Podcast: Tackling global forces with Lord William Hague
Rt. Hon. William Hague joins the pod to discuss what's really happening behind closed doors when policy makers and business leaders meet to discuss tackling the global forces shaping the world.
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The full transcript is available below:
[00:00:00.12] - Announcer
Welcome to the Investor Download, the podcast about the themes driving markets and the economy now and in the future. I'm your host, David Brett.
[00:00:24.17] - David Brett
Hello. I hope you're all well. We have a very special guest for you this week in the year of elections, we thought we'd get a politician on the podcast, or at least a former politician. The Right Honourable Lord William Hague agreed to join us. Lord Hague's held many senior roles, including leader of the House of Commons, but he's best known as the leader of the Conservative Party between 1997 and 2001. He was also First Secretary of State and Foreign Secretary between 2010 and 2014, and he now pursues a wide range of business and charitable activities. For those suffering from election fatigue, don't worry, this isn't a podcast about elections, and we only briefly touch on politics. This is a conversation about the global forces, steering markets, and the economy, and what's really happening behind the scenes when policymakers and business leaders meet to discuss the events that are shaping the world. We discuss ageing populations, AI, climate change, and deglobalisation. But I did say we briefly touched on politics. So first up, I check in to see where Whether Lord Hague is experiencing election fever.
[00:01:34.23] - David Brett
Lord Hague, welcome to the Investor Download.
[00:01:36.17] - William Hague
Thank you. Great pleasure.
[00:01:37.19] - David Brett
Yeah, it's an absolute pleasure to have you on here. You seem in a sprightly mood this morning. You've got election fever yet?
[00:01:42.08] - William Hague
Well, thankfully, I'm well beyond election fever. It's nine years since I left the House of Commons. Well, everything was running fine at that stage, by then, that's it, by the way. So the country has hit greater difficulty since then. So no, I've not really got election fever. I'm glad I don't have to stand for election. I think elections are actually tougher on the people standing than they even used to be in my time.
[00:02:06.15] - David Brett
I was going to say, considering you're sprightly, you don't seem like you miss it that much.
[00:02:10.04] - William Hague
I don't miss it at all. No. I admire the people who are really in there now. Rishi Sunak is a great friend of mine, but I have a lot of respect for Keir Starmer as well. When you see them doing the TV debate that they've been doing this week, and they're really going at each other, I'm glad I don't have to do that anymore.Sends.
[00:02:30.19] - David Brett
A bit of a shiver down your spine.
[00:02:32.22] - William Hague
Yeah.
[00:02:32.22] - David Brett
Okay, we're not here to talk about politics in particular. We're here to talk about global forces, actually. We've been talking about it in Schroders for a fairly long time. We've known them as the 3Ds or the 4Ds. We talk about ageing populations, climate change, fragmenting geopolitics, and technology. I just wanted to get your view on what you're hearing when you go around the world talking to policymakers, talking to business owners, and how those two are marrying up. Because generally, we read the press, we hear one side, we don't necessarily hear what's actually going on deep down. So I want to start with ageing populations. There's a massive issue all around the world in developed markets, in China as well. From what you're hearing when you speak to policymakers, how are they dealing with the fact that populations are ageing that's causing pressures on health care, retirement, et cetera.
[00:03:19.05] - William Hague
Well, on the whole, they're not dealing very well. Of course, it varies a lot from one country to another. And in many countries, we've been raising retirement ages for a long time. When I was Pensions Minister in this country 30 years ago, we raised over a long time the women's pension age to be the same as men, and it's been going up since then. So of course, that is happening in a lot of countries. That's a very common policy response. But some countries are trying to stop the fall in the birth rate, trying to increase the fertility rate, encourage people to have more children. Those policies seem doomed to failure because something really fundamental is happening that as populations become more urbanised and more educated, the birth rate falls. We're even seeing that in Africa now, which still has much the highest birth rate of the continents of the world. So there's those sorts of policy responses. And then, of course, it has an impact on the geopolitical situation because China, as you just mentioned, China is facing this extraordinary fall in population, an 8% decline, maybe by the middle of the century. 8% of China, that's more than 100 million people, fewer in China.
[00:04:31.10] - William Hague
Now, that means if you are the United States, where you've still got a more favourable demographic position longer term, your long term strategy actually can be quite long term. You can sit China out because China is going to face all the problems of that ageing population. So policy responses are, yes, at retirement, are to do with geopolitics. And of course, they will also require healthcare responses because governments will switch, I think, to the need to keep that older population more active for a longer time, both in the workforce and not requiring such heavy health expenditure.
[00:05:12.20] - David Brett
There doesn't seem to be a silver bullet for it, but have you heard any good suggestions when you've been in these policy meetings? An idea that you think, Oh, that actually might work?
[00:05:21.03] - William Hague
No, there isn't absolutely no silver bullet. But I think the one thing that would make a huge difference is increasing the health span as well as the lifespan of people, what I was just referring to at the end of the last answer. And that will focus governments more on how you ensure people's long term health. Now, that is to do with technology and medical breakthroughs because we're seeing remarkable medical advances. That's one of the most exciting things about the age that we live in, of detecting diseases in advance and treating them more successfully. Vaccinations against certain individual vaccinations against types of cancer, this thing. So that, of course, will help to increase the healthy lifespan of people. But it also means governments in our next few years will be producing policies much more actively on things like obesity, which are really weighing, literally weighing on government expenditure and the ability of people to keep working. So companies that are in that sector, in the food sector, are going to come up more and more against government policy that aims to change what people eat in the Western world and much of the rest of the world.
[00:06:33.20] - David Brett
And of course, the more medicine advances, the longer people live. And then that adds to the problem because then you've got older people that need work as well. Do you know how they're going to tackle that situation?
[00:06:43.02] - William Hague
Well, I think there will be demand for older people to work because the other side of this demographic change is a shortage of young people, a shortage of workers. Now, we don't know, of course, nobody knows how AI is going to interact with that. Are we going to need more people in the workforce or fewer people in the workforce? But what we do know is fewer are going to be available in many developed economies unless there is much higher immigration, and that's not politically acceptable in most of those countries. And that's an important force in the world. It's an inflationary force because it means unlike the last 30 years where we had a surplus of people a lot of the time, we're all going to have to pay more for the people who we want to work for. So tapping into that older workforce, I think it will become much more the norm to be working in your '70s. The early retirements that we've seen of the last 20, 30 years are not going to be the way of the next 20, 30 years.
[00:07:44.02] - David Brett
You're giving me palpitations, breaking me out in a sweat.
[00:07:46.07] - William Hague
Sorry to alarm you about that.
[00:07:48.07] - David Brett
Yeah, go on. Another few years to go.
[00:07:49.21] - Announcer
On Apple Podcasts, Spotify, or wherever you get your podcasts, you're listening to the Investor Download.
[00:08:00.04] - David Brett
Okay, you talk about immigration. Migration will become an issue with climate change. Some places in the world will just become inhospitable. So when you're in those meetings, what are people saying about climate change? Because, again, we hear companies are just cracking on because they can't guarantee what the government is going to be. So they're just going to crack on with whatever policy they think is the right thing. What are you hearing from policymakers?
[00:08:21.12] - William Hague
Well, again, it varies, of course. Yes. If you go to a meeting, I go to meetings somewhere like Davos and sit with those policymakers, and it's the real commitment of political and business leaders to forge ahead on all the agreed policies under the COP process on climate change. But as we know, when many of those ministers are getting back to their countries, they'll say, well, we're not going to do this quite as quickly. Even if we're a German government with a Green Party in it, we're going to go a bit backwards on a replacing boilers policy. And even if we're the British government that has a legal commitment to net zero by 2050, we're going to go a little bit backwards when electric vehicles come in. And this is happening all over the Western world because it turns out when you actually face the consumer with a more expensive choice, they don't like it and they react politically. And so many policymakers are very strongly committed to the transformation of power grids, renewable energy, and so much of that is going to continue, but it won't happen quickly enough for the world to hit its targets.
[00:09:36.24] - William Hague
And the big picture here is we're going to overshoot. The world is going to overshoot. It's already overshooting on a one and a half degree increase in temperature with climate change. We will not succeed in getting consumers to change their behaviour sufficiently. And there will be in the future much more emphasis on carbon capture and storage. And on geo, literally geoengineering the planet in many ways, because that will be the only way in the end to stop or reverse climate change.
[00:10:12.09] - David Brett
And by geoengineering, you talk about creating clouds where there might not necessarily be clouds to make...
[00:10:16.22] - William Hague
That sort of thing. Or great arrays in space generating electricity there and transmitting it to Earth or reflecting the sun's rays back. So this is a science in its very early stages. But you can see how one of the great uses of artificial intelligence might be to forge a way, a future on that or on nuclear fusion, really the Holy Grail, for the future of energy. And that might, not in time for 2050, but in these things in the second half of this century, might become huge industries. And some of the great corporations of the future are going to be in those areas that, at the moment, are really very small areas of science.
[00:11:05.06] - David Brett
Yeah, it feels like all those films, Sci-Fi films we used to watch when we were growing up are now starting to become reality a little bit.
[00:11:10.17] - William Hague
Exactly.
[00:11:11.04] - David Brett
Which is frightening, also a little bit optimistic because it means we can predict the future, maybe, or maybe life imitating art.
[00:11:17.23] - William Hague
Well, I think we're just in this period, which it's hard for us to get used to people who've been alive for the last 40 to 60 years, which is we lived in a rather stable period, which was quite safe on the whole... We were very lucky to live after the World Wars of the 20th century and in a period of economic growth. Now we're entering a period which is... It's very exciting because it's this technological transformation, and fortunes will be made in getting into the right thing. But it's also much more dangerous than the period that we have lived in, because this change in the climate is coming at the same time as a change in the geopolitical cycle and in many economic cycles and in a migration cycle, all of which you're talking about. And that is a very dangerous period in world affairs.
[00:12:08.02] - Announcer
Get in touch with us by email at schroderspodcasts@schroders.com or visit our website, schroders.com/theinvestordownload.
[00:12:22.13] - David Brett
Okay, so we've touched on degobilisation there. And from what we're starting to see, certainly in company reports, we are starting to see companies talking more about reshoring, on-shoring, bringing stuff back in from what they used to manufacture abroad. Again, how does that marry with some of the populist policies that we see coming out of certain countries in the world? Is there a relationship that's starting to get fractured between companies and the politics above them?
[00:12:49.03] - William Hague
Yes, I think there is. Yes. And you can see that in policies towards China. Of course, there are many companies that don't like being told that they can't sell their goods to China, that they can't sell... There is NVIDIA, that's become such a valuable company. But the US government says, you can't sell your most advanced chips to China. I'm not sure the management that haven't really liked that. And so they have to adapt products that they can sell to China. So there is that tension, and you can see it. There will be people who are really looking forward to being the importers of Chinese electric vehicles into Western economies, and they could have a thriving business It's doing that. But governments are going to say, no, that's 100 % tariff in the United States or in the European economy. I think there are bound to be restrictions, perhaps not as severe as in the US, but in Europe and in the UK on Chinese exports, which would threaten in the end, of course, to destroy the domestic industry that might develop in Western economies. That's all commercial political tension. The word of warning here is the politics will win.
[00:14:01.18] - William Hague
I'm not just saying that as a former politician. It's just that you saw in COVID, where there is a... We've seen in the Ukraine war, things that are not economically sensible. They still happen because they are politically desired. And so you have to get ready for that for a greater degree of decoupling. It's not really complete. It's not de-globalisation because it usually means a greater diversification of supplies, but it is a decoupling in some respects from China.
[00:14:33.13] - David Brett
I was actually going to ask whether you agreed with the way tariffs are being used. It sounds like you don't necessarily agree that you understand the reasons why they're being used.
[00:14:40.22] - William Hague
Well, I do understand the reasons why. I do agree with them to some extent, I suppose, as a fence sitting position, in that if you make them so high that there is no threat at all from China, no competition from China, which is really what is happening in the United States. Then, of course, you can end up with a very laser inefficient domestic industry that isn't under the pressure to compete. That's the classic problem with protectionism. On the other hand, you can see that if you do nothing, given that it's clearly the policy of the Chinese government to improve the economic situation by exporting production, not by a consumer-led recovery in China, but by exports that are subsidised and often parts of state-owned enterprises, that is actually not fair competition. So the question is, how do you calibrate? What is that? Is that a 25% tariff or a 50% tariff? It's probably not 100% tariff. But I don't think there is a position where you say, well, just let them all come in because It's not just cars, it's also critical mineral supply. If you're Australia and you want to develop your lithium mining industry, you're about to face China flooding the market with lithium and bankrupting industry.
[00:16:00.24] - William Hague
Well, strategically as well as economically, you're not going to allow that. There is some level of tariffs here, which is an inevitable response of the West to China's policy.
[00:16:13.16] - David Brett
We didn't seem to mind so much when it was TV, video cameras, but now suddenly it's a political hotbed.
[00:16:19.22] - William Hague
Yes, but this is a different... We didn't mind because China was joining the World Trade Organisation, and China we thought was going to become more like us. But China has gone in the opposite direction. It is more politically centralised. It is a more solidified dictatorship. Xi Jinping, since 2013, has taken China in a different direction, and it's become a much more powerful country in the world, which is a strategic rival to the United States and other parts of the West. And there's the tension over Taiwan. You can't get away from the fact that there is a risk in the coming decade of conflict project or international crisis in the South China Sea. And so that means it would be quite foolhardy of Western countries to leave themselves crucially dependent on vital imports from China.
[00:17:13.03] - David Brett
Okay, final question, because I know you got to go very soon, AI and technology. I just wonder, we probably passed a rubricon a couple of years ago when ChatGPT came out. What are the discussions like in terms of legislation around controlling the AI? Are they happening or are people leaving? Or are policymakers leading it down to the private companies themselves?
[00:17:32.19] - William Hague
Well, again, it's obviously different around the world. The European Union has been the most advanced, if you think of it that way, at developing quite a lot of regulations about the development of AI. Other countries like the US and the UK say, well, actually, we want it to develop in our countries, so we are not going to overregulate it. China regulates a different way. Middle Eastern countries are doing a huge amount of work on artificial intelligence, but will only regulate it in a way that makes it work very closely with their governments, just like China and in the interests of the state. So it's a real mixture. The point about regulating AI, though, I think is it's not... Ai is going to be a general purpose technology that changes all other technologies. There are different forms of AI. There are many different forms of AI, but they're going to change all other technologies. And so there isn't just going to be a rule book over there that is AI rules. It will change the rules of other things. It will change the rules of social media because of the government supply, because of the extreme risk of disinformation, for instance.
[00:18:48.10] - William Hague
So it's not particularly an AI rule book, but it will become a social media rule book. And so we've got to get ready for that affecting regulation across the entire economy.
[00:18:59.24] - David Brett
And again, from your discussions with policymakers and businesses, are you optimistic about the future and the way AI is going to be used, or do you slide on the pessimistic side? Or are you on the fence?
[00:19:10.20] - William Hague
Well, it is both at the same time. I'm optimistic because the Particularly in health.. When you look at things like Morefield's Eye Hospital here in London and the cooperation with DeepMind, this has now led to breakthrough AI analysis of retinal data means they can spot Parkinson's disease before it's happening in your eye. Well, that's the beginning of millions of such breakthroughs. So policymakers are aware of that and want to encourage that. On the other hand, of course, AI can also be used to radicalise terrorists on a big scale, or when mixed with biotech in other ways, could be used to produce viral genomes that will spread easily, that will make COVID seem like a tea party. So we're back to this, this is an age that is extraordinarily exciting, but particularly dangerous. And it's a struggle for governments to come up with the rules of that quickly because they're not used to moving that quickly. And that's the big challenge for governments. How do you regulate things that are moving at a faster speed than the cycle of legislation and regulation that they are used to? That's a problem most of them have not solved.
[00:20:32.12] - David Brett
And I guess as well, the expertise largely lies outside the government because they're all working for private companies.
[00:20:37.19] - William Hague
This is absolutely a major problem in government departments. I think people find it difficult to know how to understand the technologies. How even does a Defence Ministry really understand the AI and other technologies now becoming available to it in radically changing armed forces? Those that are actually in a war, like the Ukrainians, are doing that because they are under that intense daily pressure. But for big, sleepy bureaucracies, this is very hard. And they are going to need the private sector to help them and advise them. Otherwise, they will be lost in this technological world.
[00:21:18.14] - David Brett
Lord Hague, it's been a pleasure speaking to you. I'm still shaking from the fact that I've got another few years you have to get to retirement.
[00:21:24.08] - William Hague
Oh, decades, I think, in your case.
[00:21:25.21] - David Brett
No. But thank you so much for joining us.
[00:21:28.01] - William Hague
Thank you very much indeed. It's been a pleasure.
[00:21:30.07] - Announcer
That was the show.
[00:21:34.13] - David Brett
We very much hope you enjoyed it. You can subscribe to the investor download wherever you get your podcast. And if you want to get in touch with us, it's schroderspodcasts@schroders.com. And you can find out much, much more at schroders.com/insights. New shows drop every other Thursday at 05:00 PM UK time. In the meantime, keep safe and go well.
[00:21:57.05] - Announcer
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