:00:00. > :00:19.Welcome to HARDtalk. I am Stephen Sackur. The Western world, for so
:00:20. > :00:24.long the dominant force in global politics and economics, is confused
:00:25. > :00:30.and uncertain. In the past week, elections in the UK and France have
:00:31. > :00:39.pointed to fractures in Europe. Donald Trump's worldview and Angela
:00:40. > :00:44.Merkel's are poles apart. In the West consensus is no more. My guest
:00:45. > :00:49.is Stephen King, influential economist, writer, and chief
:00:50. > :00:52.economist to HSBC Bank. Is liberalisation stuck in reverse
:00:53. > :01:28.gear? -- globalisation. Welcome to HARDtalk. Given the
:01:29. > :01:32.dramatic nature of events in the UK, we have to start with Britain and
:01:33. > :01:38.moved to the world as a whole. The UK. We have just seen an election
:01:39. > :01:43.that has brought about a hung parliament and the sense that no one
:01:44. > :01:48.knows really what the government Theresa May forms will actually do
:01:49. > :01:52.about Brexit and other challenges. Do you feel a deep sense of
:01:53. > :02:01.incoherence and uncertainty in Britain? There is. Brexit was 52- 48
:02:02. > :02:05.in favour of leaving the EU. 40 84 Remain. Those who wanted to leave,
:02:06. > :02:11.they were a variety of different views as to what people wanted. Some
:02:12. > :02:16.had an astounding view of things in the past in the 1960s when
:02:17. > :02:23.globalisation was getting on their way. Others said the EU was far too
:02:24. > :02:27.protective. We are better off outside of it to recover
:02:28. > :02:32.productivity. Others focused on the issues of migration. That was
:02:33. > :02:39.clearly an issue for many people in the UK to be in many ways, the vote
:02:40. > :02:43.for Brexit was a vote against the EU. It is that split that has made
:02:44. > :02:49.life so difficult for politicians across the political spectrum over
:02:50. > :02:55.the last few months. When we talk about that, we must remember the
:02:56. > :02:59.Conservative Party under Theresa May got 43% of the vote, but 40% of the
:03:00. > :03:05.vote went to Jeremy Corbyn and the Labour Party, selling a hard left
:03:06. > :03:15.and radically socialist agenda at a tax and spend agenda. In terms of
:03:16. > :03:19.Britain and a broad consensus over years about liberal economics and
:03:20. > :03:26.open economies and embracing globalisation, is that at an end?
:03:27. > :03:30.There was little debate about something that matters, economic
:03:31. > :03:36.growth. Economic growth, you have decent growth with tax revenues. You
:03:37. > :03:41.can do a lot with public spending. You can target pensions and
:03:42. > :03:46.healthcare as well. What you want to do. In the past ten years, we have
:03:47. > :03:51.seen little economic growth. We are battling over the spoils of economic
:03:52. > :03:57.activity. That battle becomes awful to be on the one hand, some say it
:03:58. > :04:01.should be a low tax economy. That only benefits the wealthy according
:04:02. > :04:06.to some people. You could have a high spending economy. Evidence from
:04:07. > :04:12.around the world is if you have high public spending you can squeeze out
:04:13. > :04:18.entrepreneurial activity. Both parties refused to discuss how you
:04:19. > :04:21.make the cake bigger. As a consequence, they were not able to
:04:22. > :04:32.discuss how to create revenue to do what they want to achieve. My point
:04:33. > :04:37.is borne out of your book, Brave New World, talking about globalisation.
:04:38. > :04:41.It seems there is a lesson from the United States, where one can argue
:04:42. > :04:46.Donald Trump, whatever he actually is in terms of a successful
:04:47. > :04:52.billionaire businessman, he is no fan of globalisation and small L
:04:53. > :04:59.liberal economics. One can say the same arguably about Theresa May and
:05:00. > :05:06.certainly Jeremy Corbyn, and others like Bernie Sanders in the US. There
:05:07. > :05:12.seems to be a move away in the West in many different countries away
:05:13. > :05:17.from this liberal consensus, of which globalisation is an important
:05:18. > :05:21.part the pillar absolutely. What has happened is the narrative has
:05:22. > :05:25.changed. Go back to before the financial crisis. 1989 with the
:05:26. > :05:46.Berlin Wall. There was a powerful sense at the time that the world
:05:47. > :05:49.could be a better place with Western liberal and democratic values, and
:05:50. > :05:53.the world could be better and the West could trade with China or
:05:54. > :05:56.Brazil, etc. But we have seen growth rates slow down dramatically, even
:05:57. > :06:01.in China and India. There has also been a much bigger sense of winners
:06:02. > :06:05.and losers in the West. Inequality. Bernie Sanders was telling me just
:06:06. > :06:09.the other day that as far as he is concerned, the rise of the
:06:10. > :06:13.billionaire oligarch class is one of the fundamental sicknesses that is
:06:14. > :06:20.undermining the health of his nation, the United States, today. It
:06:21. > :06:23.is possible. If you look around the world, you realise that
:06:24. > :06:28.globalisation has actually dragged a huge number of people out of the
:06:29. > :06:34.tea. Bernie Sanders said during the campaign that he said it wasn't
:06:35. > :06:38.working for the US and elsewhere. -- out of poverty. I think that is a
:06:39. > :06:43.mistake. In the US, you have winners and losers. In China, you have had
:06:44. > :06:47.an extraordinary transformation in living standards over the past few
:06:48. > :06:52.years. It has a different effect on things. In China, income equality
:06:53. > :06:57.has gone up because of a dramatic increase in globalisation. Others
:06:58. > :07:01.remain in poverty, but many have been lifted out of it. The US and
:07:02. > :07:07.Europe. It is a different story. Some have been left behind for one
:07:08. > :07:13.reason and others have done well for another copy it is a Western
:07:14. > :07:19.difficulty, not a global one. In the US, you want high levels of income
:07:20. > :07:23.equality in the usual way. In the case of the UK and Europe, it is
:07:24. > :07:29.more complex. You have an increase in overall income equality. But you
:07:30. > :07:33.have dramatic increases in regional income inequality. London has done
:07:34. > :07:39.well in the last 30 years. Wales, you have been left behind. In the
:07:40. > :07:45.Eurozone, Europe, Germany, you are doing quite well... In a sense you
:07:46. > :07:48.have got a stake in this because you work for one of the biggest
:07:49. > :07:54.transnational corporate banks for many years, the chief economic
:07:55. > :07:58.adviser. You ever a system where the banks were bailed out for totally as
:07:59. > :08:06.unstable behaviour in 2007 and eight. -- oversaw it. You also
:08:07. > :08:14.oversaw a financial system that helps the very rich and did nothing
:08:15. > :08:21.for the low and middle earners. Over a generation, if you live in the
:08:22. > :08:30.United States, Europe, your living standards have not only risen by ten
:08:31. > :08:34.many cases have actually gone down. -- but in. I provided advice to many
:08:35. > :08:39.people. I did not have the power to give those kinds of results. You
:08:40. > :08:45.were not the architect of the system, you were a happy and
:08:46. > :08:52.comfortable cog in the wheel, if you like. You must have seen in 2008 the
:08:53. > :08:59.fallout of the crash which are so many people. It is worth
:09:00. > :09:02.remembering. In the period before 2007, there were warnings about what
:09:03. > :09:10.might happen. No one got the whole story. I was writing in 2003, 2004,
:09:11. > :09:16.about the dangers of the US housing bubble, for example. Clearly, house
:09:17. > :09:22.prices were rising quickly. Look at the US at the time. There was little
:09:23. > :09:26.willingness to speak about these dangers and listen to them. In
:09:27. > :09:31.hindsight, there was a bubble. Look at the attitude of the US government
:09:32. > :09:36.at the time, whether it was the administration, Congress, they said
:09:37. > :09:43.we need a property owning democracy. Look at regulators. They were happy
:09:44. > :09:48.to allow the growth of so-called sub-prime lending. Many things were
:09:49. > :09:52.going on. When I warned of these kinds of things, and other people as
:09:53. > :09:57.well, who were warning about the dangers associated with it, there
:09:58. > :10:03.was a collective unwillingness to listen, whether you where a bank, a
:10:04. > :10:08.Finance Minister... The power of the system is vested very clearly with
:10:09. > :10:12.transnational corporations and an elite who are tied into the
:10:13. > :10:18.political system and who can game it. That may be changing right now.
:10:19. > :10:29.To go back to the British election, you remain a key economical voice in
:10:30. > :10:34.Britain. Who does Theresa May listen to when she has to put together a
:10:35. > :10:39.Brexit strategy? The argument is in recent times, frankly, big business
:10:40. > :10:44.has been somewhat discredited in the eyes of the public, she has not been
:10:45. > :10:50.listening to them. I think the way she has put her policies across is
:10:51. > :10:53.look at the person in the north of England, Wales, whatever, she wants
:10:54. > :10:57.to reach out to more people. Big business has in one sense been
:10:58. > :11:03.ignored. That is highly understandable. I saw a survey after
:11:04. > :11:09.the election from the Institute of Directors, which has seen 67% of
:11:10. > :11:13.business leaders professing to be either quite or very pessimistic
:11:14. > :11:20.about the future of their businesses in the UK today. To you, does that
:11:21. > :11:25.represent something of a crisis here in the UK in terms of where the
:11:26. > :11:33.economy is going to go as Brexit uncertainty continues? Part of the
:11:34. > :11:38.in -- uncertainty is do we have access to the single market, if we
:11:39. > :11:44.have it, what do we have access to? Britain attracts lots of business
:11:45. > :11:49.from abroad with transnational corporations. It does so because it
:11:50. > :11:53.has a flexible labour market, the English language, all of these
:11:54. > :11:57.advantages. People come to Britain precisely because they want proper
:11:58. > :12:04.full access to the single market so they can sell to the whole of Europe
:12:05. > :12:07.by building cars, for example, in Britain. If it turns out these
:12:08. > :12:16.companies, Japanese, American, whatever companies, if they have no
:12:17. > :12:21.access, risky access, they may go to Germany, Poland, wherever. Do you
:12:22. > :12:28.read where we sit today? You are a much more loose adviser to HSBC now.
:12:29. > :12:31.Not the chief adviser. They are classic transnational business with
:12:32. > :12:37.a long history in London as well as Hong Kong. That is true. Going
:12:38. > :12:41.forward, the directors, bosses, those of HSBC, they have to make a
:12:42. > :12:48.choice, do we continue to invest in eight London headquarters, or do we
:12:49. > :12:54.put more future investment into a European hub or Hong Konga London.
:12:55. > :13:02.The Prime Minister, so much confusion. Hard Brexit, soft Brexit,
:13:03. > :13:07.what is a boardroom like HSBC doing? I cannot speak for them as I do not
:13:08. > :13:11.represent them. But in terms of any company, whether it is American,
:13:12. > :13:15.Japanese, whatever it might be, they will be thinking hard about whether
:13:16. > :13:20.Britain is the right place to be copied the consequence for Britain
:13:21. > :13:25.is they have a balance of payments deficit over the last few years
:13:26. > :13:31.funded by investment coming from abroad. Is that funding does not
:13:32. > :13:35.come through, the sterling could be weaker. -- if. That could be good
:13:36. > :13:41.for exports. But that is not right. It raises import prices. It means
:13:42. > :13:48.prices in the shops go up. It means a lower wage rise. One of the
:13:49. > :13:53.ironies of the Brexit vote is many people who might have voted for
:13:54. > :13:56.Brexit in England or Wales, wherever, as a consequence of the
:13:57. > :14:00.falling sterling and spending power, they are worse off.
:14:01. > :14:09.I think one of the economic forecasting groups said the hard
:14:10. > :14:13.Brexit, which is pulling out with no deal on preferential access to the
:14:14. > :14:19.single market, they said that it could cost, over the next ten years,
:14:20. > :14:23.2.6% of GDP. If we go for a so-called Norway option, for access
:14:24. > :14:29.to the civil market, even though no voice in how it is shaped, that
:14:30. > :14:35.might be half as damaging, 1.3% loss over the decade. In your view, how
:14:36. > :14:39.grave is the threat hanging over the United Kingdom, today, in terms of
:14:40. > :14:41.economic damage done? Burst of all, I should reveal my own preferences.
:14:42. > :14:45.I voted remain, so I had economic I voted remain, so I had economic
:14:46. > :14:50.concerns about the consequences of any kind of Brexit. I would also
:14:51. > :14:55.note that if you interpret Brexit is a vote against, three double,
:14:56. > :14:59.immigration, it is a difficult under those circumstances to the Norwegian
:15:00. > :15:03.type model. -- first of all. Freedom of labour, movement of labour, is
:15:04. > :15:08.one of the pillars of physical market. If you refuse that, then you
:15:09. > :15:14.this cannot have full access to the civil market. And the desire to have
:15:15. > :15:18.an a la carte menu, to pick that and the other, within the EU itself,
:15:19. > :15:24.those rules, it makes a difficult those rules, it makes a difficult
:15:25. > :15:28.summer can easily do have full control over immigration and at the
:15:29. > :15:30.same time be a member of either the single market or the European
:15:31. > :15:42.Economic Area. -- it make full control over. You have just
:15:43. > :15:49.come from the United States, where you have witnessed, as we all do,
:15:50. > :15:55.Donald Trump's impact on America. All the legal issues, Russia,
:15:56. > :16:00.investigation issues, but let's just talk about Donald Trump and
:16:01. > :16:03.economics. His message is one of America first. An embrace of the
:16:04. > :16:08.idea of protectionism when necessary for American jobs. The building of
:16:09. > :16:15.walls were necessary to stop people coming into his country. It is the
:16:16. > :16:19.liberal open economics that we have liberal open economics that we have
:16:20. > :16:23.talked about as the consensus for the last generation. Add to that,
:16:24. > :16:30.you know, the message coming from Britain, and would you say that we
:16:31. > :16:34.are at the end of an era in terms of the West's economic thinking? I
:16:35. > :16:44.think we probably are. If you go back a long way to 1944, the
:16:45. > :16:48.so-called Brettoneaux conference. These institutions recognise
:16:49. > :16:55.something important, which was that countries connected with each other
:16:56. > :17:01.and engage with each other. People had learnt after the terrible extras
:17:02. > :17:04.of the interwar period that having countries that did not relate to
:17:05. > :17:10.each other, did not engage with each other, was very damaging. --
:17:11. > :17:15.Bretonneux. Trying to avoid the damages of the Treaty of Versailles,
:17:16. > :17:26.you have money coming through to Europe, a generous act by the US,
:17:27. > :17:29.you had the seeds being signed for what eventually became the European
:17:30. > :17:33.Union. The importance of each of these that was by creating the rules
:17:34. > :17:36.of the game internationally, trade connections, connections and other
:17:37. > :17:40.people and their movement, and so on, it meant, in one sense, that
:17:41. > :17:44.wealth and income could rise pretty swiftly. But what has happened over
:17:45. > :17:48.the last ten or 15 years, partly because of the growth and the
:17:49. > :17:54.increase in income equality, there is a sense that these institutions,
:17:55. > :18:02.in fact, all the global economy, has failed. It has raised questions
:18:03. > :18:07.about the security of the nationstate. A retreat in the West,
:18:08. > :18:11.but not a retreat in the years. China is not talking about
:18:12. > :18:16.retreating. China is absolutely... Beijing is entirely happy about
:18:17. > :18:19.this, because it gives China an opportunity to create its own form
:18:20. > :18:23.of globalisation, which competes... It is a very different brand of
:18:24. > :18:28.globalisation that we now need to look towards and to understand as
:18:29. > :18:34.perhaps the pre-eminent force of the 21st century. I have this sense, and
:18:35. > :18:42.this is a long historical sweep, of where we move from eight pre-
:18:43. > :18:45.Columbus world where post Columbus world. The point about this is that
:18:46. > :18:51.we have lived all allies with a sense of it is Europe, it is the US,
:18:52. > :18:55.it is basically the West that governs the world. -- a
:18:56. > :19:02.pre-Columbus. And you can take this back to Columbus. PCs of European
:19:03. > :19:07.empire building? Absolutely. And that reaches into a populace is with
:19:08. > :19:13.you as having the dominant power after the Second World War and of
:19:14. > :19:17.course with the fall of the Berlin wall and so on, the thought was that
:19:18. > :19:21.Western values had won. -- apotheosis. Because the West has
:19:22. > :19:26.lost its way, and other countries have been successful, especially
:19:27. > :19:34.China, we start to see these questions coming through. With
:19:35. > :19:40.Donald Trump, he said that they would withdraw from the transpacific
:19:41. > :19:44.partnership. This would link North America, South America, and Asia, to
:19:45. > :19:48.create a trading bloc, whereby a ready could agree on the rules of
:19:49. > :19:57.the game and engage with each other. Important, of course, be DPP
:19:58. > :20:05.excluded China. -- TPP. This book is subtitled the And of Globalisation.
:20:06. > :20:08.Whatever the politics of the day in the United States are indeed the
:20:09. > :20:13.United Kingdom is, those forces might include the unfolding, or the
:20:14. > :20:17.third unfolding of the digital age, the Internet, and within that goes
:20:18. > :20:21.with it. -- End. You could include artificial intelligence, robotics,
:20:22. > :20:26.3-D printing, all of these things. Surely they are going to leave us
:20:27. > :20:31.all interconnected. Whether we like it or not. That is a natural
:20:32. > :20:35.conclusion. Although you can cast doubt on some of this. The reason I
:20:36. > :20:40.do that is not because of technology that has come of what you do that.
:20:41. > :20:45.So if you look at previous eras of globalisation... Bec technology
:20:46. > :20:49.tries to globalisation, doesn't? Not tries to globalisation, doesn't? Not
:20:50. > :20:56.necessarily. It decrease the cost of medication around the world. -- but
:20:57. > :21:01.technology. Social media, I think, has credit circumstances where you
:21:02. > :21:05.have a herding of idea, which is of pursuit of belief, rather than a
:21:06. > :21:13.pursuit of truth. -- decreases. Under those circumstances, it makes
:21:14. > :21:16.it possible for politicians to be popular who would not have been
:21:17. > :21:21.years ago. Donald Trump was delayed at exploiting social media. People
:21:22. > :21:27.might live at his Twitter accounts, but it did well for him. One of the
:21:28. > :21:30.biggest issues in late 20 century was the growth of what has been
:21:31. > :21:35.described as global supply chains. You make something and... You have
:21:36. > :21:40.your iPhone and it is made in China and sold for a vast amount in the
:21:41. > :21:44.US. Nevertheless, you have this global supply chain. Capital can go
:21:45. > :21:48.in search of relatively low-cost labour in different parts of the
:21:49. > :21:53.world. But imagine a world where by robotics means that robots are even
:21:54. > :21:58.cheaper than the low-cost labour. And why not bring the production
:21:59. > :22:03.backup? That process of reshoring will be eight interesting and
:22:04. > :22:08.potentially dangerous tree of the next decade. Because the more that
:22:09. > :22:14.you reshore, the more difficult it is to spread well to other parts of
:22:15. > :22:22.the world, so it will be harder to catch up. One of betrayed that --
:22:23. > :22:28.when I betrayed you as a big fish, it seems to me that you spend your
:22:29. > :22:32.entire career at the heart of a financial and economic system which
:22:33. > :22:37.looked forward with great optimism to the future, because it felt to me
:22:38. > :22:41.and you, at your HSBC bank, you are part of it, you felt that the world
:22:42. > :22:47.was yours, going in your direction. Do you not feel that any more? Do
:22:48. > :22:50.you feel... I know that you have left HSBC, but you still represent
:22:51. > :22:58.an important and influence are worse in the West. You still fear for the
:22:59. > :23:01.future? Yes. -- influential force. I think when people west such a
:23:02. > :23:05.retreat into the idea of nationstates, it starts to define
:23:06. > :23:10.itself as asked against them, whoever they might be. Globalisation
:23:11. > :23:14.was once a desire or mechanism to reduce the dam in the world. It was
:23:15. > :23:18.us altogether. Some might dispute that. But it is dramatic reductions
:23:19. > :23:23.in terms of global poverty of the last 30 or 40 years, you could say
:23:24. > :23:28.that this a great powerful and in economic terms a very successful
:23:29. > :23:31.story. But when you return to the nationstates and start talking about
:23:32. > :23:34.us and them, you end up with a much more antagonistic relationship
:23:35. > :23:38.between different countries around the world. And the most obvious
:23:39. > :23:43.antagonistic relationship that might exist in the year ahead is the
:23:44. > :23:50.existing superpower and the aspiring superpower, namely the relationship
:23:51. > :23:58.between the US and China. And then going back to the pre-post-Columbus
:23:59. > :24:02.world, if you go back and look at all these Chinese led organisations,
:24:03. > :24:06.that is cut are familiar. Because this is something I recognised from
:24:07. > :24:12.my pre- Columbus Day. Back to the future? Back to the future. Stephen
:24:13. > :24:21.King, we have two and about. They give a much indeed. -- we have too
:24:22. > :24:22.end it there. Thank you very a much indeed.
:24:23. > :24:39.Yesterday was a bit of a breezy day for most parts of the UK,
:24:40. > :24:42.with a fair bit of cloud and a little bit of sunshine.
:24:43. > :24:46.In the north-west of the UK, we got temperatures up