Highlights from the Semafor World Economy Summit

Semafor’s first annual World Economy Summit kicked off in Washington D.C. on Wednesday as some of the world’s most respected bankers, CEOs, CFOs, finance ministers, and economists discussed what’s next for the economy and financial markets during this unprecedented period of transition and uncertainty.

Speakers included Oksana Markarova, Ukraine’s Ambassador to the U.S., Lael Brainard, director of the US National Economic Council, Ambassador Katherine Tai, U.S. Trade Representative, and Brad Smith, Microsoft’s president.

Here are the highlights from the summit.

Pritzker, the former US Secretary of Commerce under Obama, said that as a businesswoman there was “lots to worry about” in the U.S.

“Someone earlier... said the United States is in the best position in the world, and that’s a little troubling given I think we’ve got challenges in our economy,” she said, citing inflation and banking challenges.

Referring to the banking crisis, Pritzker said it was going to have “massive ripple effect as it relates to credit, credit availability and real estate particularly, I think you’re going to see a big disruption there.”

Pritzker said that across sectors in the U.S., “everybody’s struggling.” She said that inflation needs to come down, because “frankly, I don’t know that the economy can afford the Fed continuing on the path it’s been on. It’s been a very fast change.”

Pritzker also warned against severing economic ties with China saying that U.S. and China “decoupling is very scary.”

“Frankly, the two largest economies need to work together,” she said. “Decoupling is very scary...what is going to happen is, at some point, American business is going to look at itself and say, ‘It’s not worth it.’ Or ‘I can’t afford to be active in both places I’m going to have to pick that isn’t good for the world.’”

Tai, the current US trade representative, argued that trade was a critical lever for the Biden administration to tilt the American economy to benefit workers.

“We’re looking for new approaches to help us navigate a very challenging economic time period right now,” Tai said. “And seizing the opportunity to try to set ourselves up for a more positive set of better outcomes from our trade policies working in tandem with our other economic policies.”

She also said the U.S. was “affirmatively embracing the [World Trade Organization],” mentioning that the administration ratified a WTO deal on Tuesday to slash subsidies that prompt overfishing and damaged marine environments.

When asked if Americans are trusting trade more, Tai said that she has been traveling the U.S. and the world to “make the case that we are here to rebuild trust not just in trade, but that trade is here to reinforce all of the economic policies that this administration is focused on, on building out that economy from the bottom up and the middle out.”

Patel, the EVP and General Manager of Security & Collaboration at Cisco, stressed on the need for lawmakers and policymakers to understand how artificial intelligence works, saying that AI is set to become “as large as the internet if not bigger.”

He called for the need for AI to be regulated, adding that policymakers would “need to really understand the nuance and the complications of how AI works.”

He also called for the need of education and dialogue between the public and private sector to set policies that aren’t too restrictive so that other countries overtake the U.S. in innovation.

Patel said there was a “significant downside to AI if done wrongly and a significant upside to humanity if done in the right way.”

“And that’ll actually depend a lot on the way the policy gets set.”

— CISCO was an event partner of the Semafor World Economy Summit.

Philipp Carlsson-Szlezak, the managing director and global chief economist at Boston Consulting Group (BCG), said there is more optimism about the U.S. economy in New York than in Washington.

He said he was “struck by how pervasive negativity” was in the capital compared to Wall Street which was a lot more “upbeat.”

Carlsson-Szlezak said that he was also optimistic about news that core inflation — prices of food and energy — was decreasing, adding that while the battle hasn’t been won, it’s “tilting in the right direction.”

— BCG was a knowledge partner of the Semafor World Economy Summit.

Landrieu, the former New Orleans mayor who now serves as U.S. President Joe Biden’s senior advisor and infrastructure coordinator, acknowledged that American airports need to catch up to other world-class ones, but said that last year’s $1.2 trillion Infrastructure Investment and Jobs Act would help “push us forward.”

Responding to a question about American airports being “rundown” compared to places like Singapore and Hong Kong, Landrieu said that a lot of the U.S. infrastructure is “old,” but added that the administration has made “massive investments” in hundreds of airports “because we got to catch up.”

“We’ve forgotten to invest in ourselves and all of our infrastructure is is old... and we’re way behind. This bill is pushing us forward fast,” he said, adding, “There’s no reason why our airports ought to take place second fiddle to anywhere else in the world.”

When asked if Landrieu was considering a run for president, he said, “Not at this time.”

“I’m for Joe Biden. He’s gonna run again and he’s gonna win again, by the way,” Landrieu said.

Some experts believe there’s a risk the Federal Reserve lets up in its war against inflation to avoid sparking a recession.

“There is a danger of the Fed declaring victory too early,” Michael Strain, Director of Economic Policy Studies at the right-leaning American Enterprise Institute said. “Things are trending in the right direction but we are still in an economy with a substantial imbalance in supply and demand.”

Despite signs of inflation easing as the Fed raises interest rates, some argue that the threat of a recession remains high in the later half of 2023.

“I have said a few times I think the risks of recession are relatively high. I think more than 50%. Probably during the latter part of this this year,” said Roger Ferguson, the former vice chair of the federal reserve, adding that it will “probably be short and shallow and one that can be managed.”

On the current gridlock on Capitol Hill over raising the debt ceiling, Strain said he believed that the risk of the U.S. defaulting on its obligations was higher than it was during the 2011 fiscal showdown.

Microsoft Vice Chair and President Brad Smith responded to Elon Musk and other tech figures calling on companies to pause AI research for six months, saying, “I don’t see people pausing the research.”

He added: “A six month pause does nothing if everything pauses, including the world of regulation. I’d rather see government move faster.”

Asked whether he hangs out with Musk, Smith said: “Not socially.”

Smith also said that his company’s digital threat analysis team had recently identified efforts by the Wagner group and Russian intelligence to penetrate gaming communities such as Discord “as a place to get information into circulation.”

Jordan’s Finance Minister Mohamad Al-Ississ emphasized on the importance of creating sustainable refugee programs so as to avoid potential “powder kegs” of violence, citing the example of the Taliban.

“Taliban did not come out of Afghanistan, it came out of the hopelessness of refugee camps in Pakistan,” Al-Ississ said. “A hopeless refugee is the biggest danger.”

He said that despite Jordan accepting over one million refugees from Syria, the world has largely forgotten about the crisis and instead shifted the focus to Ukraine.

“Let’s talk about the dichotomy here: in how the world responded to the Ukraine refugees...before dealing with the existing crisis elsewhere,” he said. “You’re simply passing the seed for the next crisis.”

Most Indians don’t miss TikTok following the nationwide ban in 2020, Nandan Nilekani, co-founder of Indian IT consulting firm Infosys, said.

He said that other platforms like Instagram and YouTube, as well as local startups, came up with their own versions of the short video format, “so I don’t think anyone is missing it.”

The White House’s top economic advisor Lael Brainard said the American financial system is both “sound” and “stable” after major bank collapses prompted a government bailout last month.

“The core of the system has a great deal of capital,” she said.

The Biden administration intervened and shielded all customer deposits, including those with amounts beyond the $250,000 federal insurance limit.

Brainard casted the blame on Silicon Valley Bank and New York Signature Bank for taking “unacceptable risks” with their balance sheets.

She declined to speculate whether more banks were at risk of collapse later this year. “I think we do have the same playbook that works very well, but it is relevant for banks that fail.”

In a pre-recorded interview with Semafor’s Steve Clemons, U.S. Sen. Mark Warner (D-Va.) detailed the provisions of the RESTRICT Act, a bill that he sponsored that could ultimately lead to a nationwide TikTok ban.

He said the measure doesn’t single out TikTok, but rather would give the app “its day in court” on national security grounds.

“The [Chinese Communist Party] can call on ByteDance, which owns TikTok, at any time to turn over data or manipulate information. That ought to concern us,” Warner said.

He said his bill would follow a “rules-based approach” and put the burden on the U.S. government to show whether TikTok or any other foreign-owned technology posed a national security risk.

If TikTok is ultimately banned, he said the law as written wouldn’t allow the government to go after or charge any individual for bypassing security measures and accessing TikTok.

And he believes influencers and creators who have made a career through TikTok would be able to replicate their success on another app.

“The market would create an alternative,” Warner said.

Massachusetts congressman Jake Auchincloss, a Democrat who sits on the House Select Committee on China, said that Xi Jinping and Vladimir Putin are “salivating at the prospect of Trump re-entering the White House in 2025.”

He said that Jan. 6, 2021, the day of the attack on the U.S. Capitol, was “Xi Jinping’s best day in office because when the United States degrades its own democracy on the world stage for people all over to witness, it undermines our the power of our example.”

Auchincloss and Trump’s former national security advisor, Robert C. O’Brien, who was speaking remotely at the summit, then had a tense exchange over Trump’s recent criminal indictment.

O’Brien said that he had heard from foreign leaders that Trump’s criminal indictment was “the darkest day for political prisoners around the world.”

Auchincloss retorted that Trump had been “fanboying all over Vladimir Putin” during his presidency, adding, “Thank goodness we have Joe Biden in the White House when Vladimir Putin decided to invade Ukraine.”

The rising level of stress and unhappiness in the world has been described as the “other global warming,” Gallup’s CEO Jon Clifton said.

Gallup polling shows that negative emotions have been rising consistently across 150 countries over the past 10 years, Clifton said.

He said that many other countries have surpassed the levels of stress and anxiety in the U.S. since 2006.

Oksana Markarova, the Ukrainian ambassador to the United States, said that Ukrainian businesses are expanding and paying taxes despite a “full fledged war.”

“We are building Ukraine 2.0,” Markarova said, saying that the country “survived this winter” despite Russian attacks on infrastructure.

She said part of the economic development projects will be focused on rebuilding energy infrastructure.

Markarova also addressed concerns about corruption in Ukraine deterring economic growth, saying that President Volodymyr Zelenskyy is committed to fighting it.

“We definitely have zero tolerance to corruption,” she said. “To engage in corruption these days is treason.”

She also mocked Russian propaganda for framing Ukraine as a failed state, saying that corruption is more prevalent in Moscow.

“We have a fraction of Russian corruption always,” Markarova said. “And now we see how in the army supplies how incapable their army is... God bless Russian corruption of course at this stage.”