The Failed Age of Globalization & a New Era of "Homecoming"
10/17/22 | 16m 51s | Rating: NR
As the global economy faces increasing pressure, our next guest is making the case that the era of globalization is over. Rana Foroohar is a global economic analyst for CNN and columnist at the Financial Times. In her new book, "Homecoming," Foroohar examines ways in which events like COVID-19, and Russia's war on Ukraine, have disrupted fragile global supply chains.
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The Failed Age of Globalization & a New Era of "Homecoming"
>>> NOW, AS THE GLOBAL ECONOMY FACES INCREASING PRESSURE, OUR NEXT GUEST IS MAKING THE CASE THAT THE REIGN OF GLOBALIZATION IS OVER. A GLOBAL ECONOMICEST AND IN HER NEW BOOK "HOMECOMING" SHE EXPLAINS HOW UKRAINE AND CHINA DISRUPTED SUPPLY CHAINS. THE FUTURE FOR THE GLOBAL ECONOMY MAY LIE IN LOCAL AND REGIONAL BUSINESS. >> THANK YOU, CHRISTIANE. WELCOME TO THE SHOW. >> THANKS FOR HAVING ME. >> WE ALWAYS THOUGHT THAT GLOBALIZATION, FREE TRADE WOULD MAKE EVERYTHING WEALTHIER, NATIONS WEALTHIER AND ALLOWED PEOPLE TO GO TO WALMART ON A SUNDAY NIGHT AND GET A FLAT SCREEN TV CHEAPLY BUT WHAT WE DIDN'T UNDERSTAND IT MIGHT MAKE IT SO THEY CAN'T GET THE EARLY MORNING BUS AND HAVE A DESCENT LIFE BECAUSE OF A DESCENT JOB. TELL ME ABOUT THE FAILURES OF GLOBALIZATION. >> YOU KNOW, YOU'VE REALLY HIT THE NAIL ON THE HEAD. LIBERAL GLOBALIZATION, WHAT WE'VE KNOWN FOR THE LAST 40 YEARS WAS ABOUT THE IDEA MONEY, GOODS AND PEOPLE COULD TRAVEL ACROSS BORDERS WHEREVER THEY WANTED AND THAT THEY WOULD LAND UP WHERE IT WAS BEST FOR EVERYONE AND SO WHAT WE GOT WAS CHEAP CAPITAL COMING FROM THE U.S. INTO ASIA, THE EXCHANGE WAS FOR CHEAP LABOR AND WE GOT A LOT OF CHEAP STUFF. AS YOU SAY, WE GOT LOW, LOW PRICES IN WALMART AND ON AMAZON BUT IT DIDN'T MAKE UP FOR THE FACT THAT EVEN THOUGH THERE WAS ALL THIS WEALTH AT A GLOBAL LEVEL WITHIN COUNTRIES, WITHIN THE U.S., WITHIN MANY EUROPEAN COUNTRIES, GREAT LEVELS OF INEQUALITY WERE GROWING AND BIG PARTS OF COUNTRIES WHO WERE BEING HALLOWED OUT IN OUR COUNTRY IN THE U.S., THE SOUTH WHERE YOU'RE FROM. THESE AREAS DID NOT SEE THE KIND OF WEALTH THAT THE COAST DID. WE HAD AN IDEA EVERYONE WOULD BE A BANKER AND SOFTWARE DEVELOPER AND THAT'S FINE AND WE OUTSOURCED THE BASE AND IT DIDN'T WORK WELL ENOUGH. THOSE CHEAP GOODS DIDN'T MAKE UP FOR THE FACT THE PRICE OF THE THINGS THAT MAKE YOU MIDDLE CLASS, HOUSING, EDUCATION, HEALTH CARE IN AMERICA, THEY WERE RISING AT MULTIPLE TIMES CORE INFLATION EVEN BEFORE WE HAD THIS LATEST BOUT OF INFLATION AND I THINK THAT THAT SENSE THAT WE NOW NEED TO RECONNECT THE GLOBAL ECONOMY TO NATIONAL POLITICAL CONCERNS IS REALLY WHERE THE ACTION IS. >> YOU HOMECOMING. NOT JUST ABOUT NATIONAL CONCERNS BUT LOCAL. LIKE EVERY COMMUNITY. IT'S A HOMECOMING FOR THAT. EXPLAIN THE CONCEPT OF HOMECOMING. >> YEAH, ABSOLUTELY. SO ONE OF THE TRENDS OF THE LAST 40 YEARS HAS BEEN CONCENTRATION. CONCENTRATION OF POWER. CONCENTRATION OF WEALTH IN A HAND FULL OF CITIES AND IN A HAND FULL OF COMPANIES. A LOT OF STATISTICS SHOW THAT. MY TAKE IS THAT BASICALLY IF YOU WANT TO HAVE A FUNCTIONING LIBERAL DEMOCRACY, YOU'VE REALLY GOT TO SPREAD THE WEALTH. YOU'VE GOT TO GET A MUCH BROAD ER RANGE OF COMMUNITIES FEELING THE PROSPERITY. WE CAN LOOK BACK AT THE LAST FEW ELECTIONS IN THE U.S., THERE WAS A SENSE OF WEALTH, A SENSE OF OPTIMISM, THE FUTURE MIGHT BE BETTER, THOSE AREAS TEND TO DEVOTE FOR JOE BIDEN. THE AREAS WHERE THEY DID NOT HAVE THAT TENDED TO VOTE FOR DONALD TRUMP. WE'VE SEEN POPULISM NOT JUST ON THE RIGHT BUT ON THE LEFT, AS WELL. BERNIE SANDERS IS SORT OF THE OTHER SIDE OF THE COIN IN THAT SENSE. SO YOU'VE GOT TO START BUILDING UP LOCAL COMMUNITIES AND ONE OF THE THINGS THAT I'M ACTUALLY VERY ENCOURAGED ABOUT IS THAT ASIDE FROM THE POLITICAL CONCERNS, ENCOURAGING NEW PRODUCTION IN THE U.S. YOU SEEN FOR THE FIRST TIME IN HALF A CENTURY TWO BIG SEMI CONDUCTOR FACTORIES BEING STARTED IN THE U.S., ONE IN OHIO, ONE IN UPSTATE NEW YORK, THIS IS GREAT BECAUSE IT'S ABOUT BUILDING MANUFACTURING AND BUILDING RESILIENCY BUT THERE IS A LOT OF NEW TECHNOLOGIES THAT ARE IN TRAINED THAT ARE ALLOWING THINGS TO BE DONE MORE LOCALLY. THIS IS WHAT I LOOK AT IN MY BOOK. I SPOKE TO ERIC SCHMIDT FORMER HEAD OF GOOGLE AND WE TALKED ABOUT ADDITIVE MANUFACTURING, 3-D PRINTING. THIS USED TO BE SOMETHING FOR HOBBIESTS. IT IS NOW SOMETHING THAT EVERY INDUSTRY IS LOOKING AT BECAUSE IT ALLOWS YOU TO MAKE PARTS RIGHT ON LOCATION. YOU CAN MAKE A WHOLE CAR THIS WAY NOW OR A WHOLE HOUSE. I WENT OUT INTO TEXAS AND SAW HOUSES BEING 3-D PRINTED IN SIX DAYS FOR $250,000. THAT CUTS OUT SEVEN DIFFERENT SUPPLY CHAINS AND ALL THE ENERGY AND CARBON COST TO TRANSPORT THEM AND TO BRING THAT ECONOMIC GROWTH AND ACTIVITY INTO LOCAL COMMUN COMMUNITIES. THESE ARE A COUPLE EXAMPLES. >> WE'VE BEEN TALKING A LOT ABOUT CHINA AND ESPECIALLY RECENTLY WITH SUPPLY CHAINS DISRUPTED AND THEN THE CHIPS ACT SAYING OKAY, WE CAN'T BE SO RELY YENT ON CHIPS FROM TAIJUAN AS WELL AS FROM CHINA. DO YOU THINK THIS WHOLE TREND IS GOING TO MEAN WE'RE GOING TO HAVE TO WEEN OURSELVES AWAY FROM STRONG ECONOMIC RELATIONSHIP WITH CHINA. >> IN A WORD, YES. I DO. I'VE THOUGHT FOR A LONG TIME DECOUPLING WITH CHINA WAS HAPPENING AND IT'S NOT JUST SOMETHING THAT IS ABOUT THE U.S. CHINA IS CLEAR IN THE FIVE YEAR PLANS WHERE IT'S GOING AND MADE A STATEMENT MANY YEARS AGO IT WANTED TO BE FREE OF U.S. TECHNOLOGY OF WESTERN TECHNOLOGY, THAT IT WANTED TO HAVE WHAT IT CALLS A DURABLE CIRCULATION ECONOMY, WHICH IS SORT OF WHAT WE'VE BEEN TALKING ABOUT. IT'S KEEPING PRODUCTION AND CONSUMPTION CLOSER TOGETHER. THAT MAKES SENSE. TO ME, CHINA IS A BIT LIKE THE U.S. AND THE WORLD WAR II PERIOD WHERE IT'S A BIG SINGLE LANGUAGE MARKET. IT STILL HAS ROOM TO RUN. IT MAKES SENSE TO KEEP MORE PRODUCTION DOMESTIC. THAT'S FINE. THE PROBLEM IS THAT THE U.S. AND CHINA HAS BEEN IN A DYSFUNCTIONAL ECONOMIC RELATIONSHIP FOR MANY DECADES NOW AND IT'S GOING TO TAKE TIME AND DIFFICULTY TO UNTANGLE THAT. >> HERE IS ONE PROBLEM. TAKE LITHIUM, WHICH IS REALLY IMPORTANT TO THE ELECTRIC CAR BATTERIES AND TO THE LAPTOPS IN FRONT OF US. CHINA DOESN'T HAVE THAT MUCH LITHIUM BUT A HUGE AMOUNT OF THE WORLD SUPPLY OF REFINED LITHIUM COMES FROM CHINA. IF YOU TRY TO START A LITHIUM REFINING PLANT, IT WILL TAKE FOREVER BECAUSE WE DON'T PERMIT AND IT'S NOT IN MY BACKYARD AND PEOPLE ARE AFRAID OF THE WORD LITHIUM PROCESSING. WE JUST CAN'T MANUFACTURE AN AMERICA NOT SIMPLY BECAUSE OF THIS GLOBALIZATION LIBERAL BUT BECAUSE WE'VE COME SO CONSTRICTED. HOW DO WE GET OVER THAT? >> THESE ARE FANTASTIC POINTS, ALL OF IT, IT PLAYS THAT THE WHOLE NOTION OF WELL, CHEAP ISN'T REALLY CHEAP WHEN YOU START LOOKING AT WHAT ARE THE ENVIRONMENTAL COST AND LABOR COST? WE SENT EVERYTHING OVERSEAS AND SAID LET THEM DEAL WITH THE POLLUTION AND EMPLOY CHILD LABOR IF THEY WANT. WE'RE BRINGING JOBS AND INDUSTRIES BACK, WE HAVE TO MAKE HARD CHOICES. THERE ARE RARE EAT MINERAL COMPANIES BEING LAUNCHED OUT WEST. THERE IS ONE THAT JUST REOPENED IN CANADA. SO THE U.S. AND EUROPE ARE LOOKING FOR MORE REDUNDANT. WE HAD EFFICIENT SYSTEMS MEANING THEY'RE QUICK. THEY'RE CONCENTRATED. THEY WORK AS LONG AS NOTHING ELSE IS GOING WRONG IN THE WORLD BUT AS THE PANDEMIC AND WAR IN UKRAINE HAS SHOWN US, THE MINUTE SOMETHING CHANGES A GEOPOLITICAL SITUATION, TSUNAMI, YOU KNOW, SOME KIND OF ENERGY SPIKE, THE SUP PRY CHAINS DON'T WORK SO WELL ANYMORE SO WE'RE WELL ADVISED TO START CREATING MORE RESILIENCY AND REDUNDANT. >> WE WANT TO BE MORE SELF-SUFFICIENT WE PROBABLY NEED TO BE LESS RELIANT AND EUROPE NEEDS TO BE LESS RELIANT ON ENERGY FROM RUSSIA, VENEZUELA, SAUDI ARABIA. OTHER PLACES. BUT WE ALSO HAVE PROBLEMS SAYING YEAH, LET'S HAVE MORE OIL AND NATURAL GAS LEASES. LET'S GET PIPELINES LIKE JOE MANCHIN WANTS. >> YES. >> IS IT POSSIBLE TO DO WHAT YOU WANT WITHOUT SAYING NO WE HAVE TO ACTUALLY IN THIS TRANSITION PERIOD WEEN ORE SHELVES FROM ENERGY FROM RUSSIA AND CHINA? >> HUGE ISSUE AND GREAT POINT. I WOULD HAVE LIKED TO HAVE SEEN MORE U.S. SHALE PRODUCTION ONLINE. OF COURSE, ENERGY MARKETS ARE VERY TRICKY. THEY GO UP AND DOWN AND HIGHLY CYCLICAL. WHEN ENERGY COSTS ARE LOW LIKE THEY WERE UNTIL RECENTLY, PEOPLE SAY WELL $70 SHALE DOESN'T MAKE SENSE ANYMORE SO THEY CUT OFF PRODUCTION. I THOUGHT FOR A LONG TIME WE NEED AN INDUSTRIAL POLICY WHEN WE START TO HAVE SMART GRIDS TO MANAGE ENERGY COMMUNITY BY COMMUNITY AND SENSORS TO REALLY HELP US TO JUST DO THINGS MORE EFFICIENTLY, MORE LOCALLY AND MOVE TO THOSE GREEN TECHNOLOGIES, WHICH CAN CREATE MORE JOBS. YOU KNOW, IMAGINE IF YOU GOT EVERY COAL MINER RETRAINED IN CLEAN ENERGY PLATFORMS AND CLEAN ENERGY WORK. THAT'S WHAT THE BIDEN ADMINISTRATION IS TRYING TO DO. NOT EASY BECAUSE WE'RE GOING TO HAVE TO WORK A AN INTERESTING SPEECH. >> WE RELY ON IT. >> JANET YELLEN ACTUALLY HAD A CONVERSATION IT'S ABOUT PRICES WHEN IT COMES TO TRADE. THE DEPUTY PRIME MINISTER OF CANADA ACTUALLY GAVE AN INTERESTING SPEECH ABOUT THIS AT THE BROOKINGS INSTITUTE LAST WEEK AND SAID LOOK, WE'RE IN A NEW WORLD. IT MATTERS WE GET ENERGY FROM AUTOCRATS AND WORK TOGETHER TO COME UP WITH CLEAN ENERGY PLATFORMS. WE NEED TO GET EUROPE ON BOARD WITH THAT AND THIS IS SOMETHING THAT'S GOING TO BE TRICKY AS WELL. IT'S ONE THING FOR THE U.S. OR NORTH AMERICAN, SOUTH AMERICA TOGETHER, WHICH ARE A BIG BLOCK, WE HAVE FOOD, FUEL, CONSUMER DEMAND. WE CAN HUNKER DOWN AND DO LOCAL. EUROPE FEELS ANXIOUS BECAUSE THEY ARE PULLED IN MANY DIFFERENT DIRECTIONS. BRITAIN POST BREXIT FEELS VERY ALONE. GERMANY AND FRANCE MAYBE ARE TOGETHER STILL THE CENTER OF EUROPE. BUT WILL THE CENTER HOLD? YOU KNOW, SOUTHERN COUNTRIES LIKE GREECE AND ITALY ARE BEING PULLED INTO THE CHINESE OR BIT THROUGH THE ONE BELT, ONE ROAD STRATEGY SO THE WORLD IS BUMPY. THE WORLD IS MULTI POLAR AND DIPLOMACY AND FRIENDSHIP IS STILL GOING TO BE VERY IMPORTANT EVEN IN A MORE LOCAL AGE. >> HERE IS ONE PROBLEM I FELT WHEN I READ YOUR BOOK, WHICH I LOVE, BY THE WAY. >> THANK YOU. >> BUT IT WAS THAT OKAY, IF WE ARE GOING TO BE LESS DEPENDENT ON CHEAP GOODS, GLOBALIZATION, FREE MOVEMENT OF CAPITAL AND TRADE, STUFF LIKE THAT, IT MEANS A WHOLE LOT OF THINGS ARE GOING TO COST A LITTLE BIT MORE. THE FLAT SCREEN TV IS GOING TO COST MORE AND SO IS THE OIL AND GAS, SO IS SOLAR PANELS THAT YOU TALKED ABOUT. SO WILL EVERY COMPONENT THAT WE BUY, WE'VE GOT A REALLY BAD INFLATION PROBLEM. THE TREND YOU'RE ADVOCATING, WOULDN'T THAT ADD TO INFLATION? >> IT WOULD IN THE SHORT TERM AND THERE IS NO GETTING AROUND THAT. CHEAP ISN'T REALLY CHEAP WHEN YOU COUNT IN THE TRUE COST OF LABOR. THE TRUE COST OF ENERGY. YOU CAN'T PUT A PRICE ON CARBON AND THE EMISSIONS COMPANIES ARE EMITTING TO CREATE THE THINGS IN WALMART WE GET SO CHEAPLY SO YES, THERE IS GOING TO BE SOME SHORT TO MEDIUM TERM INFLATION PRESSURE BUT I WOULD SAY THAT IF YOU ASKED PEOPLE, WORKING PEOPLE MAKING $25,000 A YEAR, WOULD YOU RATHER HAVE MORE CHEAP STUFF THAN WALMART AND AMAZON OR A JOB, A MIDDLE CLASS JOB THAT IS SECURE TO ALLOW YOU TO PROVIDE, HOUSING, EDUCATION FOR YOUR FAMILY? I THINK THEY WOULD PICK THE LATTER. IT ABOUT USING TRANSFORMATIVE NEW TECHNOLOGIES, ALL THE THINGS WE'VE TALKED ABOUT, THE TRANSITION TO CLEAN ENERGY TO START TO BUILD PRODUCTIVITY AND TO BUILD A NEW ECONOMY THAT CAN BRING EVERYONE ALONG AND IF YOU LOOK HISTORICALLY, THE PERIODS WHERE WE'VE HAD A LOT OF SHARED SUSTAINED GROWTH HAVE BEEN WHEN THERE IS A TRANSFORMATIVE NEW TECHNOLOGY LIKE THE RAILROADS LET'S SAY OR THE INTERNET, THE GOVERNMENT PUT AS FLOOR UNDER IT, SUPPORTS IT AND IF WE CAN HARNESS THAT OPPORTUNITY AND STOP THINKING SO SHORT TERM, I THINK WE CAN BE IN A GOOD PLACE. >> AND WHAT ABOUT A CONSUMER TO GET THEIR GOODS CHEAPER THROUGH WALMART OR AMAZON? >> THEY CAN'T GET ET CHEAP ENOUGH TO BOLSTER THE FACT HOUSING IS UP 50% YEAR ON YEAR. >> DOESN'T THAT HURT THOSE LITTLE COMPANIES YOU WRITE ABOUT THAT ARE TRYING TO DO THINGS IN A LOCAL GOOD WAY? DON'T THEY GET CRUSHED BY THOSE WHO KNOW HOW TO PLAY THE GLOBAL SUPPLY CHAIN? >> THEY HAVE. ALTHOUGH, IT'S INTERESTING. YOU'RE STARTING TO SEE A REAL SHIFT IN WASHINGTON AROUND ANTI TRUST FOR EXAMPLE. ONE OF THE BIG INITIATIVES THAT THE BIDEN ADMINISTRATION IS LOOK AT THE CONCENTRATIONS OF POWER IN AGRICULTURE FOR EXAMPLE. YOU REMEMBER WHEN THE PANDEMIC HIT, NOBODY IS GOING TO RESTAURANTS. EVERYBODY IS LINING UP TO THE GROCERY STORE. YOU CAN'T FIND THINGS. WHY IS THAT? BECAUSE FOUR COMPANIES ARE CONTROLLING IT. IT'S A VERY CONCENTRATED FRAGILE SYSTEM SO LINA KHAN, TIM WOO IN THE WHITE HOUSE, ALL THESE FOLKS ARE STARTING TO THINK ABOUT HOW CAN MAKE SURE THERE IS OPPORTUNITY FOR ALL, SMALL, MID SIZED AND COMMUNITIES AND WORKERS. >> HOW DO YOU SEE THE SPROS -- PROSPECTS OF A RECESSION? YOU'RE TALKING LONG TERM BUT TO GET THERE, HOW DO YOU DO THAT BALANCE THAT MIGHT PREVENT THAT RECESSION? >> WE HAVE AN ECONOMY SO FINANCIALIZED, WALL STREET, ALL THE THINGS THAT ARE BOUGHT AND SOLD ON WALL STREET IS FOUR TIMES THE SIZE OF THE ACTUAL ECONOMY THAT WE LIVE IN. HOW DID WE GET THERE? OVER THE LAST HALF CENTURY, WE HAVE POLITICIANS OF BOTH STRIPES SAYING WE DON'T WANT TO TAKE THOSE HARD GUNS AND BUTTER DECISIONS. WE DON'T WANT TO CHOOSE BETWEEN INTEREST GROUPS. LET'S JUSTS TO THE BALL TO THE MARKET. THE MARKET KNOWS BEST. THAT MEANS THEY TOSS THE BANKERS TO THE FEDERAL RESERVE. IT KEPT INTEREST RATES LOW FOR 40 YEARS. AND TO THE ECONOMY AND THE PANDEMIC HAPPENS AND MORE MONEY PUMPED IN. THEN YOU GET A SITUATION WHERE THE ECONOMY IS SO HIGHLY FINANCIALIZED AND LEVERAGED. CENTRAL BANKERS CAN PUMP UP PRICES, THEY CAN'T BUILD A NEW FACTORY AND INVENT A NEW iPHONE. NOW THEY HAVE TO TRY TO BRING DOWN THE INFLATION, ASSET INFLATION THAT'S HAPPENED FROM THIS ARTIFICIAL PUMPING UP OF THINGS AND FAST BECAUSE THE INFLATION IS REALLY HITTING REAL FOLKS AND I HAVE ARGUED AS HAVE MANY THEY SHOULD HAVE STARTED DOING SOME OF THAT AFTER THE FINANCIAL CRISIS TO GIVE THEMSELVES MORE ROOM TO BREATHE. >> THANK YOU SO MUCH FOR JOINING US. >> THANKS, WALTER.
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