Economics and chess are two of the passions of Kenneth Rogoff (Rochester, New York, 1953), Economics and Public Policy professor at Harvard University and one of the most prestigious researchers in the areas of macroeconomics, exchange rates, and financial crises in the United States, where he worked at the International Monetary Fund. A graduate of Yale, with a Ph.D. in Economics from MIT, he visited Madrid this Monday to give a keynote lecture on the "uncertain" future of the dollar at the Rafael del Pino Foundation. Before that, he granted an interview to EL MUNDO in which he expressed his enormous concern about President Donald Trump's "improvised" policies.
Question. Are you concerned that Trump will ban the admission of foreign students at Harvard?
Answer. He is being a tyrant, trying to intimidate Harvard and punishing foreign students. It is absolutely outrageous. It is one of the worst things he has done to Harvard, along with withholding funds or raising taxes. He has tried in every possible way to harm the University; he wants it to yield. But this is just punishing innocent people and causing much more harm to Harvard and the United States than anything else. Our foreign students are many of our best students and often stay in the United States because they find our most innovative companies, at the forefront of medicine, technology sector... This is our business model: in the US, we attract the best from the rest of the world and integrate them, and the idea of blocking that I think is one of the worst things he has done not only to Harvard but to the United States. In many ways, it is worse than the trade war.
Q. Will there be long-term consequences for science?
A. There will be huge consequences. Although we will see what happens because Trump's policy can be one thing today and another tomorrow. He knows it's wrong. He knows. In fact, just a couple of months ago, he said he would grant a green card to any foreigner graduating from a US university. It is clear that he has that nickname, 'taco' [acronym in English for 'Trump always backs down'], which hurts him because it is true: he has not achieved anything from Putin; unless Israel bombs Iran, which I don't know if it will happen, Iran will soon have a nuclear bomb and Trump is not doing anything; in China, he has not achieved anything; and he will not get anything from Europe either. Trump is undermining the rule of law, soft power, the university system, which has been a gateway for foreigners. He is causing damage that cannot be reversed. We may have the most wonderful president in 2028, but our people have not changed. There is anger. The same voters Trump appealed to are still there. Most of what he is doing is very populist, so I think the damage will be lasting. One of the reasons the dollar is dominant is because we are secure. If you are Spanish and buy an apartment in New York, we will not take it away from you... but now, who knows? He is weakening the judicial system, so we will see what happens in the end, but I think the damage he is causing is very deep.
Q. Can Harvard do anything?
A. Well, if we could sue the US for damages, we would win. We will survive, but foreign students will suffer irreparable damage. It is clearly one of his most damaging policies among many. I want to make it clear that there are deep problems at Harvard and in the fundamental issues that Trump criticizes, he is right more often than he is wrong. There is a lack of diversity of viewpoints, a lack of conservative voices at Harvard, Princeton, Yale, Berkeley, and UCLA... at all the universities you have heard of. It's as if here all the professors are socialists. 20 years ago, for every Republican, there were three Democrats; now there are 20, so students do not hear alternative opinions. This is extreme in sociology, history... but even in economics, it is taught too much that the Government is always the solution. This is a problem and so is antisemitism. It is surprising. It is true that there is a problem but the solution is not to end Harvard. For me, the closest analogy is when the Khmer Rouge in Cambodia destroyed ancient Buddhist temples. That's what he is doing.
Q. About the trade war against the world, is he improvising or following a chess strategy?
A. Trump would like you to believe he is playing four-dimensional chess. He uses that analogy. But no, he is just improvising. His trade policy is simply stupid. Tariffs are a bad idea, they harm the country imposing them more than other countries, although most people do not know it. But that is not really the problem, the problem is uncertainty. I have a friend who imports wines from Spain and Italy to the United States, and she has a small business, not a big company, and she does not know what tariffs will be applied to her. She does not have much money, so she needs to pass it on to her customers in advance, but she does not know how much to charge them. That uncertainty is spreading throughout the economy and I do not think it will stop.
Q. In its latest forecast, the OECD said that the US GDP will grow by 1.6% this year, but China will remain above 4%. Do you agree?
A. I think both are too optimistic. China is not growing that fast. Official figures may show 4% growth, but prices are falling, interest rates are plummeting, and demand has collapsed. I think traditionally, China's figures have been smoothed out, but not biased upwards or downwards. However, I think in recent years they have been exaggerated. China will be lucky to achieve an average growth of 3% in the next decade.
Q. Is there a shift in geopolitical forces happening?
A. We are seeing a rift. That is for sure. China and the US will not be as integrated as before, and Europe will have to learn to assert itself much more. But not everything is Trump's fault: China was planning to take Taiwan and I think that will happen; Putin is trying to take Ukraine; Iran continues to try to take over the Middle East... These things are not created by Trump, but he is accelerating the process.
Q. In a recent article, it was asked whether Europe's economic stagnation was due to insufficient stimulus or an "sclerotic and inflated" Welfare State. Do you have an answer to that question?
A. Clearly, it is more due to the sclerotic and inflated Welfare State than to the lack of stimulus. This is what has caused Europe to lag behind the US. 20 or 25 years ago they were on par. Today, it has left it far behind. This is not because there are more stimuli in the US, but less regulation. It is a more dynamic economy, with lower taxes... so having smart, specific, and timely stimulus is very good, but that is not Europe's main problem.
Q. What is it?
A. The main problem in Europe is the lack of dynamism. The difference between the US and Europe lies almost exclusively in taxation, biotechnology, and technology. If we remove our technological actions, the US stock market has not really outperformed the European one. If we remove productivity in technology, the US has not grown more than Europe.
Q. If we want to maintain the Welfare State, what can we do?
A. The only sure solution would be to grow very fast, but that is not easy to achieve. Europe is excessively regulated. I have just come from Germany, which used to be very efficient, and now it is a disaster. They know that to do anything you have to overcome many regulatory obstacles. But there is no simple answer to these things; the Draghi report, for example, has very good ideas. The problem is that, as he shows, lower productivity is what makes incomes lower here. Now companies want to move out of the US, students want to leave, money wants to leave... It is an incredible opportunity for Europe right now, to reaffirm itself as a geopolitical force, which I think would be very valuable to stabilize the world.
Q. In Spain, for example, despite GDP growth, there is an increase in inequality, is it the evil of our time?
A. When you grow rapidly, inequality increases, but that does not mean that people in the lower strata are worse off than if the country were not growing. For example, if in the US you are in the 20th percentile from the bottom, according to any economic indicator, you are above the 50th percentile in Spain. I think if you look at Spain and wonder how things have changed compared to Portugal, I would bet that those in the 20th percentile have been better off than in many other places in Europe. This would be the inequality that I call community-based, but for me the deep problem of inequality in our time is not what happens within Spain or France or the United States, but that Africa has fallen far behind and we will pay for it in terms of migratory crises.
Q. In your talk today, you will talk about the "uncertain" future of the dollar... will it lose its hegemony?
A. Well, it reached an incredible peak, it has been falling, and with Trump, it will fall faster. It will not end the dollar. Nothing will replace it. In fact, let me say it more precisely: nothing will replace it anywhere. But in Asia, the Chinese currency, the renminbi, will be more important, and the euro will be used more in Latin America, Africa, and other countries. As the United States worsens, the euro will improve a bit. It will not change overnight, but we are likely to have a major fiscal crisis in the US in four or five years, perhaps much sooner. That will also harm the dollar. It will harm everyone, but it will also harm the dollar.
Q. Will that crisis lead us to a global crisis?
Well, when the USA has a crisis, it creates a lot of volatility everywhere. The whole world continues to live in a world dominated by the dollar, and when the USA has high inflation, volatility, and recession, it is bad for everyone.