In Conversation with Naushad Forbes | Confederation of Indian Industry Partnership Summit

Asia Society Policy Institute President Kevin Rudd, who also serves as president and CEO of Asia Society, recently participated in the Confederation of Indian Industry (CII) Partnership Summit, where he spoke about the U.S., China, economics, and climate with Dr. Naushad Forbes, past president of CII. The exchange begins at 37:21. Here is an excerpt from Rudd's remarks:

On America looking in or looking out, it is a question of glass being half-full or half-empty. I personally had a view that the glass was starting to look fairly empty under President [Donald] Trump, not simply because of his unique political style, but on the question of its dual impact, one, the fracturing of U.S. domestic politics, and causing the emergence and legitimization of a more isolationist America from traditionally the most internationalist of parties in the United States, namely the Republican Party. That I think was a structural danger for all of us who want to see an activist America in the world.

And secondly, the geopolitical and geo-economic attitude of Trump’s nationalist isolationism towards traditional friends and partners and allies — look at the threats of tariffs towards India for example, and at the same time, the legitimization of protectionism in the American body politic, in a Republican administration which is traditionally the champion of free trade. So the fact that Trump is not there, and the fact that there is a more internationalist Democratic administration under [President Joe] Biden, puts the glass, as it were, from being half-empty; and significantly half-empty to a quarter-empty (or a quarter-full) in my view, to one that is more like a glass two-thirds full.

Of course the legacy factors which Biden has to now deal with because of the Trump period in office are significant, because of a divided political system, the legitimization of protectionism, as well as a new Republican questioning of America’s role in the world (from the far right of the Republican party). Biden’s response to the Trumpian challenge, but also to the China challenge, has been to double down on the rebuilding of American domestic economic strength. If you look very carefully at the first year of the Biden administration, it has had as its central organizing principal the passage of relevant acts of the United States Congress, not just by way of economic stimulus, but most importantly, investment in the future drivers of American long-term economic growth. The jury is still out on how effective that will be, but the primary emphasis in year one has been, frankly, to rebuild the foundations of American national power.

At the same time, as we all know as friends and partners of the United States, America’s second priority has been the rebuilding of its alliances and strategic partnerships around the world — in our part of the world of course with Japan, South Korea, India, and Southeast Asia. In fact the intensity of the diplomacy has been quite strong, given the absence of presidential interest frankly in this part of the world during the period of the Trump administration.

So on those two questions, we see a relatively activist U.S. administration. Its Achilles heel has been its indifference on the economy, by which I mean not the domestic economy, but its indifference to the free trade economy around the world: The absence of America from RCEP, the absence of America from the Trans-Pacific Partnership, the absence of America from rebuilding the centrality of the World Trade Organization as the driving force for global trade liberalization, because of the overwhelming protectionist United States Congress, both Democrat and Republican. So that is the Achilles heel of American strategy: its politics and geopolitics I think are soundly thought out, but its weaknesses in geoeconomics, at the center of which is trade, and this protectionist impulse.

On the return of the state, your second thesis, yes it's true, partly because it is natural and unavoidable, notwithstanding the impact of the neoliberal economic agenda since the rise of [former U.K. Prime Minister Margaret] Thatcher and [former U.S. President Ronald] Reagan. For the last 40 years you’ve seen a general retreat of the state and a general resurgence of the market, the consequence of which is therefore for all to see by and large the growth levels around the world have been on the whole, strong, through the 80s, 90s, and the 00s, until of course we produced two great global dislocations — first was the global financial crisis — that was when my own hair turned white, as I was in office at the time. Many of my colleagues had their hair fall out, mine just turned white — in the largest economic downturn since the Great Depression. Secondly, less than a decade later, the global pandemic, and as a consequence, a further global economic downturn, now the largest since the Depression.

So, these have been enormous systemic assaults on the global, shall we say public goods, the global financial and economic management on the one hand, and global public health management on the other. It is necessary therefore for the state to step up, to step in and intervene in order to hold the economy and hold, shall we say, public health together. Of course, the critical question mark given the massive accumulation of global public sector debt as a result of this massive intervention, and coming on the back of a previous massive intervention less than a decade before with the global financial crisis, is the extent to which through which the International Monetary Fund and the G-20, we now have sufficient political resolve and a policy roadmap to bring us to a position of what I describe as overall fiscal and financial and economic balance once the engine drivers of recovery set in. The temptation will be to keep the state at the forefront and in fact there needs to be, in terms of a vibrant economy, in all our countries, a better balance between market and the state than perhaps we currently have.

If I could make a sidebar comment there, one of China’s great dangers at the moment domestically is in fact that for not only the global pandemic, but also the trade war with the United States, but also the statist and pro-party attitude of [President] Xi Jinping, to cause the balance between state and market in China to lurch back much more decisively in the direction of the party-state and away from the market and principal private sector actors, and I believe to the long-term detriment of China’s overall economic growth performance.

On the final question you raised which is climate, I would simply say this: The international community welcomes India’s participation in Glasgow. I’ve been on the other side of the trenches fighting Indian bureaucrats and political leaders on climate change since the Copenhagen conference in 2009, so I know the center of gravity of politics in India on this question and the reasons for it. I don’t need to be reminded of it; I’ve had multiple lectures from many government ministers, prime ministers down, about all of that. So the script is well known. However, the other script is perhaps less known, that unless we have China and India on a trajectory towards carbon neutrality, then not only will it destroy China’s and India’s environmental economies by century’s end, because of unsustainable levels of global warming between three and four degrees centigrade, but it will also fundamentally undermine the global environmental commons and global economic growth as well.

So therefore it is essential for these two large economies to come within the global consensus on this. I noticed carefully what Prime Minister [Narendra] Modi said about his conditionality for India’s carbon neutrality soft pledge of 2070, which was India would need a $1 trillion international investment fund to engineer the energy transformation which is necessary. Here is my wild guess by the way: Don’t be surprised if the international community rises to that challenge together with the resources of the Indian government itself, because none of us wish to get to a stage, say by the 2040s, where the combination of technology and capital, the Chinese are on track to carbon neutrality but India is not, and India in turn becomes the world’s largest emitter, and under those circumstances in the future, that we did not have a capacity to engineer the transformation of the Indian energy sector and the broader Indian economy.

So, while many in India would have said that Prime Minister Modi’s promise of carbon neutrality in 2070 — put a trillion dollars on the table — was basically kissing it all goodbye, I actually have a different view. I think that India has entered the public policy space, I think the international investment community is frankly awash with cash, and looking for somewhere to go, and if we can devise the at scale renewable energy transformation projects in India, don’t be surprised if we actually start to make more rapid progress than some of the cynics would suggest.