The Scene
The second day of Semafor’s World Economy Summit kicked off Thursday in Washington, featuring interviews with dozens of global power players discussed the biggest issues of the day — artificial intelligence, trends in global finance, and the rising middle class.
Semafor’s journalists will be in conversations with newsmakers including U.S. Secretary of Health and Human Services Xavier Becerra, White House National Economic Council Director Lael Brainard, and John Williams, President and CEO of the Federal Reserve Bank of New York.
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David Rubenstein, Carlyle Group co-founder and co-chair
On U.S. debt: “When I left the White House under President Carter, we had about $800 billion of debt. We now have roughly 35 trillion, and nobody seems to be worried about that much; in part because people are willing to buy our Treasury bills; at some point people won’t be willing to do that.”
Henry Wang, founder and president of the Center for China and Globalization
On China’s Belt and Road infrastructure initiative: He said the initiative had generated a lot of corresponding reactions with the U.S.’ Build Back Better program, the European Union proposing the new Global Gateway, and India’s proposal of an Indian Middle East economic corridor to Europe. “So I think China is still doing its best to work with the Global South and work with developed countries, if necessarily, multinationals, to work together to solve this global deficit.”
John Williams, President & CEO, Federal Reserve Bank of New York
On the fed interest rate: “The higher rates... haven’t caused the economy to slow too much,” he said, citing a tight labor market and fewer imbalances in the economy. Still, inflation has been a bit of a “bumpy road,” he added, but data suggests it is trending downward.
On inflation forecasting: “Transparency has helped us,” Williams said, agreeing with former Fed Chair Ben Bernake’s assessment of the Bank of England needing to be more transparent about inflation forecasting. “The Fed has moved from being kept somewhat opaque to more and more transparent and clear, not only in setting our 2% inflation goal, but explaining how we think about the economy, giving our projections and the dot plots and all that to help as best as we can for the public to see how we’re thinking what’s driving our decisions.”
On the Fed’s inflation goal: “I think 2% inflation goal is the right one,” he said, adding that “low inflation is the bedrock of prosperity.”
On the Fed dealing with a second potential Donald Trump presidency: “The world happens around us,” he said, adding that regardless of who is in the Oval Office, the Fed focuses only on “achieving maximum employment and price stability goals.”
Gyude Moore, Senior Policy Fellow at the Center for Global Development On development assistance from China: “Regardless of the kind of government that is in the country, the Chinese are willing to engage. So for many countries, at least in the part of the world that I’m from, having a third node of global power in the rise of China has shifted the balance and how we deal with the West.”
On Western concerns about Chinese “overcapacity”: He said for Africa and other parts of the world, ” our posture is ambivalence” when it comes to the argument of Chinese overcapacity. “For example … if we’re going to switch over and use clean energy, are we going to use solar panels produced here or in Canada that are going to be more expensive, or use the ones from China? So what is perceived in developed economies as an overcapacity for China, makes what China produces cost competitive in markets that are very, very poor.”
Sim Tshabalala, CEO, Standard Bank
On how African economies are grappling with global geopolitical tensions: He said a “war between the United States and China is improbable,” adding that recent high profile visits of U.S. officials to China are reassuring signs. Still, he advocated for African governments and African businesses to retain their independence and neutrality.
Xavier Becerra, U.S. Secretary of Health and Human Services
On the origin of COVID-19: “We’re all still trying to figure this out. It would really help if China were more transparent. We’re all trying to get to the same end. We’re never going to know unless China opens up some more.”
On whether we’re prepared for another pandemic: “In many ways, we know the pieces to the puzzle. Of course if it’s some new virus or it it’s manmade or a biological infection, we have to be prepared to try to figure that one out.”
John Waldron, President and COO Goldman Sachs
On China: “Capital controls can be problematic,” he said, adding that its one reason why many investors are not looking at China anymore and that Japan and India have become more attractive destinations for investors.
On potential impacts of a Trump presidency: “I think it’s early to make a judgement on the election at this point. Markets don’t price U.S. elections until it’s very close. We are starting to think about policy difference... how Trump would deal with China.”
On consumer banking: “I think one of the real lessons learned in the financial crisis is if you’re solely reliant on wholesale funding , and there’s that kind of a market disruption, you are really at risk in terms of losing your funding,” adding that retail banking is not part of “Goldman’s Sachs’ DNA” and that their funds can do more to help businesses.
Julie Su, Acting U.S. Labor Secretary
On unions’ popularity: “Unions in the last three years have demonstrated that when you have a union on your side, you can enjoy really historic gains in the workplace,” Su said, adding that the pandemic mobilized workers to voice their demands. “We’ve seen historic gains at the bargaining table, double digit wage increases across hospitality to healthcare to Hollywood, autoworkers, delivery drivers.”
On independent contractors: “Of course there’s a role for independent contractors our economy,” Su said, adding that the White House is more focused on cracking down on misclassification of employees rather than trying to eliminate contract work.
On some Republican States banning heat protections for workers: “I think it is a mistake to take away standards that local governments in their wisdom and in their knowledge about their communities are putting in place to protect working people.”
Democratic Sen. Ron Wyden, Chair of the Senate Finance Committee
On a potential Trump presidency’s impact on the Inflation Reduction Act:
“Every month [the IRA] gets more and more resilient,” Wyden said, adding that a growing number of Republicans are becoming aware of how the bill has helped fund local businesses that their constituents are benefiting from.
On the TikTok divestment bill: Wyden — who said he’s not a TikTok user — said there are “substantial national security issues” with the app because of its Chinese ownership and privacy and First Amendment issues. He said that he supports the divestment proposals but would not support former U.S. Treasury Secretary Steve Mnuchin taking ownership because of his connection to “Arab states that are hostile.”
Hank Paulson, former U.S. Treasury Secretary
On U.S deficit: “Our national fiscal trajectory is unsustainable,” Paulson said. “The national debt we have will ultimately, if unchecked, destroy our economic wellbeing and our national security which is rooted in the economy. And the bad news is people have talked about the deficit risks for so long. I think both parties believe that it has cried wolf. But the longer we wait, the more expensive it will be, the more dangerous it would be to try to dig ourselves out of this morass.”
On artificial intelligence: Paulson said the quick advancement of AI can have “huge benefits for humanity” but will also be “disruptive,” and can cause job losses in some industries. “I think we’re also being naive if we don’t recognize that technology is growing in many ways faster than policymakers ability to understand it and manage it.”
On competition with China: “I am 100% for...emphasizing our national security, having a superior defense capability, sequestering the most sensitive and advanced technologies,” Paulson said. However, he said question of U.S. cooperation with China is an “existential” one, and that it would hard for the U.S. to battle climate change, nuclear proliferation, and cyberthreats “without working with China… in a complementary way.”
Kevin Warsh, former member of the Federal Reserve Board of Governors
On the Fed’s performance in the last year and what he would differently: Warsh blamed the massive surge of inflation on the central bank’s “biggest economic policy error in the last 45 years,” and “the errors that have been made in the last six months.” He said the Fed needs “deep introspection” and that their theory that the U.S.’ inflation problem is because “workers are earning too much and living too well” is wrong and that “America’s inflation problem is because the government’s living too well, spending too much, printing too much, monetizing too much.”
“Inflation is a choice… largely by the fiscal and monetary authorities,” Warsh said, adding that “The Fed is responsible for the inflation rate, and the Fed needs to take ownership of it.”
On his name being floated as the new Fed chair fed under a Republican administration: Without specifying his political future plans on whether he would get back to policymaking, Warsh said that “this is hinge point in history” for the U.S. economy and that “if you care as much about the country as we do” then you have to have the ” open mindedness to serve” if the government calls on you.
Daniel Pinto, President of JP Morgan Chase
On the possibility of Fed interest rate hikes: There are “very, very low probabilities” of raising rates, Pinto said, adding that because there are not too many imbalances in the economy for higher interest rates to have a “massive impact.”
On the Fed’s performance: The Fed has done a “really good,” Pinto said, pointing the growing economy, inflation slowing down, and full employment. “It may take a bit longer till they can cut rates, but at the end, it’s not such a big deal because the economy is still growing.”
On whether JP Morgan Chase CEO Jamie Dimon is a contender for the Treasury Secretary: Dimon adds “so much value” in any position, Pinto said, adding that he could see him as a future Treasury Secretary.
On credit fund risks: “As the amount of funding goes up, they have to find the loans to lend. So most likely, credit conditions will deteriorate, governance will deteriorate, and … margins will compress. They will have to add more and more leverage, so as they become bigger, most likely they will become bigger and riskier.”
Lael Brainard, Director, White House National Economic Council
On steel tariffs: “It’s critically important that there be a fairer playing field and that China not again run its old export dumping industrial overcapacity playbook,” she said, adding President Joe Biden “wants fair competition with China... and we’ll stand against unfair trade.”
On Biden’s opposition to Nippon Steel’s bid to takeover U.S. Steel:
Brainard said that while Japan is an important ally and that the White House welcomes foreign investment, the steel industry has very important national security considerations and that Biden “is very clear that... U.S. Steel should remain domestically owned and domestically operated.”
On whether the White House will tap into emergency oil reserves to keep gas prices down: Brainard did not specify whether the Biden administration would release more oil from the U.S. Strategic Petroleum Reserve, but said that “we’re keeping a very close eye on gas prices at the pump... and events in the Middle East.”
On whether Biden ill impose oil sanctions on Iran: Brainard did not comment on whether Iranian oil sanctions were incoming in response to its attack on Israel, but said that the administration is “highly attentive to international oil markets and domestic gas prices… and wants to make sure that those gas prices remain in current ranges as we go into the summer driving.” She added that sanctions were a “very important tool for national security purposes.”
David Zapolsky, Senior Vice President, Global Public Policy & General Counsel, Amazon
On AI regulation: Zapolsky emphasized on the potential of using AI in transformative ways, saying “I’m convinced that we’re going to cure cancer with this type of technology.”
“The worst thing would be to enact regulations that would slow, those innovations, or research,” he said. The danger of regulation was to approach it as a “one size fits all,” he said.
A key piece of regulating AI is “surveying the regulatory landscape to see if the the outcomes that we’re afraid of are already covered by existing laws — because in many cases they are — and then if we see gaps to focus on regulatory energy on those gaps.”
On government cohesion in regulating AI
“It’s a bad world if every single government has a different set of standards for regulating AI,” adding that it was encouraging to see some consensus build between different countries, adding Amazon supports “use-based sectoral approach to regulation.”
Nandan Nilekani, Co-Founder of Infosys
On AI regulation: He said AI needs “some basic regulation, but it’s too early to make it very strict. It has to be an innovative architecture with light guardrails.” Nilekani said that many of the issues posed by the technology are covered by existing laws.
On concerns about AI being used to influence elections: “Look, I think the fact is technology has been used to, you know, impact elections for quite some time now. It’s been happening here since the last 10 years. I think this is just an acceleration of that. There will be more deepfakes, there will be more synthetic voice of somebody, there will be more misinformation, so I think that’s something we need to think about. One of the ways to think about it in a scalable way is to think about having the provenance of every data on the system proven.”
On his prediction for Indian AI in the next five years: “I think that AI in the next five years will accelerate development and growth,” Nilekani said. AI could help ensure that “more children are educated,” “healthcare is better” and that India’s economy continues to grow, he said.
Aravind Srinivas, CEO, Perplexity
On AI regulations: Srinivas warned that lawmakers could “over-index” with regulations, saying it could hinder research.
On Perplexity’s plans to make an enterprise version of its AI software: “A lot of people tell me that their companies don’t let them use Perplexity during work ... So let’s fix this problem for you and your employer,” Srinivas said. “You need a version of Perplexity you can run in your enterprise, and we are working on that.”
Arati Prabhakar, White House Director of Science and Technology Policy
On TikTok: “The big issue for TikTok from a national security perspective is about the vast amount of information that the platform is able to collect about people and specifically the fact that because of its ownership there’s there’s a direct line to the People’s Republic of China, which in in the geopolitics of today is a deeply concerning issue.” She added, “The president has called for divestment. He has not called for a ban.”
On TikTok’s privacy concerns: “What’s happening on Tiktok? Specifically, this is one part of a larger privacy landscape. We know there are huge privacy issues. Our privacy has eroded in the information era and social media era It’s happened gradually, but we’ve come to a place that there are some quite deep privacy concerns.”
On the White House initiative of the National AI Research Resource:
Prabhakar said that the AI revolution is being led by a handful of powerful tech companies with access to expensive computing systems and data. But “we just need a broader set of creative minds engaged in this,” which is why the White House wants to fund more computing for smaller companies and researchers.
Tye Brady, Chief Technologist, Amazon Robotics
On whether AI will take away people’s jobs: Brady dismissed concerns that AI will take away people’s jobs, and said more robots would lead to more jobs. “It’s people and machines working together and I’m very, very optimistic about this.... I believe that when we give [people] the right tools, particularly in AI, it allows people to be more intelligent.”
Julie Sweet, Chair and CEO of Accenture
On how companies should adapt to the changing geopolitical environment: “I have once simple rule that I follow myself. … If you look at how you’re operating your company and there isn’t meaningful change in how you’re doing that this year versus last year, you are probably going to have some trouble.”
Rob Thomas, SVP, Software and Chief Commercial Officer, IBM
On EU’s AI Act: “We support the EU AI act. I think they really got some things right. This notion of regulating the use as opposed to the technology, I think is critical...We want to open innovation but you have to think about uses, which I think the EU did well.”
Max Fenkell, Head of Government Relations, ScaleAI
On keeping the U.S ahead of its competitors: “If we want to truly lead the world in the adoption of AI, what that means is that government agencies need to start adopting AI...I think right now it’s about learning the technology and how to best implemented it in workflows.”
Anna Makanju, VP of global affairs at OpenAI
On deepfakes concerns: “Even if no one piece of disinformation, no deepfake really has a huge impact, there is something we call the liars dividends, which means that people may begin to distrust everything that they see.”
On how limited broadband access means AI’s benefits aren’t equal: “I think it’s one of the things that keeps me up at night...So the reasons that I’m extremely bullish on government using it because they are ultimately, the biggest providers of services, [to people].”
On AI’s energy use: “I’m really hoping that this actually creates an impetus for investment in more green technology, because we do see that the amount of energy that is necessary is going to skyrocket, partly because demand for this technology is so massive. It’s not just us. The amount of investment in this technology right now across the board is immense.”
Stéphane Bancel, CEO, Moderna
On AI improving public health: “I think we are going to in three to five years, understand most diseases, and that’s gonna be a first in humankind.”
On using AI for drug development: “I’m more optimistic because we have been using the tool a lot, and some of the insights we’re starting to get from a scientific standpoint are things that none of our scientists were aware of.”
