Global Discord: Values And Power In Fractured World Order | Hoover Institution

April 6, 2023 Hoover Institution | Stanford University

A Hoover History Working Group Seminar with Sir Paul Tucker.

Paul Tucker will be sharing his new book, Global Discord: Values and Power in a Fractured World Order, which considers the geopolitics and legitimacy of the international economic and legal system. The book develops an analysis of the history and future of the international order from the perspective of incentives-values compatibility, that is, the connection between self-enforcing equilibria and history-dependent legitimation principles. Using this framework, the book identifies vulnerabilities and design flaws in today’s international monetary order, trade system, investment order, and international financial system.

April 6, 2023 Hoover Institution | Stanford University A Hoover History Working Group Seminar with Sir Paul Tucker. Paul Tucker will be sharing his new book, Global Discord: Values and Power in a Fractured World Order, which considers the geopolitics and legitimacy of the international economic and legal system. The book develops an analysis of the history and future of the international order from the perspective of incentives-values compatibility, that is, the connection between self-enforcing equilibria and history-dependent legitimation principles. Using this framework, the book identifies vulnerabilities and design flaws in today’s international monetary order, trade system, investment order, and international financial system.

ABOUT THE SPEAKER

Sir Paul Tucker is a Research Fellow of the Mossavar-Rahmani Center for Business and Government at the Harvard Kennedy School. He was formerly the Deputy Governor of the Bank of England, sitting on its monetary policy, financial stability, and prudential policy committees. Internationally, he was a member of the G20 Financial Stability Board, chairing its group on resolving too-big-to-fail groups; and a director of the Bank for International Settlements, chairing its Committee on Payment and Settlement Systems. He was knighted in 2014.

He is the author of Unelected Power: The Quest for Legitimacy in Central Banking and the Regulatory State (2018), which charts how the extraordinary power of unelected central bankers and regulators needs to be structured and checked in the interest of democratic legitimacy. His other activities include being a director at Swiss Re, president of the UK’s National Institute for Economic and Social Research, a senior fellow at the Minda de Gunzburg Center for European Studies at Harvard, a member of the advisory board of the Yale Program on Financial Stability, and a governor of the Ditchley Foundation.

Episode Transcript

(00:00):
[MUSIC]

>> Niall Ferguson (00:07):
Hello, I'm Niall Ferguson, the Milbank family senior fellow
here at the Hoover Institution, andI chair the Hoover History working group.
And we have just had the pleasureto listen to my old friend,
Sir Paul Tucker,talking about his new book,
Global Discord, Values andPower in a Fractured World Order.

(00:29):
Sir Paul's trajectory is an unusual one,for
33 years he was at the bank of England.
He rose through the ranksto be deputy governor, and
only late in life turned fromcentral banking to wider
questions of government andindeed, global governance.

(00:53):
And I wanted to start, if I may,
by asking you what led to that changeof direction after such a long
time working as a central bankerconcerned with financial stability?
You've written a book which is as muchabout geopolitics and history as it
is about the technical world of monetarymanagement and financial stability.

(01:18):
How did that come about?

>> Paul Tucker (01:19):
Well, first of all, thank you very much for having me here.
It's been really marvelous over the lasthour, and I'm looking forward to this.
Two things, I think, which came together.
The first is leaving thatformer life nine years ago,
gave me an opportunity tolive an alternative life,
a life that I may have chosen to live.

(01:41):
Age 22, 23,I contemplated carrying on at Cambridge
in philosophy, butinstead became a central banker.
So it's partly that, but it's also partly,and this was true of my previous book,
unelected power, which was aboutlegitimacy in the domestic state.
If you are a senior,very senior policymaker,

(02:04):
exercising power in the backgroundall the time are a whole
set of assumptions aboutthe decency of the state,
legitimacy of the state,international organizations.
I chaired two anda half international committees.
If you do that with effects inthe real world, if you do that,

(02:26):
you can't but think what's going on here?
What does this cooperation rely on?
And among other things,it relies on peaceful coexistence and
some norms of coordination andcooperation.
And the book is an exploration ofthat in a period where it's all in
jeopardy because of a great rising power.

>> Niall Ferguson (02:49):
I should have perhaps said that at that time while you were
Deputy Governor at the Bank of England,you were Director of the Bank for
International Settlements.
Chaired the Basel committee on Payment andSettlement Systems, and
were on the steering committee ofthe G20 Financial Stability Board.
And in those roles, you clearlydid see a world of institutions,

(03:09):
some of which I think you cameto see as being rather siloed.
And I wonder if we could talka little bit about that.
You're now based at Harvard,you've been in the academic world for
nearly a decade now.
Is your argument in this bookthat the specialists in monetary
policy need to spend more timetalking to the specialists in

(03:34):
national security orforeign policy or trade policy?
Is the critique of our existingsystem partly just, there are silos,
and that leads to poor strategy?

>> Paul Tucker (03:46):
I think, yes, I think silos are a product of being able to take
all sorts of things for granted,most of all, peaceful coexistence.
We have lived for decades and decadesunder an American European order, which
Japan and others joined, and all of thosethings could be held in the background.

(04:07):
And you could get on with your part ofpublic policy, in my case, financial and
monetary policy for somebody else,trade policy for somebody else,
environmental policy.
And it's just not like that anymore.
Everything is in degree,a move in the game of geopolitics,
partly because somany economic policies can be weaponized,

(04:29):
as the expression goes, butnot just because of that.
I'll give you an example.
So, in Washington at the moment,
the periodic game of the debt ceilingis being debated, played out.
This is hard knucklegame within the Beltway,
played by very sophisticated people, but Ithink they've missed the broader context.

(04:52):
And the best way of summing thisup is vote default, vote Beijing,
that whatever gainsare reaped domestically,
they will be surrendered geopolitically.

>> Niall Ferguson (05:04):
And that brings me to your four scenarios.
This is a book that gives us fourpossible or plausible futures,
lingering status quo, superpower struggle,
new Cold War, and number four,reshaped world order.
And I read this, and I thought,isn't this obviously new Cold War?

(05:24):
Why are you not quiteconvinced by that analogy?
Because to me,it just seems we had an interwar period.
That was when you were a central banker,and it was between Cold War one and
Cold War two.
Now we're in Cold War II, and immediately,
it becomes obvious thatgeopolitics dominates.
Why is it not Cold War II quite?

>> Paul Tucker (05:41):
Because so far, the decoupling doesn't create almost
completely separate blocs thatcan find their way through
commercial life completely separately,compete in the security space.
I do think there is an element of that.

(06:01):
Proxy wars were a featureof the old Cold War.
I think Ukraine is bestthought of as a proxy war.
I've thought that since it happened andI think I may say that in the book,
Putin could not haveprosecuted the war for
so long without at leastacquiescence from Beijing.
But there isn't anything likea complete decoupling in

(06:24):
commerce that maybe Ihave been an advocate of.
This is symmetric, butI've been an advocate of the West inducing
its over dependence on unfriendlystates that could plainly
spiral out of control andend up with bifurcated economic blocs.
But so far,that's not where we are at all.

(06:46):
We are still in a worldwhere western economies and
the Cinese economy touch eachother in millions of ways,
in thousands of places every day,if not every second.

>> Niall Ferguson (06:59):
And that led you to a somewhat less familiar historical analogy,
which is the Anglo French rivalrythat extended really from the late
17th century right intothe early 19th century.
Talk a bit about the implicationsof that analogy.
Clearly, it's not completely decoupled.

(07:19):
There clearly were many points of contact,including intellectual points of contact.
But what's the implication of thatanalogy for our world in 2020.

>> Paul Tucker (07:29):
The thing about the British French struggle,
from roughly, as you say,1689 to 1815 or so.
Is it was everywhere, everythingthere were, in terms of everywhere,
it was here one can thinkof the war of independence,
the revolutionary war, in that context,it was on the coast of India,

(07:50):
in Africa, in parts of Southeast Asia.
It was very much commercial,competing, constraining.
It went on for so long that therewere moments of rapprochement.
A trade agreement was reached sometimein the middle of the 18th century.
Two countries fell into war again, and
that moment wasn'trecaptured until the 1860s.

(08:13):
Perhaps most of all, it was ideological.
And this distinguishes it, I would say,from the standard comparator of
the second German Reich in Britainat the turn of the 20th century.
That was for sure the standardproblem of rising power and
a jealous, established power.

(08:34):
But it wasn't terribly ideological.
Whereas France and Britain,
Britain was ideological atthe beginning of the 18th century,
Britain saw France as seekinguniversalist, absolutist monarchy,
and at the end of the 18th century,universalist revolutionary radicalism.

(08:56):
As Burke, the Irish British thinker,writer parliamentarian, said at one point,
the problem with France isn't its power,it's the wrong kind of power.
And that kind of captures how we,a broad we,
which includes part of East Asia,think about the People's Republic.
The problem is not the Chinese people,it's not Chinese civilization.

(09:19):
The party itself andthe party's conception of itself,
amounts to a great ideological challenge,
which they themselves have articulatedin very ideological terms.

>> Niall Ferguson (09:32):
War lasted about 40 years, part of the point you're making is
that this could last a very muchlonger time, because it resembles that
Anglo French rivalry that's lasted formore than a century.
And I found that one of the mostinteresting points the book makes.
But it also struck me,as I was reading it,
that it is itself a rather18th century book.

(09:54):
You're inspired by the writings ofthe great Scottish Enlightenment thinkers,
Adam Smith and David Hume.
You're writing on an enlightenment scale,
it's all here, political economy,geopolitics, economics.
And not many scholars these days wouldattempt to be so interdisciplinary.
Do you think of yourself asa kind of latter day philosophy,

(10:17):
an heir to the Scottish Enlightenment?

>> Paul Tucker (10:19):
An heir to the Scottish Enlightenment, in some respects, yes.
The book is very much andovertly trying to bring David Hume
to geopolitics andinternational political theory.
Hume is writing in the middleof the 18th century,
before political economy on the one hand,and political philosophy,

(10:41):
on the other hand, have gone theirseparate ways, which, by mill,
in the middle of the 19th century,they basically have.
So yes, it is,I find more help in 18th century thinkers,
help us confront our predicament,
than I have found in 19th century ormany 20th century thinkers.

(11:03):
Of course, that's music to my ears,not only because I'm a Scotsman, but
because Hume regarded history asbeing equal to political philosophy.

>> Niall Ferguson (11:11):
I have one last question, and that is,
does that worldview leave yousomewhat pessimistic about
the west using that term in itsbroadest sense, in this protracted
struggle with an authoritarian,if not totalitarian, China?
I sensed in our discussion,when we talked about specific issues,

(11:34):
like a showdown over Taiwan orthe internal legitimacy of institutions in
the west, that you are somewhatgloomy in your outlook.
Am I wrong about that?

>> Paul Tucker (11:44):
I wanna temper that, I mean, you're not completely wrong.
But there is one source of great hope,if not optimism,
which is our system of government ismagnificent in one really important way.
It separates how we feel aboutthe government of the day from how we feel
about the system of government.

(12:05):
When we felt let down orfrustrated by the government of the day,
we can vote them out withoutlosing faith in the system.
I think China's system of governmentin that respect is more brittle.
To lose faith in the party isto lose faith in the system, and
therefore they don't havethe cushion of separating the two.

(12:27):
And therefore their performance needs tobe, perhaps needs to be relentlessly good,
which no one can manageover a sustained period.
But what this underlines is we musthave faith in who we manage to become.
And we must remember that all systemsof government rely on norms and
conventions, and ours are forged throughour history and are worth holding onto.

(12:54):
And people on every side ofpolitics here in the United States,
in Britain, in continental Europe,must remember that can't take for
granted the system thatwe manage to achieve.

>> Niall Ferguson (13:07):
Well, Sir Paul Tucker, of course, the Bank of England
was an important institution in theevolution of those successful norms and
institutions in Great Britain.
I want to thank you very much forcoming and
sharing your wisdom with usat the Hoover Institution.
The book is global values andpower in a fractured world order.

(13:28):
It's been a huge pleasure to haveSir Paul Tucker here with us at
the Hoover Institution showing thatcentral bankers can do many things,
including history.