Tariff Special: The Intelligence Squared Economic Outlook with Helen Thompson (Part One)
42:46 Share

This episode is sponsored by Indeed. When it comes to hiring, timing is everything. Opportunities pop up fast. We've all had that moment where you're staring at a gap in your team, knowing things are about to get busy and thinking, we need someone now. Indeed cuts through the noise and gets you in front of the people who are actually right for the role.

So, when it comes to hiring, Indeed is all you need. Stop struggling to get your job posts seen on other job sites. Indeed's sponsored jobs helps you stand out and hire fast. With sponsored jobs, your post jumps to the top of the page for your relevant candidates so you can reach the people you want faster.

and it makes a huge difference. According to Indeed data, sponsored jobs posted directly on Indeed have 45% more applications than non-sponsored jobs. We find that Indeed makes hiring so fast.

When you know you're always going to get such a high level of potential candidates, you waste far less time finding a great fit to fill the role. Plus, with Indeed-sponsored jobs, there are no monthly subscriptions, no long-term contracts, and you only pay for results. How fast is Indeed? In the minute I've been talking to you, 23 hires were made on Indeed, according to Indeed data worldwide.

There's no need to wait any longer. Speed up your hiring right now with Indeed. And listeners to this show will get a $75 sponsored job credit to get your jobs more visibility at indeed.com slash intelligence squared.

Just go to indeed.com slash intelligence squared right now and support our show by saying you heard about Indeed on this podcast. Indeed.com slash intelligence squared. Terms and conditions apply. Hiring Indeed is all you need.

The Hoover Dam wasn't built in a day. And the GMC Sierra lineup wasn't built overnight. Like every American achievement, building the Sierra 1500 heavy-duty and EV was the result of dedication. A dedication to mastering the art of engineering. That's what this country has done for 250 years.

and what GMC has done for over a hundred. We are professional grade. Visit gmc.com to learn more. Assembled in Flint and Hamtramck, Michigan and Fort Wayne, Indiana of U.S. and globally sourced parts. Welcome to Intelligence Squared, where great minds meet.

I'm producer Mia Sorrenti, and I'm joined today by head of programming, Conor Boyle. Conor, what can we expect from today's episode? Well, today, Mia, we've got tariffs, tariffs, and more tariffs. I suppose the biggest thing that's happened in the economy in the last few months has been the return of Donald Trump to the White House and his desire to

as he sees it, stop the rest of the world exploiting the United States in terms of trade policy. So I know you were originally in touch with Helen Thompson. We're going to do an energy special about global energy, but I suppose we kind of, if we're going to do an economic outlet, kind of has to be about

Yeah, absolutely. So this event was actually part of our Economic Outlook series, which is in partnership with Guinness Global Investors. But we thought, like Connor said, for this installment, we were speaking to the political economist Helen Thompson, and it seemed like we could speak about nothing else. For this installment of the series...

You know, Helen is an expert on kind of globalization. Like you said as well, she is really into kind of the political economy of energy. And she's also the author of this book called Disorder, Hard Times in the 21st Century. So we thought it was great to have someone who had that kind of historical overview to kind of give some context to these developments and how Trump's next actions might impact us going forward this year.

Because who knows? There's a lot. Seismic things have happened and seismic things will continue to happen. So it's great that we could hear from Helen on this. Absolutely. So let's get into it without further ado. Our host, as always, for The Economic Outlook is Johnny Diamond, BBC broadcaster and journalist. So let's go to him now with more.

Thank you very much. Thank you. There are three rounds of thanks to be given. Normally there'd only be two, but I'll tell you why there's three this time. The first is to Helen Thompson. Welcome. Thank you very much indeed. Professor of political economy, hang on, at Cambridge University, author of Disorder, Hard Times in the 21st Century. You may remember her. Also,

until relatively recently as a columnist in the New States, where she wrote the cleverest thing in that fine magazine. The second thanks are, can I just echo Mia's thanks to Guinness Global Investors, without whom these events would not happen. We're extremely grateful for their support. And the third round of thanks are to you who have made it,

through the travails of the London Underground system. If your journey was as sweaty as mine, I am sorry. I hope you are recovered or recovering. It is brilliant that you are here tonight. Just briefly, the format of this evening, much the same as we have done before. Helen and I will talk for around 50 minutes or so. Whilst that happens, if you're watching online, do feel free to send your questions in. They'll appear on the iPad in front of me. We'll also then open questions

questions to those who have struggled through the London Underground system. These are interesting economic times, so there is a lot to discuss.

Helen has many specialities. One of them in particular is energy, which we will come to. But there is a sort of vast elephant, Trump-sized elephant in the room. And that, of course, is tariffs and their impact both here but also all around the world. Can I start first of all, Helen, most economists' response is,

the tariff announcement has been broadly along the lines of Henny Penny, the sky is falling in. Do you agree? Well, first of all, I should say that I'm not an economist, so I don't feel confined to giving an economist's answer. Forgive me.

I think that the general principle of protectionism usually brings lots of economic and political problems with it. I think when you have somebody like Trump and the advisers around him who are trying to turn American trade policy in a largely protectionist direction, but for reasons, and maybe we can come to this, that actually aren't just to do with trade,

that actually you're going to get something that's particularly pernicious in its consequences because that, I think, partly explains the chaos of it. The fact that we have rounds of announcements, tariffs go up, retaliatory tariffs go up further. Today he announces all.

earlier today that actually we're back to square one with China, except we're not really back to square one. We're back to where things were before April and certain bits of tariffs stay in place, including the ones pertaining to fentanyl. And so actually when you combine tariffs with the kind of uncertainty and uncertainty

really chaotic uncertainty that's been introduced by the Trump administration's approach to tariffs, then you get something that's very negative all around. I'm not somebody who thinks, though, that there is never any justification for tariffs and that the world should engage in completely free trade. And I tend to think that economists ignore the political...

implications of the distribution of trade and that that isn't really a luxury that politicians regardless really of which party they come from can have. If we strip out then the uncertainty and I understand it's quite difficult to do that given the roller coaster we've had for the past what five or six weeks you strip out the uncertainty do you still see tariffs as essentially damaging

the global order, to global trade, to global prosperity? I do and I don't. I mean, the reason why I say that I do is because, you know, if you look, like, historically, there are good reasons to think that the fewer tariffs that there are, that the better the collective world economy grows, or the higher, the speedier, higher the growth rate. I think, though, that we do live in...

extraordinarily difficult times for the world order. And I think that a world in which China does around 30% of the world's manufacturing is not one that is necessarily well suited to free trade. And I think in that sense, it's entirely explicable that a crisis of the world trading order has come about. That doesn't mean to say that I think that the way in which the Trump administration has gone about it is either rational or

or even internally strategically coherent. But I think that you would expect that the United States would, whoever is the president, think that that trend continuing, such that China takes a bigger proportion of the world's manufacturing, is not one that the United States can tolerate. And I think if you want a point of view

of how this becomes clear. If you go back to Trump won, so when he first declared for the Republican nomination in 2015 that came a few weeks after Xi Jinping had announced Made in China 2025, the strategy for turning China into a high-tech manufacturing superpower, essentially, that China's share of world manufacturing was closer to like 20% than to 30%.

If you look at Trump 1, if you look at Biden, and now Trump 2, each of these three presidents have tried to do something to shift politics.

the terms of trade in industrial production somewhat back in the United States' favour. They've not been succeeding in doing that. But I think the fact that the Biden administration showed quite strong protectionist impulses at times, think of the 100% tariffs on electric vehicles from China that were put in in the spring of 2024, shows that the underlying issue is structural and it isn't just about Trump.

Even though it's very difficult to talk about the last few weeks without Trump's chaos. One of the comments that came out after the first enormous round of tariffs was announced

was a rather sarcastic comment from an American commentator saying, do they really expect us to start making shoes again? You know, low margin goods. And I have to say, when I was based in Europe, European Commission officials would say the same sort of thing. Do they really think our future is in sort of low margin manufacturing? I mean, is there a future for advanced economies in low margin manufacturing? Is there a logic to it economically?

I don't think the issue really now is about low margin manufacturing. The issue is about high tech manufacturing and China's success in it. And I think electric vehicles are a very good example because I think that electric vehicles are central really to the psychic shock that China's technological success over the last few years has had, not just in Washington, but in Europe too, is that China's

EV manufacturers, particularly BYD, do this better now than anybody in the world. I would say better than Tesla if you look at it in terms of actual quality of product in relation to the costs of producing it. So if you're the German manufacturer,

car industry that has got extraordinarily used to being very competitive and that the German political class has got very used to German car manufacturing being a central if not foundational part of the German economy certain political things flow from that I don't think you can just very easily say we don't care about this and that we're just going to see Germany's place

if you like, in the international division of labor in this area to China. The difficulty is, though, that China's size is such that it's also very difficult, if you're Germany, to be protectionist in this matter because the consequences are that your companies will not be able to compete successfully in China. Now, they're not doing that at the moment, but they need to learn to try if they want to stay in the game because of the size of the Chinese market.

So you get both the incentive to be protectionist because you can't allow the outcome to happen, but at the same time, if you are protectionist, you make things difficult for your companies to compete in what is now the biggest EV market in the world. So I think we're just in an astonishingly difficult, in this respect, historical moment when it comes to trade. There isn't any parallel, I think, that you can look to in the past and say, well, this is how you can stabilise

a multilateral international trading order under these set of geopolitical or geo-economic conditions. The word fragile has been used about the global economic order. Do you agree? And if you do, can you explain what it means?

I mean, I think that the world economy is fragile in a structural sense in a number of different ways. And I think we can see that in a way most clearly by looking at what's going on in the United States. And if we just leave trade aside for a moment, the United States debt has grown very rapidly.

since the 2008 crash, but in particular since the pandemic, it's something around now 120% of GDP. It's not immediately unsustainable, but there is a big problem in the short term, which is over the course of the next year or so, the United States needs to refinance or refund about $9 trillion worth of that debt because it's mid-term.

because it's maturing. And that's one of the reasons, I think, why we can see such instability in the bond markets. And that's where the interaction with the trade question comes, because the trade news impacts very directly on the bond markets. And even some relatively small movements in the bond markets has significant impacts on the Americans' ability to refinance this debt over the next year or so. So I think that

The American debt is destabilizing. It's, if you like, on a much greater scale, a version of the problem that did for Liz Truss here. And at the same time is that the United States has deindustrialized. And I think that successive administrations, and I say...

that because I want to say that the democratic president in Biden came to the same conclusion, thinks that that's not something that's politically viable. I don't think they've got any real idea what to do about it. I don't think any of them have had a strategy for reshoring manufacturing production to the United States. But

I think that they have to try and that even if they don't succeed, if they were to be seen to be doing nothing and simply to say that the present trajectory of American deindustrialization and China taking an ever greater share of manufacturing, world manufacturing production, that's not politically sustainable, I think, in the United States. If it were sustainable, then we wouldn't have seen the first Trump presidency, I think, let alone the second Trump presidency. And

And so in an economic sense, what is happening is that multipolarity, if you like, is already here. And the Americans have got to adjust to it. And they're going to adjust to it in ways that are going to inflict quite a lot of short to medium term pain upon themselves in doing so. And that then has consequences for the rest of the world, including obviously for China itself. So I think that these dynamics actually lead to cumulative instability in the world economy.

The picture you're painting is of a world that got to a particular point, in particular an America and Chinese relationship that got to a particular point that we'd never seen before in terms of manufacturing dependence, if you will. A president, or even two presidents, who took pretty significant steps to try and redress that. But I suppose the question is,

Do you believe manufacturing will reshore? Do you think it is a reality or are we in such a new world that you can't really sort of prophesy about that? I think that it's very difficult to see how the United States can do that quickly. And I think that if you look at the Inflation Reduction Act passed by the Biden administration, at the centre of that

was an attempt to use the energy transition to achieve reshoring of American manufacturing production, as well as doing the energy transition itself. And that was seen as something that was necessary to compete with China. It had a clear geopolitical motive.

And at the same time, I think it was seen as something that was necessary to stop a second Trump presidency. And that obviously, like, failed. Now, if you think about the prospects for European countries, not least ours in Britain, trying to re-industrialize, when the Americans, with the amount of actual fiscal support

firepower that went into the Inflation Reduction Act can't really do it, then I think that that suggests that either it's for the long haul or that it's just a very difficult thing to do. And why would China give up those advantages? And that gets us on to AI, which I think has made this situation even more complicated, is that China over the course of the last six months has delivered another psychic shock

um not just in washington again but in in europe which was deep seek it was a particular shock in washington because it showed that despite the fact that by the administration and it had been the bigger driver here i think had declared a semiconductor chip war on china starting in 2022 and intensifying it in in 2023 that that failed i mean the point of it was to stop china being able to do something like deep seek

And actually, China showed that it could get around the sanctions. I don't believe that the sanctions were... that it wasn't necessary for it to have those inputs. It was more that China found other ways of evading the sanctions. So the United States declared tech war on China, and it lost, at least where AI is concerned.

And so I think we have to see then that the American response to that is to say, well, that has profound geopolitical security implications for us, given the importance of AI for defence and drones, etc. We have to try to do better. We have to try to manufacture...

things that we used to manufacture in the defense industrial sense. We have to do the very high-tech end better. The difficulty is that China's also got human capital advantages. It's now clear, I think, in terms of the technical education

The Chinese compared to what's going on in the United States despite the fact the United States got the best universities In the world. So this is incredibly difficult competition that the United States now Faces and it never faced a competitor in the Soviet Union or West Germany or Japan if we think about its economic Competitors during the course of the 20th century that could do what China's done and China's doing this is

when it's still actually a middle-income country, if you look at it in terms of per capita income. So I think that the geopolitical implications of the structure of the world economy and the US-China relationship have become actually terrifying in Washington.

We talk about Britain a little bit. Two trade deals announced last week. The consensus appears to be that actually the trade deal with India was perhaps a little more interesting than what was deemed to be a rather thin trade deal with America, maybe a sort of holding pattern trade deal. When you saw those, did you think this is definitely good news for the British economy?

That's a quite hard question to answer. I certainly didn't think they were unequivocally good news for the British economy. I think there's obviously lots of potential for growth of trade with India. I think the politics of some aspects of the trade deal with India are going to be quite difficult.

I think in terms of the American deal, as you said, Johnny, it's somewhat on the thin side. And I think it's also got to be put in a context of how does that fit with the British ambitions or at least the ambitions of the Starmer government to reset relations with the European Union when...

effectively what this says is we want to take advantage of being outside the European Union. We want to try to be one of the first states to get a trade deal with the United States and get tariffs down to the sort of the basic like 10% level. And it's not really the way in which the European Union has approached the question of trade with Trump since 2008.

Liberation Day as we're supposed to call it, was announced. So I think that whilst there's always some positives to trade agreements, the politics domestically is complicated. And I think that the US one in particular really does raise some quite significant questions about what our relationship with the European Union is going to be in the future.

Economic relationship. The government will always say we don't have to choose and then there'll be any number of different metaphors of bridges and footpaths and whatever you want to call it. Do you think

you sort of do have to choose. Yeah, I mean, I think an awful lot that's happened on a whole set of trade questions since the United Kingdom left the European Union, or indeed in that transition period between the 2019 general election through to us leaving, and I would include the pandemic in this, has shown that actually we do

because that's what it means to be outside the European Union. And the European Union exists, and sometimes I think that the leaders of the European Union governments don't like this fact, in a geopolitical world in which...

its insistence that there are, if you like, de-geopoliticized economic questions that can be about the single market. I mean, the integrity of the single market are made much more complicated by geopolitics. In some ways, they've now been made much more complicated by the

obvious importance of the UK in security terms to the Eastern European members of the European Union post-Russia's invasion of Ukraine? What do you do about defence procurement and working with Britain in relation to the single market? I think that the questions are as

in a way for the EU as they are for us. But I don't think that we can fall back, as you say, on finding metaphors to say we're being bridges and et cetera, that actually it's hard choices and you can't have a trade agreement

policy that's aligned with European Union rules that insists on dealing with Trump in your own terms, because that's not the way that it works. And I think that it's also true that if you look at the things that some of the European Union states will want to do to try to avoid pressure from Trump...

which will be to buy more American liquefied natural gas. That's something that we already buy quite a lot of already. We're not in the same position in relation to our energy choices or gas choices in particular as some of the European states are. I think that although it's very clear that the Starman administration does want a reset,

in economic terms and in security terms with the European Union and trade's got to be central to that. I'm not at all clear how that comes about, particularly in the context in which there's an importance being put on being first in line, so to speak, to get closer to Washington.

You chose to hit play on this podcast today. Smart choice. Progressive loves to help people make smart choices. That's why they offer a tool called AutoQuote Explorer that allows you to compare your progressive car insurance quote with rates from other companies. So you save time on the research and can enjoy savings when you choose the best rate for you. Give it a try after this episode at Progressive.com. Progressive Casualty Insurance Company and Affiliates. Not available in all states or situations. Prices vary based on how you buy.

Summer's here and Nordstrom has everything you need for your best dress season ever. From beach days and weddings to weekend getaways and your everyday wardrobe. Discover stylish options under $100 from tons of your favorite brands like Mango, Skims, Princess Polly and Madewell. It's easy too with free shipping and free returns. In-store order pickup and more. Shop today in stores online at nordstrom.com or download the Nordstrom app.

Summer is coming right to your door. With Target Circle 360, get all the season go-to's at home with same day delivery. Snacks for the pool party? Delivered. Sun lotion and towels for a beach

a beach day delivered. Pillows and lights to deck out the deck, that too, delivered just when you want them. Summer your way, quick and easy. Join now and get all the summer fun delivered right to your home with Target Circle 360. Membership required, subject to terms and conditions. Applies to orders over $35.

Are you still quoting 30-year-old movies? Have you said cool beans in the past 90 days? Do you think Discover isn't widely accepted? If this sounds like you, you're stuck in the past. Discover is accepted at 99% of places that take credit cards nationwide. And every time you make a purchase with your card, you automatically earn cash back. Welcome to the now. It pays to discover. Learn more at discover.com slash credit card. Based on the February 2024 Nielsen Report.

At Capella University, you can learn at your own pace with our FlexPath learning format.

Take one or two courses at a time and complete as many as you can in a 12-week billing session. With FlexPath, you can even finish the bachelor's degree you started in 22 months for $20,000. A different future is closer than you think with Capella University. Learn more at capella.edu. Fastest 25% of students. Cost varies by pace, transfer credits, and other factors. Fees apply.

I want to move on to energy in a little bit. I would remind those at home and some questions already coming in or in offices wherever you're watching and those here that you will be able to get to the end of my blundering questions quite soon and put your own questions to Helen instead. Just to sort of close off free trade for the moment, we speak free

sometimes, or the commentary sometimes seems to suggest a sort of unbroken line of greater and greater free trade over the past, what, 100, 150 years. It's not the case, is it? Free trade as a sort of ideology or global ideology amongst developed and developing economies is relatively new.

Yeah, I think one thing that is really important to see in the American part of this story is that the period in which the United States has been relatively committed to free trade in its history is much more the interlude and that protectionism is much more the norm.

The only real period in which I'd say it's relatively uncontested is from the Bretton Woods Conference in 1944 through to the end of the Bretton Woods system in the early 1970s, whether one says it ends in 1971 or 1973. Indeed, if you go back to that moment when, to all intents and purposes, Richard Nixon was ending the Bretton Woods system when he ended dollar-gold and convertibility.

he put up tariffs at the same time. And he did it for a very explicit reason. They were going up until other states agreed to devalue their currencies against the dollar. One of the objectives, I think, that Trump also has with tariffs, it's not the only one, that's why the policy becomes so confused.

But there's nothing in that sense unprecedented for an American president saying, we're going back to being more protectionist because we don't like the outcomes, not just in terms of the balance of payments, but we don't like the outcomes in terms of currency, and we're going to try and tie questions about the balance of trade to questions about security. Again, something that not just Nixon did, but actually Lyndon Johnson did too. And I think if you look at then the pattern here,

in, let's call it, the globalized economy from the 1990s, the period that's taken to be globalization. The last completed round of trade

talks within the World Trade Organization goes back to the creation of the World Trade Organization and the Uruguay round that came to completion. The Doha round never got completed. You can see the backlash against trade, not just in the United States, but in quite a number of developing countries too by the end of the 1990s.

So I actually think that trade is something where the norm is much closer to protectionism than seems the case. And the very least, even the states that are most rhetorically committed to free trade, like the European Union, I know it's not the state, but...

for the purposes of trade, there's always exceptions and qualifications to that. Probably the only state, large state, where you can say there was an unbridled commitment to free trade for a substantial period of time was Britain, from the repeal of the Corn Laws through to the 1930s.

And do you see, again, and I know that you've spent a fair amount of time trying to divine the reasoning behind Donald Trump's tariffs. Do you see an argument about sovereignty there as well? And that, you know, when you agree to free trade, you are enmeshing yourself in the negotiating process, the World Trade Organization process, foreign entanglements. When you raise tariffs, you're saying, we do what we want.

Yeah, that's an interesting question. I could be wrong here, but I don't recall Trump using the language about sovereignty when he's been talking about tariffs. I think that it is there in the American conservative tradition or the American Republican tradition,

It's the reason why, if you go back to the immediate years after the Bread and Woods Conference, that the international trade organisation that was supposedly going to be the formal structure of the post-war international economy never came into being because the US Senate refused to ratify the treaty. And GATT came in place, and it was supposed to be sort of a provisional arrangement until that issue had been fixed, but it was never fixed. If you look at some of the arguments that are made by...

american republicans in the 90s against the world trade organization they're very much in the language of of sovereignty i think trump is more of a sort of instinctive protectionist than that he's just got this idea in his head that tariffs are good or beautiful as he likes to call the things that he likes the most and that he's willing to say that trade is a zero-sum game so if

some countries got a surplus over the United States in his mind it's over the United States rather than being a surplus within a company like deficit that that's a that's a bad thing and he also wants to use tariffs as I said as a tactic in trying to achieve other outcomes so I don't think he's particularly concerned about sovereignty but there's no doubt that there is a whole as I say

American Republican tradition that does focus on the sovereignty threats, particularly when free trade is entrenched in international organizations.

Can we turn to energy? Because the energy price shock that followed the Ukraine war was a very significant political and economic problem for the UK and for other countries, but certainly for the UK it felt rather special. Do you think the UK is as vulnerable now as it was then? And is, in your understanding, is anything in hand to reduce those vulnerabilities?

I think that the UK actually does have a really difficult position, even in a comparative sense within Europe in its energy position. We have been a net energy importer since around 2004, and that brought to an end the interlude that was created by North Sea oil and gas imports.

And at that time, or around that time, it's when obviously Tony Blair was Prime Minister and Gordon Brown was the Chancellor, the working assumption that they made about electricity was that by the time where we are now, the middle of the 2020s, that it will be possible to run a grid fundamentally of solar and wind.

and that it wasn't necessary really for the UK as the nuclear reactors reached the end of the life cycle, they wouldn't need to be replaced. So if you go back to the 2004, I think it is, energy white paper that the Blair government produced, it's optimistic about what solar and wind can do, and it's

quite negative about nuclear, not least for some good reasons because of the costs of nuclear, but now we are where we are in the middle of the 2020s. And what we can see is for North European countries with the weather which we know that we have in North Europe, that it's very difficult to get around the intermittency problem. The storage requirements are such that they technologically can't be delivered at scale.

for the problem and if you look at then the situation that the UK faces is is that we committed to elimination of coal we're not a country that has particularly sophisticated hydropower system and we've been on a downward trajectory where nuclear is concerned and we've been taking a long time to build the new nuclear reactors that are or the one at least that's under construction and

So that means that the amount that we're regularly using for electricity alone of natural gas is pretty high in comparison to most European countries. And pretty much all European countries are doing worse where energy is concerned in this respect than the United States, or indeed China, for that matter. So we have a particular vulnerability, I think, because of being a North European country with the...

underlying energy mix we have for generating electricity. And then if you look at the way in which our houses are heated, is we're fundamentally gas boilers rather than electricity. If you go to France, electricity does much more of the work in terms of heating houses than it does in Britain. So we've got a double vulnerability on the high gas prices.

And then, although obviously gas prices, natural gas prices are well below the peak that they were, not just in 2022, but in the latter part of like 2021, they're still high compared to what they were before the acceleration started in the second half of 2021. And just on top of it all is we've also got the problem that we, for other reasons as well, have a rather large trade deficit here.

And we're using more and more imported hydrocarbons as the North Sea winds down. So our status as a significant net energy importer weakens the balance of payments. And that weakens sterling. And that can have effects in the bond markets. And that's the kind of underlying problem, if you like, that hit this trust, is all our weaknesses collapse.

come together in crisis moments to reinforce each other. So if we had a better energy position, we would also, I think, have a better macroeconomic position. Once upon a time, balance of payments, if I could just take you away from energy for a moment, was a sort of headline issue. And governments would, well, allegedly fall on issues of balance of payments in the 1970s.

It seems to have just receded into the background, perhaps not for our guests from Guinness Global Investors, but for the everyday. Why is that? Well, I think essentially what the 70s did and financial liberalization did was to make it much easier for advanced economy states in the short to medium term anyway to finance balance of payments.

I mean, you weren't in the situation where you actually had to go to the International Monetary Fund like we did in 1976 when you hit a crisis. The problem is, as we can see over time, once you have, if you like, something that might be called a structural trade deficit, is that it has a weakening effect on your currency and then that can have the potential...

in crisis moments to mean that interest rates have to go up to defend your currency. That actually happened to the Thatcher government quite a lot by the middle of the 1980s. That has a negative effect on growth. That makes the cost of borrowing much more expensive than they would otherwise be. So it's not that you can't do the financing of a balance of payments properly,

deficit it just has sets in the long term i think of negative consequences that make the general problem of macroeconomic management more difficult than it would be without it

Thanks for listening to Intelligence Squared. This episode was produced by myself, Mia Cirenti, and it was edited by Mark Roberts. To hear the full conversation ad-free, you can become an Intelligence Squared member over at intelligencesquared.com forward slash membership or hit the IQ2 extra button on Apple. In honor of Military Appreciation Month, Verizon thought of a lot of different ways we could show our appreciation, like rolling out the red carpet, giving you your own personal marching band,

Or throwing a bumping shindig. At Verizon, we're doing all that in the form of special military offers. That's why this month only, we're giving military and veteran families a $200 Verizon gift card and a phone on us with a select trade-in and a new line on select unlimited plans. Think of it as our way of flying a squadron of jets overhead while launching fireworks. Now that's what we call a celebration because we're proud to serve you. Visit your local Verizon store to learn more.

For

From emails to reports and project proposals, it's hard to meet the demands of today's competing priorities without some help. Grammarly is the essential AI communication assistant that boosts your productivity at work so you can get more of what you need done faster. Just a few clicks can tailor your tone and writing so you come across exactly as you intend. Get time back to focus on your high-impact work. Download Grammarly for free at grammarly.com slash podcast.

That's Grammarly.com slash podcast.