We Have to Restructure Globalization, Stiglitz Says

on wealth, the pushback from conservatives as well. The classic two thousand two is globalization and as discontents. There's a long new afterward. It's not just like a six page afterward. You really put some thought into it when you wrote the afterward. I'm sure you had an idea in your mind and then you had to rewrite the afterward. What was the rewrite like of the new afterward? Well, the big idea it was that when I wrote Globization Discontent,

I just left uh. Being Chief Economists of the World Bank, I saw the discontent in the developing world, and I saw that there was a real rationale behind that discontent. Globalization had been unfair, particularly for say Africa, up and afterwards, yeah, exactly. And then uh Trump becomes president the United States and he says globalization is unfair to the United States. And you have to ask the question, how can globalization be unfair to the United States, unfair to the developing world.

How can it be that something that was supposed to be so good for everybody while winds up being hated by everybody. And one of the reasons for writing the book was to try to to unravel that that dilemma. Another one was that Trump says, uh, NAFTA and every one of our other trade deals or the worst deal ever. And what he seems to suggest is that actually almost said is that our trade negotiations got snookered by the

smart trade negotiators from Mexico. And come on, he said in China, Joe Joe stickless with us from Columbia, Folks, Professor Stiglets, he said in Shina, he blamed past presidents exactly, that that that we that we have been taken advantage of by by those in other countries, and that you know, I've watched these trade negotiations for thirty five years, and the idea that we were snookered by by those in other countries that they took advantage of us is absolutely wrong.

We got what we asked for. The real question was were we asking for the right thing? Okay, but whether this Joe is you grew up in blue collar Gary, Indiana, Mr Trump fact represents a huge swath of disaffected blue collar America. Now why is this blue collar now different from the blue collar you knew in Gary, Indiana long ago and far away? Well, first, he doesn't represent those

they voted for him. Voted for him, but they voted for him because he says that he's going to put forward a set of economic policies that are going to let's make their play better. And that was the third reason I wrote the book. I wanted to answer the question, would the policies that he put forward actually do what he promises? Or is there in third way another way? Uh, it's clear that the policies that we did in the past, it's clear that. And my argument was that his protectionism

was not gonna work either. It was actually going to make them worse off. Okay, I learned people go, how did you learn to wear a bow tie? Tom? And it wasn't that I got it from Senator Simon of Illinois. But that was a good in the esteemed economists from Illinois long ago and far away. Where are the Democrats in your party who can move centrist to assuage the fears of more traditional, non Trumpian Republicans. Do you have any optimism the Democratic Party can get out of its

own way in its own recent historical baggage. I think so I do have some money. Why do you say that, Well, I think one of the elements, Uh, they're beginning to grasp. Uh. One of the elements of correcting where the problem is where things have gone wrong is market power. Uh that Uh. One of the reasons that globalization is being so bad is that it has weakened UH workers marketing power and UH play provided a framework in which large corporations have

gotten larger and larger. So there's an increasing concentration of market power, uh, just like there was in the goaded age at the end of the nineteenth century. Uh. And they've grasped that and says we uh, And I said, we have to do something about that. A second element is that we have to have systems of social protection without protectionism. UM. And part of social protection is having

a tax system that's fair. Uh. So underlying one of the elements of of making our economic system work is that those who gain have to share some of the

benefits with those who have lost. Show the primal screen from conservative the four conservative Democrats that are out there, but a huge body of people who I would suggest didn't want to vote for President Trump is there's the Democratic Party, his law its way from the wards of Gary, Indiana from years ago, and from other geographers, well, Pat Toomey of Senator from Pennsylvania's to deal with us every day? Why is your world you grew up in so embarrassing

to East coast and left coast Democrats. Well, that's a political issue. Uh, let's get back to Mike McKie political classes. They're the only ones that don'ts no. But uh, there are many complexities to these political dynamics. We all know that in the United States, Uh, money matters in politics. And I'm afraid that that the search for money has distroyed. It has led to a focus on where the money is, you know, exact simple and and I'm for you only.

I think we have to get back to the roots of where where the voters are, and the voters are ordinary citizens who have not done very well, and you know, just the real the reality is that most Americans have lost uh as a result what has going on in the last thirty third of a century. And globalization, as I point out in my book, is a part, not the only part of the story, but an important part

of the story. And we have to restructure globalization. It's not with globalization itself, it's with the way we manage globalization. So let me ask one quick set up, please, you only get thirty seconds, and then we can delve into this later. The tax bill argument that the administration makes is especially the repatriation that their their concept is sevent of corporate earnings go to labor, go to labor, and only to capital, which is kind of the opposite of

what most people have said. So do you disagree with them? Uh? Their analysis of what will happen as a result of the corporate income tax cut is uh. But if we'll get into I want to ask that because that's one of their major arguments that they make, that workers will get a big raise out of this. And you were talking how even the CEOs, even the CEOs have said that's wrong. I mean, it's really striking that We've gotten a big dose of honesty from a lot of the CEOs,

you know. Uh. Cone asked a group of CEOs what were they going to do with the tax cut, and only three of them their hands and said, maybe we'll show a little investment traditional economics. Uh. Research shows that workers get maybe of profit corporate profits, whereas capital the owners get, which, as you were just saying, makes logical sense. Uh. And yet the the argument for the tax bill reverses that do you know of any economic research supporting that idea? No? Uh, no,

no credible research actually. Uh. After the Console of Economic Advisors came out with the report, uh uh, there were two very good articles that were very quickly published on the internet, uh, analyzing where what the weight of evidence was. And and it was quite frankly an embarrassment because for uh fifty years, the SIN sixth creation the Console of Economic Advisors has always tried to be reflect the best of economic science, you know it when the evidence was

against it, they would be totally silent, you know. And and sometimes politicians do put forward something, but it was never actually going on the record, uh, and and uh saying things that we're against what economic science. Ha said and this was an embarrassment for UH what has has been a very strong institution in our government, UM, one that tries to give the American people, and I'm bipartisan basis the what economics says about various policies being advocated

by administrations. You see what I've done here, Tom, I've set up a shameless plug for Bloomberg News is to lou On Eurompeia and his story this morning on this Uh, if you look at Bloomberg dot com, he's looked at what CEOs are saying they will do with the cash.

So there's a third good story out there for you, Joe. UM. The other thing we're talking about during the break is the tax trigger that they're putting into this and UH, let's leave aside the the idea of you know, the value of this tax plan and the politics of this tax plan, but just uh, from a from an economic

point of view, tax trigger bad idea. What the basic problem is that, UH, when the nature of the tax trigger is that when if the tax revenues are less than they say, and almost surely they will be, uh, it raises taxes. That's what economists call is pro cyclical tax policy. In other words, tax policy is supposed to run against the tax so that when the economy is weak, taxes are cut to stimulate the economy. When the economy is strong, uh, you raise taxes. We're doing just the opposite.

The economy is relatively strong and we're lowering taxes. That's going to be pro you know, exaggerate the movements of the economy, and the tax trigger will do just the opposite. If the economy gets weak, tax revenues go down, and the tax trigger says, now we're gonna raise taxes um and that will weaken economy further. It's the worst kind of economic say that you could imagine. And I tried

to read it yesterday. Man, he's glazed over by paragraph three and forty two numbers of it's formulaic beyond believe Joe. There's a lot of people out there who have grown up Republican who want to find an alternative. Can your Democratic Party generate an alternative for two thousand twenty Yes, I think they can. Uh, Well, who is going to be a long process. I mean, I think one of the reasons that you don't see people uh putting their names for it is we know the political what the

political process works. It looks like whoever there there there, Joe, everybody who's running is older than you. Uh, not everybody. There are some some people who are who are younger, who have a lot of ability. The real question is what will the central messages of and the central platform of the Democratic Party look like. And I think uh to come back say in my book, Uh, one of my messages of my book Globalization, it's discontents to revisit

it is we have to manage globalization better. It's not with the problem with globalization, it's the way we managed it. When it's working well, it can lead the economy you do well. But the problem when it's not well managed. Even if the economy does well, more than of the benefits go to the people at the top. And so you have to have systems of social protection without protectionism, which is the route that the Republicans are going. So

it has to be a different message. Part of that message is market power, ugglomeration of market and within you're afterwards, we've got the phrase market power just took us. Congratulations from two thousand two on a strong new edition of his classic Globalization, Globalization and its disc Well, we've got to go. I know you do. I mean we've got to um get you into our London studios as well.

When you're over there. We migrate now to a careful discussion in uh too short a time here this morning with vage matel of I n G on the foreign exchange space verage. I'm sure you saw the news on Britain with an attendant strength in cable. What euro Sterling? I haven't talked about it in a while. Is a euro Sterling a profitable place to play the back and forth of Brexit. Well, for most of your Sterling has kind of been a political gauge for rest risks, political

risk in both Europe and and the UK. Earlier this year was the French elections. He saw the Euro sort of pricing a bit of political streaming over summer, the Euro turned into a safe haven and it's kind of demonstrating these characteristics at the moment as well. Our outlook going into next year for US we see two cyclical

forces offsetting each other for Eurosterling. So whilst you're going to get a positive repricing in on the Sterling side as Brexit talks make some good progress in the UK economy, maybe instill some animal confidence. Equally, the Eurozone economy looks pretty upbeating that's right where I wanted to go. They're both strengthening as the I n G car right exactly. So for us, we actually see we've we've got a

nuanced profile. We actually think the first quarter might be relatively better for Sterling against the Euro, just purely because you have the specter of the Italian election risks for the Eurozone and also a positive repricing on the Brexit front. We're seeing part of that today, a transition deal with the next catalyst that we think could drive Sterling even higher. We're looking sort of for the low eight five eight five level that that's our sort of mid early sort

of next year. A target after that. We're kind of then in sort of this period where it will net around that sort of a five level and sort of cycle thats fluctuate around there unless we get another layer of positive steering in the UK economy towards a soft Brexit. Uh. We're not making any big calls here. That's the that's the twenty nineteen story. But for now, eighty five is what we're looking at. What is your single best idea in the next year, just grab it up here. What

does a cross rate where you think alpha can be made? Well, so we we were sort of running with this sort of monetary convergence theme going into next year. So it's it's it's where the low yielders can play sort of catch up against the sort of against the sort of higher yielders. The yend actually looks like a pretty good place that I want it finds the peak dollar yen

sort of finding a peak up in one fifteen. But yen crosses as well, especially against sort of some of the some of the higher yielders which are suffering like as the year, et cetera. So we were quite like these sort of convergence trades for US. We're also quite like euros, so euro against the Aussi dollar again another convergence trade there, the ECB tightening, the Australian, your curves thaying relatively flat, going into neetka, all of these convergent,

your convergent trades. Well, right, we're gonna have fun and this in the Bloomberg folks, you'll see this chart first out on Twitter. Thank you for listening to Bloomberg Radio. You're looking for stronger yen which and dollar yen is from one eleven down to one oh nine one oh eight. Do I have that right exactly exactly? And so for us, what we're looking at, it's this idea of a V shaped invertive V shaped profile for Dollienne. You may get

arrived just purely. Is this that the tax still goes through maybe at the turn of the year, but I think it'll be quickly faded. I think markets have learned their lesson from translation earlier this year. They want to see the evidence in the growth. They want to see the evidence in the data. I don't think we don't think we're going to get that sort of evidence coming through at all the US economy going into next year.

Where's your target? And Aussie And I'm going to put this chart out folks, based on what Varage says, where's your target on Ozzie again, Well, so I think when we look at it, it's sort of it's it's it's kind of around the sort of potentially could go back to sort of those low low seventy five, sort of low seventies level, so to ciclically, that's where direction of

travel seems to be going. I'm making the Varage Patel circle on my Bloomberg chart right now down at the seventies six level, folks, we're gonna put this is what I love about surveillance. We can have a pro like Verage Patel on we can make the chart is he speaks and in this case with radio, you can see it out on Twitter just like that. That's very good from my m G. Varage Patel, Thank you so much. Rage. We gotta get you back on longer next time. Sorry

for this the abruptness this time. Jeff Kerry, are you see with us with Golden sax? He looks at come on days and particularly oil Will you go to Vienna two? S's like watching I mean, let's be honest here, is it like watching paint dry? I mean you look at the list of planary speakers and closing comments. Is it like the definition of watching paint dry? There's a reason why I haven't been back for a little Yes, exactly, That's what I thought. You say. The story with this

opaque is the mystery over inventories. Is that like where's the oil? Well? I mean there's different metrics to measure the inventories, and if you go with the opaque data, it would suggest that rebalancing is roughly complete. Now, if you use the I A data, it would say it's yes, it's roughly complete. Now that's not the end of the uncertainty. Then if you add in what metrics do you use? Do you use days of forward consumption or do you use the inventory levels? Um? That will if you use

days of forward consumption of the rebalancing. So how far we are along the rebalancing path. There's a high level of uncertainties, which is enough for you to make a call. I mean, if we're an arrange bond quality of a vector up vector, well are our base case is that we're still having the cut ending in April of next year, and then we have a you know, a a gradual increase in both OPEC and Russian production after that. Now, obviously the meeting is going to lead to most likely

some extension beyond that um. You know, of the three outcomes that you would have, you know, than the nine month extension UM, which would be I think the market really has not priced that in yet, a six month extension, which is roughly what the market has priced in, and then a three month month extension with a reassessment or a taper discussing how you would actually create an exit strategy. Have you ever seen this this almost negotiated or discourse

driven dynamics and oils supply. No, And and I think one of the key the key issues is that there's so much debate eight right now on what you're going to use as a metric. So if you go back to November two thousand and fourteen, that one was viewed as having a high level uncertain it really didn't because it was either cut or don't cut. This one is where are we in the rebalancing process and how much do we need to actually still do to get a

rebalanced market. And that's where the core the debate is that is less of a black and white and much

more of a gray area to be in. We should mention the West Texas four right now brent significantly higher than they were earlier this year, and everybody says, you know, the deal is why, But there were a lot of predictions at the time that they were making a deal among these countries that what that's going to do is bring American fract oil back into the marketplace and scent producers and that would put a cap on prices doesn't seem to have happened yet. Well, first I want to

correct there. You know, are we at fifty seven fifty due to the OPEC cut strictly no demand, Let's do not underestimate demand in on globally is on fire right because the economies are getting exactly I mean that that's because you got to look at the fact that copper is sitting near right now, which has nothing to do with an opeca. But anyway, let's go back to your

question about the supply response from the shale producers. We saw earlier this year when we got up around fifty six dollars of barrel, we saw a substantial response from US shale producers in terms of the rig count. We aren't seeing it this time. One of the key issues is the fact that the investors um after May and June this year, UM, we're less willing to accept um

large CAPEX programs. And I would say that if the dicipline being imposed on the producers by the investors, it's leading to a very different outcome, much more constrained in terms of why did they not want to accept it. They want returns and they want they want cash, they want dividends they are no that they're no longer going to allow them to deficit spend. So, um, what's the break even return price now for for oil? Particularly you

know coming out of the the United States? You know, just looking at the behavior of the producers of the last last year, looking at the financial data coming out of out of the companies, that put us somewhere in that fifty seven range. So thirty dollars is not gonna happen again? Well, I mean you're gonna say it's not gonna happen again. You have a train wreck and demand. You could easily see that again. But you know, barring a train wreck and demand, the answer is unlikely. What

about much higher than we are right now? I mean, is there is there? Does the supply that we provide now uh put a cap? Well? Actually, I think given the the strength we've seen in the fundamental day data recently, the level of you know, geopolitical uncertainty out there, combined that with the rhetoric around the OPEC cut of a potential nine month extension, it's actually kind of surprising that

this market hasn't moved higher. I mean, I like to point out, you know, during that hurricane season back in late August of this year. These markets just really did not move, which is an indication that you know that volatility both to the upside and downside really has been capped recently. Jeff Curry, thank you so much. Don't be

a stranger. He's with Goldman Saxons, look at comodies and particularly the OPEC meeting to come all sources and perfectly Mr Curry emphasizing that there's a huge uncertainty out of this meeting as well, arguably in terms of international relations. My interview of the week, if not the month, he has James Travitas is at the Fletcher School, Toughs University, formal Admiral of the Navy with a modest knowledge of

our history of jaw boning and such. Admiral, My book of the summer was your fantastic leader's bookshelf, but easily could be my book of the year, but I wanted to get it out right away. Is my book of the summer, and in it is the heartbreak of a four fifty page book where you want to just die through the first forty seven pages. It is John Keegan's The First World War. He begins with the European tragedy and then the heartbreak and arrogance and lack of humility

of a set of world leaders. In chapter two, war Plans. Are we planning ourselves into a defense or war position with the policy of the United States on this Wednesday, I worry a lot in that regard Tom about North Korea. Um. The common phrase about World War One is that the great Powers sleepwalked into that war and didn't take the kind of diplomatic economics steps that were necessary to definitively

avoid it. And I kind of feel where edge in that way with North Korea and the uh intransigence on our side and on Kim Jong inside is creating a real collision course. And frankly, Um, I think the chances of war and that peninsula have gone up and up and up, and pretty much the only thing left in the locker between us and an absolute necessity to go in and take him on is whether he detonates a hydrogen bomb over the ocean. And I think that's next. John Keegan is so good at the minutia and pulling

it into the present. For example, I didn't know about the League of the Three Emperors, and this is ancient eighteen seventy history. But what you learn in n is if we do this, they'll do that. But they do that, and they do that and that and that. Are we in that same sequential framework in an X y Z space that they were in. We are. And it's called war plans and we have them, and Kim Jong un has them in North Korea and in the First World War time, as you know, they mobilized into this uh

step by step by step process. Here it's an escalation of events from North Korea and then we're going to respond. And those war plans can drive you inexorably forward in less leaders step up and walk back from the abyss. But I see no indication of that at the moment. Okay, let's go technical on this right now, folks. Youre aerospace

engineering with James te Vida's only I'm Bloomberg surveillance. All you need to know, folks is the equation is V equals the square root of gr squared over our plus H. That's galileo. You put a rocket in the air and you want to point at forty five degrees. I got a little upset this morning, Appal, because we're not reporting in the media that basically they took this ginormous rocket and put it st eight up in the air, not at forty five degrees, but weighs deeper and it comes

down near Japan and a normal trajectory. Can it go a lot further distance in the vicinity of your San Diego? Oh my gosh, Tom it can? It can fly right over San Diego. Wave at it in land in Washington, d C. If you do the map which you through out there, that thing will go about eight thousand miles And that's because of time of flight and angle of flight. So yeah, we're in a different ballpark on distance right now in terms of what he can do. Okay, orbital

velocity seventeen thousand, five miles per hour. Folks, you memorize that freshman year of engineering. I mean we all get that. We're not talking orbital velocity. But James, your good friend Mr maddis holding court in Washington, our last savior would suggest, as you say, it would give us time to shoot the thing down. Can that would say that with confidence?

I don't think you can, because all of our missile tests that shoot in that cruise dase where it would be going over say Seattle on the way to San Antonio. We're only knocking it down about fifty of the time. Tom, That is not a highly effective system. And frankly, I don't want to bet San Antonio in that system. Okay, But within this then, and thank you for your frankness here, with your past public responsibilities, within what you've just said,

and forget about Seattle. They're supposed to get the thing twenty five miles south of Okinawa, pick it up and shoot it down. You know, I get the good news story, which isn't gonna happen. How does your navy respond to these realities within a new war plan made in the last twenty four hours. Yeah, we've got to in the navy side of things, Tom, We've got to up our game in missile defense, and that means using our agis UH destroyers and cruisers more effectively, and we have the

ability to do that. It costs money, but I would argue that's money well spent on the maritime missile defense side of this thing. Early in this guy, if you're just joining us folks from Fletcher School, Toughs University near Boston, James Travitis with this former Supreme Commander for NATO and of course an admiral of our US Navy over therese. You can't say enough again about a sequence of books

led by the leader's bookshelf. I just it's seventy books, beautifully laid up by people with way too much time in their hand to read no more than than we do. You mentioned in the beginning of this conversation addimal that North Korea has a war plan. Our audience doesn't buy it. This guy's a nut. He's acting unilaterally without war plans. Does he have a real military behind him? He does, and uh, it's a structured military and a disciplined one.

And um, it's not superbly equipped across the entire spectrum of battle, but he has the capability to inflict massive the initial casualties on South Korea, particularly on the city of Seoul. We should not underestimate his ability to put that machine of war at playing. What does General Mattis need to do to breathe all in Washington, our legislative branch and of course his boss. What does he need

to brief them on the news travitous urgency. Um, I'm sure he's doing it, which is to um request more assets for intelligence to increase the missile defense posture as we just talked about, to put more offensive cyber weapons at play. Tom, that's a real capability we can deploy and to begin to consider this is controversial. A maritime blockade of North Korea, much as we put a blockade on Cuba in the k Well. I know you were on the blockade of the Confederacy. Link it to blockade's work.

Come on, it's two thousand seventeen. It would not work without Chinese ease cooperation. So, as usual, all roads to pun Yang lead us through Beijing. We've got to get China on board even to implement that idea, let alone get Kim Jong onto the negotiating table. Do you one final question? Do you suggest that we have a constructive of late relationship with a leadership of China? Are they playing us for a fool? I think it's somewhere in the middle, Tom, China is playing a long game and

they're playing at a more sophisticated level. We're playing checkers and they're playing go. Oh. I like see, that's why he's the professor, Richard. He goes right, You know, rich Truman, I'm the worst go player out of nineteen thousand Bloomberg employees. I lost a house playing Go in our Hong Kome office about twenty five years ago. I mean just terrible. Thank you so much. James Tevitas on short notice, the

Animal from Fletcher School. And I can't say enough again about leaders Workshop, A great book in there on the Greek wars of a century and centuries ago. And I can't say enough again about John Keenan's Kegan's One volume. I'm reading it here in the ninety ninth anniversary of World War One is easy read. John Keegan is just can't say enough about it. James tra Vigas, thank you.

Thanks for listening to the Bloomberg Surveillance podcast. Subscribe and listen to interviews on Apple Podcasts, SoundCloud, or whichever podcast platform you prefer. I'm on Twitter at Tom Keane before the podcast. You can always catch us worldwide. I'm Bloomberg Radio