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All Right, we're going to stay on global relationships the economies that drive them, and turn on over to doctor Adam Posen. He's president of the Peterson Institute for International Economics.
He joins us from I believe.
The Nation's capital on this Tuesday, Yes, Washington, DC, Doctor Posen, good to have you back here on Bloomberg and on Bloomberg BusinessWeek Daily. These relationships. I first got to ask you, you know, watching the relationship what seems to be a very close relationship between the United States and Saudi Arabia, and I think about their economies.
How do you see it? What's significant for you here in watching this?
Thank you Carol for having me back on Bloomberg BusinessWeek Daily. I want to pick up on some things you discussed with your previous guests, which is there is a huge economic leaving aside the national security incentive for Saudi to behave in this way in that MBS, the Crown Prince has very definitely been seeing part of his agenda to try to transition Saudi away from over dependence on export of fossil fuels, and it's the right thing for them
to do. From the economic perspective, and obviously Saudi for many decades has been accumulating surpluses of cash and trying to invest them. They've been trying to diversify. I wouldn't go quite as far as your previous guests did in extolling how much a RAM cost first five, but they've been trying. I think the deeper integration with the US is a path towards that, and it is a credible path towards that. That's not to say they haven't been doing a lot of good things in terms of domestic
investment and on the economic front on liberalization. They have, and I know a lot of very serious money investors who are very excited by this, but just to say this puts them on the path for the US, However, I think it's less important economically. It is more about the security relationship, or at least it should be. There's never been a shortage of people willing to invest in the US, or at least except with the exception of a few years in the late seventies and early eighties,
not since nineteen hundred. And that remains the case, even though things are happening to make the US a little less attractive. So for the US, I think there has to be more of the security, diplomatic conditionality. Just simply getting Saudi investment in the US is not that big a game.
What type of conditionality, especially in exchange for fter thirty five state of the r jets.
Well, Tim, I think that's the right question, And I would not say it necessarily needs to be tied to Israel recognition in the abraham A courts, but it needs
to be tied to something of that caliber. So maybe it's something about how they're relating to Iran, or something about the Saudi mutual guarantees with Pakistan, some sort of agreement on how the Saudis will influence Pakistan, or maybe it's about the investment which the Saudis have indicated they're willing to do in rebuilding Gaza and dealing with what will be refugee issues there. All I'm saying is that
it has to be something substantial. But I also think you want the f thirty fives, of course are a big carot, but you also want to think of it in terms of the relationship. And this is what is key, whether it's UK or Saudi or Japan.
Adam Adam you talk about relationships, and I think about something that came up questioning by reporters of the President and MBS while at the White House, and that is about kind of the relationships that the Trump organization has with Saudi Arabia on business deals. And we have a story in the Bloomberg about the Trump organization planning a luxury resort in the Maldives with a Saudi Arabian partner.
It's just one case. I'm just curious.
You've watched, you've talked about, you've analyzed different administrations, this kind of what seems to be a mixing melding. I know the President answered the question, he said, I have nothing to do with family business, but how do you see this?
No, I appreciate your asking that, Carol, and I don't want to be mean, but it doesn't matter whether the president literally in the narrow sense, has nothing to do with it or not. We had laws, and what more importantly, we had norms, and we had expectations from the press, from the public, from the markets that the US did not deal in family enrichment when you're in public office,
let alone when you're the president. Some of your viewers might remember the old John Adams miniseries in which John Adams alienated both his daughter and his son in law or one of his sons and his son in law because he wouldn't advance them while he was in the White House. And what matters is this very strong perception which is obvious in cutter in the United Arab ben where it's in Saudi, but even with the gold that was offered just the other day to the President, that
there is this perception that you link things. Now, I don't want to overdramatize this. There are a lot of countries in the world, including Saudi, including Turkey, including China, where this kind of ties go on between the leaders, families and chosen friends and foreign policy and other governments. It's not good, it's not fair, it's wasteful and distortionary. But it's also not the end of the world. Businesses
and investors can proceed. But for the US, this is going back to your original question, this is a huge step change. We've not seen anything like this the least since Teddy Roosevelt, meaning one hundred and twenty years.
So just to be fair, because we certainly get feedback from our audience, and to say that the president says I'm not involved, though, you know, and we've had you know, any president that walks into the White House, Republican or Democrat, you know, certainly has allegiances to industries or so on.
So I agree. I agree, it's never going to be absolute. And we all know the stories of people going back to Jimmy Carter's brother selling beer, that there's always relatives who try to profit on these things. But the so again,
this isn't about ascribing the levolent intent. But you want to have a system in place where people expect and feel, particularly investors, but also average citizens expect and feel that this is an exception, not the rule that you occasionally have the rogue family member, but that on the one hand, policy choices are not being driven and being perceived and by these things, and on the other hand, the economic
choices are being made on a commercial basis. And that's why, no matter how many times people of different parties and different administrations or appointments fail on this front, you want to have a system of scrutiny and rules and presumptions that it discourages our elected officials from being so overt about it. I think, to be fair, you know, the Trump administration and the sons of President Trump and Secretary Lutnik and the Middle East negotiator Guy and all these people.
You know, they're being very open, and I think that in one sense does matter, like they are with Crypto, But in another sense that doesn't solve the problem because then the perception is still people are being favored, decisions are being made on a bad basis. You have to offer gold, crown or hotel deals to make things happen, and.
Transparency doesn't necessarily negain actions, right.
Yeah, Doctor Wilson, Doctor Posen, you said it's not the end of the world if we're in a situation such as this or in a society.
Such a sist But it's not the end of the world.
But I'm wondering if there are potentially long term economic repercussions that happen in societies that don't necessarily have the same rules in place, if we can look to history or modern history to get an understanding of what the implications of that could be in the US.
In your view, oh, I think they're enormous. I think then because it's the US, which, as I've argued to him, has been the lynchpin of the rules based, law based system of economy since World War Two. It has repercussions around the world because it means the US is not only enforcing the norms against this kind of corruption or
perceived corruption or tied political choice making. It means that the US is setting an example that you can get away with it, and other people should get away with it, and it breaks down the regimes and the operating principles we have to attorney thinks. So when I say it's not the end of the world, I don't mean to suggest it's not very harmful. It will reduce the returns on capital. It will reduce the ability of average people and normal businesses to get access to opportunities. It will
divide the world. It will increase in stability and investment markets. It will waste public money. It's bad in a lot of ways. I just merely want to be very clear that though it's unusual for the US in the last one hundred plus years to behave this way, in our long ago history and in other countries around the world, this has taken place, and that there have been much small or much less overt examples of this by you, a previous US administration, and you.
Know, just thinking about all you've just said, doctor Posen, and then kind of squaring that with the recent government shut down and the domestic issues that kind of came to the forefront. You know, the one in eight Americans who are on some kind of food assistance or food stamps. You know, the amount of Americans that are just struggling to put food on their table, a roof over their head.
I want to bring it down.
Then, with so much focus on global issues, and some would say when you're president, you have to look beyond the.
US borders as well as within the US borders.
But having said that, what is it that you know is being maybe being ignored in your view domestically, that's really got to be.
Addressed, and you're asking very profound questions. I'll just say that in an enlightened administration, the reason you get involved in the rest of the world is because it ultimately is if you've set up a rest of the world that feels safer and less corrupt and more stable and less subject to disease and refugee flows and wars, that's
ultimately to the benefit of the average American. And if you have open and free commerce on a rules based basis that raises American opportunities and American citizens purchasing power. So I agree with you, there's a question of how you prioritize. And this goes to the point with Saudi. I'm not sure that that should be the biggest priority of an American administration right now. It's fine, you can walk into gum. It can be one of the things.
So when you say what's in the domestic front, I think the removal of health care support subsidies and access to Medicaid and to all these Obamacare related things is going to materially affect the health and well being of millions of human beings in the and that is bad economically,
but it's bad in human terms. I think the reduction of options through the anti migration policies, through other policies that make it so more people, mostly women in late middle age, have to stay home to be caregivers to elders and to children and to disabled people, is materially bad for humans and is a huge pressure on people.
And I think the combination of anti migration policy, attacks on the Fed tariffs deal making, some of which looks corrupt, all adds to a more inflationary environment, which reduces real incomes for people. So there's a whole bunch of things on the domestic front. But I just want to say that it's not about choosing the global versus domestic. It's about choosing the self interested versus the public welfare.
I think we need to leave it there, but I gotta say sometimes I'm in all of our guests, and I certainly am on this Tuesday, Doctor Posin, thank you so much.
Really appreciate all the kids for having me same here. Thank you for joining us.
Doctor Adam Posen, President of the Peterson Institute for International Economics,