Transcription
We're delighted to have Martin Wolf as our guest today on Global Media Talk and SPRO TV. Martin is the chief economics commentator at the Financial Times. He was awarded the CBE, Commander of the British Empire, in 2000 for services to financial journalism. Prospect magazine described him as the Anglosphere's most influential finance journalist. Harvard President Morris Lauren Summers has called him the world's preeminent financial journalist. And Muhammad El-Erian, CEO of Pimco, former CEO of PIMCO, said Wolf is by far the most influential economic columnist out there. He is the author of five books, read philosophy, politics, and economics at Oxford, and received his Master's in Economics at Oxford. Martin, thank you for joining us. I'm excited to get your perspective on key geopolitical economic issues that challenge us today.
It's a great pleasure to be with you. Well, it's a, you know, some, someone brilliant once said, "May you live in exciting times." And that wasn't, that wasn't perhaps a compliment, more of a curse. We have to decide which. But we, we are certainly in, in very exciting times. And one of the things that I'm very happy to have you is, I think you give us a, you, you'll be able to give us a different perspective. And in the US, we are, you know, famously sort of US-centric, and we hear, we're in our own echo chamber, and we, you know, it serves us well, uh, to be able to hear what other folks in the world are thinking about us.
I, I want to get right to it and, uh, the, the, the war in Russia, Russia and Ukraine, or in Ukraine invaded by Russia, um, has challenged us for the past three years. And I want to, um, be provocative and, and say, what do you think of the idea that the saviors of Europe might actually be Vladimir Putin and Donald Trump? The, I guess the stunning surprise of Russia's invasion and Trump's reversal of the post-war Atlanticism that supported NATO. Is that a wake-up, you know, ultimately for Europe, which for 75 years, you know, clearly chose butter over guns?
Well, so first of all, and this actually fits, fits with your opening, my memory, but you might be more expert than I am, that the "May you live in interesting times" is the way I heard it, uh, was actually an old Chinese curse, which might be completely wrong, but that's what I was told. Anyway, for me, that fits very well with the way I think about this. Uh, everyone has their own background and, uh, and, uh, I was born in 1946, which is a very long time ago, immediately after World War II, and my parents were both refugees, uh, from Nazi Germany, which is very important in my explaining my thoughts about many things like this. And, uh, uh, basically their entire families, their wider families were, uh, killed in the Holocaust. So I find the idea of interesting times or exciting times of the kind you mention instinctively frightening. So I generally feel that praying for some incredibly exciting, uh, event because you will rise to the occasion and it will transform you is a slightly infantile attitude to life because it might just end up by ending the world. And the, and we are more able to do that now than ever before.
In recent thinking, and I mentioned in one of my columns, I did a little bit of research on what serious people think global thermonuclear war would do to the human population, true thermonuclear war. And they, and the analysis I saw, which was from a reputable American university, said it would kill about six billion people. So there's a degree of excitement we really don't want. Uh, and I do feel at the moment we are very close to more excitement than we want. But, uh, and in this case, it's because, uh, Russia is, of course, a country with about 5,000 nuclear warheads. The US much the same. That's enough to, as I said, exterminate most of humanity. And when you start getting head-on war, close to war, um, it gets very frightening. And by the way, this is one thing with which, on which I really agree with Donald Trump. One of the things I rather like about him is his big difference from the would-be dictators of the past. He, he really doesn't seem to like war, and that's a very good thing.
Now, the question is whether, uh, despite my anxiety about where we are at the moment, uh, the, the, the amount of global disorder on economics, politics, and so forth, will this be good for Europe? Well, there are two questions there, really. Is this a genuine challenge for Europe? Absolutely, without a doubt. And not just, uh, Ukraine and, uh, uh, uh, America's recalibration of its commitment to NATO, which are obvious profound challenges to post-war Europe and its desire to be peaceful. Um, and particularly post-Cold War Europe. Uh, what you say about defense really wasn't true, uh, prior to 1991. The, the Europeans spent a lot on defense, and the Germans had a huge army. Uh, you know, the bulk of the troops confronting the Soviets in Germany were German. Please remember that. It was, they had a conscript, a conscript army. Uh, the British had a large army, um, there. And so it was an alliance. Of course, the Americans had the dominant weight of power. They were richer. They had all these nuclear weapons. They didn't really want Europe to integrate militarily, by the way. They resisted that very strongly in the '50s. People seem to have forgotten that. But the, why shouldn't they? It's a very long time ago. But the basic point is this was a fairly equal alliance, given, uh, the concentrated power of America, until the Cold War when we decided history was over. Some other people did, and that's a lot of what has happened in the last 30 years. History is now back. It's also back in a very big way in economics. Perhaps we'll discuss that later.
So the Europeans have to decide what to do. So what I would summarize it by saying, the Europeans are aware they have a problem. They don't know whether and how to, uh, ensure their own security. They are clearly unprepared in terms of the money they're spending, in terms of where they get the troops, uh, and in terms of providing arms of all kinds because they haven't really, um, oriented themselves to that. And to create a really large army would probably require conscription, which would be very, very difficult, uh, um, very, very difficult in a number of countries. The question then, that's the challenge: Will they rise to this? At the moment, I would say it doesn't look very likely. There's a lot of rhetoric, just as a lot of rhetoric about economic reform and economic dynamism, but in the end, Europe is, well, 27 members of the EU, very different countries, very different histories. And then there's the UK, too. Um, it's an awful lot of countries to herd together. And admittedly, only a few, maybe five or six, matter, but even that is a lot of countries to combine. And there's no natural leader, as there is in NATO, within the overwhelming dominance of America. It's obviously the leader. There is no natural leader in Europe. And the European Union as such, even more Europe as such, doesn't have an integrated command outside NATO, and that's still dominated by the Americans. The, the, the command of NATO is still with an American general. So it's a very big shift.
And then there's also the economics of it. They'd have to raise more money. That means cutting the welfare state or raising taxes, both desperately unpopular. The politicians aren't ready for this. And finally, in every European country that matters, there's a very significant populist movement, generally, but not exclusively right-wing populist movement. Quite a lot of these people actually rather admire and like Putin. They don't want to fight for, uh, Ukraine. Their attitudes are actually a bit like that of the administration about it. So if you add these things together, while it's clearly a very major challenge for Europe, there's no doubt about that at all, I think it's very unclear whether enough will happen for Europe actually to be able to defend Ukraine, meet the challenge on its own. They, there will have to be some American involvement, particularly American arms, American intelligence, um, American willingness to put pressure on Putin. Without that, I don't think this is going to work. But with that, I think it might.
I, I do want to move, uh, move on to economics. And I guess the question is, is, is related but also quite important, and you, you just touched upon it. Uh, so has this, the Trump restoration, as we'll call it, Trump 2.0, know, permanently changed how the UK and Europe, and perhaps the rest of the world, view the United States? Or is it perhaps the night terror will end in three and a half years, and whomever the next president will be will be, you know, much better? Or is this, does this change? So what do they think? And would this, will this change permanently change the international view of US assets and whether or not they will continue to fund our ever-enlarging budget deficit?
Well, the answer to this is, we don't know. But I think, or we don't know in the sense we really, really don't know what's going to happen in the US. We don't either. That may not matter for your question, because what has happened has unambiguously vastly increased the range of possible outcomes. So if you asked somebody who followed international politics, both economics and international relations, 20 years ago, so let's say, uh, 2005, whether what we are now seeing could happen, I think the overwhelming majority, I mean, just 99.5%, probably, maybe I'm exaggerating, of foreigners, whether they were friends or foes, would sort of immediately say it's impossible, that can't happen, because it amounts, uh, to the, a decision by the US to change in very profound ways, not just its domestic politics, which is obvious, the way the government operates, so forth, but essentially to demolish, um, most of its post-war commitments. You know, what it has been, um, question the alliance, question its commitment to liberal economics, com, um, question its commitment, above all, to, to liberal trade, uh, question its commitment, a whole range of international institutions that it created, that its creation. So, this is, uh, even in 2000, you know, with George W. Bush, charging all over the world trying to spread democracy by force of arms, when commitments to NATO were unquestioned, hostility to, to China, yes, was there, but within an alliance context, the, the commitment to the WTO, all these things were unquestioned. So, what we have realized is that the assumption that those commitments were rock solid was wrong. You just were simply wrong. Now, and once you've seen that, you'll never go back to the complete confidence you had in the opposite. So, we now think America is not what we thought it was.
Now, then you raise the question, okay, does that mean we know what he will be? Uh, does it mean we know it will be Trumpian? No, we don't know it will be Trumpian. Uh, uh, I personally think it's very likely it will be, that the shift is going to be enduring, but I could be wrong, of course, I recognize that. But, uh, even if other forces win now, that is to say, the next presidential election, there's a reversal, uh, for a while. Well, we've seen two things. We've seen America change all its views on these matters and its actions. And we know that the current administration is backed passionately, fiercely by a very large number of Americans, close to half. Now, maybe that will dwindle, but it's an enormous number. And these people have very, very, very different views from the traditional Republicans. You know, that's gone. Ronald Reagan isn't around. So, we have to assume that these forces will remain very powerful, even if they are defeated in the next election. Big question. And they could come back. They might come back in a different form, but they could come back. So we have to assume not only that this could last, but even if it doesn't, it could come, could, could come back again. The America of the period from, let's say, Pearl Harbor to 2016 has just gone. That, that confidence in that has gone because the political forces within America are profoundly different from what they were then. Just the move from Mitt Romney to Donald Trump as a Republican candidate was itself an absolutely colossal event. So my assumption is, we don't know what will happen, but what has happened is big enough to make us quite sure that we cannot assume that what will happen is that we're going to go back to the status quo ante. That seems incredibly unlikely. In fact, to my mind, inconceivable. So we have to assume that from now on, and perhaps for a very long time, we don't know how long, uh, future policies of the United States will either be like this, or they will be highly embattled, or perhaps to some degree a bit of both.
Will they still buy our debt? I guess is the Well, then the question, the, there are the first, well, there are many questions there. First of all, um, the US remains the world's strongest economy, the strongest currency, and, uh, that's a tremendous asset, and there are no good alternatives. It's very important, and though we can't rely on it in the old way, it's still the most important potential ally, ally around, and, uh, most countries want to continue to have good relations with the US. And that was shown in the trade negotiations, even if they hate what's happening. And, uh, even China wants to have workable relations with the US. So I think that if the US doesn't do anything really crazy, people will continue to buy US debt, rely on the US dollar, rely on US capital markets, vote demure, in the l, in the absence of anything better, as it were. You can't be something with nothing, and there is something else. There's an important qualification to that, that depends on, on what the US now does. You know, this is a famous Winston Churchill, uh, quote, although it's attributed to Winston Churchill, that the, uh, uh, the US always does the right thing in the end, though not before first exhausting all the alternatives. And, and the, so I tend to assume that in the end, uh, Mr. Trump and his team will not, uh, make a laughingstock of American monetary policy and pursue what I think of as a Latin American populist monetary system, like Argentina's. I, it sort of seems to me inconceivable that the American economic and financial establishment and corporate establishment will allow that to happen. But if it does, creditworthiness will be destroyed.
Well, it's, it's, it's, you know, I wish very good health and prosperity to Scott Bessant, who seems to be the most sane mind in the administration in terms, certainly in terms of finance. And I take heart that, you know, 10 years ago, uh, Greece was practically defaulting, and now their 10-year debt is about, about where the US is. So people do forget. And at the end of the day, our capital markets are so big that if you want some real return and some reasonable safety, not a lot of, you know, not a lot of other debt to buy. I do, I agree completely. And, but it does depend on Mr. Trump not doing some of the crazy things, to put it bluntly, he's talking about.
I, I love your analogy about Richard Nixon as well. That's apt, and I don't think many people, unfortunately, in my generation, I'm a little too young to remember Richard Nixon. Um, well, the, there are very few advantages of becoming ridiculously old and still working, but one of them is that you remember very, very well episodes which are very similar. Richard Nixon, I, from my personal point of view, is, it was infinitely preferable to Donald Trump. That's my personal view. But as personalities, as you know, somewhat authoritarian figures who wanted people in the administrations to do exactly what they wanted and doing extreme, I mean, he introduced wage-price controls, he introduced, I mean, he, he was monstrously interventionist in the economy, and he suborned the Fed, Federal Reserve. He's clearly, as a figure, um, far and away the most like, um, um, Donald Trump, at least in the last century.
Striking, striking, really. You know, I wish you had another hour to discuss it. But in the, our last few minutes, could you briefly give us your view, it's only a few minutes, um, on China? In terms of, has that government, that combination of a totalitarian government trying to run a quasi-market economy, have they finally run into a roadblock that is going to be difficult to get rid of and get around? I should say, uh, and I don't think we'll have time to discuss India, I know you visited recently, just your quick thoughts on China and India and sort of their path forward.
Well, this is where I really don't know, but I have written and thought about it for a very long time. My assumption is that in both cases, the political forces for working a way out of a way of continuing to progress economically will probably be prove overwhelming. Is to say, um, the Chinese people and the Indian people will not accept being stuck where they are. They're in very different positions, but they won't accept that they will be stuck where they are. And so if the systems they have don't work, um, then one way or another, possibly very messily, they will be changed because you can't avoid, ignore the desires of more than a billion people. That's my first point. The second point is, in both cases, I think a bit more in China's now, um, they do have some fairly large problems along with immense strengths. And I, uh, they're problems of macroeconomic imbalance, and they're problems about working out, in the Chinese case, macroeconomic balance and working out the role of the private sector as against the state. But I tend to think in the Chinese case that the, um, I tend to think the government will be pragmatic enough and is being pragmatic enough to ensure that if what they're doing now isn't working, that they will have to change. I don't think Xi is Mal at all. And I think he wants China to prosper, and I think he knows that it has to if the regime is to survive. Now, that's my guess. These are guesses. Uh, but that's my hypothesis. So, and if they want to change, they sure can. Then China's potential remains, despite all the obvious problems, gigantic. It's still a very relatively poor country with an enormous population, even if declining, of extraordinarily immensely capable people. I mean, that seems to me obvious. So I would, my view is, you bet on China.
And I have the same view of India. It's much messier and disorganized, but there are an immense number of very capable, very gifted Indians. We know that, uh, they do very well. Just look how many American companies are run by Indians, right? Uh, uh, the idea that they can't get above, you know, their GDP per head in real terms, about 10% of US levels. Is anyone going to tell you and believe? Are you going to believe they can't get to 30%, which is where China is? I mean, they want it. They've seen it. They, they have better lives now. In the last 30 years, I've followed India since for 70, no, 60, roughly, um, in the last 30 years, 35 years, for the first time in the history of India, there have been really significant improvements in standards of living, not perfect, could have been better or worse. So one way or another, India again will find a way through this and will continue to develop. So my view is, the West, I've written this many times, we have to bet on these countries succeeding, and others, but these are the most important, and we have to adjust to their succeeding. And the idea that we can, or should, but we can, and this is, I think, a craziness of some in America, not, I think Donald Trump, to his favor, that we can stop it somehow, that China can be derailed, I think it's crazy and also utterly wicked. So we have to adapt to a world in which these are great powers, and the West, which is what, 12% of the world's population or so, he's not going to run it as he did 100 years ago or 50 years ago. It's crazy. So my view is betting that that won't happen, that somehow we can prevent it, that the US, with 4% of the world's population, can continue to run the whole world, is absolutely grotesque. And I feel about this very, very passionately, and it's a terrible mistake to think we can go that way, and it will be disastrous for us and I think the world.
Martin, thank you so much for this lovely conversation. I look forward perhaps having you on the show again. We, you, you have so many interesting things to say then that I want to think about and unpack. So, thank you once again for your time. Uh, much appreciated.
[Music]