Transcripts For BBCNEWS HARDtalk 20170613

I am stephen sackur. The western world, for so long the dominant force in Global Politics and economics, is confused and uncertain. In the past week, elections in the uk and france have pointed to fractures in europe. Donald trumps worldview and Angela Merkels are poles apart. The Western Consensus on Liberal Economics and globalisation is no more. My guest is stephen king, influential economist, writer, and Chief Economist to hsbc bank. Is Globalisation Stuck in reverse gear . Stephen king, welcome to hardtalk. Thank you very much. Given the dramatic nature of events in the uk, we have to start with britain, and then move our perspective to the world as a whole. But the uk. We have just seen an election that has brought about a Hung Parliament and a sense that nobody knows really what the government theresa may forms will actually do about brexit and a whole host of other challenges. Do you feel a deep sense of incoherence and uncertainty in britain . There is. Because the vote brexit was originally 52 48 in favour of leaving the eu. 48 for remain. And for those who wanted to leave, they were really a variety of different views as to what people wanted. Some had a nostalgic view of things in the past in the 1950s and 1960s when globalisation was not getting on their way. Others said the eu was far too protective. We are better off outside of it to recover productivity. Others focused on the issues of migration. That was clearly an issue for many people in the uk. In many ways, the vote for brexit was a vote against something, against the eu. Without being clear of what it was. It is that split that has made life so difficult for politicians across the political spectrum over the last few months. When we talk about the split across the political spectrum, we must remember that the Conservative Party under theresa may got 43 of the vote, but 40 of the vote went Tojeremy Corbyn and the labour party, selling a hard left and radically socialist agenda, a tax and spend agenda. More radical than we have seen in years. In terms of britain and a broad consensus over years about Liberal Economics and open economies and embracing globalisation, is that at an end . There was little debate about something that matters, economic growth. With economic growth, you have decent growth with tax revenues. You can do all sorts of things with public spending, you can target pensions and healthcare as well, what you want to do. In the past ten years, we have seen little economic growth. We now have a kind of battle over the spoils of economic activity. That battle becomes awful. On the one hand, some say it should be a low tax economy. Many would say that is not fair, because you are only benefiting the wealthy. You could have a high spending economy. Evidence from Around The World is if you have high public spending you can squeeze out entrepreneurial activity that you want to generate decent long term growth. Both parties refuse to discuss how you make the cake bigger. As a consequence of that, they were not able to discuss how to create revenue for all that they want to achieve. My point is borne out of your book, brave new world, talking about globalisation. It seems there is a lesson from the United States where one can argue donald trump, whatever he actually is in terms of a successful billionaire businessman, he is no fan of globalisation and small l Liberal Economics. Yes. One can say the same, arguably about theresa may, and certainlyjeremy corbyn, and others like bernie sanders, in the us whom i interviewed recently on hardtalk. There seems to be a move away in the west in many Different Countries away from this liberal consensus, of which globalisation is an important part. Absolutely. I think whats really happened is the narrative has changed. If you go back to before the financial crisis, and actually a little bit further, 1989 and the fall of the berlin wall. There was a powerful sense at the time that the world could be a better place with western liberal and democratic values, and the world could be better and the west could trade with china or brazil, or whatever might have been the case. But we have seen growth rates slow down dramatically, even in china and india. But also, there has also been a much bigger sense of winners and losers, in the west. Inequality. Bernie sanders was telling me the other day that as far as he is concerned, the rise of the Billionaire Oligarch Class is one of the fundamental sicknesses that is undermining the health of his nation, the United States, today. Well, its possible, although, if you look Around The World, you realise that globalisation has actually dragged a huge number of people out of poverty. Bernie sanders said during the campaign that he said globalisation wasnt working for the us and elsewhere in the world. I think that is a mistake. In the us, you have winners and losers. In china, you have had an extraordinary transformation in Living Standards over the past few years. It has a different effect on things. In china, Income Equality has gone up, but its only because youve seen a dramatic increase in urbanisation. Others remain in poverty, but many have been lifted out of it. The us and europe. It is a different story. Some have been left behind for one reason and others have done well for another. It is a western difficulty, not a global one. Moreover, in the us, you want high levels of Income Equality in the usual way. In the case of the uk and europe, it is more complex. You dont have an increase in overall Income Equality. But you have dramatic increases in regional income inequality. If you are in london, you have probably done quite well over the last 30 years. Wales, you have been left behind. In the eurozone, europe, if youre germany, you are doing quite well. In a sense, you have got a stake in this because you work for one of the biggest transnational corporate banks for many, many years, the chief economic adviser. You oversaw a system where the banks were bailed out for totally irresponsible behaviours in 20072008. You also oversaw a Financial System that helped the very rich and did nothing for the low and middle earners. And we have seen the figures show it. Over a generation, if you live in the United States, europe, your Living Standards have not only risen, but in many cases, have actually gone down. First of all, i wish i was that powerful. I provided advice to hsbc, and i provided advice to many people. I did not have the power to give those kinds of results. Ok, so, you were not the architect of the system, you were a happy and comfortable cog in the wheel, if you like. You must thought about this in 2007 2008, when you saw the fallout of the crash which affected many people. It is worth remembering in the period before 2007, there were warnings about what might happen. No one got the whole story. I was writing in 2003, 2004, about the dangers of the us housing bubble, for example. Clearly, house prices were rising quickly. Look at the us at the time. There was little willingness to listen to these warnings of danger at that particular time. In hindsight, there was a bubble. Look at the attitude of the Us Government at the time, whether it was the administration, congress, they were in favour of saying we need a property owning democracy. We need more people owning property. Look at regulators. They were happy to allow the growth of so called sub prime lending. Many things were going on. When i warned of these kinds of things, and other people as well, who were warning about the dangers associated with the story, there was a collective unwillingness to listen, whether you where a bank, whether you were a finance ministery. The power of the system is vested very clearly with transnational corporations and an elite who are tied into the political system and who can game the political system. That may be changing right now. To go bring you back to the the british system, you remain a key economical voice in britain. Who does theresa may listen to when she has to put together a Brexit Strategy . The argument is that in recent times, in part, frankly, big business has been somewhat discredited in the eyes of the public, she has not been listening to them. I think the way she has put her policies across is look at the person in the north of england, wales, whatever, she wants to reach out to more people. Big business has in one sense been ignored. That is highly understandable. You know what is stunning . I saw a survey after the election from the institute of directors, which has seen 57 of Business Leaders professing to be either quite or very pessimistic about the future of their businesses in the uk today. To you, does that represent something of a crisis here in the uk in terms of where our economy is going to go as this Brexit Uncertainty continues . Part of the uncertainty is do we have access to the Single Market, if we have it, what do we have access to . The problem here is that britain attract lots of business from abroad from transnational corporations. It does this because it has a Flexible Labour market, the english language, all of these advantages. People come to britain precisely because they want proper full access to the Single Market, ie, so they can sell to the whole of europe by building cars, for example, in britain. If it turns out these companies japanese, american, whatever companies if they have no access, risky access, they may go to germany, poland, wherever it might be. How do you read where we sit today . You are a much more loose adviser to hsbc now. Not the chief adviser. They are classic Transnational Business with a long history in london as well as in hong kong. Yes. Going forward, the directors, bosses, those of hsbc, they have to make a choice, do we continue to invest in a london headquarters, or do we put more future investment into a european hub or hong kong . Theresa may, sitting there, with so much confusion, hard brexit, soft brexit, what do you think a boardroom like hsbc is going to do . First of all, i cannot speak for them as i do not represent them. No, but i want your insight. But in terms of any company, whether it is american, japanese, whatever it might be, they will be thinking hard about whether britain is the right place to be copied the consequence for britain is they have a balance of payments deficit over the last few years funded by investment coming from abroad. If that funding doesnt appear, the sterling gets be weaker. But that is not right. It raises import prices. It means prices in the shops go up. It means a lower wage rise. A lot of consumers, a lot of households, and are being worse off. One of the ironies of the brexit vote is many people who might have voted for brexit in england or wales, wherever, as a consequence of the falling sterling and the erosion of spending power, they are actually worse off. An Economic Forecasting group said that pulling out of the eu with no deal, preferential access to the Single Market could cost 2. 6 of gdp. If we go for the norway option, full access to the Single Market even though no voice in how it shaped, i. 6 loss of gdp. In your view, how grave is the threat hanging over the uk today in terms of economic damage done . hanging over the uk today in terms of economic damage done . I should reveal my preferences. I voted remain. I should also note that if you interpret brexit as a vote against for example immigration, to have more control of immigration, it is difficult to have a norwegian type model. Freedom of labour is one of the pillars of the Single Market. If you remove that than by definition you cant have full access. In britain is a sense of the desire to have an a la carte menu. You can pick this and that the other. Within the eu there are rules. Rules about the freedom of all of these things. Within the scope of those rules it makes it very difficult simultaneously to have full control of immigration and bea have full control of immigration and be a member of either the Single Market or the European Economic area. So when you look at it you think the choice is britain wants to make other choices that are available to it from the eu. They may be contradictory. Youve just come from the us where you have witnessed as we all have on our tv screens Donald Trumps impact on america. All the legal issues, the russian issues, lets just america. All the legal issues, the russian issues, letsjust talk about trump and economics. His message is one of americas first and that embrace of the idea of protectionism when necessary for americanjobs, the protectionism when necessary for american jobs, the building protectionism when necessary for americanjobs, the building of walls where necessary to stop people coming into his country. It is the antithesis of this open, Liberal Economics that weve talked about. Add to that the message that came from britain and would you say that we are at the end of an era in terms of the wests economic thinking . We are at the end of an era in terms of the wests economic thinking . think we are. If we think back to the conference in the us in 1984, which set the global institutions for the post war world, they recognised something important, which is that countries connected with each other in gauge with each other and are far better off having that engagement under certain global rules, that disengagement. People have learned with terrible experience that having countries that didnt relate to each other, didnt engage with each other, was damaging. The trying to avoid those mistakes. You have the creation of the International Monetary fund, the world bank, money coming through the European Form of a plan which was an act of extreme generosity on bihar for the americans. We have the seeds being so for what eventually became the european union. The importance of each of these was that by creating rules internationally, trade connections, connections between people and movement, it meant in one sense that wealth and income could rise pretty swiftly. Whats happened over the past income could rise pretty swiftly. Whats happened over the past 10 income could rise pretty swiftly. Whats happened over the past 10 15 yea rs, partly whats happened over the past 10 15 years, partly because of growth and the increasing Income Equality, theres a sense that these institutions have failed or the global has failed and there is a retreat into the supposed security of the nation state. In one sense there is a return to what we saw in there is a return to what we saw in the interwar period or at times during the 19th century stock white retreat in the west but not the east. China is talking of retreat. I think beijing isnt entirely happy about this because it gives china an opportunity to create its own form of globalisation. Entirely unhappy. Is there a brand of globalisation we now need to look towards and understand as the pre Eminent Force of the 21st century . I feel this is pre Eminent Force of the 21st century . I feelthis is a pre Eminent Force of the 21st century . I feel this is a long historical sweep. I have a sense of shifting towards what was described asa shifting towards what was described as a post columbus world to a pre columbus world. Christopher columbus . Yes, it is you wondered Which Columbus we have lived all oui Which Columbus we have lived all our lives with a sense that it is europe, the us, basically the west which governs the world. In one sense you could link that all back to columbus and the shift in Power To Columbus and the shift in power to western europe. The seeds of European Empire . Absolutely. That in a sense reaches its climax with the us becoming the dominant power after the Second World War and was also associated with the fall of the berlin wall and when west Western Culture is one. Other countries have been successful, notably china, so we have this new competition. One of the first things trump did, although to be fair Hillary Clinton did a similarthing, to be fair Hillary Clinton did a similar thing, was to withdraw from the tra ns pacific partnership, similar thing, was to withdraw from the Trans Pacific partnership, a set of rules keeping with the briton era, the link in north america, parts of south america, with parts of asia, to try to create a trading bloc whereby everyone can agree on the rules of the game and trade with each other. Importa ntly the rules of the game and trade with each other. Importantly it excluded china. Dpp. Each other. Importantly it excluded china. Dpp. That vacuum can each other. Importantly it excluded china. Dpp. That vacuum can now each other. Importantly it excluded china. Dpp. That vacuum can now be filled. There are some forces that are going to continue to push us towards a more open global eyes world, whatever the politics of the day in the us or the uk. Those forces might include the unfolding. Further unfolding of the digital age, the internet and everything that goes with it and you could include artificial intelligence, robotics, 3d printing, all of these things will surely leave us more interconnected . Thats a natural conclusion but in the book i cast doubt on some of this and the reason for this is a think it depends not so much on having technological advance but what you do with that technology, when it comes along. You look at previous times of globalisation. A Technology Drives it, doesnt it . First of all Technology Helps to reduce the cost of communication Around The World. But there are all sorts of pressures. One example is social media, which has i think created circumstances where you get a herding of ideas, which is a pursuit of belief rather than the pursuit of belief rather than the pursuit of belief rather than the pursuit of truth, if i can call it that. Under those circumstances it makes it easier for people, that. Under those circumstances it makes it easierfor people, like populist politicians, to be successful in a way that was unimaginable 20 years ago. So i think donald trump succeeded because he was brilliant at exploiting social media. Robotics, one of the biggest revolutions in the late 20th century was the growth of what we describe as Global Supply chains. You have your ifo thats built in china and sold for a lot of money in the us iphone. China and sold for a lot of money in the us iphone. Yes, thats more complicated than being built in china, but you have the supply chains. That develops on the idea that capital can go in search of relatively low cost labour in different parts of the world. Imaginea different parts of the world. Imagine a world where robots are cheaper than low cost labour . It will bring the production back home. Thats reassuring process will be an increasingly interesting and potentially dangerous story over the course of the next few decades. The more you reshore the more difficult it is to spread wealth to other parts of the world. When i portrayed you as a big fish with global reach, you as a big fish with global reach, you said, lets not get carried away, i was not so very important. It seems to me you have spent your whole career at the heart of the financial and Economic System which look forward to the future because it felt. You were part of it at hsbc bank. You felt the world was yours, calling in your direction. View not feel that any more . I know youve left hsbc, but you still represent an influential voice in economics in the west. Do you feel fea rful economics in the west. Do you feel fearful for the future . I feel uncomfortable in some ways. I think when the west begins to retreat into the idea of nationstate and begins to define itself as as against them, whoever they might be, Globalisation Isa whoever they might be, globalisation is a mechanism to reduce the them in the world. In terms of the dramatic reduction in Global Policy over the past 30 or 40 years, the reason we say this was a very powerful and in historic terms of successful story. Once you start retreating into the nationstate and creating this as and then, you end up creating this as and then, you end up with a more antagonistic relationship between countries. The most obvious such relationship that might exist in the future is the existing superpower and the aspiring superpower. Going back to the pre post columbus world, if you are someone from 1100 or 1200 a. D. , and you looked at the map of the world, you looked at the map of the world, you would say that entirely familiar because this is something i recognise from my pre columbus days. Back to the future. We have to end there. They give very much for being on hardtalk thank you. Hello, there. The middle of the week is going to bring a peak in the temperatures. You could describe it as very warm across many parts of the country, especially across southern areas of england and wales. You could describe it as hot. Some sunny spells around, but thats not quite the case everywhere because on the Satellite Picture you can see the cloud thats been rolling in from the atlantic. This will be clipping into Northern Ireland and western scotland. So here there will be more cloud through the day and it will be breezy. Some splashes of rain at times, especially to the far north west. There could be the odd shower in the afternoon in england and wales. Further south, long spells of sunshine and thats where we will have the highest temperatures. For the middle part of wednesday afternoon, maybe the odd shower over northern england, but 24 degrees in leeds and manchester. Towards the south east, lots of sunshine and easily up to 27 28. Always a little bit cooler towards the coast. We could have 18 degrees in plymouth. Fine and sunny across the South West Of England and much of wales. There could be the odd shower, especially over high ground. The vast majority staying dry. Cooler towards the coast. For Northern Ireland there will be more cloud, but the day is by no means a washout. A lot of dry weather, mainly mpatchy rain into the north west. More rain in the northern and western parts of scotland. For Eastern Scotland there should be some sunshine and a fair degree of warmth as well. Through wednesday night it will turn quite muggy across eastern areas. The humid air still in place. Temperatures not dropping far. Out west, a change. The ban deep of rain working through Northern Ireland and into scotland, wales. This is associated with a cold front and as that moves in from the west on thursday it will start to introduce cooler and fresher aironce again. Still a pretty warm day in east anglia and the south east, with some Humidity Holding on. But as the Weather Front continues to move eastwards it will sweep the real heat and humidity away. Temperatures in most places on thursday afternoon about 16 19 degrees. There will be sunshine, but there will also be hefty showers across parts of the north west. Then well have some showers again on friday, especially in parts of wales, Northern Ireland, western scotland. Some drier and brighter weather further east. Still up to 23 degrees in the south east and into the weekend it looks like the heat and humidity will return in the south. Always cooler further north, with a little bit of rain. 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