 our semi-crazed policymakers view all of this not just in the lens of economic competition, but in the lens of military dominance, which is, again, a little bit boring, a little bit predictable and very dangerous to have a mindset the way that our policymakers do. That's what's going on right now. This is a war of technology, they think. Now, as an economist, it's all mind-boggling to me because in economic think, technology is the way we do things, the way we solve problems, the way we overcome climate change, the way we stop poverty, the way we treat people for help. It's not a general saying, my god, if we don't have the best autonomous weapons that can murder other people with AI, we've got to stop China. So the idea that it's all a technology battle is wrong. This is Rob Johnson, president of the Institute for New Economic Thinking. I'm here with a fellow Detroit veteran, Jeffrey Sachs, that is one of the leading lights all around the world and has been for many years. I always pay tribute to my good friends, the Romels, because when I was an undergraduate at MIT, they turned me on to this brilliant graduate student who was a friend of their family and I've kept track ever since. In a way, Jeff is the director of the Institute for Sustainable Development at Columbia University and he's also the head of a Sustainable Development Solutions Program or Initiative at the United Nations. Jeff, thanks for being with me again. It's great to be with you and yes, fun to be fellow Detroiters, very important. What I always say is we were canaries in the coal mine because as children we got to see a cauldron of unsustainability. Let's talk a little bit about a number of things. Recently, I saw you on the BBC talking about US-China relations and took quite a bit of issue with how it was being framed and I know you've written pieces, Project Syndicate in February was an extraordinary piece. We are turning a corner, climate change is now and everyone's awareness, it can't be done without US and Chinese collaboration but I think you're, let's talk about what you think is mischaracterized in the potential for US and China to work together. I think the basic point is we need a world in which cooperation is the dominant mode, whether that's to fight the pandemic or to fight climate change or to promote development. We can't do this in a divided world and yet the tensions between the US and China have been rising. I think dangerously so and I believe unnecessarily so that puts me a bit at odds with a lot of people in the United States I would say most of the political class at this point which takes it more or less for granted that China's an enemy. At best we'll have harsh competitive relations could get worse. I view all of that as wrong spirited, wrong-headed, bad analysis contrary to my own eyes and ears over the past 40 years. I've been going to China since 1981 typically a couple of times a year at a minimum often several times a year. I've been all over China for decades visiting remote areas, visiting western China, Xinjiang, visiting Tibet, visiting Yunnan, visiting the coastal regions and I do not see China as the enemy. I do not see China as the hostile force out to undermine US well-being which is actually even taken as an article of faith in our formal foreign policy documents that China is out to undermine the United States and undermine the world. I think that this is an absolutely dangerous perspective and by the way if you believe it the solution is sit down and negotiate and talk to the other side and solve problems but not this kind of name calling shouting through the press of course it was even more insane when we had a president on Twitter because we should not have politicians on Twitter. I'm not sure we should have Twitter at all frankly but we should not be doing foreign policy by tweets. We should be discussing, solving, brainstorming, presenting evidence, analyzing but not just name calling, unilateral sanctions, attacking Chinese companies, warning as our officials do everywhere in the world don't you dare buy from Huawei. This will cause great damage to your relations with the United States. We're making threats all over the world that aim to really stop China's continued economic and technological development. I think it's disgusting and stupid frankly. Those are the two adjectives that I would use. They do not comport with our well-being, with our national needs and certainly not with the world's needs. That's what I called out. There aren't too many voices in the United States unfortunately calling for balance. We have both political parties that are anti-China and the Biden administration just about every time it opens its mouth about China's negative. Trump was crazy so that was erratic but Biden is not positive, not even neutral and not so far saying let's sit down and negotiate. In fact the formal position is we're not going to have a strategic dialogue with China because we can't trust them and we don't come out well in such strategic discussions. That's always a mistake. President Kennedy said let us never negotiate out of fear but let us never fear to negotiate. That is the right position and the position is sit down and talk because so much is a misunderstanding, so much is biased thinking, so much is lack of perspective that unless we talk we can't understand each other and we can't solve problems. The U.S. is the one that walked out of all the agreements that doesn't abide by international agreements. We're the one that say no no we're not going to be part of the international criminal court. We're the one that is not a party to convention on biological diversity. We're not a signatory of the international covenant of economic social and cultural rights. There are so many parts of international law that we don't abide by because a lot of the United States action really is in the kind of Trump mindset that he put it you know vulgarly and crudely but it is no one's going to tell us what to do. Not the UN, not anyone else as as if law is some kind of punishment. Well if you think that you're almighty then you say I don't want to be constrained by international law and that has been a U.S. view of the U.S. right wing for a long time. But I think China actually wants international law because they see that with international law they wouldn't be held back. They would be responsible for their own development. I think that they are proud and believers that if they have an international rule of law they're going to thrive. I think that's true too. It's a very talented nation, a great civilization, a great history, a lot of catching up to do because of the horrible period under European and Japanese imperial pressure and war. So China's catching up good. That's what I would like to see in the world. Countries overcoming a sorrowful past history that had a lot to do with imperial dominance which was the 19th and 20th century experience up until the mid century of the 20th century after World War II. And that's not pernicious, that's not against U.S. interests but it is pro-China interest. And my feeling is that's great. I want to see China develop. But American policy makers are, you know, they're horrified. Oh, they'd be bigger than us. Well, yeah, they have four times the population. So of course China would be bigger than us. Oh, they would catch up in technology. Yeah, why not? Capable people investing heavily in research and development. The idea that that necessarily diminishes the United States is the kind of dangerous zero-sum thinking that will get us into a lot of trouble if we persist in that. And you're right, Rob, that the playbook is the Cold War and there is a reading of the Cold War that, God, didn't we do great? You know, we went toe-to-toe with the Soviet Union and they ended up collapsing. That's not how I read the Cold War. I read the Cold War as strongly unnecessary, extraordinarily dangerous, almost brought the world to annihilation. I'm not using the term casually. And something that we should be trying to avoid desperately, not to go back to that kind of danger which existed in that time. Sight, my acquaintance and recently partner in making a video, Daniel Ellsberg, whose book, The Doomsday Machine, talks about not just the bilateral conflict but the burning of the upper atmosphere and the nuclear winter that can destroy, basically turn us into an ice age and destroy the food sources all over the earth. No one has been more vivid, more correct, more perspicacious than Daniel Ellsberg about these risks. That's a phenomenal book, The Doomsday Machine, but it's based on a phenomenal history. He was assigned, as you know very well, as a Rand officer after being a brilliant student in the first days of Game Theory at Harvard. He was assigned to look at nuclear policy of the United States and he came to the horrifying realization that we had a finger on, not only on the button, but on the button that would destroy the whole world. And that our doctrine was just about any accident could trigger a full-scale nuclear attack that by US intelligence estimates would take out 700 million people because it was going to be an attack to destroy the Soviet Union and China, even if China wasn't directly involved, why not? We should target them as well. And then as usual, with the idiocy of our intelligence agencies, they didn't understand any of the atmospheric dynamics and the physics that would have ended our lives, too. I think there's a funny kind of blind spot that I saw you take on on that BBC program, which is a lot of people in the United States say China is an authoritarian country and they don't treat people right in some regions. There's pretty good evidence for that. And you said, yeah, but what about how the United States treats people like African-Americans and runs its prison systems and all the kind of things that we're not in a place where, which you might call, we're going to go save the world unless we change how we practice what we preach ourselves. And I thought you're standing up to that. Mindframe really created quite a luster, quite a momentum in that conversation of the BBC. I have a foreign policy doctor and I call Jesus as foreign policy because in the Gospel, of course, Jesus famously says, why do you point to the moat in the other's eye when you have the beam in your own eye? And what Jesus is doing in the Gospels is explaining basically how not to judge in the wrong way. And he is saying you better take care of your own base, your own ethics, in order to be able to be ethical with regard to others as well. And we have, of course, a terrible blind spot. Here in the United States has walked out of the Paris climate agreement under Trump, walked out of the World Health Organization under Trump, walked out of UNESCO, cut aid, behaved atrociously, imposed unilateral sanctions. That's all abroad, not to mention all of the civil rights and human rights violations at home. And the first thing we do when the when the Biden administration comes in is point the finger at them, even in the shadow of the insurrection that we had on January 6th. Well, that's not how to behave. How we should behave anyway with the new administration is to meet and say, let's hope for good cooperation and that we can come to mutually beneficial understandings. That's how you greet someone anyway as a civilized human being. But in Alaska, we did just the opposite. We opened first words. What about Xinjiang? What about Hong Kong? What about Taiwan? Fighting words, the very first moment of interchange as if the United States didn't have a lot of explaining to do about having a weird psychopathic president over the preceding four years. And can we pick up the pieces to get something normal going again? So this is my basic point, which is we need to behave in a civilized way so that we can have a civilized relationship with other countries and in a nuclear armed world. It's insane to do otherwise. I've seen you in the halls of the Vatican. I've seen the things you're exploring on, which you might call framing the relationship between economic theory and the deeper moral teachings. You know, I do think, as you know, what Pope Francis is telling us is extremely pertinent for us. He's written two wonderful encyclicals, one called Ladato Si, which is about climate change and about environmental destruction. And he says, you know, do not destroy creation. We depend on it. We are part of this world and nature doesn't forgive it. We'll kick back very hard. And then he wrote a second encyclical called Fratelli Tutti, a brotherhood of all or brotherhood and sisterhood of all properly translated. And it's really a perfect accompaniment to the sustainable development encyclical because it's about encounter with others. So it's framed around the good Samaritan who helps the person in the road. And yes, it's basically wisdom, pastoral wisdom of how to get along in this world. And I think that that is part of ancient truths. Of course, the ancient world also had its nonstop wars and genocide. So it's not as if they knew necessarily better, but the teachings of how to get along, we can remember as being extraordinarily important. And Pope Francis is basically saying right now, we need a world that recognizes its interdependence. We need actually, he says, we need a plan for our common home. And he's absolutely right about that. Yeah. Yeah. Let me come back a little bit to the dynamic between the United States and China. I've worked quite a bit in China starting around 1990 and ran the Quantum Emerging Growth Fund non-Japan Asia portfolio was my focus. I've been going there for many years and many of the trusted people, I've never met Xi Jinping, but many of the high level people I have met repeatedly. And they say one thing to me after Donald Trump came into office. We had China 2025 and there are concerns about property rights or access to our financial markets. And we understand all those things. But what we don't understand is why we are being blamed for the American leadership, not just under Trump, but before that engaging in globalization when we're a very large country that had at the starting gate of per capita income, a per capita income, roughly one 40th of the American per capita income. And the Americans did nothing for their own people in the transformation, in the adjustment assistance, in the retraining and reallocation. And the winners got their taxes cut, got to keep their money offshore, exacerbated class divisions. And we were powerless to do anything about that. And now we're being blamed for that. And I think I didn't have anything to say, but we are. It's an interesting point. I think broadly speaking, the notion in any event that China is somehow a source of major U.S. social ills is trunked up, if I could put it that way wildly. But I would say more than that. There is a point which is true that as trade with China expanded, there were places in the United States, in the Midwest, I think predominantly, that did lose jobs to the import competition from China. And it's the first, it's the second lesson of trade, because I used to teach trade at Harvard. It's the second lesson of trade theory, that trade expands the pie. That's the first lesson. But the second lesson is it doesn't necessarily distribute it the way that you would want it distributed. There can be absolute losers and more than fair winners. But the theorem that Paul Samuelson, the great economist, proved about trade already about 80 years ago, is that the winners can compensate the losers. So that everybody can be made better off. That's what you teach in trade theory. Look, the pie is going to grow. Ah, but the slices of the pie could really leave some people short. But it's possible that those that are getting the huge slice of the pie, they could share something. So everybody's slice is bigger than it was without trade. Well, we didn't have that at all because our society, our politics, our political economy since Reagan, was so anti-social democratic, so anti-sharing, that losers were losers in the moral way, not only in the financial way. Hey, if you lost, tough for you. You must be a loser. And Trump was, of course, the most extreme weird exposer, because for him there are killers and there are losers. So when Trump came in, the only thing he really did was cut taxes for the rich even more. But you know, what he claimed that he was going to do was reverse the trade with China, and that that would bring back some jobs. And I think that was a part of his success in 2016 elections, because he carried by a sliver those swing industrial states in the Midwest, and that's what put him into the White House. The truth is, that's not where the jobs were really lost. The jobs were lost to automation, to technology, and so forth. Those are not jobs coming back. So it was all based on, you know, a phony economic or false economic perception. But even if it were true, the right way to handle an issue of inequality is through U.S. redistribution rather than closing down global trade. You close down global trade, everybody loses. You redistribute, then the winners help to compensate the losers. But that's a mindset that America doesn't have, because we're lacking that discourse in American political economy that winners should help losers. In the American mindset, and it's a pretty complicated cultural mindset, it goes back to John Locke, it goes back to the Puritans, it goes back to the prosperity gospel, it goes back to the racism. The mindset is, if you lose, that's pretty tough, but you're probably a loser. And if you're depending on somebody else's help, you're really a loser. So that's an American view, which is quite distinctive in our culture, really pernicious, but it feeds into the China question because the Chinese leaders can't really understand, well, if you have some people that need help, why aren't you giving them help? Why are you blaming us just like you said? And they're right. The truth is, that cooperation, that's been a mutual gain, but not an equally shared gain. And China doesn't face the same thing vis-a-vis Europe, because in Europe, I would say the social democratic ethos is pretty pervasive. It's not the American ethos that if you lose, that's your tough luck. It is much more, somebody will come to help you pick up and you certainly won't lose your health benefits, because those are for everybody. It's fascinating, you're bringing back all kinds of readings. As I mentioned, I was an undergraduate at MIT and I took History of Thought with Paul Samuelson. And he wrote papers. And he made a lot of that economic thought. Yeah, but he made a lot of, what I'll put, late papers that were like asterisks, because he could see what was happening, particularly as U.S. and Japan pressures and the pressures on the auto industry were emerging. Right after he got the Nobel Prize, I think he was intended to give a speech on international trade and it had to be postponed until the next year. But he gave a speech that was about that we do not compensate the losers and it could exacerbate social unsustainability as we now call it. He also wrote about the implications in a world of changing technology, that the winners get what you might call the cash to go invest in technology and the dynamics can create a place where in the first allocation you might have been better off but in the long run you might have been a loser if you didn't do the proper transformational job. He was very unhappy that there was a kind of grandiosity and simplification by the free trade advocates in the U.S. including academics that said free trade is great, leave it at that. And Samuelson in 1941 wrote a, I think it was 1941, wrote a paper that became known as the Stoper-Samuelson theorem. And the Stoper-Samuelson theorem showed how you could have absolute losers from trade in a context where trade was making a bigger economy, just what I was mentioning earlier. So he was the formal author of the models that displayed why you need internal redistribution. His answer was, don't stop trade but make sure that you take care of everybody. And a lot of free trade proponents failed to add the proviso, take care of everybody and then the trade opponents failed to understand the benefits of trade. So a lot of people that are politically sympathetic with say on the left or center left are anti-trade but they don't understand that's not really the right way to proceed. We wanted an integrated cooperative world but we want to take care of everybody so it's more open trade plus social democracy. That's the Scandinavian vision of this, I think it works the best. Samuelson says, why is it harder for a rich man to enter the kingdom of heaven and for a camel to pass through the eye of a needle? There must be a reason and I suppose that reason is better known to Europeans who have had to put up with American tourists for a century than to Americans themselves. Affluence breeds self-confidence even to the point of arrogance. As Samuel Butler said, there was always a certain lack of amiability about the go-getter. And I had an experience that resonates with everything that you've been saying about U.S. versus Europe. There was a gentleman named Lief Progratsky who ran the consulate for Sweden. I know Lief very well. And I've known Lief because I was involved in the Swedish devaluation when I worked for Soros in 1992 and he and I have worked together ever since. And Lief brought me to a meeting where a bunch of Swedish economists said they wanted INET to consider something that forever the European model had been considered sclerotic and the American model of deregulating the supply side to reallocate factors of production was viewed as dynamic and the growth model that should be emulated. And they said to me, given automation and given globalization and given that Donald Trump is now president, this was 2019 January, what we see is that a Sweden says I love the robots because it increases that production possibility frontier, the envelope of possibility. And I am confident that I will get retraining my health insurance, my pension and my children's education. So I want to be part of the dynamic. In America, you're breaking down. That was the punchline of what Lief wanted me to hear. But by the way, the Swedish model was really always based on that idea that we shouldn't resist actually productivity increases, new technologies, international trade, because everyone will get taken care of. So that bigger pie will end up more vacation time, more leisure time, better health care. So they've been on that theme for a long time and it's really true that today you get the anti-trade or anti-technology reaction if you don't have a system that shares because then it really is a fight of losers against winners and you just end up with social struggle. Well, and I, going back to the echoes of our time in Detroit, I've seen an awful lot of what I'll call otherness. A man named Arjun Jayadov and I wrote a paper once where we looked at regional variations in economic activity and particularly places that were being plundered by austere state and local budgets, automation or import penetration that was new. It was a time of adjustment. And what we saw was survey evidence indicating that these shocks created despair. And what we saw in lockstep was indicators of racial animosity went up with economic despair. So we created what you might call an otherness that promoted a dysfunction, which Peter Temmin has written about in his book on the Fadishing Middle Class, where we stopped the rungs in the ladder of the education system because we became so divisive about not educating those others. And so I went back to the Swedes and I said, well, maybe it's because you're more racial ethnically homogeneous that you can do this and take care of each other. We have a very big challenge to overcome based on what I'll call the scar tissue of my formative years in Detroit and what I see going around around the nation. You know what his answer to me was? You might be right, but if you don't overcome that scar tissue, the prevailing model will be China because they know how to use the state to make these transfers. Yeah, that's very interesting. I'm just saying. And of course it was it was a swede, Gunnar Myrdal, who came to the U.S. in 1946 to tell us about the racial challenge that needed to be overcome in his book, The American Dilemma. And they're still trying to teach us about that. Last thought, going back to this question of how U.S. elites and governments neglected to support American people in the onset of globalization development of China and automation. We have a situation now where I believe that Trump capitalized on that woundedness. But a lot of the things that we've been fighting with China about have to do with intellectual property rights, pharmaceutical rights, access to financial markets. These are all the high margin services now, picking a fight. These are companies who've probably been violated because they did a foreign direct investment and then they watched factories like theirs being replicated rather than expanding the scale, which they thought was the original promise. This is some of the angst about the China 2025 program. But it looks to me like the wealthy and the powerful now have joined both parties, the demonization of China, and perhaps the fear in the Biden administration of not doing that, which you and I both think is ominous. But the fear of not doing that is that what you might call the general population, which was wounded by globalization, has been taught to blame the Chinese rather than their own leaders. And they fear losing control. You know, the Biden administration fears losing control of the House, the Senate, and perhaps the White House. How do we overcome that? How do we overcome the false consciousness of the general public about who's responsible that my Chinese ally pointed out when he said the Chinese were powerless to create the transformation within America? There are, of course, many, many deep currents of American politics and the China issue is one of many. And to understand any of our dynamics domestically, we have to look not only at foreign policy issues, but even more at racial divides and at wealth divides. So the questions of America's plutocracy, the questions of America's tradition of white supremacy, and the questions of America's tradition of foreign policy exceptionalism are all on the line right now. And so there's a lot of angst, anxiety, confusion, claims, and counterclaims. When it comes to China, it is certainly the trigger of the current phase of relations was China's breakthrough to becoming a high-tech innovative country. And it was specifically the Made in China 2025 program, which was a pretty brash statement. I think from a tactical point of view, I would not have suggested that China put it the way it did, but basically China said, okay, here are the 10 top technologies, we're going to dominate them. Okay, if they had said we're going to advance in them, it would have been tactically smarter, less hubris. Of course, we have our own hubris. We need to come in first. We're going to win the race to the moon and so forth. But the gist of it is straightforward, in my view, which is that China said we're going to move to the forefront of key technologies. Most of them, semiconductors, advanced transport, precision medicine, precision agriculture, renewable energy, and robotics and so on. Good list, smart policies, the right kind of innovation-led development that China needed. Now, that scared the wits out of American policymakers, first of all, and it also violated the implicit idea that American policymakers naively had about China, because it wasn't that America said, well, they're going to become like us. What American policymakers believed is China would become wealthier and it would develop, but under the wing of the United States, we would be clearly in the technological lead. We would be organizing global principles and there would be a place for China, just like there would be a place for the whole world in development. So it was an America-led mindset and it used to be called the flying geese model of the development that Japan propounded. We'd be the goose in front. We would always be in the lead technology and then China started saying, you know, we're going to innovate. And that is really the trigger to all of this now, which is hell no and you're cheating and we've got to stop you and this is a grave threat. And of course, it also gets implicated in the integration of AI and semiconductors and everything else into the military sphere, into the security sphere, into the surveillance and cyber warfare sphere. So that's a lot of the problem, which is that our semi-crazed policymakers view all of this, not just in the lens of economic competition, but in the lens of military dominance, which is, again, little bit boring, little bit predictable and very dangerous to have a mindset the way that our policymakers do. That's what's going on right now. This is a war of technology, they think. Now, as an economist, it's all mind-boggling to me because in economic think, technology is the way we do things, the way we solve problems, the way we overcome climate change, the way we stop poverty, the way we treat people for help. It's not a general saying, my God, if we don't have the best autonomous weapons that can murder other people with AI, we've got to stop China. So the idea that it's all a technology battle is wrong, dangerous, zero sum at best, but negative sum in reality. But that's really what we're up against right now. And that's why the real battle for the moment is America trying to stop the advanced microchips from going to China. I'm almost sure, I'm not absolutely sure because I'm not at the cutting-edge knowledge of this, but my guess is that this is a two or three-year workaround hindrance for China, not some existential threat. China now has thousands of semiconductor companies that are being absolutely showered with cash to figure out how to make small nanometer microcircuits. And they're good, and they're smart. And my guess is they'll figure out how to do it. And then they'll get on with making low-cost phones again and 5G systems and so on. But it would be so much better if we were recognizing that this doesn't have to be a war to the death, and God forbid that it becomes one, but rather an opportunity actually to decarbonize our energy systems, solve problems of transport and mobility, help poor people get educations. If we thought about it in those terms, we'd come to a very, very different perspective and a new kind of foreign policy.