Now on bbc news, its hardtalk with sarah montague. Welcome to hardtalk. Im sarah montague. My guest today has a reputation for telling uncomfortable economic truths. He famously predicted the Global Financial crisis of 2008. Now Raghuram Rajan says capitalism is under threat and if World Leaders want to save liberal democracies from a surge in populism they need to give more power to local communities and take it away from big governments and big businesses. When he left his job as governor of Indias Central Bank is that it was better to be a doer than an advisor. Now the superstar central banker is being talked of as one of the front runners to governor of the bank of england. Would he rather do thatjob than advise in another . Raghuram rajan, welcome to hardtalk. Thanks for having me. That quote from you better to be a doer than an advisor what is it that you want to do . What i wanted to do that time was really turn around peoples view of india. I thought there was a lot of potential for growth. There were reforms that were easy that we should have done and we proceeded to do it, when i was Central Bank Governor. So that was the doer part of it then. And in being an economist, is it the same thing more widely, is it improving peoples lives, what is the doing . Well, i think that is the aim, should be the aim of every economist, right. You should be able to persuade people that there is a way to improve their lives. Often it means undertaking reforms which are not so obvious. Sometimes which are painful. But, in the long run, i think history suggests that we sort of broadly know how to go forward and make peoples lives better. There is a job in which you could do again, which is that of being the governor of the bank of england and you are being talked of as one of if not the front runner. Are you interested in a job . Well, i am perfectly happy in my job. And thats not a diplomatic statement. Its actually true. Im perfectly happy and i havent applied for any job. Have you been approached to apply for it . Well, i havent applied, thats. I will it there. But, of course, that doesnt answer the question as to whether. Because its something that will be coming up very soon. The appointment will be made in the autumn. Well, i really believe that the central bankers job has become much more political in recent times. For that its best that a country has somebody who understands the political structure within that country and how to navigate that. And so it seems to me that thats something that people have to take into account when they determine who they want as Central Bank Governor. So for somebody like you, would you understand the politics of the united kingdom, not least set against the challenger brexit . Its obvious that i am and outside and i have very little understanding of the ebbs and flows of politics in this country. That role of the central banker, which youve pointed to before as having changed, you said that you now have to have the skills of a politician without appearing to intrude on political space, because you cant afford to be seen to do that. Is that what happened in india . Did you intrude on political space which meant that you ended up doing a three year term rather than staying longer . No, well, the term was for three years. So the question was whether you are going beyond that for a second term. In india, to some extent, as i said, the need was notjust for reforms, but also to explain those reforms. Its not like the government comes in with an agenda, here are the things we want doing, including central bank independence, Monetary Policy, et cetera, et cetera those are things you have to sell. And the way you sell it is by making public speeches. We need to bring down inflation. Heres the reason why we need to do it. We need to liberalise the process of bank licensing. So you need to sell your reforms. And thats where i said you have to be careful. Because on the one hand youre creating an agenda, but it has the danger of possibly intruding on political turf. And that was something that you came up against in india, because you were seen to have successfully reduced inflation, but in doing so you were what, as many saw as, restrictive on Interest Rates, which was suggested was to the detriment of growth. And you had politicians from the government parties who wanted you out. Mentally he is not fully indian. He has wilfully wrecked the economy. His audience was essentially western and his audience in india was transplanted westernised society. Yeah, yeah. Well, its the same government which is now claiming credit for bringing down inflation. So ill leave it there. But is that why you had to go . There were suggestions, not least from somebody who is now saying you should have the job of governor of the england, angus dent, ceo of the lending platform archover. He said that he stood up to corruption across india at great personal risk. He was so dedicated he had to leave the country after his term was brought to end. Is that true . Let me not make it so heroic. I think i basically had a conversation with the government on what we needed to do next and we tried to talk about what they wanted, what i wanted, and we couldnt reach an agreement. Thats were i said, ok, thats where i stop. I have a wonderfuljob at the university of chicago. Im an academic at heart. I decided to go back. Thats where we left it. Was the job fully done . Not fully. Because we were cleaning up the banking system, trying to bring out the bad loans, et cetera. So that requires some more time. My successor continued that process. What i feel happy about is that there was ownership of the reforms. The Monetary Policy committee is in place. Its working. The bank clean up is working. The process of bringing in new banks happened. And theyre now starting out and expanding. So the whole point, i mean, its. Somebody once said the cemetery is full of indispensable people. And, you know, its important that you create the ownership of whatever reforms you put in place, otherwise they reverse very quickly. Now, as far as its clear that you have, from your non answer, i would suggest its clear that you have been approached about being governor of the bank of england. You make the point about what is required of somebody who understands the politics. Danny blanchflower, whos economics professor at dartmouth college, who has described you as head and shoulders above other candidates, said, why would anyone want to put themselves in the position of having to deal with brexit . Do you think hes right that actually its not a desirable job because of the challenge in thatjob . Look, i dont want to go into the merits of the job. Im sure a really good candidate will come into thatjob. I do think that the issue of brexit is going to be a very difficult one for the central bank to deal with. There is a belief across the world today that Central Banks have this magic bullet, that they can fire any time, theyre just not firing it right now. The reality is Monetary Policy has less and less effect as we use it over a period of time. And believing that that will be the answer to many of our problems is, i think, overly optimistic. The Central Bank Governor could just drop Interest Rates and that will help everyone. And that will help everyone. And i think, to some extent, the central Banking Community is partly responsible for this myth. Because they have to, sort of, create expectations so that inflation doesnt plummet, people dont have very pessimistic expectations about inflation, they always have a bazooka they can bring out. The reality is as you have easier and easier policy for a sustained amount of time, that bazooka becomes weaker and weaker and at some point, i mean, you should admit we really cant do that much, its up to other elements of government to step up. And thats where ive been talking about decentralisation and more sort of power to the community, because i think one of the biggest problems in industrial countries is that today we have a serious problem of underdevelopment in industrial countries. Its no longer about monetary stimulus or fiscal stimulus, there are pockets that these stimuli simply pass by. Think of a neighbourhood which is ravaged by crime. Bringing down Interest Rates is not going to bring investment into that community, you first have to bring down crime. But thats not something the Central Government can do or the regional government, its something the community has to do. And so i think, again and again, when you look across these abandoned communities, these communities where growth no longer exists, its not a problem of stimulus. Ok, well now, on that, this is where you are largely in favour of the ideas behind brexit, arent you, that it is returning, bringing sovereignty back to a more local level . Well, i am for the idea that we do want an open world, we do want to encourage flows across borders, whether its capital, goods, or people, however in order to get there we have to give people more of a sense of control over their lives. So the flipside of an open world has to be more democratic control. Thats the only way were going to manage that open well. And thats where im saying, yes, there is a demand from countries to take back control that equals the language of the brexiteers, but theres also a demand from the regions to take back control from the capital. I think this is part of a continuum. People will want a sense of agency over their lives. You mean brexit doesnt go far enough . What im saying is the idea of decentralisation that the conservative party have had, for example, with what was it called, the big society, thinking through that and making that work effectively would have been a good thing. Of course, we know it didnt for a variety of reasons. But i think across the industrial world, if we are to get a sense of buy in, we have to democratise the process much more. Now this is something that you have written about in a book, the third pillar, which talks about three pillars of a good society, business, government, and community, and its community thats being squeezed, which has led you to suggest that these are dangerous times. Yes. What do you mean by that, how dangerous and why . Well, the very idea of capitalism is being questioned, right. So the idea of capitalism is we are going to create a Playing Field, a level Playing Field, where you have the chance to show what youve got and if you do really well youre rewarded and we create a safety net underneath you so in case you do really badly you dont fall far. The problem, however, is that in order to participate on the Playing Field today you have to have a good education, you have to have had adequate healthca re growing up. So in order to get to the starting point theres a lot that has had to have happened to you. And thats where i argue before you get there today, where you grew up determines how far you. This is the argument of professorjoseph stiglitz that capitalism is rigged in favour of the rich. Notjust the rich. I mean, it could be in favour of the middle class also, in some aspects, where you have good middle class schools and et cetera, et cetera, which allow you to get that initial education. This goes back to my point that where you are born and where you grow up matters much more today because of the minimum level for participation is a High School Degree or. Or. So the idea of it being that this is a dangerous time is what . Why is that dangerous . Because today, far more than in the past, the sense that it is a rigged game, notjust because there are collusive practices at the top, but because i dont even get a chance to get to the starting point. I am in a banlieue in france, i am in a small town in the united states. I go to a mediocre school. I have no chance. I dont even know theres Something Like the ivy leagues and i have no chance of getting the good jobs that are out there. And youre saying, what, that this is driving votes towards populist figures and populist ideas . What this is doing is making me much more aware of the effects of market forces, especially the negative effects, when i see that big employer in town leave because theyve suffered competition from abroad, i dont also see the country has benefited enormously from the expansion of services. We have a city like london which is chock full of financiers because i dont have a hope of getting any of those jobs. So the point is in order to manage globalisation, you have to give the people who are left out a belief they have a chance and that means more focusing on the basics. Do they have good schooling, do they have good healthcare . Thats a very local thing. So im not saying anything different from what a lot of politicians are saying. What im saying is in order to get that right, its not about policies from the centre, its about strengthening the community they live in and that requires a different set of policies. So thats about moving money from london to the regions. London money but also power, the ability to determine what you do because often the specific problems in a community are very Different Community to community. One community as i said has a problem of crime, the other community has a problem of, its kids dont have the right vocational training. Not Everybody Needs that phd in order to function. And yet instead, we have an increasing urbanisation of wealth. We have people moving to the big cities and away from, in the uk of course, it tends to be coastal areas that are ending up very poor. So is there any evidence that what you are saying is happening . No, so what i am saying is precisely that, that we are taking out Economic Activity from large parts of the country. Now, the solution is not to move everybody to london because not everybody can afford to be in london, so how do you move Economic Activity back . And thats where idea that we can work much more at a distance today may be what rescues us in part going forward, that more and more people will opt to stay there. So its the technology itself, which you have been raised as having very big concerns about, Huge Technology companies and huge Financial Companies which you have suggested need far more Government Intervention to control. Well, not not. I mean, Government Intervention but very careful intervention. These are often very Efficient Companies that are bringing down costs, that are offering products that people want, so it cant be the ham fisted intervention of the past, thou shalt not do this and thou shalt not do this. You want to be cleverer. So one of the big concerns is are these Companies Holding back innovation by buying up smaller rivals before they get to pose any threat . And your answer to that question . Is a company like google or amazon or facebook. They have done a fair number of acquisitions which have stilted competition. There is something called the kill zone which venture capitalists talk about. I will not finance any company which operates in this space because this is a space which is too close to the big guys, they will eat it up, and eat it up for pennies rather than pounds. So the point is, there may be cleverer ways to ensure that competition, what we want is competition, that competition in these industries prevails, innovation prevails, and that might mean being much cleverer. Its not just about saying, i will stop you from growing to more than 40 of the industry, but it maybe, i wont let you take over these ones. Are you suggesting, if you are saying this is a message that people are sending to World Leaders, are you suggesting that actually that populism is a good because its sending a message . I think populism raises the right questions, i dont think it has the right answers, by and large. And is anybody listening to you . I mean, we come back to this question of better be a doer than an advisor. Is there any sign that anybody is doing it . Well, people listen, they listen slowly. They listen over time. Ill give you an example. When a lot of flows were coming into emerging markets, i talked about the problem of spillovers from easing Monetary Policy, that there was a lot of. And immediately, i got pushback. Oh, youre talking about these financial spillovers, this is not a big deal, at cetera, et cetera. Over time, it seeps in. Mark carney talked about spillovers in his speech a few months ago, it made it into the g20, the g20 now worries about these financial spillovers. You have to point to these things and over time they start getting into. Its when nobody remembers who said it that it actually starts making it into policy. And as far as policy is concerned, were at a time when you are warning of these dangers in a way of changes to society. What is the economy that they are facing because some are warning that we have another global recession looming with all thats going on . Are you among those . No, i dont think we do. What we have on the one hand is fairly strong employment numbers across the industrial world, fairly strong Consumer Confidence and consumption is still reasonably strong for where we are. What has collapsed to some extent is Business Confidence because of all this brexit, the trade shenanigans that are going on between the us and china, and as a result, nobody is really putting a 30 year plan anywhere because i dont know how the world will look five or six months from now. So investment is falling, consumption is Still Holding up the question is can we resolve the Political Uncertainty so that businesses start picking up again before we go down . Ok, and just on brexit, no deal brexit, would that be an economic disaster, which i think is one phrase youve used . I think no deal will be very difficult for the country. I presume that as you get closer to no deal, there will be some ways of trying to make paper over some of the problems but if no deal means no deal and nothing much has been done to anticipate it, i think it could well be very, very difficult. And the potential trade war between the challenge between President Trump against china, which christine lagarde, the outgoing head of the imf, refers to as self inflicted wounds that must be avoided. So you have to see this as part of the us being scared of chinas rise. So its as much about what china has done in the past as it is about chinas ambition. We, in the united states, i think what we are seeing in washington, is a consensus that somehow this rise has to be stopped. I would rather that the rise be managed because its very hard to stop but the Trump Administration has gone out to essentially combat china on a number of fronts. The problem is, what is the resolution of this fight which is acceptable to china and acceptable to, you know, now that youve shaken things up, youve let the genie out of the bottle, so to speak, and that, i think, nobody really knows. Im not even sure the administration knows, how do you get an accord which allows china to, you know, continue its growth but change the methods that it uses and at the same time there is a monitoring structure which is sufficient for the us to believe that it has, you know, changed those methods. Weve disrupted everything. Putting things back is much harder. So will there be an accord . There might be an accord but will it satisfy . There im far more doubtful we will get an accord which will satisfy both sides. You dont sound, for somebody who is not predicting a recession, you dont sound particularly optimistic about the global economy. Now, look, and this is where i think we have, sort of, now monetary easing coming back in a big way, it will have some effects at the margin, it will borrow some of future growth, it will create more problems for the future. At some point, i mean, we cant keep running the World Economy on easier money and more debt. We will have to recognise the limits to that. Now, in a sense, what Monetary Policy is facilitating is bad policy on other fronts and so we have to be careful. Raghuram rajan, thank you very much. Thank you. Hello. It has been a bit of a mixed weekend weatherwise but as we head through this coming week, its going to be all eyes on the temperature because things are turning increasingly hot and humid too. Not dry for all of us. Some rain in the north west during the course of monday and later in the week, were expecting some thundery downpours to develop. And the reason for the heat and humidity is that weve got High Pressure sitting to the east of the uk, with the winds rotating around that, drawing in all this hot air from continental europe, and it is particularly hot. In fact, in paris, we could see temperatures up to 42 celsius later this week, which would break the all Time Temperature record recorded in the french capital. Weve had this line of cloud and weather fronts pouring in from the atlantic during sunday night and through the day on monday, theyre going to be bringing further rain, initially across Northern Ireland the west of scotland. Further south, its a mild and quite a murky start to your monday morning so weve got quite a lot of that low cloud, lingering around Western Hills and coasts through the day but elsewhere, the cloud should tend to in and break across much of england, Northern Ireland too. That rain pushing its way northwards, so sitting across western scotland for much of the day were it will be quite heavy and persistent but in the sunshine, temperatures up to about 28 or 29 degrees. Itll feel pleasantly hot monday afternoon and then into monday evening, we eventually lose that wet weather from the north of scotland, lingering through the course of the night, but by tuesday morning, most of us dry with some clear spells, a bit of patchy cloud here and there are those temperatures from the word go will be in the mid to high teens so through the day on tuesday, probably the driest day of the week across the uk. Lots of long spells of sunshine with a southerly breeze, top temperatures by tuesday towards the south east up to about 33 or even 3a degrees. Further north west, were looking at those temperatures into the mid or possibly high 20s so a hot sunny day with light winds on tuesday but as we had to tuesday night, its going to be fairly warm, fairly uncomfortable for sleeping. In fact, about 10pm, temperatures still nearly 30 degrees so youll certainly notice that things are going to feel pretty sticky through the course of tuesday night and with all that humidity, heavy showers and thunderstorms are possible, theyre likely to push northwards tuesday night and through the course of wednesday, some uncertainty about where they are going to be, probably the north and west. The south east likely to stay dry through the day on wednesday and here, temperatures could well reach about 32 degrees or so. Again, it is another hot day for most of us but a little fresher in the far north west. Things continue to heat up later in the week. 35 in london on thursday but do watch out more heavy and thundery showers, mainly in the north west. Bye for now. This is the briefing, im sally bundock. Our top story one person is critically ill, dozens are injured, after gangs of men dressed in white t shirts attacked pro democracy activists in hong kong. Theresa may is to chair an emergency meeting of her ministers on how to respond to the seizure of a british ship by iran. Seven months after a block from european governments,two charities have resumed migrant sea rch and rescue operations in the mediterannean. And how a curtain and some algae can convert as much carbon dioxide