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Stephen King - Economist

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Welcome to HARDtalk. I am Stephen Sackur. The Western world, for so

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long the dominant force in global politics and economics, is confused

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and uncertain. In the past week, elections in the UK and France have

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pointed to fractures in Europe. Donald Trump's worldview and Angela

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Merkel's are poles apart. In the West consensus is no more. My guest

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is Stephen King, influential economist, writer, and chief

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economist to HSBC Bank. Is liberalisation stuck in reverse

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gear? -- globalisation. Welcome to HARDtalk. Given the

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dramatic nature of events in the UK, we have to start with Britain and

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moved to the world as a whole. The UK. We have just seen an election

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that has brought about a hung parliament and the sense that no one

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knows really what the government Theresa May forms will actually do

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about Brexit and other challenges. Do you feel a deep sense of

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incoherence and uncertainty in Britain? There is. Brexit was 52- 48

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in favour of leaving the EU. 40 84 Remain. Those who wanted to leave,

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they were a variety of different views as to what people wanted. Some

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had an astounding view of things in the past in the 1960s when

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globalisation was getting on their way. Others said the EU was far too

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protective. We are better off outside of it to recover

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productivity. Others focused on the issues of migration. That was

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clearly an issue for many people in the UK to be in many ways, the vote

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for Brexit was a vote against the EU. It is that split that has made

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life so difficult for politicians across the political spectrum over

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the last few months. When we talk about that, we must remember the

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Conservative Party under Theresa May got 43% of the vote, but 40% of the

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vote went to Jeremy Corbyn and the Labour Party, selling a hard left

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and radically socialist agenda at a tax and spend agenda. In terms of

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Britain and a broad consensus over years about liberal economics and

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open economies and embracing globalisation, is that at an end?

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There was little debate about something that matters, economic

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growth. Economic growth, you have decent growth with tax revenues. You

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can do a lot with public spending. You can target pensions and

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healthcare as well. What you want to do. In the past ten years, we have

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seen little economic growth. We are battling over the spoils of economic

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activity. That battle becomes awful to be on the one hand, some say it

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should be a low tax economy. That only benefits the wealthy according

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to some people. You could have a high spending economy. Evidence from

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around the world is if you have high public spending you can squeeze out

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entrepreneurial activity. Both parties refused to discuss how you

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make the cake bigger. As a consequence, they were not able to

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discuss how to create revenue to do what they want to achieve. My point

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is borne out of your book, Brave New World, talking about globalisation.

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It seems there is a lesson from the United States, where one can argue

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Donald Trump, whatever he actually is in terms of a successful

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billionaire businessman, he is no fan of globalisation and small L

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liberal economics. One can say the same arguably about Theresa May and

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certainly Jeremy Corbyn, and others like Bernie Sanders in the US. There

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seems to be a move away in the West in many different countries away

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from this liberal consensus, of which globalisation is an important

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part the pillar absolutely. What has happened is the narrative has

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changed. Go back to before the financial crisis. 1989 with the

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Berlin Wall. There was a powerful sense at the time that the world

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could be a better place with Western liberal and democratic values, and

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the world could be better and the West could trade with China or

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Brazil, etc. But we have seen growth rates slow down dramatically, even

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in China and India. There has also been a much bigger sense of winners

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and losers in the West. Inequality. Bernie Sanders was telling me just

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the other day that as far as he is concerned, the rise of the

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billionaire oligarch class is one of the fundamental sicknesses that is

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undermining the health of his nation, the United States, today. It

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is possible. If you look around the world, you realise that

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globalisation has actually dragged a huge number of people out of the

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tea. Bernie Sanders said during the campaign that he said it wasn't

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working for the US and elsewhere. -- out of poverty. I think that is a

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mistake. In the US, you have winners and losers. In China, you have had

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an extraordinary transformation in living standards over the past few

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years. It has a different effect on things. In China, income equality

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has gone up because of a dramatic increase in globalisation. Others

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remain in poverty, but many have been lifted out of it. The US and

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Europe. It is a different story. Some have been left behind for one

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reason and others have done well for another copy it is a Western

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difficulty, not a global one. In the US, you want high levels of income

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equality in the usual way. In the case of the UK and Europe, it is

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more complex. You have an increase in overall income equality. But you

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have dramatic increases in regional income inequality. London has done

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well in the last 30 years. Wales, you have been left behind. In the

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Eurozone, Europe, Germany, you are doing quite well... In a sense you

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have got a stake in this because you work for one of the biggest

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transnational corporate banks for many years, the chief economic

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adviser. You ever a system where the banks were bailed out for totally as

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unstable behaviour in 2007 and eight. -- oversaw it. You also

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oversaw a financial system that helps the very rich and did nothing

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for the low and middle earners. Over a generation, if you live in the

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United States, Europe, your living standards have not only risen by ten

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many cases have actually gone down. -- but in. I provided advice to many

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people. I did not have the power to give those kinds of results. You

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were not the architect of the system, you were a happy and

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comfortable cog in the wheel, if you like. You must have seen in 2008 the

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fallout of the crash which are so many people. It is worth

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remembering. In the period before 2007, there were warnings about what

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might happen. No one got the whole story. I was writing in 2003, 2004,

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about the dangers of the US housing bubble, for example. Clearly, house

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prices were rising quickly. Look at the US at the time. There was little

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willingness to speak about these dangers and listen to them. In

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hindsight, there was a bubble. Look at the attitude of the US government

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at the time, whether it was the administration, Congress, they said

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we need a property owning democracy. Look at regulators. They were happy

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to allow the growth of so-called sub-prime lending. Many things were

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going on. When I warned of these kinds of things, and other people as

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well, who were warning about the dangers associated with it, there

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was a collective unwillingness to listen, whether you where a bank, a

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Finance Minister... The power of the system is vested very clearly with

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transnational corporations and an elite who are tied into the

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political system and who can game it. That may be changing right now.

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To go back to the British election, you remain a key economical voice in

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Britain. Who does Theresa May listen to when she has to put together a

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Brexit strategy? The argument is in recent times, frankly, big business

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has been somewhat discredited in the eyes of the public, she has not been

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listening to them. I think the way she has put her policies across is

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look at the person in the north of England, Wales, whatever, she wants

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to reach out to more people. Big business has in one sense been

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ignored. That is highly understandable. I saw a survey after

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the election from the Institute of Directors, which has seen 67% of

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business leaders professing to be either quite or very pessimistic

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about the future of their businesses in the UK today. To you, does that

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represent something of a crisis here in the UK in terms of where the

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economy is going to go as Brexit uncertainty continues? Part of the

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in -- uncertainty is do we have access to the single market, if we

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have it, what do we have access to? Britain attracts lots of business

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from abroad with transnational corporations. It does so because it

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has a flexible labour market, the English language, all of these

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advantages. People come to Britain precisely because they want proper

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full access to the single market so they can sell to the whole of Europe

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by building cars, for example, in Britain. If it turns out these

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companies, Japanese, American, whatever companies, if they have no

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access, risky access, they may go to Germany, Poland, wherever. Do you

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read where we sit today? You are a much more loose adviser to HSBC now.

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Not the chief adviser. They are classic transnational business with

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a long history in London as well as Hong Kong. That is true. Going

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forward, the directors, bosses, those of HSBC, they have to make a

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choice, do we continue to invest in eight London headquarters, or do we

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put more future investment into a European hub or Hong Konga London.

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The Prime Minister, so much confusion. Hard Brexit, soft Brexit,

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what is a boardroom like HSBC doing? I cannot speak for them as I do not

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represent them. But in terms of any company, whether it is American,

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Japanese, whatever it might be, they will be thinking hard about whether

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Britain is the right place to be copied the consequence for Britain

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is they have a balance of payments deficit over the last few years

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funded by investment coming from abroad. Is that funding does not

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come through, the sterling could be weaker. -- if. That could be good

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for exports. But that is not right. It raises import prices. It means

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prices in the shops go up. It means a lower wage rise. One of the

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ironies of the Brexit vote is many people who might have voted for

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Brexit in England or Wales, wherever, as a consequence of the

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falling sterling and spending power, they are worse off.

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I think one of the economic forecasting groups said the hard

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Brexit, which is pulling out with no deal on preferential access to the

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single market, they said that it could cost, over the next ten years,

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2.6% of GDP. If we go for a so-called Norway option, for access

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to the civil market, even though no voice in how it is shaped, that

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might be half as damaging, 1.3% loss over the decade. In your view, how

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grave is the threat hanging over the United Kingdom, today, in terms of

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economic damage done? Burst of all, I should reveal my own preferences.

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I voted remain, so I had economic I voted remain, so I had economic

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concerns about the consequences of any kind of Brexit. I would also

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note that if you interpret Brexit is a vote against, three double,

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immigration, it is a difficult under those circumstances to the Norwegian

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type model. -- first of all. Freedom of labour, movement of labour, is

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one of the pillars of physical market. If you refuse that, then you

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this cannot have full access to the civil market. And the desire to have

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an a la carte menu, to pick that and the other, within the EU itself,

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those rules, it makes a difficult those rules, it makes a difficult

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summer can easily do have full control over immigration and at the

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same time be a member of either the single market or the European

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Economic Area. -- it make full control over. You have just

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come from the United States, where you have witnessed, as we all do,

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Donald Trump's impact on America. All the legal issues, Russia,

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investigation issues, but let's just talk about Donald Trump and

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economics. His message is one of America first. An embrace of the

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idea of protectionism when necessary for American jobs. The building of

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walls were necessary to stop people coming into his country. It is the

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liberal open economics that we have liberal open economics that we have

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talked about as the consensus for the last generation. Add to that,

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you know, the message coming from Britain, and would you say that we

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are at the end of an era in terms of the West's economic thinking? I

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think we probably are. If you go back a long way to 1944, the

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so-called Brettoneaux conference. These institutions recognise

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something important, which was that countries connected with each other

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and engage with each other. People had learnt after the terrible extras

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of the interwar period that having countries that did not relate to

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each other, did not engage with each other, was very damaging. --

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Bretonneux. Trying to avoid the damages of the Treaty of Versailles,

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you have money coming through to Europe, a generous act by the US,

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you had the seeds being signed for what eventually became the European

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Union. The importance of each of these that was by creating the rules

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of the game internationally, trade connections, connections and other

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people and their movement, and so on, it meant, in one sense, that

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wealth and income could rise pretty swiftly. But what has happened over

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the last ten or 15 years, partly because of the growth and the

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increase in income equality, there is a sense that these institutions,

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in fact, all the global economy, has failed. It has raised questions

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about the security of the nationstate. A retreat in the West,

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but not a retreat in the years. China is not talking about

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retreating. China is absolutely... Beijing is entirely happy about

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this, because it gives China an opportunity to create its own form

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of globalisation, which competes... It is a very different brand of

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globalisation that we now need to look towards and to understand as

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perhaps the pre-eminent force of the 21st century. I have this sense, and

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this is a long historical sweep, of where we move from eight pre-

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Columbus world where post Columbus world. The point about this is that

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we have lived all allies with a sense of it is Europe, it is the US,

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it is basically the West that governs the world. -- a

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pre-Columbus. And you can take this back to Columbus. PCs of European

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empire building? Absolutely. And that reaches into a populace is with

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you as having the dominant power after the Second World War and of

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course with the fall of the Berlin wall and so on, the thought was that

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Western values had won. -- apotheosis. Because the West has

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lost its way, and other countries have been successful, especially

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China, we start to see these questions coming through. With

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Donald Trump, he said that they would withdraw from the transpacific

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partnership. This would link North America, South America, and Asia, to

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create a trading bloc, whereby a ready could agree on the rules of

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the game and engage with each other. Important, of course, be DPP

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excluded China. -- TPP. This book is subtitled the And of Globalisation.

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Whatever the politics of the day in the United States are indeed the

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United Kingdom is, those forces might include the unfolding, or the

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third unfolding of the digital age, the Internet, and within that goes

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with it. -- End. You could include artificial intelligence, robotics,

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3-D printing, all of these things. Surely they are going to leave us

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all interconnected. Whether we like it or not. That is a natural

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conclusion. Although you can cast doubt on some of this. The reason I

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do that is not because of technology that has come of what you do that.

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So if you look at previous eras of globalisation... Bec technology

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tries to globalisation, doesn't? Not tries to globalisation, doesn't? Not

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necessarily. It decrease the cost of medication around the world. -- but

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technology. Social media, I think, has credit circumstances where you

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have a herding of idea, which is of pursuit of belief, rather than a

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pursuit of truth. -- decreases. Under those circumstances, it makes

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it possible for politicians to be popular who would not have been

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years ago. Donald Trump was delayed at exploiting social media. People

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might live at his Twitter accounts, but it did well for him. One of the

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biggest issues in late 20 century was the growth of what has been

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described as global supply chains. You make something and... You have

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your iPhone and it is made in China and sold for a vast amount in the

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US. Nevertheless, you have this global supply chain. Capital can go

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in search of relatively low-cost labour in different parts of the

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world. But imagine a world where by robotics means that robots are even

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cheaper than the low-cost labour. And why not bring the production

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backup? That process of reshoring will be eight interesting and

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potentially dangerous tree of the next decade. Because the more that

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you reshore, the more difficult it is to spread well to other parts of

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the world, so it will be harder to catch up. One of betrayed that --

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when I betrayed you as a big fish, it seems to me that you spend your

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entire career at the heart of a financial and economic system which

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looked forward with great optimism to the future, because it felt to me

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and you, at your HSBC bank, you are part of it, you felt that the world

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was yours, going in your direction. Do you not feel that any more? Do

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you feel... I know that you have left HSBC, but you still represent

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an important and influence are worse in the West. You still fear for the

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future? Yes. -- influential force. I think when people west such a

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retreat into the idea of nationstates, it starts to define

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itself as asked against them, whoever they might be. Globalisation

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was once a desire or mechanism to reduce the dam in the world. It was

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us altogether. Some might dispute that. But it is dramatic reductions

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in terms of global poverty of the last 30 or 40 years, you could say

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that this a great powerful and in economic terms a very successful

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story. But when you return to the nationstates and start talking about

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us and them, you end up with a much more antagonistic relationship

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between different countries around the world. And the most obvious

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antagonistic relationship that might exist in the year ahead is the

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existing superpower and the aspiring superpower, namely the relationship

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between the US and China. And then going back to the pre-post-Columbus

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world, if you go back and look at all these Chinese led organisations,

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that is cut are familiar. Because this is something I recognised from

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my pre- Columbus Day. Back to the future? Back to the future. Stephen

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King, we have two and about. They give a much indeed. -- we have too

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end it there. Thank you very a much indeed.

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Yesterday was a bit of a breezy day for most parts of the UK,

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with a fair bit of cloud and a little bit of sunshine.

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In the north-west of the UK, we got temperatures up

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