Professor Jeffrey Sachs' Final Warning: Why You Must Prepare for the New Global Reality

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[00:00:00]Well, there's clearly been some important breakdowns. Uh the USChina uh trade and investment relationship is uh never going to be what it was 10 years ago dynamic with confidence with the mutual investments in both directions. I think that period is over. uh clearly the Europe Russia linkages are damaged uh perhaps to the point of no return in our generation. That's very significant.

[00:00:31]Europe is the big loser uh in that breakup. Uh clearly there is regionalization taking place because there are simply more risks of uh anything related to long-distance trade and logistics. So uh trade and investment relations within Asia are strengthening. Uh trade and investment relations within Africa are likely to strengthen. Uh Europe is rather beerefted uh because it broke relations with its main natural resource provider uh supplier which was Russia. Uh and all it looks to is a completely unstable, nasty and disdainful United States right now. So Europe is completely a drift economically. These are deeper trends uh that are not going to be changed by any of the events in the next weeks or months. But I think it's very important to say at the outset that the world economy still hangs in the balance uh even in days and weeks. Sounds melodramatic, but I think it's true. uh if the United States resumes the war with Iran, which I think we have to put at 50% or higher, uh the results would be devastating uh under any circumstance. Uh and um we're at that precipice. We have a completely deinstitutionalized United States government. Uh we have a uh absolutely out of control Israeli uh military state. It's become nothing more than a a war state. Um and it wants continued war. If the war that is uh uh on simmer right now turns back to boil uh then uh when we meet after that if that happens uh everything will be dramatically accelerated magnified uh and made horrendously worse in its short-term economic impact. But the point is because of essentially US uh uh efforts to somehow maintain a a kind of preeminence that the US no longer has, but the attempt to maintain it through regime change uh and war operations. the breakup of what was a uh an integrated world economy is real and unlikely to return uh anytime soon. I should add that the very nature of the digital economy uh the interpenetration of of bites in in in the digital economy means that the United States from a military and security point of view is determined to create a US centered part of the world that is uh separate from China's and that also means that by nature of the technologies. Uh the US is going to break the trading system in one way or another for many years to come. And that's not just Trump's uh petulence.

[00:03:48]That will be a national security perspective in the United States that's widely shared in Washington. So we're in a fragmented world, but I think uh the fragmentation leaves Europe really outside of everything. It leaves the United States probably aiming mainly to control what will be an increasingly unruly Americas, which will uh not accept uh the uh the increased uh US dominance that the US is trying to impose right now and I think Asia will become increasingly integrated and the winner of all of this will be Asia.

[00:04:30]>> Yeah, I agree. It seems that uh well at least Europe will be the big loser here.

[00:04:34]My concern always after the cold war was that with NATO expansion we redivided the continent which makes Europe weaker terms of the security, economics also politics and now we see this manifest itself as some mass hysteria and uh very rational war enthusiasm. So you know Europe cut itself off from Russia. We see Middle East being uh reorganized and essentially Europe is now putting all its eggs in the US basket because this was the source of stability over the past 80 years. But uh even the US now is uh very openly losing its interest in a less relevant Europe. Uh how do you see the possible pathways now though for Europe? I mean is there a way to restore its prosperity or relevance security or or do you think it it's already played all the cards it could? Well, the Europeans should have reflected on the fact that it was the United States that worked very hard to keep Europe and Russia apart. Uh, and so for decades, it was the United States that was uh warning against Nordstream and against the uh closer relations between Germany and Russia. meaning that those uh links were good for Europe uh especially good for Germany as the main economy uh main economic motor of Europe I should say.

[00:05:51]Um and the United States viewed that as a risk to America's own preeminence and its own political sway in Europe. So Europe should have noticed that they had the leverage. Uh but Europe played along completely with the US. became enamored of the idea that we will expand uh into central and eastern Europe. I I like that idea, but I did not like the idea of building a new wall to exclude Russia. Uh this is a an absolutely absurd idea from Europe's point of view.

[00:06:24]Europe should reverse this. This is geography. Uh they will wake up, somebody will look at a map again and ask how did we bring this about on ourselves. This is a really complete self harm. But if you look at the current leadership of of course it's not going to happen with people like Vanderlayan or Kayakalis or or Meritz or or Starmer, God forbid that maybe the British will never come to this idea.

[00:06:52]But the point is that um the European political leadership has bought into a completely failed uh e economic and geopolitical strategy. uh and now is a failed political class and um until that changes one way or another with new political entrepreneurship in Europe um Europe is just going to be in decline economically. We see it there's industry is shuttering up uh and um there is no bright spot in the European economy right now at all.

[00:07:26]>> Yeah. I recently, you know, read the speech of uh Elbridge KBY, the under secretary of defense for policy. And what I thought was remarkable was it didn't really suggest that the war in Ukraine should come to an end. The speech more suggested that the Europeans should just um you know, arm themselves and and take over. So, in other words, outsourcing the war rather than ending it. Uh and uh as we've seen, the Europeans now just approved this $90 billion to Ukraine. They call it a loan but I think that's more to deceive their own public because this money is not coming back. Uh but at the same time there seems to be growing preparedness to also or get more directly engaged in this war with Russia. Um but as we see this we also see opposition growing in Europe as well because as you said the political elites and the public they're not necessarily on the same page. Do you do you see any any shifts here like people waking up among the public or do you think that the current political elites are too entrenched?

[00:08:21]>> Let let me say something about KBY and something about the funny thing that happened uh on the way to our current disaster. Um I've been teaching international trade now for 46 years. uh and when I studied as a student uh we studied international trade and why it was good, why it was uh mutually beneficial and we spent about 15 minutes in the semester on what was called the national security exception and I remember uh my professor who was a learned professor uh of international trade saying well you know all the good things we're talking about trade we should remember that there might be exceptions if national security is at stake and it was about a 15minute assign Uh now this is the way that economists I would say good economists view the world and good economics in this regard goes back to Adam Smith. Uh we celebrate the 250th anniversary of the wealth of nations uh this year. Adam Smith's idea was that an expanding world market is mutually beneficial for all of the participants. uh and he was a great humanist and he said everybody will benefit even today's bereft and colonized peoples will gain strength through international trade and the flow of ideas and there will be a rebalancing of the world so that all parts of the world will benefit from open trade and Smith advised the uh British monarchy and parliament of his day in 1776 give up the American colonies you don't need military control just trade with the America you don't need to have an imperial policy. Um eventually or soon enough actually the the American Revolutionary War broke out and by 1781 uh the you the British colonies were now independent of uh Britain. But the point was that economics as a uh discipline has recognized that open trade is mutually beneficial. uh of course trade under colonial or imperial imposition is not but open trade among sovereign nations is mutually beneficial. What happened in the United States is that as the US lost its nerve with the rise of China in particular but more generally with the catching up of many countries so that the US dominance or share of the world economy was going down was that economics was taken over. I have to say by the international relations people who view the world not as win-win but as win- lose. Uh and suddenly the idea that economics should be uh ordered to preserve American hegemony became an increasingly interesting uh discussion in the American scene. I found it never very interesting. uh I found it uh absolutely uh uh ignorant of basic economics and also wrongheaded because fundamentally for me the rise of China was not a threat. It was a benefit first to the 1.4 billion people of China and ultimately a gain for the whole world through trade through China's innovations and so forth. But from the American uh point of view, conceptual point of view, people like Eldrich Colby or people like Jake Sullivan in the Biden administration, economics became the instrument for continued American hegemony. And the last 20 years has been spent on honing the instruments of economic warfare. uh that we should think about trade and the flow of technology mainly from a military and geopolitical point of view not from an economic point of view. So the main idea was now we have to remake the economy to suit American dominance or to protect and extend American dominance. Jake Sullivan, who uh was the national security adviser for Biden, now teaches at Harvard University, my old uh stomping grounds, and he's written a piece in foreign affairs recently, our uh uh important journal for discussion of geopolitics. Again, uh basically about how economics should be run for the sake of American power. Well, to my mind, all of this is mind-boggling in its economic ignorance and its economic destructiveness. But this kind of discussion dominates right now.

[00:12:56]Economics is no longer about economic prosperity and well-being in the US. Uh even I would say university context.

[00:13:06]It's about power. uh and it's about how we can head off China's rise and how the information technology world should be organized so that uh China is not a beneficiary or how the Nvidia chips are kept out of China's hands and so forth.

[00:13:24]All of this has reoriented our thinking in an extraordinarily destructive way because we are taking down the basic scaffolding which made the world economy uh achieve uh economic uh growth and development for the developing countries to a large extent and people uh in the US say globalization failed.

[00:13:49]Globalization did not fail.

[00:13:51]Globalization provided the basis for worldwide economic progress that happened to be especially rapid progress in the developing and emerging economies. That's success. That's not failure. But what economic growth did was diminish in particular the share of the United States in the overall world output. And that is what is unnerving to uh these strategists so-called. They want to keep American dominance, not American well-being. So the American people are suffering from this absurd war that we're in because this Iran war is tragic, but also completely absurd.

[00:14:36]It never should have happened. Any sane president would have known not to do this. Trump brags in fact that since 1979 all the presidents of the United States refused this war but I did it which is a testimony to his complete lack of understanding and insight not a tribute to his bravery it's a tribute to his impulsivity his recklessness his absence of process his ignorance uh not to any prize that he has but it's part of this idea that we're playing with the world economy for the sake of American in power, not even for the economic well-being of the American people. So, Glenn, as you said, everywhere in Europe, the public is disgusted, and they're going to be more disgusted in the coming months because their living standards are going to go down further.

[00:15:25]They're disgusted in the United States.

[00:15:28]Trump's uh approval ratings are plumbing new depths each month. Now he's down to 34% approval rating and I think it's 62% disapproval rating and a couple percent don't know uh few percent don't know but uh this is happening all over the uh so-called western world which has turned economics into a weapon aimed at Russia and at China rather than as an instrument for well-being that might actually help Russia and China as well as helping ourselves. So, this is basically what's happened. And that's why it doesn't surprise me that Mr. Colby in uh in the Pentagon would view an ongoing war as a good thing because from their point of view, they're not looking at what's good for the American people. They're looking at the question of what is good for this uh conceptual idea of American dominance.

[00:16:29]Well, when we look at this weaponization of economic connectivity, of course, blocking Chinese access to technologies or stealing the sovereign funds of Russia, that's one thing. But one area of economic warfare that has historically been a source of war has been naval blockades and um yeah, this uh restriction of access to maritime transportation corridors.

[00:16:50]It didn't seem like it was a key challenge over the past few decades, but now we see, you probably saw the a recent speech by Trump where he kind of brags that well we are we are essentially pirates now. We can seize ships take their cargo and uh it's not just talk. We've seen the blockade on Venezuela, Cuba, uh Iran just random also have hijacking of tankers over the years. So we see uh going after Russia's u commercial fleet. Uh the Europeans now the UK plus nine other countries are setting up a naval alliance to contain they call contain which means confront Russia. We also see the threat of possibly the United States seeking to intercept Iranian vessels all the way to the straight of Mala which would then be essentially war on China. Did do you where do you see this going? Is this uh is this again back to history of u you know if you want to trade you need to have a powerful navy to you know make sure commercial vessels are supported by guns.

[00:17:46]This is all shocking because some of the most basic principles uh of international statecraftraft have been freedom of navigation on the high seas and for the United States to be championing piracy. Well, at least Donald Trump says out loud what others try to not say out loud. I think um this piracy of the United States will prevail in the Western Hemisphere. It won't be challenged uh from outside certainly uh and uh it will be challenged from inside the western hemisphere. In the end, Latin America, though it is under the sway and military dominance of the United States, will not accept what is happening right now. But it will take some years because the United States is not only putting on blockades uh not only directly uh overthrowing uh governments and it will do so with Cuba most likely very soon uh but it is also intervening in the political systems and elections of almost every country. So it is in the short term turning the Americas into a bastion of of US dominance. Uh and this will probably succeed in the short term because I don't think Russia or China or anyone else from the outside will challenge this. But the farther away you go from the United States, this becomes uh unworkable and the United States will not succeed in the end in blockading Iran. uh the US doesn't even have the naval capacity to do so. It doesn't have the staying power to do so. It can't even keep a comprehensive blockade from a strictly military point of view. But from a a geopolitical point of view and with China and Russia uh and uh others that oppose this, I don't see this lasting. uh if Europe is stupid enough to take on Russia and uh Russian shipping directly, there will be war between Europe and Russia and Europe will Europe will be devastated. uh the European current class of political leaders uh with a few exceptions uh that uh a few people who are honestly thinking about this but I'm thinking of the main characters uh of Mertz and Mcronone and company uh they will in their short period remaining in government uh possibly lead Europe to destruction uh not just to economic decline which they've been doing for a number of years. The further one goes uh towards Asia in this uh the uh ability of the United States to have sway diminishes fast. I think one of the lessons of the Ukraine war and the Iran war is that the US military dominance is not impressive uh anymore. This is a matter of change of technology. It's a matter of the rise of military power of Russia, of China, of North Korea, of Iran. Uh it's the nature of technology itself that uh the uh big expensive US weapon systems are not especially tuned to the kind of warfare that we have now.

[00:21:01]So I think the closer one gets to Asia, the less relevant the United States becomes. And that's why I said at the outset of our discussion today that I think Asia as a whole will become more economically integrated. The US will not have chokeolds than it can hold. Uh China has a formidable navy already. Uh and it has a very sophisticated uh AI empowered military that it's building very rapidly. Uh and it's not naive about US intentions to say the least. uh so I don't see the US being able to prevail uh in its uh overall strategy of uh or aim of hijgemony nor do I think it can project power in Asia and if things really get tough and China acts in its own neighborhood uh the way that the United States is acting in its neighborhood and say that China decides for whatever reason and I hope it never comes to this and it doesn't have to But China blockades Taiwan. The implications for the United States are extraordinarily devastating actually. Yes, we're building we're building semiconductor fabs in the United States, but nowhere at a speed or depth that can begin to replace the supply chains that come from Taiwan, Japan, and Korea. And if China asserts its regional power like the United States is doing, the US does not have a military response. Every war gang in recent years has shown that and that change is accelerating and we're seeing the limits of US technology actually because they're expensive and they're poorly tuned to the changing world which is why the Pentagon is scrambling to uh come up with the some kind of new technology model. But that's years and years and years ahead. Uh so all of this is to say I don't believe that the United States can impose its will even in the Iran war. I think that it may well try to do so in the coming days or weeks and then let's talk again because the whole world situation in the short term is going to be dramatically uh worsened. uh and um everything we're saying will not uh uh fit the reality even in four or five or 6 weeks of a renewed outright war in which the physical infrastructure of the Gulf region is uh heavily damaged and that's the likely outcome. So all of it is to say the US uh is uh on the wrong track.

[00:23:48]Uh irrational, very poorly led, rather desperate uh to keep control over what it no longer controls. And therefore, as I say often, the United States is by far uh the most dangerous country in the world because it's uh uh it it is uh trying to do what it can't achieve. Uh and when you have that gap of aspiration which is global dominance and the reality and you try to pursue your delusion uh you end up creating great harm and all to add that it is spurred by its junior partner in all of this Israel which has even greater delusions, biblical delusions, biblical scale delusions uh that are uh absolutely bizarre uh and um that prod the American delusions. So, it's a it's quite a quite a dangerous situation, but there's no good outcome for the United States. And until the European political class changes and understands the basic realities of geography uh and of changing power and technology, Europe is just going to be completely out of this whole scene.

[00:25:06]I agree. Europeans should realize geography is destiny. But uh with the US though it's certainly it's a resilient country. But uh I wonder how much stress it can absorb because this whole idea that it can replace energy supplies to Europe, East Asia, all of this assumes that the other great powers will just sit by and uh not respond and that its uh vessels will simply also remain obedient. Uh it's >> yeah well the US is isn't so resilient.

[00:25:35]The US has a shiny uh a a shiny and very bright uh dominant uh technology sector.

[00:25:45]Uh so Silicon Valley, hats off to a lot of accomplishments, no doubt. But if you travel uh in the mainstream of America, there's a lot that's broken down and people are very unhappy for understandable reasons. uh and uh the infrastructure is decades out of date.

[00:26:06]Um the uh difficulties of uh working day people are very very significant and none of this is being attended to by this uh political class in Washington which is uh out of date by at least 30 years uh in its understanding of America and understanding of the world. It's a completely money uhdriven corrupted political class to begin with and the things that are said in the United States uh have very little resemblance to the reality of the world right now.

[00:26:42]So I don't think the US is so resilient in in any way and the unhappiness is very great. I think people uh could look at the question that's asked by Gallup of the American people. Are is the country on the right track? Uh and this hovers around one out of five Americans saying yes and the vast majority of Americans saying no. Uh, and that reality has been with us for a while.

[00:27:08]And nothing that's happening, nothing, not one element of Trump's delusional world is putting America on the right track. So,