The US-China Cold War just shifted - Yanis Varoufakis & Wolfgang Munchau | The Econoclasts

Added: 2026-05-27

[00:00:00]Donald Trump could have picked a fight with President Xia. That's what Marco Rubio wanted. Well, Trump didn't.

[00:00:05]>> If this world really goes into sort of the West versus the rest type confrontation, not only is there a great risk of serious military confrontation, you know, a third world war, but there's also a significant risk of significant economic dislocation.

[00:00:18]>> Companies like Antropic are really scared of companies like Deep Seek because the Chinese are catching up very very quickly.

[00:00:25]>> China has this massive advantage. It has in the long run the better energy policy. It's heavily invested in renewables. Trump has kind of killed that industry in the United States.

[00:00:34]>> He is flip-flopping between talking about Brexit and saying, "No, no, no, no. This is not what I'm going to be on about elections, about local issues."

[00:00:41]>> Burnham played down the fears by saying, "Yeah, no, he will pursue the same fiscal policies than Rachel Reeves." If you commit already at this stage to the same fiscal rules, then I'm asking myself, what is the point?

[00:00:52]>> My prediction is that he may very well lose this by election because he started off in this particular manner.

[00:00:58]Welcome to the econocclass in the week of a dangerous Ebola outbreak in Africa and after Donald Trump has made a maybe not quite so historic or maybe indeed historic visit to China. Good morning Jiannis. What is your orthodoxy that you're going to debunk today?

[00:01:15]>> Hello world gang. Yes indeed we don't talk much about Africa. Maybe we should change that. Uh this outbreak of Ebola is pretty grim news. I'm going however to concentrate on the President Xi President Trump summit in Beijing. You know this this orthodoxy which is unfolding as we speak that nothing much was accomplished. It was a kind of u anticlimax. No great deals were struck.

[00:01:41]Well I'm going to argue that this was a very significant very significant and actually a quite successful summit.

[00:01:48]Mercifully, it extended Adinfenitum Trump's deferment of the tariffs and President Xi's deferred rare earth export bans and that's not something to be scoffed at. I will be talking about the future of the Labour Party in the UK. The challenger to Kama is the Manchester Mayor Andy Bernham. He will fight a constituency race in a constituency close to Manchester called Makerfield where he is going to be up against the reform party which has been leading there in the last local elections. Now Bernham is a man of the left. You know he promises a new start for the Labour party but I have you know looked at what he's been saying on the economy and he looks to me like someone who hadn't thought much about the economy and it is the economy where Kiestama is failing and it is the economy where Bernon will fail as well.

[00:02:40]I do not think it will be much of a change but that's for later. Janice over to you now.

[00:02:47]>> There's a pattern you see over and over again. It's not that people don't recognize risk, it's that they don't act on it. A lot of people understand what's happening right now. Inflation, monetary policy, the instability of the system, but their savings, their retirement are still sitting in the same place, still tied to the same system. And usually it comes down to one assumption that there's more time, that you can deal with it later. But that typically is the part people get wrong because when things shift, that's when people realize how exposed they actually were. And by then, it's obvious, but it's late. So, some investors are starting to think about this differently. Not trying to predict what happens next, just reducing how much of their money is tied to the system itself. For some, that simply means holding a portion in physical gold, either purchased directly or within a tax advantaged account like a gold IRA using existent retirement funds. I've been looking into it and there's a company called Augusta Precious Metals that focuses on this.

[00:03:41]They walk you through how it works, answer your questions, and then it really comes down to whether it makes sense for your situation. There's no pressure around it. If you want to look into it, go to learnoldirra.com or text on her to 35052.

[00:03:56]>> Well, thank you, Vulcan. Well, folks, the big event at least uh when it comes to high-end politicking of the last few days was the visit by President Trump along with many tech lords and other businessmen and Marco Rubio and Pete Hex to Beijing. The western press, the American press and the Washington Post, the Guardian and so on were underwhelmed by the news that came out of that summit. It was described as a stalemate, as a summit that promised much and delivered little. And you know, this is the orthodoxy which um Vulcan and I feel like we should be debunking now because you know, sometimes nothing is a great achievement. This summit is coming after a year of intensified tensions between the United States and China. Uh the new cold war that Trump began in his first term uh had escalated massively.

[00:04:57]Therefore, having a summit like this which cementss and extends the truth that was achieved uh when was it? last October, last November is no mean feat. The two superpowers inched closer to coexistence.

[00:05:14]And looking at Trump, listening to Trump, it seems to me that he has rolled back the neocons's push for uh conflict over Taiwan, for instance. This mod of the town is now under extreme jeopardy because Silicon Valley needs to up the ante with China. But let me start at the beginning. Uh you will recall that on liberation day Trump announced 54% tariffs on China and then China retaliated and by October of last year of 2025.

[00:05:48]Trump threatened to boost these tariffs to an exorbitant 200%. Had he done that effectively he would have ended all trade between the United States and China. And it took President Xi's retaliation, the threat to ban all rare earth exports to the United States to get Trump to chicken out, to back down fast, agreeing to a truce. We will not tariff you, Trump said to see if you don't cut us off your errors. And that truce was going to be revisited last April. In the end, it was revisited in May during this uh trip by uh the United States president to Beijing. The fact that they did not even mention the tariff and rare earth war hinted at making the truce permanent and that should be considered a major success. I think this summit silence on the tariff and rare earth war should be welcomed as a loud a boisterously good result. It would be a mistake to think that this kind of truce was a foregone conclusion.

[00:06:52]And here are some pointers. On the 2nd of May, few weeks ago, the Chinese government legislated to ban Chinese companies from complying with American and European sanctions. Essentially, President Xi, his government, told Washington and Brussels that the time when the West enjoyed extra territorial jurisdiction in China was well and truly over. Now, Donald Trump could have picked a fight with President Xi on this. He didn't.

[00:07:24]Secondly, before Trump landed in Beijing, the Chinese government had warned Trump against America's pledge to supply Taiwan with what was it 15 billion dollars worth of advanced weaponry. Now, Trump could have pushed back. That's what Marco Rubio wanted.

[00:07:41]But the neocons wanted, they wanted the American government, white, the White House to push back against uh President Xi's threats. Well, Trump didn't.

[00:07:52]Instead, he said, "When you look at the odds, China is a very, very powerful big country. That's a very small island." He meant Taiwan. Think of it. It's 50 mi away where we are 9,500 miles away. Uh that's a a little bit of a difficult problem. Taiwan was developed, and this is quite interesting what he said, uh because we had presence in the United States, he meant that did not know what the hell they were doing. They stole the Taiwanese that is the Taiwanese stole our chip industry. Well, that's a big statement, isn't it? It's a a statement that made uh big waves in Taiwan and must have been quite uh you know musical in the ears of President Xi. Now, there's the third issue that I want to raise Vulcan as well. The question of how Trump would react to President Xi's power play for joint American Chinese leadership of the planet. Effectively, Xi told Trump in no uncertain times and in his face that if America is to become great again, it needs China. And as if that were not enough, Xi lectured Trump on the difference between a balance of superpower terror as it existed between the United States and the Soviet Union in the 60s and 70s. And his proposals, the Beijing proposals for constructive strategic stability, they call it, and they base it on three planks. First, enlarge the tie of common interest between the United States and China.

[00:09:22]Secondly, eliminate winner takes all zero sum kind of games. And third, end the roller coaster of American inspired conflict, confrontation or war. Now, Trump could have pushed back and he did not. So, that's a good news. What do you think, Vulcan?

[00:09:39]>> I agree with you. I also believe that the USChina relationship does not have to be advers adversarial and I believe it in fact I think she has a point here.

[00:09:49]I think a lot of the stuff that's happening around us in the you know in the 2020s is the result of the west misjudging its size and influence. This is you know our narrative on Ukraine.

[00:10:02]It's our narrative on China. We're fighting China. We're banning products.

[00:10:06]We are obviously fighting the Russians uh indirectly through our help in Ukraine. Behind this is the idea that we are still big sort of a sunset boulevard type of uh you know delusion of our own grande of the of the powers. But the reality is that in terms of you know global GDP if you measure this properly the west is approximately the same size as the Russia China axis. We're not the dominant force anymore. the world is much more balanced in terms of its uh GDP. You would not know this if you looked at dollar GDP because you know Russia and China are not you know fully taking part in in dollar markets. So their their purchasing power their general economic power is not fully captured by a classic dollarbased perspective.

[00:10:55]We are less united than they are less able to you know take it on the chin unlike the Russians for example. We see this in Ukraine. Russia has been not only been evading Western sanctions skillfully, but it's also been enduring uh hardship to a greater extent than we would. This is not a fight we can win.

[00:11:14]And we're seeing this. We're seeing all these fights that we're doing. You know, whether this is Iran, we underestimated the enemy. Russia, we underestimated the enemy. It's always this under we underestimated China. The Biden administration famously underestimated China when it imposed the semiconductor, the high performance semiconductor ban, thinking that this would keep China in sort of a stage of permanent underdevelopment. The opposite was true.

[00:11:39]China developed a semiconductor industry. And while you can fool yourself to think that they're still behind behind you like by you know um a half of a generation and semiconductors the idea that that China is sort of being relegated by that decision is is absurd. I'm very much sort of in the Kissinger mold of foreign policy. You know whatever you have to say about the guy and you know you can say a lot of negative things about him. He got one thing right. He he understood the the danger of the cold war situation and he understood the need to manage it. He know he maintained back channels in diplomacy. Famously he had a back channel going with the Russian ambassador to Washington. But that was a viable back channel during the uh cold war. Important. We don't have this at the moment in Europe. We don't speak to the Russians. We even disagree about whether we should talk about to the Russians. So the fact that Trump has this channel with she is hugely important. And it is this this that prevents accidents. these conversations, these the meetings, the meetings of mind that that happened there and that is important for the global stability and I think that will also rearrange a lot of the factors if this world really goes into sort of a you know the west versus the rest type confrontation. Not only is there a great risk of serious military confrontation, you know, a third world war if you will, but there's also a significant risk of significant economic dislocation, lack of action on clim climate change, which does actually require all the big issues require that the world kind of works together, not against one another. And you know, you've seen how climate action has been completely derailed. And and if there is any progress, it's usually due to pol to economic progress and technological progress. But politically we are really regressing in many respects. So yeah, I welcome this and I I you know I completely with you on this point.

[00:13:30]>> It's funny you should mention that he's trying to manage the new cold war which by the way he started but even though it's true that he started the the cold war the new cold war remember when he banned Huawei and Z and then slapped these 25% tariffs on Chinese aluminium.

[00:13:48]Uh but nevertheless, what was interesting, was it not that, you know, when he lost to Joe Biden, uh Joe Biden was meant to be the anti-Trump, he was meant to be the guy that walks into the White House and reverses everything that Trump had done. Instead, the new cold war that Trump had begun was turbocharged by Joe Biden. And I think that Joe Biden turbocharged the new cold war to such an extent that Trump got scared of the new cold war. Now he's trying to manage manage in particular the ban on microchips the chips act by Joe Biden. Um I think that Trump wasn't happy with that and you can see now that you know he took Nvidia's Jensen Wang with him. It was a hilarious moment he went when when he said in one of the interviews he he was giving on Air Force One uh that he was going to ask the Chinese to open up their market for microchips. Seriously, it was Joe Biden, the United States, that banned the sale of advanced Nvidia chips to China. And Trump is is he seriously asking Beijing to reverse Washington's own policies because he cannot go against Joe Biden's microchips act so much because and the reason why because has been offered us u I don't know whether you've seen recently anthropic published a paper it's was called 2028 two scenarios for global leadership and in you know anthropic which is supposed to be the less gung-ho less gung-ho than Google or Palanteer when it comes to the weaponization of AI for belligerent purposes. Uh Anthropic nevertheless is demanding with this paper that the administration ramps up the new cold war against China turbocharging even further Biden's legislation that bans microchips. Now the question is why? One of course explanation is very clear that you know companies like Anthropic are really scared of companies like deepseek uh because the Chinese are catching up very very quickly even though they don't have access to the most advanced microchips they are managing they have workarounds they have extremely good coders and programmers and they can squeeze a lot more juice out of older and less advanced microchips but I think wan there is something else happening here there is uh coalescence. This is my theory. Shoot it down if you want between Silicon Valley and Wall Street because you know I don't think that uh Open AI and Antropic have much to fear from Chinese AI companies because you know they're effectively the Chinese AI companies are not competing in the United States. They're not competing in Europe so much. Uh but what I think they really do fear is uh an advantage that the Chinese have uh which is systemic.

[00:16:33]It's it's not technological. It is systemic. And that is that in China there's no clash. There's no contest, rent seeeking contest between uh their big tech, their AI industry and their banking sector and their banks. They two work together. Maybe they don't want to, but they are forced to do so by the government. And the result is that you have an integration of cloud capital, uh, AI if you want, and the finance.

[00:17:01]It's called I call cloud finance. And the result is WeChat, the central bank digital currency and so on. Things that you will never see in the United States.

[00:17:10]Why? Because Wall Street does not want to share its financial grants with Silicon Valley. So companies like Anthropic, like um XAI, Elon Musk, they would very much love to develop uh cloud finance in the same way that the Chinese are doing, but Wall Street doesn't let them. And therefore, American big tech sees this as a major impediment. And also with the genius act uh the fact that you know companies like uh tether are given the opportunity to issue effectively uh to mint the American dollar a digital version of it when Silicon Valley has difficulties doing that because they are stationed in the United States and because Wall Street doesn't let them do it. So at least that's my theory as to why Anthropic is so gung-ho about ratcheting up the new cold war that now Trump is trying as you said to manage.

[00:18:03]>> I think the AI situation is at the moment quite murky. The Americans have succeeded actually in developing some really astonishingly good models in the last few weeks. The latest updates in both for anthropic and open AI are absolutely these are not these are not just the kind of 5% improvements. they can do things that the the previous generation couldn't do. I think the Americans have another advantage which we should not underestimate. China already said it will not allow companies to fire workers and replace them with AI. Now that's we know this is how productivity gains happen. You fire workers and you you know you let the computer do the do the job. That's that's when we talk about productivity gains that will be the ones that will be China will not do that. The US hasn't got any tools to stop anyone from doing this. You're already hearing MA cutting workforce by 10%. We heard JP Morgan planning a staff reduction by about the same amount. So 10% seems to be the number that everybody in the United States seems to be sort of the ballpark that they're planning for. So what I expect to happen is that there will be a huge competition. I don't think military AI it will be hugely important. I don't think it will frontr run this in the way that the military front run the development of the semiconductor in the 50s and 60s that was largely a military you know a defense department procurement and um you know a state funded research program that's not the case now it's very much a private sector thing and you know there are different funding models but you know this is not the the military is not going to be the main thing this is so huge this market so we're not in this sort of in this sort of competition where you know if deepse succeeds And we don't because you know this is you know this is there only a few companies out now there will be so many more anthropic and open AI the big issue for them is not to keep down the bigger issue for them is just to you know the the is the is the product development and interlinking this model with some real world action some of the things they've done recently >> that that begs the question why did anthropic issue this huge you know very hugely important paper on the 14th of May arguing vehemently in favor of uh you know upping the ante in the new cold war against China. This is what they're doing.

[00:20:14]>> I would probably not make too much of it. I do not I do not want to wouldn't extrapolate. Open my eye for example doesn't you know doesn't play that game.

[00:20:21]Others are not playing this game because it's a huge it's a huge market. Now we know that Anthropic is going heavily into the area of security. You you know they released this software mythos which they released to a very small number of clients that detects security vulnerabilities in software system. Now, Mythos is a is a potential, you know, doomsday machine because because, you know, it doesn't only detect your vulnerabilities, but it detects everyone else's vulnerabilities, too. So, you can pretty much hack everyone in the world.

[00:20:49]So, anthropic clearly goes into the security business. And for anthropic, you know, a nice cold war would be, you know, great good business. Other people have different models. You know, I would assume that the big issue, the big money in AI is not the military. I mean our military spending even in countries like the United States 3 and a half% of GDP yeah is is big you know Russia 6% of GDP this is these are big numbers but it's you know our private sector spending is so much more our industrial spending AI this will be an industrial story I mean when we remember the 20s when we get old enough to remember the 2020s you know what will we remember we remember the Ukraine war maybe the the Iran war maybe but we'll probably remember AI that's that's the story of the 2020s that's what changed you know what changed the world in the long run that's the big story of what is happening and I think it's a broader social phenomenon and I think both the United States and China are extremely well placed for it it's no no surprises you know to to to learn that Europe is not for a number of reasons we discussed this in in earlier podcast and to which we will return uh but both countries having pursued very different strategy China has this massive advantage that it it has in the long run the better energy policy and also the better planning energy policy planning. It's heavily invested in renewables, solar industries, hydropower, uh massive massive expansion of renewables. Trump has kind of killed that industry in the United States is all oil and gas. And oil and gas is not going to give him this this this this sheer quantity that he needs. So the anti-renewables is a really big strategic mistake of the United States.

[00:22:25]And this is sort of my main reason I'm skeptical. But for now in terms of the product development, in terms of the software development, Americans are doing very well. But so is deepseek. I completely agree. This is a very very serious uh player and I think there's room for all of them.

[00:22:39]>> Well, nobody disagrees that AI is going to be the big talk topic that we'll be discussing over the next 100 years. So the conclusion to come back and we should have a debate about AI on its own. But I will insist before moving on to the next segment that you know this blending of AI cloud capital and finance is a clear and present nature for the United States hijgemony. But yeah I will keep telling this story now for a while.

[00:23:06]In the meantime, folks, um, hang on because, uh, Vulcan is going to talk about the succession game in, uh, Tend Downing Street in the United Kingdom, and he has some choice words for one of the great pretenders at the moment for um, the residency of Tend Downing Street, the position of British Prime Minister Andy Bernham.

[00:23:28]>> We'll be back after the break. Don't go anywhere.

[00:23:33]>> London, we are back. Following the soldout success of Econo Live, Wolf Gang and I are heading to King's Cross. Our guest, Hassan >> Hassan perism, if you will, a man that calls for an open revolution.

[00:23:44]has millions of online followers that could translate to voters.

[00:23:48]>> I'm very much looking forward to discussing the true power of the online left.

[00:23:52]>> And I'll be challenging him on some of his more controversial points on US foreign policy and most recently microl looting.

[00:23:58]>> Tickets are available right now. Go to unheard.com/econoclasts live.

[00:24:08]So, welcome back to the econ. In the United Kingdom, there is a struggle for succeeding Kama. I personally think that Kmer is toast. I may be wrong. What we do know is that Andy Bernham, the leader, the mayor of Greater Manchester, is throwing his uh hat in the ring. He's going to contest a bi-election in the area in the greater Manchester area. Uh hoping he's going to win that seat in order to challenge Kiama. The question is what happens next? Vulcan >> Bernham is contesting a constituency that is in the sort of northwestern industrial heartland, the constituency of Makerfield. In this constituency, Labour lost to reform during the local elections by quite a wide margin. In fact, so this is one of the constituencies Labours needs to recoup to regain in order to be assured of winning say the next general election.

[00:25:03]So this is in many way a good test. If Bernham makes it there he can make it and I that is the one conditional statement I can make if he wins this election which is by no means clear but if he does you know he will be in a very good position to become prime minister to challenge Starman. I would even think that Stalmer might in this case even you know step step down and let him proceed.

[00:25:22]If Bernham fails to capture the seat then we may well have Stalmer continuing because the other challenges to Stara are not very strong. The more interesting thing for me to actually discuss today is what to expect. Say Bernham wins Sermon becomes prime minister. This is something to do with economic policy. Now most people don't you know find this find this rather technical this stuff but economic policy is is important because it's the lack of an economic policy success that puts Star where he is right now. Successful economic policies usually were the result of a strategy. This is not something that you come up with in an interview. This is not like you know something that you know Jiannis and I you know come up with in in a podcast.

[00:26:06]This is something you work on. It takes a long time. Thatcher took years to develop a strategy. Tony Blair took years to develop a strategy. Karl Marx took even longer to develop his strategy. These are successful strategies in the sense that they had an impact, a political impact. Can it work politically if you don't have a policy?

[00:26:26]Now, Bernham a year ago said to hell with the bond market. There was a supporter last week, an MP from Liverpool who said that the bond markets will have to fall in line with our policy. Now we we know very much it's almost the definition of the bond market that it doesn't fall in line with anyone's policy. What any successful strategy needs is some kind of a plan to deal with these adverse situations. You know there is this bond market thing.

[00:26:52]structural economic growth in the UK is very low and that that any policy would need to deal with this issue and that any estimates of future tax revenues depend to a large extent on the economic growth rates and you might get into sort of you know vicious circles of you know lower growth lower tax revenues less money to spend higher deficits higher interest rates on bonds and and so on and you get a you get a vicious circle that's bit a little bit what happened with the current government the reason why this strategy I know I don't you know I've been a critic of Kstama's economic policies and racial reefs fiscal policies precisely because they started off with a deficit and then they worked themselves sort of downward to you know what it leaves for spending and didn't didn't think about the the true dynamics about the economy about growth and it's all it's all about growth. If you have 3% of growth you can be pretty irresponsible in terms of or what people call irresponsible. You can be pretty irresponsible in terms of your fiscal policies. You you may still need a fiscal framework, but you don't need these these incredibly rigid fix fiscal rules. If you have zero growth, yeah, you need fiscal rules. Zero growth is is is a nightmare. You can tax people. You can do that. Uh but that may may reduce your growth. And the experience in the UK has certainly shown that higher taxes, you know, are not certainly not going to help you raise more uh revenues in the long run. So these these strategies haven't worked very well. But we have to concede to Stalmer and to Reeves that they prepared. The policy that they have is a policy. It is thought through. It was costed. It is there was a thinking behind it. I don't like it myself. But this is different from something that doesn't even start from a a policy. And that is just a collection of slogans. And there's an awful lot of slogans in in the left about you know about equality about opportunity and and about enabling people and you know thinking that the joining the EU this is the latest thing that sort of sort of happening happens in in in UK politics that joining the EU would miraculously you know bring the growth back because you know the growth was apparently lost because of Brexit.

[00:28:54]You have an awful lot of these oneliners you know you know Burnham changing his economic strategy during an interview.

[00:29:01]Now whenever I see that happen that to me is a red flag. That to me means ah he doesn't have a strategy and when you don't have a strategy then the bond market is really in charge and we already seeing this because the bond market started to panic last week when Burnham looked like you know like a very probable successor to star. The bond yields have have risen. They're now you know I was looking at the 30-year bond yield is now almost 6%. This is a very very high rate. and Bernham played down the fears by saying, "Yeah, no, he will pursue the same fiscal policies than Rachel Reeves." Now, I'm not sure this is true, but if it were true, then the entire case for a burn prime ministership would completely dissipate because if you do the same policies, because it is the fiscal rules that Reeves has introduced that constrain the government in so many ways. If you commit already at this stage to the same fiscal rules, then I'm asking myself, what is the point? I will agree a agree with your conclusion but disagree with many of the reasons that you give for it just to spice things up a bit of now you and I are economists and we are the econass we have a tendency towards economism that is to find the economic rationale behind uh everything I'm guilty of that as much as you are maybe more so uh but on this I'm going to take a distance from what you were saying because I don't think that gest Starmer is facing the difficulties that he's facing that is you know he's toast as I said in the introduction only because of his failed economic policies. I think that he's sensationally unpopular within the Labor Party and in the base of the of the Labor Party for a number of reasons. There is something else that I want to share with you. Um about a year ago, a year and a half ago when I was in London in the city of London, I was talking financiers. I can tell you that even though you know Kmer was still at the prime of his first term having won a crashing majority in the House of Commons uh there were financiers including some former highranking members of the Bank of England who were speaking about Andy Bernham uh in glowing terms. Uh one of them even said you know Bernham has actually done things. he's actually shown that he can make uh at least the greater Manchester municipality complete projects whereas these bozos and they were talking about Starmer and Reeves uh can't make anything work. They are just absolutely incompetent. They can't even organize their own office. So you know the business model and the lack of a macroeconomic model that makes sense is important but I don't think it's everything. It doesn't explain the the loss of faith in Kama. The fact that you almost every wing within the Labour Party wants him gone. Having said that, I will agree with you with your outcome outcome with your conclusion. Now, in the last 24 hours, I've seen statements coming out of Auntie Bernham's mouth that to me are a very poor start of his campaign. First, he allowed himself to be dragged into the Brexit debacle by saying that he he he feels that Britain should come go back to into the European Union. He always felt that. But this was the wrong thing to say at the beginning of his campaign to win this bi-election.

[00:32:26]Why? because he gave reform and Nigel Farage something to aim for to you know concentrate all their slings and arrows on uh portraying Andy Burnham as the man who wants to betray Brexit. Uh that was a very silly mistake to do and then he tried the what was even worse the was the way in which he tried to roll this back. He started saying, "Oh, we're not going to be talking about that. We're not talking about big questions. I want to concentrate on local issues because I want to give the people of this particular constituency, I forgot his name, the best service that an MP, it's like saying that the previous MP was a fool and couldn't deal with local issues and he's come in there to deal with local issues." He's not coming in there to deal with local issues. His line should be, I'm standing because I want to be prime minister, and I want to demonstrate to the good people of the Labor Party, both members and friends, that I can defeat reform. I can defeat reform in a constituency where, as you said, Wulkan, uh, they won a few weeks ago in the municipal elections, in the local government elections. He should use this bi-election in order to tell his big story which could be about beating reform going against the misanthropy of the anti-migration drive that uh reform is leading and so are the Tories by the way. But he's not doing that. He is flip-flopping between talking about Brexit which is a huge question in Britain and saying no no no this is not what I'm going to be on about elections about local issues. I think he he started very very badly. Now regarding the bigger question, I think you're absolutely right. You know, I remember listening to him talk few years ago and and he said and I don't disagree with what he said. He said that the UK economist problems are de-industrialization, privatization, austerity and Brexit. I'm not so keen on the last explanation of the problems. Now de-industrialization is of course the key reason why Britain is finding itself in the quagmire it is in austerity you know my view about austerity so he was right and and privatization the way privatization was done under the but also Blair but he's missing the main culprit the elephant in the room and that's the city of London that is financialization there was no discussion about financialization no discussion of the problem that you and I have discussed asked many times before that you have so much money in in the city of London in the financial circuits of the United Kingdom which is not being invested in productive activities that's not on his radar and as long as this is not on his radar I agree with you that he is not going to have a business model but tactically at a political level he's set off in a terrible way by flip-flopping between saying that he's running this bi-election on local issues or on Brexit No, he can't do that and expect to win. So my fear is for him, not that I look, I'm not I don't consider him to be a a a figure of the left. By the way, you called him a leftist. I don't I you know, and I am a leftist. I should know. My prediction is that he he may very well lose this by election because he started off this in this particular manner.

[00:35:46]>> Yeah. I mean, I would agree with you that Stalmer is certainly tonedeaf to the, you know, to the heartfelt wishes of his party. I want to leave this aside because this is a different subject and I also agree with you that his you know his campaign went off in the worst possible way. I would add his commitment which he made in the interview to keep Rachel Re's policies because that's something he shouldn't have done. you know he should have instead come up with an idea an alternative in in simply in order to give people a reason to vote for him because if you know if if you already start this way serious people can question what the outcome will be and you said he doesn't have a policy for the city of London he doesn't have an economic policy I think we probably agreed we agreed on this now let's talk about Manchester now I've been to Manchester and uh I was I went I went there a year ago and I was absolutely stunned how how wonderful that city has how how it changed show how wonderful it has become. I completely grant him that whether it was because of him or despite of him as people now quarrel. I I'll give him the benefit of the doubt. It is you know he was a great mayor of Manchester in a way that Boris Johnson was a great mayor of London. I mean this is you know they're doing their their mayorships but Manchesterism as as as you know Burnham calls it uh you know bernomics as I would call it.

[00:37:00]Manchesterism isn't going to work. You and I talk about this all the time.

[00:37:03]Fallacy of composition, everything.

[00:37:05]Something works for me and then it works for everybody. How does a city work? You have a budget. Uh you do not have a currency. You do not have a bond market.

[00:37:14]You do not have these vicious circles that you have in macroeconomics. But the important point is that Manchesterism is irrelevant for the UK. I don't want to prop you whom you talk to in the in the in the city. And there are people on the left and there are people, you know, so who support Burnham uh and there are people who cringe about Slam. That's perfectly clear. and a lot of people want to get rid of him. But we should separate from this the the our analysis of what to expect from the economic policy because that is a policy that is failing in the UK. It is not only the fact that some person has done some bad things. I mean the whole Mandlesson thing and we had a whole session on that was so badly handled >> and maybe Burnham has that character. So you know you might swap you know swap the guy and get somebody who is slightly more you know more of more of a of a human. the economic policy. This is what's failing people in, you know, especially in the north of England. Uh the kind of pe the people that he claims to represent and that he he whose interest he claims to serve, they will not benefit from a policy that will be unchanged, an economic policy that will be unchanged, and it will only be about how we frame it, how we sell it. The Labour Party is about to change its leader. Uh this is a big deal. One of the lessons of this period is that you do it when you really know what you're doing. If you do it because the guy is nicer, but the economic policy is the same, I wouldn't, you know, I think this this bar is too low. If I was a strategic adviser to the Labour party, which, you know, I I you know, I'm not and will not be and not applied for that job either. I would say, you know, do it, get rid of him, but you you use the opportunity for new economic policy narrative. It has to be a different policy, but it has to be a cohesive policy. You know, there are intelligent policies on the left just as there are intelligent policy on the right. Um there are different ways of how to affect the economic outcome of the country. But Bernham doesn't have any.

[00:39:02]That is the point. It's not about whether his instincts are right. It is about you. He doesn't have a strategy.

[00:39:07]So he'll probably end up with Rachel Ree as his chancellor because he needs to plate the bond markets. It would be the worst possible start. And as you said, Jiannis, the you know, his election campaign, you know, didn't get off very well. And that basically tells tells me that he was not prepared. I mean, would you not have a strategy to talk about Brexit? Would this be something that you would accidentally get into if you if you were running for the job of prime minister?

[00:39:33]>> Yeah.

[00:39:33]>> Uh, it's for me completely inconceivable. You're seeing a pattern already being established and this is why I'm skeptical about this potential.

[00:39:41]Prime Minister Andy Bernham.

[00:39:43]>> Well, I couldn't agree with you more.

[00:39:45]When I have meetings with people in my party here in Greece, they say to me, why can't we emulate Zoran Mdani? He promised three things, four things and he's trying to deliver them. And what I say to them is exactly what you said, Vulcan, that you know, we are not running for a municipality. We are running to run a country. And you know, when you do that, you have to have a macroeconomic policy because, you know, you have to deal with the markets, you have to deal with uh interest rates, you have to deal with this remarkable inter interdependence between your fiscal policy and your constraints. And therefore, you must have a macroeconomic plan. Let's wait and see. I personally think that Andy Bernham has a capacity to would have had a capacity had he put his mind to it had he had a better plan to defeat reform in that constituency.

[00:40:35]Maybe he can recover his poise. The fact that he is more liked and has shown that he can complete a project that you know Kama never managed to complete. Even when he was director of public prosecions, there was a mess in the crown prosecution service. He was a terrible manager. Even when it comes to micro stuff. So let's wait and see, shall we? Indeed. And we discussed three subjects essentially today. The US China relationship, AI, which is part of this, and the future of British politics. And I'm sure that they all have in common that we will return to them in the not too distant future.

[00:41:12]So, don't forget to rate, like, and subscribe to The Econas wherever you listen to or watch this podcast. We'll see you again next week.