Helen Thompson on the New World Disorder

transporting and consuming that energy. According to Disorder, underpinned the great structural changes, both economic and political, of the last century. There's more, much more, but let's get started. So, Helen, are we at a pivotal point now in how the global economy operates? Yeah, I think that we are. I think we're actually at a pivotal point before the war.

I think that what we could see during the latter part of last year and the months autumn before Omgon hit was that the world economy is facing some pretty serious energy constraints that really, at any point when there's any significant growth, the world economy is now running into high energy prices, and we're not just talking about high oil prices, as has been the case with most past energy crisis, at LEAs since the nineteen seventies, we're talking

about high natural gas prices and high coal prices too, and I think high core prices has really taken a lot of people, including myself. We try to follow the energy situation quite by surprise, and I think that that goes to show the depth of the issues that we're now facing, particularly when we bear in mind that we would like the world economy to be moving away from coal as rapidly as possible given the need to address

climate change. One of your main disease is that the US failed to secure the stability of its relationships in the Middle East, and that created an instability around energy, which reverberates. So in a sense, this shouldn't have taken any of us, and by surprise by that pieces right, no. I think that what we can see during the two thousand and tens is is that the United States, in terms of its own energy needs, is in a much stronger position than it had been in the previous decades.

Since the nineteen seventies, because the shale oil and gas boom allowed the United States to achieve a higher level

of energy independence much reduced energy dependence. What was revealing, though, was the way in which as the United States achieved that it's very success had so many disruptive consequences in the Middle East, in particular because it was very problematic from the Saudi point of view to now find that American shell producers were big rivals for shares of world oil market, and as that came at a time when the United States and the Obama was also trying to

improve relations with around and then things didn't work out very well in Syria. Despite the fact that studies and states have started on the same side, what we see through the two thousands and the end as the shell boom goes on, is a complete deterioration of US relations and although to some extent they're repaired during the Trump presidencies that Trump tries to hug the Saudi Is hard, he still isn't really able to influence the Saudis when

it comes to the price of oil. And as the US shall boom foltered during the pandemic, particularly during two thousand and twenty, another American president was left trying to persuade our oil producers to produce more oil. The problem now is, with the exception probably of Saudi Arabia and United Arab Embence, it's not quite clear how many of them really can produce more oil. Particularly I think there

are difficulties with Kuwait. So there's a great global energy rivalry now between the US, Russia, and China, and countries from Ukraine to Syria to as you say, Saudi have been caught up in this lack of foresight. I guess on the part of the United States, are we doomed to see nuclear powers face off until this energy revolution is somehow enacted. Yeah, I mean, I'm not sure how much I would say that there was a lack of

foresight in the United States. I think that there was a lack of a joined up stress at various points, and inability perhaps to see the difficulty of trying to achieve conflicting aims at the same time. In a way, the way to think about what's happened over the last decade,

in particular, is is that two competitions ensued. The first actually was in Europe and in some sense has been the most geo politically lethal, and that was a competition between the United States and Russia to sell natural gas in Europe, and the Russian point of view, that was a really different situation than the one that they'd enjoyed in the two thousand's when they could take really the

European gas market for granted. I think the big change that's happened in the United States, ironically in good part as a consequence of the US show boom, is that Saudi Arabia now has to think much more carefully about who it's selling its oil too, and that means that there's also a competition, i think, between saud Arabia and Russia to sell oil to the Chinese, and the Chinese leadership have a very strong awareness of China's strategic vulnerabilities

around energy. China is also trying to act as no large importer has ever done before, which is really tried to influence the price by stockpiling. So we've got complicated dynamics because it's not just actually a competition between the producers. We've got this very large consumer in China that's actually not quite really doing what other large importers have done and is not really prepared to accept a passive position

in all this. There is the longer term ramifications of everything that's going on, and then there's the shorter term ones, and there's a scramble now to figure out what can be done about Russian oil and europe dependents honored China's ability to access it, if Europe dozen and so on. Is there a solution here beyond telling people to put

on sweaters and reducing demands somehow? I think that any solution is going to involve some measure any way of reduced energy consumption, particularly when we're being the climate situation into the picture. If we look at European unions, whatever the intentions, it's going to be very, very difficult to reduce quickly imports from Russia, not least because Asian countries are also very big purchases of liquid natural gas imports,

including from the United States. Indeed, prior to this crisis, more American exports of liquid natural gas we're going to

Asia than to Europe. So, if European countries are suddenly going to start competing for this gas, and we could already see these dynamics playing out, gas is going to become a lot more expensive only in Europe, but it's going to become more expensive in Asia too, and it's not so clear that Asian countries can simply real and take to Russia because there's only one major pipeline that

goes to China. Helen, we were speaking of the dynamics that are constraining diversification from Russian natural gas, and so I want to quote from disorder. You say in two thousand five, the pipelines through Ukraine and still carried around seventy of the euth Russian gas. Well, hell, and not much has changed as we're seeing. Does Russia have the potential to pivot to Asia and particularly China, the great consumer?

In order for Russia to be able to increase its liquid natural gas export capacity, then it's going to need capital investment from these Asian countries, and that may well happen. I think we've already seen some signs of it from Japan and to some extent China as well, But new liquid natural gas exports from Russian aren't gonna happen quickly. So I think that in a way, it keeps everybody where they are in terms of the supply chains of energy,

and that means prices are going up. So if European citizens want their countries to buy less gas, from Russia. Then the only thing left is really to reduce European gas consumption, and we can already see that reduced energy consumption is the direction of travel. I don't think that that means either that the Russian gas dependency can be eliminated quickly. Is the one way in which something can be done. Now, the politics of this really difficult at

the moment. I think there was at least moderate support for the idea of reducing gas consumption in Europe amongst many people, but certainly not amongst everybody, And I think that some of the people who are advocating it probably haven't really quite understood what the systemic consequences of ending washing gas imports would be. Helen alliances and multilateral institutions. I'm thinking particularly of NATO, which seemed to be receiving

an importance during Trump's presidency. What happens to some of these alliances in terms of the shift from globalization to economic nationalism. I think that NATO is in a different position.

I think that the fundamental difficulty that NATO has faced really comes from the differences in perspectives between On the one side, I mean the slightly caricatures, but it will do on the one side, like Washington, London, Warsaw and the Baltic countries, and on the other side France, Germany, Italy, and there's been a very different view taken of the nature of the potential Russian throat and the nature of Russian power, and that this is very divisive in the

European Union because obviously there are a number of Eastern European European Union states that have got borders with Russia and feel very fearful since the war in Ukraine started. And on the other side you had someone like President Matt Kron who I think it was in late two thousand and nineteen, was talking about resetting relations with Russia was a necessary condition for the European project being realized.

So NATO brings out not only its own internal divisions, but also go to the heart of the divisions within the European Union that enlarged Eastwoods from two thousand and four. I think in terms of the international economic organizations we can see something different. I think the trade organization has been on the back foot for a long time now. It was i would say largely irrelevant during the US

China trade war. During Trump's presidency. I think there was some difficult questions out for the International Monetary Fund though, as we see a number of emerging market in developing countries in considerable currency and financial difficulties as a result of their high and energy prices and the rising food prices that have come with them. I think the situation in Sri Lanka and Tunisia and Practkistan as particularly troubling. Here.

As soon as we get into this minefield, so to speak, we've got the question of like, well, what kind of international financial credit can be provided to countries and what kind of political conditions come with that, And even if the i m F is in a position to provide loans with tolerable conditions to the governments in these countries. Is we've seen over the last really since i'd say

the two thousand and seven eight financial crash. How in some ways the lender that really matters in the world isn't actually the IMF, but it's the Federal Reserve Board essentially as an international lender of last resort. And one of the countries that's been in considerable financial difficulty in this respect for some time now is Turkey. Turkey is obviously pretty gear politically significant in this war. Turkey doesn't

have to swap blind to the Federal Reserve Board. So I think that the really hard question is not particularly perhaps a question of dealing with the country like Sri Lanka, but the question of dealing with the country like Turkey, is in something been taken out of the remit of the international financial institutions, or at least that that's not

where the decisive action is. Yeah, I'm glad you mentioned Turkey obviously experiencing runaway inflation in Egypt another one, you know, West Africa not getting food aid, and droughts staring places like Somalia in the face. I mean, it seems like we might be in for a period of extraordinary human suffering that was exacerbated by Russia's war in Ukraine, but not necessarily caused by it. Anxieties that are under a lying many relationships, even multilateral institutions and their members seem

to be coming to the surface. What reckonings need to happen? Helen Well, I think that in the European Union and reckoning has really already happened, because quite simply, the view and warsaw is triumphed over the view of Berlin and Paris during the course of this. More that isn't to say that the politicians in the German government will now do exactly want the polls of the Latvians, etcetera, and want them to do in terms of providing support for

Ukraine have the kind desired by the Ukrainian government. But it does mean I think that the assumption of German foreign policy going back to the so going back to

the Soviet period has really shattered. Now. I think that Duran politicians might want to try and reconstruct it, but I think they're going to find it extraordinarily difficult to go back to the idea that economic interdependence with the Russians and constraining force on Russian behavior, And they are going to have to take the problems of the security of the independent states that sit between Germany and Russia much more seriously than they've done since that coal I

think in terms of erecting more generally, I think partly what is going on is a realization amongst Western governments, perhaps in particular, that the issue of energy and climate can't really be thought of in buying in terms. We can't be in a position where we're only serious about climate if we're not taking any notice of what's going

on with the problems of fossil fuel energy. And I think you can see this in the moves that Biden has made, is that Biden came in wanted to prioritize climate hope that oil supply and oil prices could take care of themselves. It isn't possible for governments to try to demonstrate their climate credibility by disengaging from the issue

of having a fossil fuel energy strategy. That isn't because we don't need to move away from fossil fuel energy, but given that we can't do that with any alacrity, fossil fuel energy supplies are not going to take care of themselves in the immediate present, and the only way in which the pressures on them right now is reduced is by considering reduced energy consumption. Listeners a reminder do

get in touch. As always, comments and opinions welcome. I'm Ad Vanney Quinn on Twitter or just email vequin at Bloomberg dot net. Helen, I want to talk a little more about China's rise. Yet another global shift that you point out is very nuanced. In the last twelve mare in particular, we're really starting to see chinks in China's armor in terms of its growth and COVID strategies, market turbulens too, and developer of falls and on and on. Is China going to be the formidable foe that we've

been suspecting it might be? Yeah, this is an interesting question. I mean, I think that actually the two thousands and tens showed that China pulled in contradictory directions when it came to the question of whether it was arise in power. So obviously, if we looked at it in terms of GDP growth, then China has grew through the two thousands and tens quicker than the Western economies, and particularly by

two thousands seventeen. Really, I think everybody understood that in order for Western economies to grow, for the rest of the world economy to grow, China needed to grow globally synchronized growth. I think the imf cause of the synchronicity, if we liked, was China. But on the other hand, I think that China had some clear economic difficulties in the two thousands and tens that weren't there for it

in the two thousand's. A point in particular to the China's two thousand and fifteen sixteen financial crisis, and when it faced a serious outflow of capital, when the implications of the federal reserves plans to start raising interest rates in the latter part of two thousand and fifteen became clear, China I think, acquired a significantly greater vulnerability to the dollar and to dollar debt during the two thousand and ten compared to what it had had in the in

the two thousand's, and that also made the push that China had engaged into internationalize its currency there and men be really impossible to pull off. It led to a fall away in investment to a number of European countries. It became difficult, I think for people to see that China could move up leagues, so to speak, financially, if it had a currency that was still subject to such strict capital controls. And now China is in this difficult

position in regard to COVID. Clearly the Chinese vaccine is not as effective as Western vaccines, that take up has not been great. They're now obviously in a position where they've decided that the only way that they can deal with this outbreak however severe or not it turns out to be. It is with these lockdowns, and locking down

Shanghai is obviously a very very different proposition. This clearly has profound consequences for China, but it also has profound consequences for the rest of the world in terms of the way in which China's weakness then moves itself around the world because the importance of China to international trade. So I think that what's true about the world, and has been true since some point in the two thousand and tens, is that the rest of the world is now as much exposed to China's weakness as it is

to China's strengths. And in terms of capital flows and so on, I mean that the momentum had been towards increased too easier capital flows from China to the rest of the world and vice versa capital market openness. Are we coming to the end of that area? You think, Helen, it's very striking the way in which the Wall Street films have been very key to move into China over

the last thirteen months. And I think that one of the things that I actually spent quite a bit of time on in the book that looked like it was going to be consequential, which was the breakdown really of Hong Kong's position as a kind of portal between the Western China and financially looks like it's less significant than I thought that it that it might be that the tightening up in Hong Kong hasn't led to a sort of a greater financial separation between China and the rest

of the world. Yeah, so the fact that the financial interdependence is deepened is really both quite striking and how it plays out in terms of the decoupling on the trade and technology side, which doesn't look to me that it's gone away. Before we even get onto the sense of green energy competition. This is going to be really interesting to watch how these competing dynamics interact with each other.

There's a lot of handwringing about small d democracy, you know, you talk a lot about representative democracy and about neoliberalism and the death of the Anglo American model. What happens in the next electoral cycle, Well, I mean, I think the United States is in for another tough at least presidential election in two thousand and twenty four, because it's difficult to see how the Democrats go into it in

any kind of good shape. I'm not saying it's particularly Biden's fault, but Biden has ended up having to deal with a set of really, really hard problems of the kind that we were just talking about in the first part of our conversation, particularly about energy. And if you look at the history since the nineteen seventies of American presidential approval ratings and oil prices, they quite strongly correlate.

At times they extraordinarily strongly correlate. So it's very difficult, I think, to see how Biden would get reelected, assuming he does want to run again. But at the same time, you clearly have some pretty profound divisions within the Republican Party, and how actually there can be an election that doesn't bring this issue of losers consent back into play again.

I find that quite difficult to see. And if we move to the mid terms, then clearly, if the Democrats were to lose the mid terms quite badly, which seems looking from here quite possible, then that makes things very legislatively difficult for Biden in the second half of his presidency, which kind of creates more impast politics, which again I don't think there's anything to help the strains on democracy.

How are the deep structural forces that you've been explaining that are at work in the international economy interacting with political contingency. So I guess previously I would have said things like Brexit from selection, but now it's Biden's low

polling the outlook for the midterms. Yeah, I mean, I think that what we can see, like through the two thousand and tens was that things that look like they've got nothing to do with each other, I that look quite contingent on something quite specific to a country's politics actually can be linked to these changing struct from forces, And that's one of the reasons why I wanted to write the book in the way in which I did so.

You wouldn't think on the surface, for example, that Brexit referendum and the difficulties that David Cameron, the British Prime Minister had him winning that referendum, had got anything to do with high oil prices in two thousand and eleven. But I think that there was a relationship because of the difficulties that those high oil prices caused for the European Central Bank in responding to high oil prices by

raising interest rates twice. In two thousand and eleven, the Eurozone got pushed back into recession that made for a macroeconomic divergence with the UK economy, led to an increase in migration that produced something of a political reaction in the United Kingdom that spurred the rise of the United

Kingdom Independence Party wanting a referendum money you membership. That was part of the story in which Camera not necessarily came to the decision in the first place in two thousand adverting to hold a referendum, but the way he tried to renegotiate the terms of UK membership before whole in the referendum I think was very much influenced by the rise of UKIP. So things in one sense that look contingent actually I think had considerably more structural forces

behind them. The pandemics an interesting example, because in lots of ways it was a contingency. But I think that the denialist would say that actually there were some reasons to think that the nature of the global economy, particularly the way in which global air transport were actually acted as a rather rapid carrier. I think that the thing about elections, we didn't see it in the French election is is that sometimes that they can be, you know,

like incredibly close. And I think we saw that to some extent in both the last two US presidential elections, where the margins and individual states that were decisive didn't turn out to be very large at all. It doesn't take much to imagine either of those elections, particularly perhaps the first one when Trump was elected, going the other way, and then much of what happened in the second half

of the two thousand tents might have been different. I mean, I think some things wouldn't have been For instance, I think that Hello Clinton election victory in two thousand and sixteen would still have led the United States to pursue a rather more confrontational policy with China than it had done to during the Obomber years, because I think by the time that two thousands and sixteen had come about, given gg Ping's articulation of the made in China strategy

in two thousand and fifteen, there was quite a strong consensus in the United States for a more confrontational approach. In that sense, Trump just articulated it in a crude way rather than actually creating that break himself. You talk a lot about the problem of losers consent and how

that's been a bugbear and may continue to be. But losers consent has always been a problem, right, Absolutely, Losers consent is necessary in a democracy, and there are times when it's been pretty absent, I think would say, particularly perhaps in the United States and number of moments. On the other hand, I would say that what we can see in United States is a weakening of losers consent

since at least the nineties. For instance, the attempt to impeach Bill Clinton, I think is an example of the fact that a section of Republican Party and interests aligned around it weren't actually willing to accept elections determining who was the president, and wanted to remove from office by

other means. I think what's happened in the United States is more tricky than it is elsewhere because of the nature of the presidential election system and the fact that it straddles the federal part of the US with the democratic part of the US via the electoral college, and once you've had two elections in sixteen years, as it was, where the electoral college and the popular vote diverged from each other, I think that in itself put considerable pressure

on loser's consent. So I think it's always a risk that it isn't there in democratic politics, but I think the United States over the last thirty years has gone further down the road of having a problem with it. So, Helen, if we're to just take a look at some of the large forces at work globalization, do we need to save the current global order in some fashion? Yeah, I'm

not sure what global order there is right now. Yeah, you can say, I mean, I guess the the idea that even trade relationships are changing, but there is still this impetus to try and create trade alliances that are global, you know, so Aucus would be one of them, for example. Yeah, I mean I think that that's clearly still interest in

some kind of rule based international trading order. I think the difficulty is, and we saw this I think during the Trump years, is that there are some issues around the size of certain countries, particularly perhaps China's and Germany's trade services that themselves have destabilizing effect on the world economy and in the case of Germany, on the Eurozone

and to some extent, the European Union. I think the difficulty is, though, what do you do beyond maintaining the rules of the World Trade Organization out some of the underlying causes of those differences, and I think that's where we get into considerable difficulty in imagining that we're moving into a world of greater international cooperation. And I think

we can see that with exchange rates in particular. Ever since really the middle of the nineteen eighties, Western governments plus Japan and now more recently China have kind of inched their way towards sort of tacit at least agreements about how to manage exchange rates, and then pulled back from them because they're actually, I think incredibly difficult given the nature of the world economy, particularly how financialized it is.

And I think that what we've seen more generally over the last few years is a bullying a part of the globalization story when it comes to finance, to trade, and to some extent production. So if we take finance, actually there's been extraordinary little decoupling between the US and China in recent years. Indeed, since the pandemic, Wall Street is more embedded in China, I would say than it

was before. And yet we can see on the productive side of the economy and supply chains increased pressure for decoupling. I think that we can see that governments across the world actually have got much more of an interest than they did have in the resilience of supply chains and in security and relation to supply chains. And the more that they think in those terms, I think, the harder it is to be putting back together a globalized productive economy.

So I had to stop underlining because I found myself underlining something on every page. But you write a lot about the nineteen seventies and how important the nineteen seventies are in terms of our understanding where we are now and how we got here, especially the latter part of the seventies. I mean, there are a lot of economies out there that would suggest that we are in an

a regime that's nothing like the nineteen seventies. But explain to us what you mean by the importance of the seventies too, now, Yeah, I mean, I would agree that there are some significant differences between the seventies and and now, And one pretty big differences is that there were very well organized trade unions capable of imposing serious harm on

Western economies. I mean, you think of the minor strike in Britain, for example in four that led to a national emergency and everybody going onto a three day working week and sitting around in the at night in the darkness. That world doesn't exist anymore. I think that the reason

why I think the seventies are important is twofold. Really the first of them is the origins of some of the economics and geopolitical issues that we now face lie in the seventies, particularly would say on the geo political side in terms of what's happened in the Middle East. But I think I in a way want to draw intentions to the seventies now to show the ways in which actually the predicaments that we face are harder than the ones that existed in the seventies, despite the parallels

in relation to energy shocks. So if we tell oil, for instance, there wasn't any real problem with the supply of oil in principle in the nineteen seventies. The problem came because it was geopolitically constrained by the reaction of the Arab States and to some extent around to the Adapa War in ninety three, and then it was geo politically constrained by the Iranian Revolution in the Iran Iraq

War at the end of the decade. What's different now is that there are reasons beyond geopolitics why the supply of oil is constrained. It Actually the major oil producers are all in different ways struggling with the limits of oil production. And you can see that in the faltering of the US shale boom. You can see that in the fact that probably the Russian oil fields in West

Siberia have passed their peak. The production difficulties in q Way, and even in a country like Venezuela where there wouldn't in principle be any difficulty was supplied as enormous difficulty with the politics. And then the other really big difference with the nine seventies is that these were West problems largely in the nine seventies, plus to some extential pan Now they're Chinas and Indias too, and that has pretty

important consequences for US in Western countries. That means that there's going to be much more competition for the supply of energy that's available, and that means I think that it's going to be harder to find a way out of the problems the energy causes. In a way in which there was a way out in the late nineteen seventies, which was increased production in both the western hemisphere Alaska

and Mexico, but also in the North Sea. And then on top of all this, you know, we weren't having to face the situation that we are now with climate change in the nineties, and principle could have been, but we didn't understand enough about it. So we're trying to deal with all these present tense energy problems while we need to engage in this energy transition now. I think that that's going to take longer time and the many people think, but it doesn't change the fact that it's

got to be done. It's got to be done, I think, not just for climate reasons, but also to deal with these fossil fuel energy ms in their own terms. So the seventies is useful as a story about the origins of our present crisis, but I think it's just as useful actually in holding it up and showing the ways in which actually what we are facing now is really quite different. Helen Thompson, Thank you listeners. The book is disorder hard times in the century. Do get in touch

with your thoughts and opinions. I'm at Vanni Quinn on Twitter or email v Quinn at bloomberg dot net. We're produced by Eric mollow Till next Time on Bloomberg Opinion.