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Watch: Economic Statecraft

Battle for the US global influence. Secretary Kerry will take the reins as free market matchmaker. Money talks. Next on great decisions. In a democracy agreement is not essential, but participation and join us as we explore today's most critical global issues. Join us, are great decision. Great decisions is produced by the foreign policy association in association with Reuters television. Sponsorship. Great decisions is provided by Yan'an, the Hartford Foundation and PricewaterhouseCoopers LLP. Hello and welcome to Great Decisions. I'm your host David Rohde. More and more foreign policy as being one by business acumen rather than military might. The United States is trying to use economic tools to promote the benefits of democracy and the free market. Because a free market means more American exports and capital to invest in American businesses. Here with me today to discuss the role economic statecraft in global politics is Eric Schmidt. Thank you for joining me. Thank you, David. So this, There's this term which we've just introduced, economic statecraft. The traditional meaning of it is something that actually former Secretary of State Hillary Clinton talked about. The State Department trying to sort of boost American exports, create free trade agreements. As a business executive, can the government play a role in terms of economic statecraft and boosting exports? Well, of course they can. And American products are in demand all around the world. We need even more aggressive and enforcement of free trade agreements and open borders and so forth. I worry that countries for one reason or another, will come up with all sorts of ways of restricting trade. But the fact of the matter is that Americans, America's global businesses, are providing a lot of economic growth and job growth. For many, many of us we all benefit from this. So part of economic statecraft is developing a more skilled workforce here. It's not simply as Secretary Clinton negotiating free trade agreements. How do you create a more skilled American workforce? Well, it obviously starts with education, and we have largely education monopolies in America, government provided typically. And we need more competition. There are hundreds of new ideas for education of one kind or another. And now with the Internet, we can actually measure outcomes. We can actually see does this approach for education, work orders, this other newer approach work can do the tests. We've never really been able to do that on scale and we can actually see what works best. Then we'll figure out how to change the appropriate incumbency is to actually do the best. And I think the educators should lead that. I don't think people like myself should make, to make solutions up, but they should encourage competition among these different choices, and they should figure out what works. There's many conservatives who say, the problem is the government when it comes to economic growth, the core problem in economics is now ultimately going to be jobs. All of the mature economies in the world are having various forms of growth and job problems. They're extreme in Europe, they're extreme in Japan, they're pretty bad in the US. Just ask a young Greek person, two-thirds of them out of work, a young Spanish person, half of them out of work. Aggregating unemployment. American employment is one of the lowest numbers it's been in, in, in decades as a percentage, even though we're doing relatively well, the jobs are not being created fast enough. You need a public policy that addresses that. How do you do it? Focused on entrepreneurship, focus on education. By the way, many of these companies can't get started because the regulations were written by incumbents, and they don't allow for new entrance. So, creating a model where new entrants can come in, they can be disruptive. So imagine a perfectly planned economy. Let's think about Europe. So many levels of government, it's impossible to make really major changes. It takes too many people, very difficult to bring out some new disruptive, but ultimately life positive and life-changing experience. And you're not fitting instead of either a traditional conservative or liberal box here, because you're, you want less regulation and less layers of government. But she say there is a sort of positive role for government. Government is a large factor in economics in many ways. But the fact of the matter is that, that mature democracies tend up overregulating. So in that sense they're Republicans are right. But if you look in many of the cases, the republican side of the industries are on the regulation side because they benefit from it, right? The Democratic side, similar roles or incumbency is for labor, for example, which again have rules which do not particularly favor in innovation. For those reasons because their change resistant. You've got to come up if you want to solve this problem of economic growth with a compromise that allows jobs to get created by companies. Just remember, jobs are created in the private sector by strong-willed people, men and women, who've got some access to capital, they need access to capital. Their countries, by the way, where business failure you go to jail. It's a pretty big reason not do a startup in America. Thank goodness if you look, many of the startups that we've seen are in fact by people who failed at a previous startup. They learned a lot. And one interesting thing you mentioned here was that government should be promoting entrepreneurship. Again, how can government do that in our sort of rigid ideologies and in our political spectrum, the American political system is now landlocked between these two not particularly representative views of the average American. And we can debate that separately. And it's an artifact of gerrymandering the political system, the strength of the Senate versus the scale of the house and so forth and so on. But the fact of the matter is this is the system that we have American businesses doing very well, given the rules, American business is really growing out. If you look at the rate at which an American businesses investing in things, right, it's doing very well. The problem is this jobs issue. In fact, the American story is very strong with respect to research and entrepreneurship. We have 18 of the top research universities in the world. There's a series of new inventions in. Now if you look at energy, if you look at materials, whole bunch of new things coming which are just on the cusp of becoming global industries. This is where the jobs will come from for America and should there be more government funding of R and D, that that is an issue in Washington, the government should always try to fund universities and basic research because they don't have other sources of that. The government should probably not become a venture capitalist because of the way government works, the way the decision-making, where the politics work don't necessarily make the right business decision. That's where the line I think should be driven. But almost everything that you use today was invented by some form of government program that was invented roughly after World War 2. A series of very, very far sighted people afterward said, let's take a chunk of all that money that was going into the military system. And let's put it into this basic R&D, including Google, including ultimately, in terms of the web. If a young American is thinking about how to be an entrepreneur and how to create jobs and a growing company. Should it be looking overseas? Should they be trying to sell to the Chinese middle-class, not the American market? If you follow my model, you're not going to be able to build moats around your country. So you're better off in a globalized world being globally competitive. That means having ridiculously inexpensive prices, broad reach, and scale. That's how you build one of these fast-growing companies. You just come in with a better product, faster, cheaper. At a global market level. If you do that, you will be competitive in these countries. What typically happens in technology as you prove the technology in the US, and then it's relatively straightforward to expand it. For things which are not particularly innovative in the US cents, they can still have significant roles in developing countries, the problem is now competing with the local domestic providers who may have business preference from the government. China, for example, has a mercantilist policy which has always had where basically all the companies that try in the US try to operate in China have to have a 50 percent ownership from local Chinese people for that reason. And, or their tariff issue. Still, the biggest tariff issue is corruption. And because of the Foreign Corrupt Practices Act, american firms are sometimes not competitive with the bribes that are being paid by foreign competitors. This is a good thing, by the way, not a, not a bad thing. So most people will say that the tariff issue is not as bad as this sort of endemic problems of operating in those countries. But some would say we're at a disadvantage. China is bribing in Africa as it expands there, some European companies are said to do it. Isn't it naive that we have the Foreign Corrupt Practices Act and it's an example of bad economic statecraft. It's better to lead with principle than succumb to bad practice. It's a matter of honor. It's a matter of principle. Human organizations don't just go after money. And if you can represent to your firm that we lost that bow, we lost that battle. We have the best product, but we lost it because we were honorable. That keeps a good employee, it keeps everybody motivated. I think we want to keep those kinds of rules is if you look at the countries that are screwed up in that way, they all aspire to be America. If you look on a per GDP basis, if you look at economic growth, innovation, they want our creativity, they want our model. They really wish they had our system. We forget that here. According to the State Department, the power of a nation is now measured more by the dollar and its coffers than the number of soldiers and its armies. So the US is emphasizing new economic tools and its diplomacy while also strengthening the economy at home. The State Department has an ambitious plan to put its 270 American embassies and consulates to work on a sort of global advertising campaign in American industry. The goal double US exports in the next five years. Washington also plans to push countries like India and China for a more level playing field. Right now, trade regulations in those nations hamper American access to millions of potential customers. In the view of many developing countries and sort of the bric nations, they are impressed with the Chinese model. Will China continue to rise? China can be understood as a relatively well-run business. There you can, their revenue growth is strong. They manage their expenses so that they don't lose money. They don't have deficits, and they carry cash right there. Assemble cash. It's not a particularly effective democracy and they squelch their opponents, they've censored us to death. We actually moved to Hong Kong, as you know, but it's well-run from a business perspective. To me the question is, how long can you run a country like a business? Can you essentially have economic growth be the only aspects of the culture of a country. And I think it's, it's not appropriate for Americans who don't live there and aren't status. I don't really understand the culture of the Confucian culture of China. To sort of really say that they know China has defied it's many critics for a very long time, we benefit from China's economic growth because the development of a middle-class in China will put enormous pressure on a one-party state. If you look at political history around the world, it's the development of the middle-class that doesn't want to be mistreated by the autocracy. That then creates the next revolution, hopefully a peaceful one. We look at the Middle East, there's, there's talk of the administration pivot to Asia, a free trade agreement in the Pacific. But we keep being drawn into the Middle East. You've spent a lot of time there. First and economic question, is there any way to promote economic growth more effectively across the Middle East? Is there more the US could do or World Bank? Each country is different. And the strongest thing that we can do is promote the openness of the internet in those countries. Because the openness of the internet will bring Western ideas modernizing the state essentially from essentially a religious or autocratic one-party systems that will lead to all sorts of problems such as we've seen in Egypt where it's back and forth and back and forth. But the core thing that's going on is that the Internet, which is essentially not controllable in the way that television wasn't. These countries is raising the expectations of the citizens. And the citizens say this is not a reasonable way of running. It also obviously empowers extremist groups which are very dangerous and so forth. I think, I think that the Arab world and course, you know, a great deal about it, had become much more dangerous since the loss of the two-party system. Now, each of these is locked in, in conflict. If you look at, for example, violence in Kenya, right? Violence in Syria, they're all fundamentally local violences with extremist groups. And almost every one of the countries that's in trouble has an internal group that they have an internal fight on that we in America would never accept. Early on. In Egypt, the US was trying to get Coca-Cola and other large American firms to come in there and help stabilize the situation economically? Or are there places where the government just really can't do anything and there's no way to get foreign direct investment. Your choices to military action or financial action, you better off giving them the money that and then having a war with them. So on a purely economic basis, I'd rather since send them that money. But I think the reality is the likelihood of that money ending up being in the way that you send it is probably not so high. I think it's better to focus as a matter of public policy on informing and empowering the citizens of this country. Information, empowering those citizens, the expectation. It's impossible now, with the exception of North Korea, which is a closed country, to essentially run these countries the way old dictators use and just, just destroy the countries. You just can't do it anymore. And that's an example of this rising expectations. The best foreign policy of America, in my view is information. And then having American companies operate in those countries. When American companies operate in those countries, they bring American values, right? So we, when we operate in those countries, treat women really well, right? In the same way we treat men, right? That's a foreign concept to many of these countries. To over and over again, or private education and so forth. I think American companies do a good job there and we should do more of it. You're the chairman of the board of the New America Foundation. There's a grant that the foundation has received to help developed ways to overcome censorship, particularly in the Middle East. How do you stop the Iranian government, for instance, from blocking access to the web? Do you see technologically that that's possible? At the moment, the most dangerous of such technology is the technology that was invented by China, which is active censorship. And they, with a turn of a dial can decide this is the kind of speech we allow. This is the kind of speech we don't wow, the discussion of their censorship program is illegal. It's a state secret and it's administered by a special office. We of course, moved to Hong Kong for those reasons because we didn't want to be subject to that. If that kind of technology gets exported to the 40 or 50 other countries of the 200 plus that exist that are engaged in currently passive censorship. And we've got a real problem. Because then you don't see a coherent Internet. You only see a half that there are many, many countries are likely to create their own version of the Internet. It's a terrible disservice to the citizens, to the government's into the other countries. Is it technically possible? Yes, the governments have control over the name service of the unmet. And they can actually just delete sites every once while in China we would find ourselves replaced by our competitor. You go to us but you'd come to your competitor. They can do that sort of thing. It's important with those countries to understand that when they do that, they pay a heavy cost because there are then no longer connected to the global economic system and the right way. They don't have access to the banking systems and the free flow, maybe they don't care, maybe they don't understand it, but it's a big cost. But firewalls can work. There are people working on technology that will route around, if you will, those. But for most Internet capability, it is certainly possible for the government to censor it actively if they wish. Thank goodness, most of them are not doing it. One of the keys to economic statecraft is free trade. Less restriction means more money to invest in American company. Free-trade agreements are often secured through the World Trade Organization and the World Bank. Multilateral organizations that use economic muscle, they take ground, moves on the global playing field. But both these institutions were created in the wake of World War Two. And developing economic powers have cried foul saying thereby laws unfairly benefit Western nations. As a result, Brazil, Russia, India, China, and South Africa, collectively known as BRICS nations, announced plans and 20 2013 to launch their own development. With an initial fund worth $10 billion. The new bank may tip the scales of economic power away from the US and its Western allies. So the State Department has begun negotiations for two different mega trade agreements with Asia and Europe. I'll also looking toward regions of developing nations like Africa, which is home to seven of the world's 10 fastest growing economies, or Central Asia. For a network of trade pipelines dub, the New Silk Road is ushering in economic renaissance. There's an E government project that Google's involvement in Myanmar. I mean, how does that work? What's interesting, Myanmar that It's such a closed country. And of course, we were there earlier this year that they're just learning some basics. So for example, SIM cards were $5 thousand to know only the elite the generals could afford them. They lower the price to $20, so everyone got SIM cards, but then this phone system collapsed because it was overloaded. So they're just beginning to develop the infrastructure that new. There's essentially no internet penetration and very few cell phones. So if you can, for, in our case, if you can sponsor legitimate political discussion, get all the candidates. This is a new concept for people in Burma. Myanmar. Get all the candidates statements on the record. Actually have people debate them and have them learn and free speech is often for a frightening country like Myanmar, you have religious groups that had been pitted against each other really quite violently for a very long time. When we were there, there was a terrible event at a town above where we were. And it turns out you would like to think that the internet was used to help squash that the rebellion. You'd like to think that call mines enter the Internet and they somehow said, Oh, would you guys stop it? But in fact, the Internet was a place of misstatements and further amplification of that. And indeed the government got very worried about that. So you have to learn about free speech. You have to learn that it's okay that other people have opinions. You have to learn that sometimes what they say is not true for countries that have never had that. This is a new lesson and a difficult one. You can put up false information. All right, no limit loosely. So how do you, how does that, how does the web not become destructive in that sense? It has to do with your view of free speech. If you fundamentally believe that the correct answer to hate speech and bad speech is more speech, which I think is the American view and our view for sure, then you think that people will adapt. The fact of the matter is that not everything you read online or in the newspaper or on television is true, that people are being paid to manipulate you and the internet. It's possible, for example, for an evil corporation, certainly not, not ours to, you know, to try to sort of pay for particular story. So when I hear that I suspect someone's trying to manipulate me and I go check and I kind of form my own opinion and I think that's the right behavior going forward. And people will do that, that individuals will read the web and get more and more skilled at sorting out accurate infinitely, if their education system encourages them, if the culture allows that. What you don't want is the Internet to become a way where people are not curious, but they're not naturally questioning. And it's used to sort of further radicalized them. The core problem of terrorism and violence around the world is what do you do with sort of unemployed male teenagers who have been radicalized through some religious or other thing. You know, they're, they're not old enough to have a stake in society, but they're old enough to cause some serious damage. If you look, for example, at the protestant Catholics, right? Go back and look at where the violence from young, young man, look at Palestine, young men. That problem is solved by getting them online, showing them alternative points of view. Getting them to say, Hey, you know, there's another choice. Think about it. You're talking about a very nuanced view of economic statecraft on American government that pushes for exports and free trade agreement. That has an excellent education system in the United States in terms of building skills that's piercing the efforts to censor in China and funding that we can agree on virtually anything in Washington. It seems. The status of our political debate make you wonder if there can be an effective American approach to economic statecraft? Well, I would, I would begin the observation by saying that America is a democracy and every one of these people was elected by us. So we are responsible for the government that we have. We chose them through our process so we can complain as much as we want. But the fact of the matter is, there's another election coming in. It's a free and fair election that's great about America. So maybe we should try to elect political leaders on both sides that have a somewhat more nuanced view of how they're going to get out of the current mass and how they're going to push the government forward. There are lots of, lots of reasons to be optimistic and pessimistic about that. Fact of the matter is that meanwhile, the private sector, the NGO sector and so forth, they've been doing a very good job of getting America as innovation messaging and so forth. There's lots of reasons to be optimistic to be an American. And especially when you compare that to the demographics and other issues of the other mature democracies I've already named Japan, all of yours, so forth. So, but until over on the long-term, you are optimistic that there will be absolutely, that will be a consensus in Washington and a new view of government's role. I'm sorry, I'm not sure. I'm not suggesting that there will be consensus in Washington and the citizens of the country May drag our government along by virtue of this. But the fact of the matter is, we now know how to solve these problems by creating new jobs, by investing these new technologies, we create export oriented businesses that shine in America. They by the way, provide lots of taxes to fund the things that government needs. And on and on and on. We want this, we need, this is part of the solution to America's greatness. And globalization doesn't necessarily mean our decline less jobs. But again, what's the choice, right? The alternative is put a ring around america, make us uncompetitive, wait 20 years, And then you're really not going to grow. You're much better off dealing with this stuff. Now, the fact of the matter, as I mentioned, is that many of the things that people are concerned about, about globalization have already moved away, right? Google recently announced bringing a series of smartphone manufacturing plants back to America. Because of changes in the way manufacturing is going. If you look at job shortages, where are they in America? Area in healthcare, there, in advanced engineering, there in accounting because of all the changes and regulations. And they're in various forms of science, technology, programming and so forth. These are, these are skills that are taught in America. You can go to school, you can learn them. They're available online. We can do this. So technology helps. Very much so well. Thank you so much for joining us. It's great to have a optimize for you. They include Hayward, Thank you so much. Come back for more on the great decisions that make our foreign policy. I'm David road. Thank you. And the battle for economic influence, the United States has a two front strategy, like the military, the State Department has declared a quote, pivot to Asia, welcoming a new era of free trade deals in the East. The treaties could mean big revenues for American companies. But they are not without. Some have criticized the deep secrecy that a shrouded than the others at point that to harsh changes in laws dealing with the intellectual property in an online piracy issues. On the other ocean, American leaders are working to finalize the Transatlantic Trade and Investment Partnership. But the harsh economic as prompted some European businesses to protest any new regulations. However, these New Deal shakeout, it's clear the US is making economic statecraft re-ordering. Because business accurate rather than military mind. We'll define the new generation of global superpowers. To learn more about topics discussed on great decisions and foreign policy. Visit our website at www dot great decisions.org. Start the discussion of US foreign policy in your community. Find out how at www dot Great Decisions.org, forward slash leader. Great decisions is produced by the foreign policy association in association with Reuters television. Sponsorship of great decisions is provided by Yana, the Hartford Foundation, and PricewaterhouseCoopers, LLP. This battle for the US global influence. Secretary Kerry will take the reins as free market matchmaker. Money talks. Next on great decisions. In a democracy agreement is not essential, but participation and join us as we explore today's most critical global issues. Join us, are great decision. Great decisions is produced by the foreign policy association in association with Reuters television. Sponsorship. Great decisions is provided by Yan'an, the Hartford Foundation and PricewaterhouseCoopers LLP. Hello and welcome to Great Decisions. I'm your host David Rohde. More and more foreign policy as being one by business acumen rather than military might. The United States is trying to use economic tools to promote the benefits of democracy and the free market. Because a free market means more. Secretary Clinton negotiating free trade agreements. How do you create a more skilled American workforce? Obviously starts with education, and we have largely education monopolies in America, government provided typically. And we need more competition. There are hundreds of new ideas for education of one kind or another. And now with the Internet, we can actually measure outcomes. We can actually see does this approach for education, work orders, this other newer approach work. We can do the tests. We've never really been able to do that on scale and we can actually see what works best. Then we'll figure out how to change the appropriate incumbency is to actually do the best. And I think the educators should lead that. I don't think people like myself should make, to make solutions up. They should encourage competition among these different choices and they should figure out what works. There's many conservatives who say, the problem is the government when it comes to economic growth, the core problem in economics is now ultimately going to be jobs. All of the mature economies in the world are having various forms of growth and job problems. They're extreme. You want less regulation and less layers of government. But she say there is a sort of positive role for government. Government is a large factor in economics in many ways. But the fact of the matter is that, that mature democracies tend up overregulating. So in that sense they're Republicans are right. But if you look in many of the cases, the republican side of the industry is, are on the regulation side because they benefit from it, right? Democratic side, similar roles or incumbency is for labor, for example, which again have rules which do not particularly favor in innovation. For those reasons because their change resistant. You've got to come up if you want to solve this problem of economic growth with a compromise that allows jobs to get created by companies. Just remember, jobs are created in the private sector. Strong-willed people, men and women who've got some access to capital, they need access to capital. Their countries, by the way, where business failure you go to jail. It's a pretty big reason not do a startup in America. Thank goodness if you look, many of the startups that we've seen are in fact by people who failed at a premium Europe, they're extreme in Japan. They're pretty bad in the US. Just ask a young Greek person, two-thirds of them out of work. A young Spanish person, half of them out of work. Aggregating unemployment. American employment is one of the lowest numbers it's been in, in, in decades as a percentage, even though we're doing relatively well, the jobs are not being created fast enough. You need a public policy that addresses that. You do it focused on entrepreneurship, focus on education. By the way, many of these companies can't get started because the regulations were written by incumbents and they don't allow for new entrance. So creating a model where new entrants can come in, they can be disruptive. So imagine a perfectly planned economy. Let's think about Europe, so many levels of government, it's impossible to make really major changes. It takes too many people, very difficult to bring out some new disruptive, but ultimately life positive and life-changing experience. You're not fitting in sort of either a traditional conservative or liberal box here, because you're back and exports and capital to invest in American businesses. Here with me today to discuss the role of economic statecraft in global politics. Is Eric Schmidt. Thank you for joining me. Thank you, David. So this, There's this term which we've just introduced, economic statecraft. The traditional meaning of it is something that actually former Secretary of State Hillary Clinton talked about. The State Department trying to sort of boost American exports, create free trade agreements. As a business executive, can the government play a role in terms of economic statecraft and boosting exports? Well, of course they can. And American products are in demand all around the world. We need even more aggressive and enforcement of free trade agreements and open borders and so forth. I worry that countries for one reason or another, will come up with all sorts of ways of restricting trade. But the fact of the matter is that Americans, America's global businesses, are providing a lot of economic growth and job growth. For many, many of us we all benefit from this. So part of economic statecraft is developing a more skilled workforce here. It's not simply.