0:19:29.679 opportunities I mentioned. So that means we have to rebuild 0:19:29.720 --> 0:19:34.359 our productive capacity in building this highly specialized, highly complex 0:19:34.440 --> 0:19:38.320 niche of ships called polar ice breakers. And if you 0:19:38.359 --> 0:19:40.159 want to do that, you first have to have no 0:19:40.280 --> 0:19:43.080 how and expertise. You probably need to have economies of 0:19:43.119 --> 0:19:46.439 scale to make it financially viable, and then you need 0:19:46.480 --> 0:19:49.639 a steady demand signal to justify the upfront costs and 0:19:49.680 --> 0:19:52.919 capex and also investments in the workforce. Well, this is 0:19:52.920 --> 0:19:57.000 where your allies matter. Friends matter. So enter Finland. It's 0:19:57.040 --> 0:20:00.919 a newly minted NATO ally right. It joined after Russian 0:20:00.920 --> 0:20:05.560 invaded Ukraine. It's widely recognized as the world's best designer 0:20:05.760 --> 0:20:09.240 and leading producer of polar ice breakers. You may have 0:20:09.359 --> 0:20:12.600 heard at some point about the Helsinki Shipyard. It's actually 0:20:12.600 --> 0:20:16.159 produced more than half of the world's total fleet. Canada 0:20:16.240 --> 0:20:18.840 is also a leading player, and actually one of its 0:20:18.880 --> 0:20:22.960 firms bought the Helsinki shipyard after its previous owners, a 0:20:23.000 --> 0:20:26.520 couple of Russian oligarchs were caught up in sanctions after 0:20:26.560 --> 0:20:29.800 Putin invaded Ukraine. So this gets really interesting. And the 0:20:29.880 --> 0:20:33.280 deal we announced at NATO is for Finland and Canada 0:20:33.400 --> 0:20:36.399 to share their expertise with US and make investments in 0:20:36.560 --> 0:20:40.520 US shipyards to grow our collective production capacity to build 0:20:40.560 --> 0:20:44.000 ice breakers. And what do they get. Well, in exchange, 0:20:44.320 --> 0:20:47.920 we agree to integrate our ice breaking supply chains so 0:20:47.960 --> 0:20:52.119 that they are interoperable at every stage of production. And 0:20:52.160 --> 0:20:56.320 then ultimately our vision collectively all three countries, it's to 0:20:56.359 --> 0:20:59.240 create a suppliers club that can capture a greater share 0:20:59.280 --> 0:21:01.600 of the global order book. And it's a big global 0:21:01.680 --> 0:21:03.879 order book. There's a long list of allies and partners 0:21:03.920 --> 0:21:07.600 that understand what's happening in the Arctic and they want 0:21:07.600 --> 0:21:09.560 to build ice breakers for the same reasons that we do, 0:21:09.840 --> 0:21:12.480 but they don't have a shipyard. And our best estimate 0:21:12.520 --> 0:21:15.800 is that the global total global demand for ice breakers 0:21:15.920 --> 0:21:19.159 over the next decade from allies and partners is between 0:21:19.200 --> 0:21:22.399 seventy and ninety vessels. That's a lot. And so if 0:21:22.440 --> 0:21:25.080 we can pull this off, we get three benefits at once. 0:21:25.200 --> 0:21:28.600 We revitalize our capacity to innovate and produce at scale 0:21:28.960 --> 0:21:32.960 in a key industrial segment number one. Number two, we 0:21:33.320 --> 0:21:37.040 safeguard our national security and project power in a key 0:21:37.080 --> 0:21:40.679 geostrategic region number two. And then number three, it's not 0:21:40.840 --> 0:21:44.879 zero sum. You know, we strengthen our allies and partnerships 0:21:44.920 --> 0:21:48.280 as we execute this deal. That's not a bad trifecta. 0:21:49.320 --> 0:21:53.280 What happened to you as shipbuilding capacity in general, that 0:21:53.359 --> 0:21:58.000 it's become so constrained or atrophied. And when you talk 0:21:58.040 --> 0:22:01.719 about this agreement with Canada and Finland, what kind of 0:22:02.040 --> 0:22:06.719 numbers and concrete mechanisms are there other than just obviously 0:22:07.119 --> 0:22:09.879 the handshake or the agreement to do something. 0:22:10.320 --> 0:22:14.320 Our shipbuilding industry is atropheed. Over the course of decades, 0:22:14.800 --> 0:22:18.760 we began to outsource, just like in many other industries 0:22:18.760 --> 0:22:22.639 in which there's a large upfront capex investment required and 0:22:22.680 --> 0:22:27.640 low margins. We outsourced that type of business overseas. So 0:22:27.760 --> 0:22:31.000