Speaker 1: Yeah, Welcome to the Bloomberg Surveillance Podcast. I'm Tom Keene
Speaker 1: Jai Ley. We bring you insight from the best in economics, finance, investment,
Speaker 1: and international relations. Find Bloomberg Surveillance on Apple Podcasts, SoundCloud,
Speaker 1: Bloomberg dot Com, and of course, on the Bloomberg. Why
Speaker 1: don't you bring in Professor Feldstone, let's do that, professor
Speaker 1: of economics at Harvard University, of course, the former chairman
Speaker 1: of the Council of Economic Advisors and the chief economic
Speaker 1: advisor to President Ronald Reagan. Professor Fauldstein joining us around
Speaker 1: a table, Professor, Good to catch up with you. It's
Speaker 1: been a while. Why is deficit spending a good idea
Speaker 1: when we're going to get payrolls on Friday and unemployment
Speaker 1: around four Deficit spending is not a good idea, It's
Speaker 1: never a good idea. But the impact of the corporate
Speaker 1: tax reform outweighs the adverse effects this time around of
Speaker 1: the increase in the deficit, So I think as a package,
Speaker 1: it's a deal worth having. There's a lot of doubts
Speaker 1: around this tax bill, Professor, and a lot of people
Speaker 1: stand one thing that's guaranteed his debt. What isn't guaranteed.
Speaker 1: Is a return from capital spending to capex and improved
Speaker 1: M and A Why do you see that happening? I
Speaker 1: see that happening because if the bill goes through with
Speaker 1: a US corporate rate, that is going to make investing
Speaker 1: in the US so much more attractive than investing elsewhere.
Speaker 1: So we're gonna see American firms bringing back capital from
Speaker 1: the rest of the world, making fewer investments outside the US.
Speaker 1: And we're gonna see foreign companies wanting to expand in
Speaker 1: the United States to take advantage of a tax rate
Speaker 1: which is much lower than it is in their own
Speaker 1: home countries. So, Professor White, is now the right time.
Speaker 1: I got back to the previous point. Unemployment near four percent,
Speaker 1: GDP near three percent. We're quite afar along in the
Speaker 1: cycle as it is. We don't needed for a fiscal stimulus. Uh.
Speaker 1: It is certainly true that the economy may turn down
Speaker 1: sometime in the next few years, and we'll be glad
Speaker 1: to have that fiscal stimulus in place. But you wouldn't
Speaker 1: do it now for the fiscal stimulus. You do it
Speaker 1: now because the politics is right, because now is a
Speaker 1: time when we can get through with the Republicans controlling
Speaker 1: both Houses and the White House, we can get a
Speaker 1: major tax reform done. But let's talk about the politics.
Speaker 1: The politics was politics of wealth inequality. That's what got
Speaker 1: President Trump into the White House. Do you see a
Speaker 1: tax bill that addresses that. I think in the short run,
Speaker 1: we're gonna see people's withholding fall. That is to say,
Speaker 1: their paychecks are gonna go up, so they're gonna be
Speaker 1: happy about that. And in the long run, we're gonna
Speaker 1: see this increased capital flow to the United States leading
Speaker 1: to higher productivity and higher real wages, a real female.
Speaker 1: We'll talk about the dollar dynamics. There's well, good morning,
Speaker 1: I've you won. John Farrell and Tom Keen Coast to
Speaker 1: Coast Good Morning Radio London, thrilled you with us. I
Speaker 1: believe John Farrell will join you in the evening hour
Speaker 1: London time. Is that true? John? Sometimes five to six
Speaker 1: I'm always that five to six weeks there Um Bloomberg Surveillance.
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Speaker 1: Professor Feldstein, What do the Trump politics and the Trump
Speaker 1: economics and the Trump sort of strong dollar, what will
Speaker 1: it mean for emerging markets? It's a different emerging markets
Speaker 1: than it was twenty years ago or fourty years ago,
Speaker 1: isn't it. Well? For emerging markets, it's going to mean,
Speaker 1: as it does for developed economies, it's going to mean
Speaker 1: less investment coming from the United States companies keeping more
Speaker 1: at home. Now. That's not going to be like a
Speaker 1: complete reversal emerging markets. There are a lot of reasons
Speaker 1: to be investing in emerging markets for American companies, including
Speaker 1: uh access to those markets, to the consumers in those markets,
Speaker 1: and to the workforce in those markets. But I think
Speaker 1: the lower tax rates in the US will mean less
Speaker 1: investing in those markets than would otherwise happen. Do you
Speaker 1: see the jobs coming back? You know, we're essentially at
Speaker 1: full employment, so the impact of all of this on
Speaker 1: the number of jobs is not going to be significant.
Speaker 1: What is going to be significant is the increase in
Speaker 1: in real wages. We're going to see real wages rising
Speaker 1: more rapidly and incomes rising more rapidly over the next
Speaker 1: decade because of the impact of this tax bill. Uncapital
Speaker 1: formation in the United States. Isn't one half of this
Speaker 1: bill the jobs bill, though, Professor, Isn't that what it's
Speaker 1: meant to be. It's sold that way. I think that
Speaker 1: the reality is it's a it's a better jobs rather
Speaker 1: than a more jobs bill. What do you make of
Speaker 1: the crafting of this bill, Professor? When we wake up
Speaker 1: one morning and realized the alternative minimum tax is still
Speaker 1: in the Senate's bill, many people didn't expect it to
Speaker 1: be there, but it was. It feels like this was rushed.
Speaker 1: Was it rushed? Well, in one sense, it's not rushed
Speaker 1: at all. I mean, the House has been working on
Speaker 1: the structure of this tax reform for years and years.
Speaker 1: Paul Ryan, when he was the head of the Ways
Speaker 1: and Means Committee, led the charge, and so this is
Speaker 1: not something that they came up with over over the weekend.
Speaker 1: But then you have to deal with all of the minutia,
Speaker 1: all of the the needs to get this or that
Speaker 1: senator or congressman on board, and and of course, at
Speaker 1: the same time, to stay within the overall ten year
Speaker 1: budget allowance. Professor. I wanted to get to this on
Speaker 1: television and couldn't. So I want to be sure we do. No.
Speaker 1: Stanley Fisher is very big on the percentage change to
Speaker 1: the mathematics of percentage change work at the lower bound.
Speaker 1: If we say the two year yield in normal times
Speaker 1: moved a certain percent, it's a lot different now at
Speaker 1: these low yields, isn't it. Do you care about percentage change?
Speaker 1: I don't think of it in terms of percentage change,
Speaker 1: because if you're starting at zero, everything looks like a
Speaker 1: very big percentage change, and we're almost at zero on
Speaker 1: a lot of these short rates. So I don't think
Speaker 1: of that. I think of what's happening to absolute levels
Speaker 1: of rates, and what's happening to real rates and those
Speaker 1: who are all super low now and they're going to
Speaker 1: be heading higher uh in the next few years. The
Speaker 1: optimism of Martin Feldstine. The other day I showed an
Speaker 1: offspring a black and white video of a guy out
Speaker 1: in l A doing twenty meal team borax ads for
Speaker 1: Death Valley Days. It became religion. No one knew that
Speaker 1: Ronald Reagan would change American conservative thought. Henry Olson is
Speaker 1: written a fabulously controversial book on the Conservatives of Them
Speaker 1: and the Conservatives of Now. George Will Cause of the
Speaker 1: nuanced portrait. Jd Vance of a Great and Immediate Claim
Speaker 1: calls it simply an excellent book. Henry thrilled to have
Speaker 1: you on. There are eight shades of conservatisms right now.
Speaker 1: Do any of them have anything to do with President Reagan?
Speaker 1: They all have. Uh, It's kind of like the people
Speaker 1: walking around in elephant blind and saying that the tail
Speaker 1: means that the snake, and the leg means that the tree.
Speaker 1: They all have some roots in Reaganism, but none of
Speaker 1: them represent the beauty of them. The arch fact is
Speaker 1: in some of us of a certain village to know
Speaker 1: that he came off the planes of the Midwest a Democrat.
Speaker 1: He had an internal humility around his fierce, combatitive spirit.
Speaker 1: Where's the internal humility and the conservative Republican movement today?
Speaker 1: It's pretty lacking when you take a look at it,
Speaker 1: that there's a conceit of ideology, that ideas can change
Speaker 1: the world in a way that you know, Reagan always
Speaker 1: thought that ideas served the realities of everyday life and
Speaker 1: the love of the average person. That really animated Reagan's
Speaker 1: politics all too often seems absent from modern conservatism. How
Speaker 1: has this been taken? Have you talking to any of
Speaker 1: our modern conservative leaders about working class Republicans. I mean,
Speaker 1: does Paul Ryan actually I mean we talk about a
Speaker 1: tax legislation done for a donor class, is any of
Speaker 1: this done for the working class Republican. I think people
Speaker 1: like Paul Ryan would say that cutting taxes for the
Speaker 1: corporations and the well to do is the way to
Speaker 1: help the working class person in the long term. But
Speaker 1: as far as direct um compassion for today's working class person,
Speaker 1: all too often that seems pretty absent in the leadership.
Speaker 1: I have talked to a number of senators and representatives
Speaker 1: who share my views, but they're not in leadership. Let
Speaker 1: me ask one more question. I'm going to bring in
Speaker 1: a distinguished gentleman from London. There there's an idea of
Speaker 1: conservatism and out of World War Two, and it was
Speaker 1: McArthur Republicans of the Midwest and there were the East
Speaker 1: Coast Conservatives in that. Is it now more amorphous? Is
Speaker 1: it now just one conservative blob versus the nuances of
Speaker 1: two generations ago. Yeah, there's different strains of conservatism, so
Speaker 1: it's not quite that way. But you know, there's social
Speaker 1: conservatism that puts the questions of religious liberty first. And
Speaker 1: there's liberty conservatism that's still all the old time small
Speaker 1: government religion. Um, but they're not divided at at war
Speaker 1: with each other quite the way the old times warm.
Speaker 1: If you're joining us now, a really an entertaining read.
Speaker 1: The working Class Republican Ronald Reagan and the Return of
Speaker 1: blue collar Conservatism. John Farrell, Thank you, Tom. I'm looking
Speaker 1: around for that distinguished gentleman from from London where you
Speaker 1: sing you're it? I met, I met. What an honor.
Speaker 1: Thank you, Henry, Hello, Jonathan farrellhead for me. For the
Speaker 1: working class Republicans. If there's nothing in it in terms
Speaker 1: of the economic policy to address their woes right now,
Speaker 1: have they done enough in terms of the cultural issues
Speaker 1: that they're attached to in the last year, Yes and no. Um.
Speaker 1: Certainly talking about patriotism, which is an undercurrent of the
Speaker 1: President's message a lot. Certainly talking about the immigration. Uh.
Speaker 1: Those are things that working class voters tend to care about,
Speaker 1: But they haven't spoken as much to the the broader
Speaker 1: longing for being part of America. And I think that's
Speaker 1: something that Trump touched on with Make America great Again,
Speaker 1: but it's been not quite as Rather obviously part of
Speaker 1: the governing policy. Well, Henry asked the question, because as
Speaker 1: far as populism is concerned and the plant of the
Speaker 1: working class right now, whether it's in the United States
Speaker 1: or elsewhere, do you find that is more underpinned by
Speaker 1: cultural issues, identity issues, political identity, or is it underpinned
Speaker 1: by economics. I think there are two streams of the same. Uh.
Speaker 1: Thing is that people who are economically stressed and to
Speaker 1: turn to other issues at the same time. But people
Speaker 1: who are of working class are finding themselves on the margins,
Speaker 1: both economically and culturally, and I think issues like immigration
Speaker 1: to kind of combine the two are particularly important to them.
Speaker 1: Henry Olson with us the working Class Republican. My important page,
Speaker 1: Henry is page two O nine, where you folding Ronald
Speaker 1: Reagan with the mainstream of Democrat politics as the grenade
Speaker 1: invasion and all that, and you mentioned Scoop Jackson. How
Speaker 1: do the Democrats respond after the last election to their
Speaker 1: search for the working class democrat or the disaffected democrat
Speaker 1: that Ronald Reagan took. What does the Democratic Party need
Speaker 1: to do after they read your book? Well, I think
Speaker 1: the Democratic Party needs to come and communion with center.
Speaker 1: They need to stop talking about the working class people's
Speaker 1: occupations as things of the path that are going to
Speaker 1: be cast aside, like manufacturing, or mining, or or trucking.
Speaker 1: And I think they need to take cultural respect for
Speaker 1: people that when there was a place for pro life,
Speaker 1: pro gun people in the Democratic Party was just a
Speaker 1: decade ago, and they swept to victory throughout these areas.
Speaker 1: They need to stop representing the elites of San Francisco
Speaker 1: and Manhattan and start trying to represent the people who
Speaker 1: actually have been the base of the Democratic Party for
Speaker 1: most of its history, the average person. Henry, how do
Speaker 1: you characterize the group of individuals that last year when
Speaker 1: they went into the election, they didn't face a choice
Speaker 1: between Republican and Democrat. They faced the choice between Bernie
Speaker 1: Sanders in the primaries and say President Trump. For them,
Speaker 1: it was really binary. They didn't look at this as
Speaker 1: Republican and Democrat. They were looking at right and left
Speaker 1: and they could swing to either. All. Yeah. I mean,
Speaker 1: one of the things that's interesting is that when they
Speaker 1: had a ways and a lot of the primaries in America,
Speaker 1: you don't have to be a registered Republican, so you
Speaker 1: really can choose. Uh. They overwhelmingly chose Trump. Is that
Speaker 1: the white working class person in Michigan who could have
Speaker 1: voted for Sanders but instead tended to vote in large
Speaker 1: numbers for Trump. And I think it's because they don't
Speaker 1: want the top down social democracy that Sanders was selling.
Speaker 1: What do they need to do around the president? I mean,
Speaker 1: you're a beast of Washington, and our last question, that's
Speaker 1: you can put that on the back of the He's
Speaker 1: gonna put that on the back of the paperback a
Speaker 1: beast of Washington. What do they need? What does the
Speaker 1: Republican Party need to do to advise the president forward
Speaker 1: to the mid term elections? What would you change directly
Speaker 1: with President Trump right now? You know? I think President
Speaker 1: Trump needs to recover his populist mojo. Is that what
Speaker 1: he's kind of become as a classical Republican in what
Speaker 1: he's doing is not very much on the economic side.
Speaker 1: That wouldn't be coming straight from a Pence or a
Speaker 1: Cruise or a Bush administration. And his populism has reduced
Speaker 1: to angry tweets and that's kind of like the worst
Speaker 1: of both worlds. I would tell President Trump he should
Speaker 1: not go with what they want next, which is a
Speaker 1: re make of entitlement programs. But he should go with
Speaker 1: the bold infrastructure program. He should start doing more like
Speaker 1: what he was talking about before he was inaugurated, about
Speaker 1: bringing American manufacturing back, and he should, uh, you know,
Speaker 1: be more like what he campaigned on the person who's
Speaker 1: not gonna help his friends in uh, in the boardroom,
Speaker 1: but help the person on main Street. We're out of time.
Speaker 1: We need to see you in Washington Studios, Henry. At
Speaker 1: some point, John Farrowe and Tom King Mr Olsen has
Speaker 1: written a terrific and controversial book with a great cover
Speaker 1: photo of middle Reagan. It's not the Reagan of the
Speaker 1: final years. It was the vitality of an actor from
Speaker 1: California at that time. The book is a working class
Speaker 1: Republican Henry Olson, Ronald Reagan and the return of blue
Speaker 1: collar Conservatism as well. How foreign it was that discussion, John,
Speaker 1: to me, it's like everybody knows what we're talking about now.
Speaker 1: I don't think it's far and I think we've experienced
Speaker 1: it in the United Kingdom as well. And what you
Speaker 1: saw that in the Brexit vote, I think there was
Speaker 1: a disillusioned group of individuals outside the metropolitan elite of
Speaker 1: London and within London they just did not understand what
Speaker 1: was handing in the rest of the country. Absolutely fabulous
Speaker 1: the working class Republican. I put it on in social
Speaker 1: media here today as well, John Ferrell, why don't you
Speaker 1: bring an esteemed guest from Mr Gorman's I'm really pleased
Speaker 1: to say that we've got one of the smartest minds
Speaker 1: on the street um for a global fixed income it's
Speaker 1: Matt Hornback of Morecan Stanley and Matt. For me, the
Speaker 1: headline in the session of the last twenty four hours
Speaker 1: fives thirties on treasuries south of sixty basis points. There
Speaker 1: has got to be a message, some signal in south
Speaker 1: of sixty basis points on five thirties. Well, I think
Speaker 1: one of the things that we've seen is investors take
Speaker 1: a little bit of a more confidence stands towards the
Speaker 1: path for FED policy. Over the coming quarters, particularly after
Speaker 1: the announcement of Governor Powell as the next FED chair,
Speaker 1: we saw investors really grow um in their confidence towards
Speaker 1: the path for FED policy. So we've got uh the
Speaker 1: December rate hike fully priced into the marketplace. People are
Speaker 1: now pretty pretty sure that we're going to get another
Speaker 1: rate hike in March beyond that, so uh people are
Speaker 1: expressing those views by selling bonds in the front end
Speaker 1: of the ILD curve. If I thought this was going
Speaker 1: to be sustained, if I thought that the FED could
Speaker 1: carry on hiking and the economy would continue to improve,
Speaker 1: I wouldn't expect to see two fives down at thirty
Speaker 1: basis points. That doesn't make sense because if you think
Speaker 1: this can last and the FED won't be cutting it's
Speaker 1: aggressively in a couple of years time, you're not going
Speaker 1: to see two fives at thirty basis points, You're gonna
Speaker 1: see two fives steeper. I don't see that, I see thirty.
Speaker 1: I see a market that send actually in a couple
Speaker 1: of years time that's going to have to cut. Well. Well,
Speaker 1: that that's the magic of of how markets work. You know,
Speaker 1: when we're sitting here going through our two thousand and
Speaker 1: eighteen year ahead outlooks, typically by the time you come
Speaker 1: to the end of the process, a consensus is developed
Speaker 1: amongst Wall Street economists and strategists like myself, and typically
Speaker 1: by the time that consensus develops, it's in the price.
Speaker 1: And so what that means is that the outlook for
Speaker 1: two thousand and eighteen, stronger growth, higher inflation that's already
Speaker 1: in the price today. What ultimately ends up moving markets
Speaker 1: in eighteen itself is any surprises to those to those
Speaker 1: consensus views, and then how the outlook for twenty nineteen develops.
Speaker 1: And on that front, our economists are are not as
Speaker 1: optimistic on twenty nineteen as they are. You came out
Speaker 1: of that acclaimed quantitative house vass right, and indeed I did,
Speaker 1: How and hell did you get from fixed income um
Speaker 1: out of Vassar College? That's like almost original to American education.
Speaker 1: So interestingly, my my start in finance was in our
Speaker 1: Tokyo office, Morgan Stanley's Tokyo office. I was an intern
Speaker 1: there for some time and then moved into the trading business.
Speaker 1: Think did folks, this is like a huge deal to
Speaker 1: go come out of the liberal arts bashion of Vassar
Speaker 1: and to achieve as you have, Matt, I think is
Speaker 1: just killer. What I'm seeing mathematically is everything's log convex.
Speaker 1: Everything's got an accelerated force to it. There's way too
Speaker 1: many curves within the log rhythmic spaces. John Farrell nicely
Speaker 1: laid out in the spread market is John mentioned I'm sorry,
Speaker 1: there's a message there. What's the message of the second
Speaker 1: derivatives right now? The message is that as we move
Speaker 1: deeper into the balance sheet normalization cycle, that's another tool
Speaker 1: the FED is using to tighten policy. There's going to
Speaker 1: be a tightening in financial conditions, which is something by
Speaker 1: the way that New York Fed President Ugly has been
Speaker 1: looking for, has been wanting to engender tighter financial conditions
Speaker 1: that will eventually impinge on the growth trajectory of the condom.
Speaker 1: Does the impitch come with a smooth curve and smooth
Speaker 1: vectors or are are we up for instability and jump conditions? Well,
Speaker 1: things never move in a straight line forever. My guess
Speaker 1: is that over the course of next year there will
Speaker 1: be bouts of volatility, unforeseen of course and uh and
Speaker 1: that will eventually lead to the FED to stop hiking
Speaker 1: rates in the fourth quarter of the year. Many FED
Speaker 1: officials are on the record of saying they're worried about
Speaker 1: the curve flattening, and they'd be worried if it's really
Speaker 1: started to invert. When is the bike point really start
Speaker 1: to kick in? If we've got two tens and around
Speaker 1: sixty basis points, did they get concerned at forty thirty twenty,
Speaker 1: I think I think for some participants, UM, the answer
Speaker 1: will be invariably yes, it depends. I mean, we've already
Speaker 1: heard from three FMC participants suggesting that they would not
Speaker 1: feel comfortable hiking with the yield curve completely flat. We're
Speaker 1: not there yet, of course, but I expect that we
Speaker 1: will be there by the or a quarter of next year,
Speaker 1: and then you'll start to hear a growing chorus of
Speaker 1: concern being expressed by f FORMC participant. Can we get
Speaker 1: to my chart of the day, Tom Traceries. It works
Speaker 1: on radio versus two year buns for anyone on radio.
Speaker 1: Just picture this a line just two fifty five basis
Speaker 1: points is the two years spread buns versus Traceries. Is
Speaker 1: there any oxygen left up there at this point? Not
Speaker 1: so much. If you actually look at what markets are
Speaker 1: pricing in for Fed policy in what you find is
Speaker 1: that they're pricing in two bases point rate hikes. Now,
Speaker 1: Morgan Stanley's economist Ellen Zentner thinks the Fed will give
Speaker 1: us three and that's roughly where street consensus is as well. Um,
Speaker 1: But in my analysis of the bond markets, you rarely
Speaker 1: price more than two thirds of what the FED will
Speaker 1: end up delivering. So in fact, if the FED does
Speaker 1: end up delivering three next year, I wouldn't expect the
Speaker 1: market to price anymore than what it already is. Let's John,
Speaker 1: this has been great, all this spread in palysis and
Speaker 1: the mathematics that we're alluding to here, forget about it.
Speaker 1: I'm at home, I'm out on the back deck. I
Speaker 1: got a monthly statement from name the shop, price down,
Speaker 1: yield up, and then there's a second month, and then
Speaker 1: there's a third month. When does the bond bear market
Speaker 1: click in? To be frank, I think we've already seen
Speaker 1: the bond bear market. We um in the wake of
Speaker 1: the um instability in the UK last year, uh, in
Speaker 1: the wake of the presidential election in we saw quite
Speaker 1: a move higher in interest rates and a move lower
Speaker 1: in bond prices. I think we've seen that market play out,
Speaker 1: and now it's time for the next phase. That's the
Speaker 1: phase where FED policy tightens further, and that's the phase
Speaker 1: that eventually leads to higher bond prices, lower bond yields.
Speaker 1: So you're talking about a bull market in bonds. Higher
Speaker 1: bond prices will click in apps lutely. I think that
Speaker 1: the talk that the thirty year bond bull market is
Speaker 1: dead was was way premature, fascinating. We can we can
Speaker 1: you come back on this? Can Well, no, we can't
Speaker 1: keep him. He's gotta go. He's gotta go. Getting a
Speaker 1: cell phone called James Corman. Tell Mr Gorman they're solving
Speaker 1: today at Morgan Stanley. This has been fab Matthew Warrenbuck
Speaker 1: please come back for a more extended conversation. He is
Speaker 1: with Morgan Stanley. Let me talk about our next guest,
Speaker 1: um as I can and set this up correctly. I
Speaker 1: was someone once said to me the only reason I
Speaker 1: talked nice about Mackenzie and so Don Barton will let
Speaker 1: me into their Davos party and full disclosure. I show up,
Speaker 1: I have a drink and I go home, unlike the
Speaker 1: surveillance staff who stays until two b two am. The
Speaker 1: Mackenzie Global Institute is truly one of the jewels of
Speaker 1: American intellectual work on India. They have been absolutely path
Speaker 1: breaking and trying to figure out the mathematics and dynamics
Speaker 1: of poverty. And they do this across a lot of
Speaker 1: other themes. Michael Chewy as a privilege of working with
Speaker 1: Don Barton at the MG I's a partner out of
Speaker 1: their San Francisco UH combine, and they're thinking about this
Speaker 1: technology stuff that we're all buried by and what the
Speaker 1: ramifications are gonna be. So this is like Michael a
Speaker 1: view from sixty thou feet. But let me cut to
Speaker 1: the media. Is my iPhone my friend or my enemy?
Speaker 1: What do you say after three pages of research? Well,
Speaker 1: I'll tell you. I mean, I think what we've discovered
Speaker 1: is that technology is just a lever for being more powerful.
Speaker 1: So depending on how you use it, it could be
Speaker 1: your friend or your enemy. But what we really wanted
Speaker 1: to do is look at the potential impact act of
Speaker 1: these technologies on jobs. What these these technologies that potentially
Speaker 1: could automate things that people do already, what those might
Speaker 1: mean for jobs. We looked at that in January and
Speaker 1: that we've published a sequel report which really talks about if,
Speaker 1: in fact, automation will be adopted increasingly do some of
Speaker 1: the things that we pay people to do, will there
Speaker 1: be enough work for people to do? Going for you
Speaker 1: have a prescription of policy prescription within the McKinsey Global Institute.
Speaker 1: Do you recommend that all nations. Should WiFi the country,
Speaker 1: is that available of a valid policy or should that
Speaker 1: be left to the private industry. Well, we'd never give
Speaker 1: policy advice. We do talk about different policy options. We
Speaker 1: do think that it is necessary in order to have
Speaker 1: to to derive the benefits of these technologies to in
Speaker 1: fact to have more connectivity going forward. But our most
Speaker 1: recent researcher has really been around UH, trying to understand
Speaker 1: if there's enough work for people to do, and if
Speaker 1: there is, what the transitions might be as we go forward, UH,
Speaker 1: and then what incomes might look like as as we
Speaker 1: go forward, as well as these technologies such as robotics
Speaker 1: and automation and artificial intelligence start to be adapted in
Speaker 1: the economy. Michael, before joining Mackenzie, you were the first
Speaker 1: chief information officer of the City of Bloomington, Indiana, and
Speaker 1: I'm wondering if you could bring that experience to bear
Speaker 1: on this very topic of jobs and automation. Are their municipalities, states,
Speaker 1: or indeed even countries that have it have a better
Speaker 1: understanding of what's going to happen and are implementing the
Speaker 1: types of programs and policies necessary to deal with it.
Speaker 1: Before this becomes you know, a riot in the streets
Speaker 1: because nobody has a job they want. Well, one of
Speaker 1: the things that we discovered in our research is even
Speaker 1: net of automation, UH, there are a lot of scenarios
Speaker 1: that we can model out which show there's enough work
Speaker 1: for people to do. Even as the robots and AI
Speaker 1: start to do more work. There's enough work for people
Speaker 1: to do, whether it's UM because we have increasing prosperity
Speaker 1: around the world, another billion people entering the consuming class,
Speaker 1: aging actually will cause more demand for a potential labor UH,
Speaker 1: deploying and developing the technology infrastructure, potentially even paying for
Speaker 1: what's currently unpaid work domestically. So that what that means is,
Speaker 1: if there's enough work, can we transition people into the
Speaker 1: work that there is to do into the new jobs
Speaker 1: of the future. Do we have any examples of that
Speaker 1: actually happening? So you know what, the the in history
Speaker 1: that the might cause for optimism is that we have
Speaker 1: been able to um solve similar scale of challenges. So,
Speaker 1: for instance, moving from the agricultural economy to the manufacturing economy.
Speaker 1: At the beginning of that story, there was no universal
Speaker 1: secondary school. We collectively invested in that in something called
Speaker 1: the high school movement. It was a true social movement.
Speaker 1: Truth be told now past the first two decades of life,
Speaker 1: retraining people at scale in a successful way, It's hard
Speaker 1: to find a lot of examples of that. We see
Speaker 1: some of them, whether it's you know, what's happening in
Speaker 1: some places in Europe, say Apart has a program. At
Speaker 1: the same time, we do think this is one of
Speaker 1: the grand challenges going forward. How can we retrain a
Speaker 1: lot of people in the mid career. Now, again, I'm
Speaker 1: an optimist. I live in California. I'd say we've done
Speaker 1: something similar before. We have a different challenge now and
Speaker 1: I'm hopeful we can do it, but it will require
Speaker 1: dedicated investment and effort to do so. Can you give
Speaker 1: us any any insight into what has been going on
Speaker 1: in China in this effort, because you know, if you
Speaker 1: have a workforce that is the size of many countries, uh,
Speaker 1: your challenges might be different just on the scale and
Speaker 1: that speed with which you have to move, particularly when
Speaker 1: you have a demographic challenge coming out of that one
Speaker 1: child policy. I think that's exactly right. I mean number one,
Speaker 1: I think one thing that we see in China is,
Speaker 1: you know, they are trying to adapt to adopt these
Speaker 1: technologies as quickly as possible because they realize they'll need
Speaker 1: the increased productivity which will allow them to continue to
Speaker 1: grow economically. But as you said, you know, as a
Speaker 1: country of one and a half billion people, it's workforce
Speaker 1: is or very soon will already be declining in size,
Speaker 1: and so again that retraining, that retraining UH imperatives is
Speaker 1: extremely strong for them as well. Quickly, here, what's the
Speaker 1: big report you have coming out at the beginning of
Speaker 1: the year wrapped around Dallas and the ene means is
Speaker 1: the mg idea of the mckensey Global Institute. Do you
Speaker 1: have an important report on a given nation coming out? Well,
Speaker 1: this this report is global and we do think that
Speaker 1: this report will form some of the discussions that will
Speaker 1: go into Davie as well. Very good, Michael Cheer, Thank
Speaker 1: you so much. Michael Chuey with mckensey Global Institute. Thanks
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Speaker 1: you prefer. I'm on Twitter at Tom Keane. Before the podcast,
Speaker 1: you can always catch us worldwide. I'm Bloomberg Radio,