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Welcome to HARDtalk. I am Stephen Sackur. The Western world, for so | :00:00. | :00:19. | |
long the dominant force in global politics and economics, is confused | :00:20. | :00:24. | |
and uncertain. In the past week, elections in the UK and France have | :00:25. | :00:30. | |
pointed to fractures in Europe. Donald Trump's worldview and Angela | :00:31. | :00:39. | |
Merkel's are poles apart. In the West consensus is no more. My guest | :00:40. | :00:44. | |
is Stephen King, influential economist, writer, and chief | :00:45. | :00:49. | |
economist to HSBC Bank. Is liberalisation stuck in reverse | :00:50. | :00:52. | |
gear? -- globalisation. Welcome to HARDtalk. Given the | :00:53. | :01:28. | |
dramatic nature of events in the UK, we have to start with Britain and | :01:29. | :01:32. | |
moved to the world as a whole. The UK. We have just seen an election | :01:33. | :01:38. | |
that has brought about a hung parliament and the sense that no one | :01:39. | :01:43. | |
knows really what the government Theresa May forms will actually do | :01:44. | :01:48. | |
about Brexit and other challenges. Do you feel a deep sense of | :01:49. | :01:52. | |
incoherence and uncertainty in Britain? There is. Brexit was 52- 48 | :01:53. | :02:01. | |
in favour of leaving the EU. 40 84 Remain. Those who wanted to leave, | :02:02. | :02:05. | |
they were a variety of different views as to what people wanted. Some | :02:06. | :02:11. | |
had an astounding view of things in the past in the 1960s when | :02:12. | :02:16. | |
globalisation was getting on their way. Others said the EU was far too | :02:17. | :02:23. | |
protective. We are better off outside of it to recover | :02:24. | :02:27. | |
productivity. Others focused on the issues of migration. That was | :02:28. | :02:32. | |
clearly an issue for many people in the UK to be in many ways, the vote | :02:33. | :02:39. | |
for Brexit was a vote against the EU. It is that split that has made | :02:40. | :02:43. | |
life so difficult for politicians across the political spectrum over | :02:44. | :02:49. | |
the last few months. When we talk about that, we must remember the | :02:50. | :02:55. | |
Conservative Party under Theresa May got 43% of the vote, but 40% of the | :02:56. | :02:59. | |
vote went to Jeremy Corbyn and the Labour Party, selling a hard left | :03:00. | :03:05. | |
and radically socialist agenda at a tax and spend agenda. In terms of | :03:06. | :03:15. | |
Britain and a broad consensus over years about liberal economics and | :03:16. | :03:19. | |
open economies and embracing globalisation, is that at an end? | :03:20. | :03:26. | |
There was little debate about something that matters, economic | :03:27. | :03:30. | |
growth. Economic growth, you have decent growth with tax revenues. You | :03:31. | :03:36. | |
can do a lot with public spending. You can target pensions and | :03:37. | :03:41. | |
healthcare as well. What you want to do. In the past ten years, we have | :03:42. | :03:46. | |
seen little economic growth. We are battling over the spoils of economic | :03:47. | :03:51. | |
activity. That battle becomes awful to be on the one hand, some say it | :03:52. | :03:57. | |
should be a low tax economy. That only benefits the wealthy according | :03:58. | :04:01. | |
to some people. You could have a high spending economy. Evidence from | :04:02. | :04:06. | |
around the world is if you have high public spending you can squeeze out | :04:07. | :04:12. | |
entrepreneurial activity. Both parties refused to discuss how you | :04:13. | :04:18. | |
make the cake bigger. As a consequence, they were not able to | :04:19. | :04:21. | |
discuss how to create revenue to do what they want to achieve. My point | :04:22. | :04:32. | |
is borne out of your book, Brave New World, talking about globalisation. | :04:33. | :04:37. | |
It seems there is a lesson from the United States, where one can argue | :04:38. | :04:41. | |
Donald Trump, whatever he actually is in terms of a successful | :04:42. | :04:46. | |
billionaire businessman, he is no fan of globalisation and small L | :04:47. | :04:52. | |
liberal economics. One can say the same arguably about Theresa May and | :04:53. | :04:59. | |
certainly Jeremy Corbyn, and others like Bernie Sanders in the US. There | :05:00. | :05:06. | |
seems to be a move away in the West in many different countries away | :05:07. | :05:12. | |
from this liberal consensus, of which globalisation is an important | :05:13. | :05:17. | |
part the pillar absolutely. What has happened is the narrative has | :05:18. | :05:21. | |
changed. Go back to before the financial crisis. 1989 with the | :05:22. | :05:25. | |
Berlin Wall. There was a powerful sense at the time that the world | :05:26. | :05:46. | |
could be a better place with Western liberal and democratic values, and | :05:47. | :05:49. | |
the world could be better and the West could trade with China or | :05:50. | :05:53. | |
Brazil, etc. But we have seen growth rates slow down dramatically, even | :05:54. | :05:56. | |
in China and India. There has also been a much bigger sense of winners | :05:57. | :06:01. | |
and losers in the West. Inequality. Bernie Sanders was telling me just | :06:02. | :06:05. | |
the other day that as far as he is concerned, the rise of the | :06:06. | :06:09. | |
billionaire oligarch class is one of the fundamental sicknesses that is | :06:10. | :06:13. | |
undermining the health of his nation, the United States, today. It | :06:14. | :06:20. | |
is possible. If you look around the world, you realise that | :06:21. | :06:23. | |
globalisation has actually dragged a huge number of people out of the | :06:24. | :06:28. | |
tea. Bernie Sanders said during the campaign that he said it wasn't | :06:29. | :06:34. | |
working for the US and elsewhere. -- out of poverty. I think that is a | :06:35. | :06:38. | |
mistake. In the US, you have winners and losers. In China, you have had | :06:39. | :06:43. | |
an extraordinary transformation in living standards over the past few | :06:44. | :06:47. | |
years. It has a different effect on things. In China, income equality | :06:48. | :06:52. | |
has gone up because of a dramatic increase in globalisation. Others | :06:53. | :06:57. | |
remain in poverty, but many have been lifted out of it. The US and | :06:58. | :07:01. | |
Europe. It is a different story. Some have been left behind for one | :07:02. | :07:07. | |
reason and others have done well for another copy it is a Western | :07:08. | :07:13. | |
difficulty, not a global one. In the US, you want high levels of income | :07:14. | :07:19. | |
equality in the usual way. In the case of the UK and Europe, it is | :07:20. | :07:23. | |
more complex. You have an increase in overall income equality. But you | :07:24. | :07:29. | |
have dramatic increases in regional income inequality. London has done | :07:30. | :07:33. | |
well in the last 30 years. Wales, you have been left behind. In the | :07:34. | :07:39. | |
Eurozone, Europe, Germany, you are doing quite well... In a sense you | :07:40. | :07:45. | |
have got a stake in this because you work for one of the biggest | :07:46. | :07:48. | |
transnational corporate banks for many years, the chief economic | :07:49. | :07:54. | |
adviser. You ever a system where the banks were bailed out for totally as | :07:55. | :07:58. | |
unstable behaviour in 2007 and eight. -- oversaw it. You also | :07:59. | :08:06. | |
oversaw a financial system that helps the very rich and did nothing | :08:07. | :08:14. | |
for the low and middle earners. Over a generation, if you live in the | :08:15. | :08:21. | |
United States, Europe, your living standards have not only risen by ten | :08:22. | :08:30. | |
many cases have actually gone down. -- but in. I provided advice to many | :08:31. | :08:34. | |
people. I did not have the power to give those kinds of results. You | :08:35. | :08:39. | |
were not the architect of the system, you were a happy and | :08:40. | :08:45. | |
comfortable cog in the wheel, if you like. You must have seen in 2008 the | :08:46. | :08:52. | |
fallout of the crash which are so many people. It is worth | :08:53. | :08:59. | |
remembering. In the period before 2007, there were warnings about what | :09:00. | :09:02. | |
might happen. No one got the whole story. I was writing in 2003, 2004, | :09:03. | :09:10. | |
about the dangers of the US housing bubble, for example. Clearly, house | :09:11. | :09:16. | |
prices were rising quickly. Look at the US at the time. There was little | :09:17. | :09:22. | |
willingness to speak about these dangers and listen to them. In | :09:23. | :09:26. | |
hindsight, there was a bubble. Look at the attitude of the US government | :09:27. | :09:31. | |
at the time, whether it was the administration, Congress, they said | :09:32. | :09:36. | |
we need a property owning democracy. Look at regulators. They were happy | :09:37. | :09:43. | |
to allow the growth of so-called sub-prime lending. Many things were | :09:44. | :09:48. | |
going on. When I warned of these kinds of things, and other people as | :09:49. | :09:52. | |
well, who were warning about the dangers associated with it, there | :09:53. | :09:57. | |
was a collective unwillingness to listen, whether you where a bank, a | :09:58. | :10:03. | |
Finance Minister... The power of the system is vested very clearly with | :10:04. | :10:08. | |
transnational corporations and an elite who are tied into the | :10:09. | :10:12. | |
political system and who can game it. That may be changing right now. | :10:13. | :10:18. | |
To go back to the British election, you remain a key economical voice in | :10:19. | :10:29. | |
Britain. Who does Theresa May listen to when she has to put together a | :10:30. | :10:34. | |
Brexit strategy? The argument is in recent times, frankly, big business | :10:35. | :10:39. | |
has been somewhat discredited in the eyes of the public, she has not been | :10:40. | :10:44. | |
listening to them. I think the way she has put her policies across is | :10:45. | :10:50. | |
look at the person in the north of England, Wales, whatever, she wants | :10:51. | :10:53. | |
to reach out to more people. Big business has in one sense been | :10:54. | :10:57. | |
ignored. That is highly understandable. I saw a survey after | :10:58. | :11:03. | |
the election from the Institute of Directors, which has seen 67% of | :11:04. | :11:09. | |
business leaders professing to be either quite or very pessimistic | :11:10. | :11:13. | |
about the future of their businesses in the UK today. To you, does that | :11:14. | :11:20. | |
represent something of a crisis here in the UK in terms of where the | :11:21. | :11:25. | |
economy is going to go as Brexit uncertainty continues? Part of the | :11:26. | :11:33. | |
in -- uncertainty is do we have access to the single market, if we | :11:34. | :11:38. | |
have it, what do we have access to? Britain attracts lots of business | :11:39. | :11:44. | |
from abroad with transnational corporations. It does so because it | :11:45. | :11:49. | |
has a flexible labour market, the English language, all of these | :11:50. | :11:53. | |
advantages. People come to Britain precisely because they want proper | :11:54. | :11:57. | |
full access to the single market so they can sell to the whole of Europe | :11:58. | :12:04. | |
by building cars, for example, in Britain. If it turns out these | :12:05. | :12:07. | |
companies, Japanese, American, whatever companies, if they have no | :12:08. | :12:16. | |
access, risky access, they may go to Germany, Poland, wherever. Do you | :12:17. | :12:21. | |
read where we sit today? You are a much more loose adviser to HSBC now. | :12:22. | :12:28. | |
Not the chief adviser. They are classic transnational business with | :12:29. | :12:31. | |
a long history in London as well as Hong Kong. That is true. Going | :12:32. | :12:37. | |
forward, the directors, bosses, those of HSBC, they have to make a | :12:38. | :12:41. | |
choice, do we continue to invest in eight London headquarters, or do we | :12:42. | :12:48. | |
put more future investment into a European hub or Hong Konga London. | :12:49. | :12:54. | |
The Prime Minister, so much confusion. Hard Brexit, soft Brexit, | :12:55. | :13:02. | |
what is a boardroom like HSBC doing? I cannot speak for them as I do not | :13:03. | :13:07. | |
represent them. But in terms of any company, whether it is American, | :13:08. | :13:11. | |
Japanese, whatever it might be, they will be thinking hard about whether | :13:12. | :13:15. | |
Britain is the right place to be copied the consequence for Britain | :13:16. | :13:20. | |
is they have a balance of payments deficit over the last few years | :13:21. | :13:25. | |
funded by investment coming from abroad. Is that funding does not | :13:26. | :13:31. | |
come through, the sterling could be weaker. -- if. That could be good | :13:32. | :13:35. | |
for exports. But that is not right. It raises import prices. It means | :13:36. | :13:41. | |
prices in the shops go up. It means a lower wage rise. One of the | :13:42. | :13:48. | |
ironies of the Brexit vote is many people who might have voted for | :13:49. | :13:53. | |
Brexit in England or Wales, wherever, as a consequence of the | :13:54. | :13:56. | |
falling sterling and spending power, they are worse off. | :13:57. | :14:00. | |
I think one of the economic forecasting groups said the hard | :14:01. | :14:09. | |
Brexit, which is pulling out with no deal on preferential access to the | :14:10. | :14:13. | |
single market, they said that it could cost, over the next ten years, | :14:14. | :14:19. | |
2.6% of GDP. If we go for a so-called Norway option, for access | :14:20. | :14:23. | |
to the civil market, even though no voice in how it is shaped, that | :14:24. | :14:29. | |
might be half as damaging, 1.3% loss over the decade. In your view, how | :14:30. | :14:35. | |
grave is the threat hanging over the United Kingdom, today, in terms of | :14:36. | :14:39. | |
economic damage done? Burst of all, I should reveal my own preferences. | :14:40. | :14:41. | |
I voted remain, so I had economic I voted remain, so I had economic | :14:42. | :14:45. | |
concerns about the consequences of any kind of Brexit. I would also | :14:46. | :14:50. | |
note that if you interpret Brexit is a vote against, three double, | :14:51. | :14:55. | |
immigration, it is a difficult under those circumstances to the Norwegian | :14:56. | :14:59. | |
type model. -- first of all. Freedom of labour, movement of labour, is | :15:00. | :15:03. | |
one of the pillars of physical market. If you refuse that, then you | :15:04. | :15:08. | |
this cannot have full access to the civil market. And the desire to have | :15:09. | :15:14. | |
an a la carte menu, to pick that and the other, within the EU itself, | :15:15. | :15:18. | |
those rules, it makes a difficult those rules, it makes a difficult | :15:19. | :15:24. | |
summer can easily do have full control over immigration and at the | :15:25. | :15:28. | |
same time be a member of either the single market or the European | :15:29. | :15:30. | |
Economic Area. -- it make full control over. You have just | :15:31. | :15:42. | |
come from the United States, where you have witnessed, as we all do, | :15:43. | :15:49. | |
Donald Trump's impact on America. All the legal issues, Russia, | :15:50. | :15:55. | |
investigation issues, but let's just talk about Donald Trump and | :15:56. | :16:00. | |
economics. His message is one of America first. An embrace of the | :16:01. | :16:03. | |
idea of protectionism when necessary for American jobs. The building of | :16:04. | :16:08. | |
walls were necessary to stop people coming into his country. It is the | :16:09. | :16:15. | |
liberal open economics that we have liberal open economics that we have | :16:16. | :16:19. | |
talked about as the consensus for the last generation. Add to that, | :16:20. | :16:23. | |
you know, the message coming from Britain, and would you say that we | :16:24. | :16:30. | |
are at the end of an era in terms of the West's economic thinking? I | :16:31. | :16:34. | |
think we probably are. If you go back a long way to 1944, the | :16:35. | :16:44. | |
so-called Brettoneaux conference. These institutions recognise | :16:45. | :16:48. | |
something important, which was that countries connected with each other | :16:49. | :16:55. | |
and engage with each other. People had learnt after the terrible extras | :16:56. | :17:01. | |
of the interwar period that having countries that did not relate to | :17:02. | :17:04. | |
each other, did not engage with each other, was very damaging. -- | :17:05. | :17:10. | |
Bretonneux. Trying to avoid the damages of the Treaty of Versailles, | :17:11. | :17:15. | |
you have money coming through to Europe, a generous act by the US, | :17:16. | :17:26. | |
you had the seeds being signed for what eventually became the European | :17:27. | :17:29. | |
Union. The importance of each of these that was by creating the rules | :17:30. | :17:33. | |
of the game internationally, trade connections, connections and other | :17:34. | :17:36. | |
people and their movement, and so on, it meant, in one sense, that | :17:37. | :17:40. | |
wealth and income could rise pretty swiftly. But what has happened over | :17:41. | :17:44. | |
the last ten or 15 years, partly because of the growth and the | :17:45. | :17:48. | |
increase in income equality, there is a sense that these institutions, | :17:49. | :17:54. | |
in fact, all the global economy, has failed. It has raised questions | :17:55. | :18:02. | |
about the security of the nationstate. A retreat in the West, | :18:03. | :18:07. | |
but not a retreat in the years. China is not talking about | :18:08. | :18:11. | |
retreating. China is absolutely... Beijing is entirely happy about | :18:12. | :18:16. | |
this, because it gives China an opportunity to create its own form | :18:17. | :18:19. | |
of globalisation, which competes... It is a very different brand of | :18:20. | :18:23. | |
globalisation that we now need to look towards and to understand as | :18:24. | :18:28. | |
perhaps the pre-eminent force of the 21st century. I have this sense, and | :18:29. | :18:34. | |
this is a long historical sweep, of where we move from eight pre- | :18:35. | :18:42. | |
Columbus world where post Columbus world. The point about this is that | :18:43. | :18:45. | |
we have lived all allies with a sense of it is Europe, it is the US, | :18:46. | :18:51. | |
it is basically the West that governs the world. -- a | :18:52. | :18:55. | |
pre-Columbus. And you can take this back to Columbus. PCs of European | :18:56. | :19:02. | |
empire building? Absolutely. And that reaches into a populace is with | :19:03. | :19:07. | |
you as having the dominant power after the Second World War and of | :19:08. | :19:13. | |
course with the fall of the Berlin wall and so on, the thought was that | :19:14. | :19:17. | |
Western values had won. -- apotheosis. Because the West has | :19:18. | :19:21. | |
lost its way, and other countries have been successful, especially | :19:22. | :19:26. | |
China, we start to see these questions coming through. With | :19:27. | :19:34. | |
Donald Trump, he said that they would withdraw from the transpacific | :19:35. | :19:40. | |
partnership. This would link North America, South America, and Asia, to | :19:41. | :19:44. | |
create a trading bloc, whereby a ready could agree on the rules of | :19:45. | :19:48. | |
the game and engage with each other. Important, of course, be DPP | :19:49. | :19:57. | |
excluded China. -- TPP. This book is subtitled the And of Globalisation. | :19:58. | :20:05. | |
Whatever the politics of the day in the United States are indeed the | :20:06. | :20:08. | |
United Kingdom is, those forces might include the unfolding, or the | :20:09. | :20:13. | |
third unfolding of the digital age, the Internet, and within that goes | :20:14. | :20:17. | |
with it. -- End. You could include artificial intelligence, robotics, | :20:18. | :20:21. | |
3-D printing, all of these things. Surely they are going to leave us | :20:22. | :20:26. | |
all interconnected. Whether we like it or not. That is a natural | :20:27. | :20:31. | |
conclusion. Although you can cast doubt on some of this. The reason I | :20:32. | :20:35. | |
do that is not because of technology that has come of what you do that. | :20:36. | :20:40. | |
So if you look at previous eras of globalisation... Bec technology | :20:41. | :20:45. | |
tries to globalisation, doesn't? Not tries to globalisation, doesn't? Not | :20:46. | :20:49. | |
necessarily. It decrease the cost of medication around the world. -- but | :20:50. | :20:56. | |
technology. Social media, I think, has credit circumstances where you | :20:57. | :21:01. | |
have a herding of idea, which is of pursuit of belief, rather than a | :21:02. | :21:05. | |
pursuit of truth. -- decreases. Under those circumstances, it makes | :21:06. | :21:13. | |
it possible for politicians to be popular who would not have been | :21:14. | :21:16. | |
years ago. Donald Trump was delayed at exploiting social media. People | :21:17. | :21:21. | |
might live at his Twitter accounts, but it did well for him. One of the | :21:22. | :21:27. | |
biggest issues in late 20 century was the growth of what has been | :21:28. | :21:30. | |
described as global supply chains. You make something and... You have | :21:31. | :21:35. | |
your iPhone and it is made in China and sold for a vast amount in the | :21:36. | :21:40. | |
US. Nevertheless, you have this global supply chain. Capital can go | :21:41. | :21:44. | |
in search of relatively low-cost labour in different parts of the | :21:45. | :21:48. | |
world. But imagine a world where by robotics means that robots are even | :21:49. | :21:53. | |
cheaper than the low-cost labour. And why not bring the production | :21:54. | :21:58. | |
backup? That process of reshoring will be eight interesting and | :21:59. | :22:03. | |
potentially dangerous tree of the next decade. Because the more that | :22:04. | :22:08. | |
you reshore, the more difficult it is to spread well to other parts of | :22:09. | :22:14. | |
the world, so it will be harder to catch up. One of betrayed that -- | :22:15. | :22:22. | |
when I betrayed you as a big fish, it seems to me that you spend your | :22:23. | :22:28. | |
entire career at the heart of a financial and economic system which | :22:29. | :22:32. | |
looked forward with great optimism to the future, because it felt to me | :22:33. | :22:37. | |
and you, at your HSBC bank, you are part of it, you felt that the world | :22:38. | :22:41. | |
was yours, going in your direction. Do you not feel that any more? Do | :22:42. | :22:47. | |
you feel... I know that you have left HSBC, but you still represent | :22:48. | :22:50. | |
an important and influence are worse in the West. You still fear for the | :22:51. | :22:58. | |
future? Yes. -- influential force. I think when people west such a | :22:59. | :23:01. | |
retreat into the idea of nationstates, it starts to define | :23:02. | :23:05. | |
itself as asked against them, whoever they might be. Globalisation | :23:06. | :23:10. | |
was once a desire or mechanism to reduce the dam in the world. It was | :23:11. | :23:14. | |
us altogether. Some might dispute that. But it is dramatic reductions | :23:15. | :23:18. | |
in terms of global poverty of the last 30 or 40 years, you could say | :23:19. | :23:23. | |
that this a great powerful and in economic terms a very successful | :23:24. | :23:28. | |
story. But when you return to the nationstates and start talking about | :23:29. | :23:31. | |
us and them, you end up with a much more antagonistic relationship | :23:32. | :23:34. | |
between different countries around the world. And the most obvious | :23:35. | :23:38. | |
antagonistic relationship that might exist in the year ahead is the | :23:39. | :23:43. | |
existing superpower and the aspiring superpower, namely the relationship | :23:44. | :23:50. | |
between the US and China. And then going back to the pre-post-Columbus | :23:51. | :23:58. | |
world, if you go back and look at all these Chinese led organisations, | :23:59. | :24:02. | |
that is cut are familiar. Because this is something I recognised from | :24:03. | :24:06. | |
my pre- Columbus Day. Back to the future? Back to the future. Stephen | :24:07. | :24:12. | |
King, we have two and about. They give a much indeed. -- we have too | :24:13. | :24:21. | |
end it there. Thank you very a much indeed. | :24:22. | :24:22. | |
Yesterday was a bit of a breezy day for most parts of the UK, | :24:23. | :24:39. | |
with a fair bit of cloud and a little bit of sunshine. | :24:40. | :24:42. | |
In the north-west of the UK, we got temperatures up | :24:43. | :24:46. |