On the surface, Robert Johnson’s career looks like the stereotypical case of somebody who has made it in finance.
Educated at the country’s elite schools of Harvard and MIT, and having worked as a managing director at George Soros’s Quantum Fund in the 1990s, and having held a prominent role in Washington, his résumé could not be more established.
However, Johnson never took his achievements for granted and always kept on pushing further, looking for the real stuff behind the facades of modern finance and politics.
As a result, he has produced an Oscar-winning documentary,”Taxi to the Dark Side,” exposing torture practices within the U.S. military. He also founded and heads the nonprofit The Institute for New Economic Thinking (INET), where he managed to step outside the box of partisan politics and economic theory to find some pragmatic solutions to our future problems.
Epoch Times: Your institute follows so many topics, but you said China is a big one, and you know Epoch Times is big on China as well, so why don’t we talk about that for a minute.
Robert Johnson: Sure. Well I think what they call the changing of the guard in world leadership has been a topic that’s been on many peoples’ minds in recent years—very different systems between the United States and China.
There are different sensibilities about what works, what doesn’t work, how ownership is constructed, and how these work together in a world system. The simplest measure is the the exchange rate. All of these aspects of what you might call the architecture of a global system, depend very much on the relationship between the United States and China.
Epoch Times: How do you see that relationship developing at this moment? It has been tense recently.
Mr. Johnson: When I spoke of the changing of the guard—it was bulky and difficult to change from British leadership to American leadership—but you had two cultures that came from the same philosophical and historical traditions.
And it was still difficult. Here we have very different philosophical and historical traditions called the Enlightenment liberalism of the West and the Confucian-Daoism-Buddhism sensibilities in China, and the philosophies that underpin each.
Then you narrow it down to a rising power with a population five times the size of the United States, and there is only so much water, land, and other resources. Who holds sway?
Right now, as you know, from the coastal tensions there is an acute what I’d call test match going on. At one of our recent panels at INET, James Kurth, who is a defense expert based at Swarthmore College, talked about how the Chinese will continue to pressure, and the Americans will continue to define the line.
The Chinese will negotiate compromises, but they will come back and look for new opportunities to pressure, because they see themselves not only as rising, but returning to that station of leadership that the Middle Kingdom once represented.
Epoch Times: What can the United States do to manage that?
Mr. Johnson: I think the United States first, and at its core, has to remain economically prosperous. If it’s economically prosperous, if its citizens are well educated, and if its citizens are participating with sophistication in the political process, it becomes more supple, more flexible, more contented, and therefore less likely to lurch into a violent reaction to the challenge of China.
Also, if our resource base, our human capital, and everything is strong, we can maintain our national defense without concerns. In a weaker society, defense has to be maintained while schools and infrastructure deteriorate. You’ll start to sow the seeds of social discord and America will not appear credibly strong and durable in the eyes of the Chinese.
Mr. Johnson: In my simple technocratic opinion; that’s long overdue. The Chinese play a much bigger role, as do the Indians and others, and their voting power [at the IMF] is very, very small in relation to that.
The European countries, as a whole, are very important to the IMF, but the individual countries—Belgium, Spain, and so forth—have voting power way disproportionate to their roles in the world economy or the size of their populations.
So I think adjustments are called for. I think adding the renminbi to the SDR is forthcoming. I’m not sure it’ll happen right away, but next year—I think 2016 it’ll very likely be adopted, and I see telltale signs of that in Washington.
Epoch Times: Can you elaborate on that?
Mr. Johnson: I just see discussions going on. I see Christine Lagarde’s [IMF managing director] leadership. The concern is about the U.S.’s veto power, the United States congressional approval of the budget, and what accommodations are made to China.
It’s a very difficult dance, but I think it is in the U.S.’s best interests. I also think it’s incumbent on the president, or the economic leaders and the business leaders, to persuade Congress that this is a natural evolution that China becomes part of the SDR, that China continues to work with multilateral institutions rather than springing away and forming their own.
China’s initiates, like the regional Chiang Mai initiative [regional currency swaps in Asia] and the Asian Infrastructure and Investment Bank, foreshadow the possibility of the system breaking into different blocks. I think this would be a worse outcome for the United States and that this should be reflected in how Congress ultimately decides.
Epoch Times: China will exert power one way or another. Either it does it alone or it does it within the system—and it’s less costly, for both parties actually, to do it in the system.
Mr. Johnson: That’s right. You learn in economics, in the discipline called Game Theory, that there are cooperative games that can be played and we’re better off if we can achieve those things. They are often unstable; they’re difficult to enact and they’re difficult to sustain, but if you can get to that cooperative place, everyone’s better off.