Speaker 1: Hello, and welcome to Stephanomics, the podcast that brings the
Speaker 1: global economy to you. And this week we're in China
Speaker 1: for the Bloomberg New Economy Forum in an enormous conference
Speaker 1: complex at Yankee Lake, which is about an hour northeast
Speaker 1: of Beijing. It is truly vast. Took me ten minutes
Speaker 1: to walk to breakfast this morning. When I got there,
Speaker 1: I found myself battling for space at the breakfast buffet
Speaker 1: with the chief executive of Goldman Sachs and the former
Speaker 1: head of Google, Eric Schmidt. That was just breakfast. The
Speaker 1: place is teeming with business leaders and global thinkers, along
Speaker 1: with quite a large number of Chinese officials. To stimulate debate,
Speaker 1: we at Bloomberg Economics produced a book of original research
Speaker 1: on the global economy, including the Bloomberg Drivers and Disruptors Index,
Speaker 1: working out which countries are going to succeed in the
Speaker 1: new era for the global economy. In a minute, you'll
Speaker 1: hear a lively session I hosted here talking about that
Speaker 1: index and the research that went into it. But first
Speaker 1: a chat with one of the many, many interesting people here,
Speaker 1: Lord Nicolas Stern, an economist now and many years at
Speaker 1: the London School of Economics, who was the head of
Speaker 1: the Government Economic Service in the UK back in two
Speaker 1: thousand and six, when he chaired what continues to be
Speaker 1: a landmark review of the economics of climate change, the
Speaker 1: Stern Review. Lord Nicolas Stern, it's great to see you.
Speaker 1: I'm struck at this conference and lots of other things
Speaker 1: I go to. Now it's a very different debate about
Speaker 1: climate change than even a few years ago, let alone
Speaker 1: when you were chairing the Stern Review, which came out
Speaker 1: in two thousand and six. So and you're sitting here.
Speaker 1: You've obviously remained involved in this debate. But if you
Speaker 1: just sort of the perspective between now and then, would
Speaker 1: you say things have genuinely got better in terms of
Speaker 1: people's unders realistic understanding of what needs to be done
Speaker 1: to combat climate change or is it just louder. Something
Speaker 1: has got better, some things have got worse. Um, the
Speaker 1: science has got worse in the sense that it's still
Speaker 1: more worrying now, partly because things are coming through faster
Speaker 1: than we thought, more severely than we thought, but also
Speaker 1: that emissions have gone on rising, temperature has gone on rising,
Speaker 1: so that's more worrying. The understanding of these issues. I
Speaker 1: think is genuinely greater than it was before thirteen years
Speaker 1: ago when the Stern Review came out. I doubt if
Speaker 1: climate change was taught very much at schools and now
Speaker 1: right across Europe, and I guess in many parts United
Speaker 1: States and India and China it is taught at schools.
Speaker 1: Greater Tunberg now sixteen say she started learning about climate
Speaker 1: change at eight? Where from in school? So I'm university professor.
Speaker 1: The students coming through have all seen the subject of
Speaker 1: climate change discussed for several years of their education and
Speaker 1: their formative years, and they're putting pressure on the rest
Speaker 1: of us now. And there's some people who were a
Speaker 1: bit skeptical thirteen years ago who thought it was the
Speaker 1: best marginal Larry Summers, Bill Gates been. I remember I
Speaker 1: spoke to Bill Gates in two thousand and six, two
Speaker 1: thousand and seven, just after it come out, and he
Speaker 1: thought it was in some sense a diversion from the
Speaker 1: really big problem of poverty reduction. And it is absolutely
Speaker 1: a big problem poverty reduction. But we're seeing that climate
Speaker 1: change is a great destroyer of livelihoods, and that there
Speaker 1: are different ways of doing things which are becoming increasingly attractive.
Speaker 1: Restoring degraded land captures carbon in the soil, increases productivity,
Speaker 1: makes you more resilient against difficult weather. So I think
Speaker 1: that relationship between poverty reduction climate change is seen rather
Speaker 1: positively now, where perhaps a dozen years or so ago,
Speaker 1: good people who were interested in reducing poverty thought, oh goodness,
Speaker 1: this is an environmental diversion from our real task that
Speaker 1: I think has gone down enormously, and you pushed back.
Speaker 1: Actually in the session we were just in, that was
Speaker 1: quite a long session on climate change, and then there
Speaker 1: was a conversation with Bill Gates. But in that earlier
Speaker 1: session you pushed back on the implicit assumption of many
Speaker 1: of the speakers that there was there continue to be
Speaker 1: this trade off between economic growth and combating climate change.
Speaker 1: How is it that people are misunderstanding that, because at
Speaker 1: some level there is there can be a tradeoff. If
Speaker 1: you think of the carbon content of human activity as
Speaker 1: being in a fixed relation to the outputs of output
Speaker 1: goes up by ten percent carbon emissions go up by
Speaker 1: ten percent, then there actually there is a trade off.
Speaker 1: But of course the whole point of this is to
Speaker 1: dradic radically drive down the carbon content of what we
Speaker 1: do now. As you do that, it comes with innovation, discovery, investment,
Speaker 1: and growth. It drives down air pollution and water pollution,
Speaker 1: and that gives you cities where you can move and
Speaker 1: breathe and be much more productive and much more cheerful
Speaker 1: actually too. It um protects the natural capital and natural capital,
Speaker 1: you know, our forests and our oceans and our water,
Speaker 1: which are key parts of our productivity as human beings,
Speaker 1: are health as human beings, happiness as human beings. So
Speaker 1: if you see that process of driving down carbon in
Speaker 1: relations into output as being creative and innovative in this way,
Speaker 1: as bringing all kinds of benefits around health and so on,
Speaker 1: which are good for productivity, then you see that actually
Speaker 1: investing strongly in driving emissions down to zero is the
Speaker 1: growth story the twenty one century. Well, it's interesting when
Speaker 1: you talk about growth because we have lots of conversations
Speaker 1: on this podcast about the state of the global economy
Speaker 1: and particularly worries about slow down in the global recovery
Speaker 1: leading to another recession, which policymakers won't have enough tools
Speaker 1: to confront because we know we've sort of got closer
Speaker 1: to maxing out MONETROSSI and A constant theme which has
Speaker 1: also come up at this event is that governments are
Speaker 1: going to have to lean more on fiscal policy. It
Speaker 1: strikes me that a lot of ministers policymakers across Europe
Speaker 1: who hear the demonstrators out in the streets talking about
Speaker 1: the environment and can see the need for fiscal stimulus,
Speaker 1: will now be looking for ways of having fiscal stimulus
Speaker 1: that's also going to get you closer to that decarbonization.
Speaker 1: Is that is that going to be Is that too
Speaker 1: good to be true? Or do you think there are
Speaker 1: some genuine win wins there. It's an argument which we
Speaker 1: have to make, and yes, I do think there's some
Speaker 1: genuine win wins there. The world is demand deficient, interest
Speaker 1: rates on the floor, we have wonderful investment possibilities, we
Speaker 1: have loads of saving. So what we have to do
Speaker 1: is to have economic policies which draws through the investments.
Speaker 1: That means good policies in relation to carbon investing in
Speaker 1: R and D, stable institutions and so on that will
Speaker 1: draw through the investment. And we have to organize our
Speaker 1: finances that we have the right kind of finance in
Speaker 1: the right place, on the right scale, at the right time.
Speaker 1: And we can do that, and we can see how
Speaker 1: to make both things happen, and that will give you
Speaker 1: an increase in invest men, very good kind of investment,
Speaker 1: and the savings will come in the finance that investment.
Speaker 1: And it's a wonderful story of investment for growth, investment
Speaker 1: for increasing demand, a Schumpeterian story, the rate economic his story,
Speaker 1: and of innovation and discovery. It is a story which
Speaker 1: increases demand, accelerates the rate of technical progress, and is
Speaker 1: sustainable because it's a structure that doesn't turn in on
Speaker 1: itself and destroy its environment like a high carbon growth
Speaker 1: story would. So this is actually in our hands, and
Speaker 1: it would be overwhelmingly negligent if we didn't take that
Speaker 1: opportunity now. And I think that's increasingly seen And okay,
Speaker 1: so what if I put another layer on this. You're
Speaker 1: a policymaker who thinks, yes, I want to have more spending,
Speaker 1: I want to do it in a way that helps
Speaker 1: de carbonize. Oh and by the way, there's also a
Speaker 1: lot of concern around rising inequality. So I have to
Speaker 1: make sure that those investments have a progressive effect as well,
Speaker 1: that they don't damage the poor the way lots relatively speaking,
Speaker 1: the way lots of innovation and lots of other forms
Speaker 1: of economic growth have in the last few years. Can
Speaker 1: you give them that as well? Can you give them
Speaker 1: a progressive, a pro poor way of supporting the environment.
Speaker 1: We absolutely can, but it means we have to run
Speaker 1: out of policies much better than they've been done in
Speaker 1: the past. But we can see how to do that.
Speaker 1: Part of the story. Suppose you have a carbon price.
Speaker 1: In other words, you stop letting people to do very
Speaker 1: damaging things for nothing, so you abolish the subsidy associated
Speaker 1: with that, another way of looking at it. But you
Speaker 1: have the carbon price and you have revenues. So what
Speaker 1: do you do with those revenues. Well, one thing that
Speaker 1: you should do is make sure that the poorer people
Speaker 1: in the population are protected, and you can actually make
Speaker 1: them better off. So if you return some of that
Speaker 1: money to the population, but make sure more goes to
Speaker 1: the poorer population and they are actually better off as
Speaker 1: a result. But you have to do it, and you
Speaker 1: have to do it consciously. Secondly, we're talking about a
Speaker 1: restructuring of our industries. We're going driving down to zero
Speaker 1: carbon everywhere in the next thirty or forty years, and
Speaker 1: that means that you do things very differently. Some things
Speaker 1: you stop doing, you stop coal mining, and these are
Speaker 1: the people who are specialized in making pistons for cars.
Speaker 1: The car makers might employ the same people, but the
Speaker 1: people who supply them with bistons would be having to
Speaker 1: switch to other things. These are dislocations. This is radical
Speaker 1: change and we've been really bad in the past. If
Speaker 1: you think of the northern towns in the UK applies
Speaker 1: to other countries too. But if you think of the
Speaker 1: northern towns in the UK, movement from manufacturing to services,
Speaker 1: that's what happens as people's incomes go up and they
Speaker 1: go out to eat and they go on holidays. If
Speaker 1: you look at labor saving technical progress, that's been fast
Speaker 1: and it's going to be fast in the future with
Speaker 1: a I and robotics and so on. If you think
Speaker 1: of globalization and the changing international division of labor, three
Speaker 1: trends which they'll have their ups and downs, but they'll continue.
Speaker 1: And then you whack them with a global financial crisis
Speaker 1: on top of all that, and you get dislocation which
Speaker 1: is very geographically focused. And we have to take that
Speaker 1: on directly. And it's not just from climate policies. It's
Speaker 1: actually probably bigger from other kinds of things are there
Speaker 1: happening as well. I am fascinated by what you think
Speaker 1: when you look at the US presidential campaign as as
Speaker 1: a serious economist who has also done all this serious
Speaker 1: thinking around climate change. On the one hand, you have
Speaker 1: almost a familiar site, although surprising in some ways, but
Speaker 1: you have an administration that's kind of in denial about
Speaker 1: climate change. But on the other side, you now have
Speaker 1: a Democratic Party in Democratic candidates who are gathering behind
Speaker 1: really very dramatic efforts to combat climate change that could
Speaker 1: involve of destroying eliminating a large chunk of the U
Speaker 1: S energy business almost overnight in the case of Elizabeth Warren.
Speaker 1: When you see that, on the one hand, you've got
Speaker 1: more serious proposals by leading presidential candidates than ever before,
Speaker 1: certainly more radical ones, but um possibly a worry that
Speaker 1: they are not realistic in what you can actually achieve
Speaker 1: in a five year or ten year time frame. What
Speaker 1: do you think. I think you can put in place
Speaker 1: strong policies, and if you have strong policies that people
Speaker 1: believe will continue, then investment comes behind those policies. So
Speaker 1: I think good policies which people find credible over the
Speaker 1: medium term, would inly would lead to important investment booms,
Speaker 1: and that would lead to rising demand and stronger growth,
Speaker 1: and it would be highly productive growth because a lot
Speaker 1: of that sufficiency. But it would also, and this is
Speaker 1: what we're discussing just now, it was also carry with
Speaker 1: it dislocation. So your policies have to be not simply
Speaker 1: bringing through this very attractive, highly productive, cleaner investment, but
Speaker 1: at the same time they would have to be explicitly
Speaker 1: oriented of our managing dislocation. And if you have one
Speaker 1: without the other, well then you risk having neither. Well,
Speaker 1: that's so, and that presumably is your concern when you
Speaker 1: look at some of these more extreme proposals, if they're
Speaker 1: not well thought. Through the Green New Deal, which has
Speaker 1: a very short time frame on it, is there a
Speaker 1: risk of a backlash if you try and do too fast.
Speaker 1: Suppose you tried to go zero carbon by twenty ten
Speaker 1: years from now. Would all the internal combustion cars be
Speaker 1: off the road? Ten years from now, would all the
Speaker 1: gas fired boilers be out? I think about eight million
Speaker 1: of them in the UK. I don't know how many
Speaker 1: there are in the US. Would all those be out
Speaker 1: in ten years. I think it's hard, and thank you
Speaker 1: very much, very good. Well, I'm delighted to have found
Speaker 1: another eminent person in the corridors here at the New
Speaker 1: Economy Forum. Ju Min, former Deputy Managing Director of the
Speaker 1: IMF and former Deputy governor of the Chinese Central Bank,
Speaker 1: now running a Sinkhwai University's National Institute of Financial Research.
Speaker 1: I should say, we're hoping that this is going to
Speaker 1: be quiet. That we've just found a corner of this
Speaker 1: conference room, so it might not be quite the same
Speaker 1: broadcast quality that we used to doctors. You you have
Speaker 1: been and I have known you over the years observing
Speaker 1: the international system, both from the I m F and
Speaker 1: before that at the People's Bank of China. I spoke
Speaker 1: to the chief economist of the World Bank a few
Speaker 1: a couple of months ago, Penny Goldberg, who was a
Speaker 1: great trade economist. She says she's changed her view recently.
Speaker 1: She thought that this move away from globalization was temporary.
Speaker 1: Now she's not so sure. Maybe we will we have
Speaker 1: seen the peak period for global integration. What do you
Speaker 1: think the globalization will continue? This is driven by the
Speaker 1: human nature, driven by the product productivity and growth and
Speaker 1: efficiency on the Yes. Currently, we saw so many things
Speaker 1: in the sort of on the globalizations, particularly from some
Speaker 1: major economies, and but I don't think they were stop
Speaker 1: the tram if you're looking for the the statistics, he
Speaker 1: was in the past eighteen months after US trying to
Speaker 1: trade fractions the US inport from trying to drop ten
Speaker 1: percents and trying to import from US drop ten percents.
Speaker 1: That's that's the results. But both countries doing quite quite okay.
Speaker 1: China still have a sweep percent of trade growth, US
Speaker 1: still really more. That's the same US trade deficity even
Speaker 1: wider from two point nine percent of GDP to sweep
Speaker 1: on two percent GDP today on So it's just say,
Speaker 1: I mean the whole water still in the course. Trade
Speaker 1: slowing down, have its own course now because the technology movements,
Speaker 1: because the service trading become more important than it then
Speaker 1: the goods trading, right, And obviously the current populism has
Speaker 1: an active impact on the globalition, but fundamentally I don't
Speaker 1: think they would change because you know, sweet quart of
Speaker 1: people living in the emerging market and income countries looking
Speaker 1: for the better good life, and the people in the
Speaker 1: rich country looking for a good quality and low prices
Speaker 1: products as well, and the product surprise chair and become
Speaker 1: longer with the technology, and I will see you will
Speaker 1: see more labor divisions and in all these sections, um
Speaker 1: So in their sense, I think that that's the the
Speaker 1: bit tranpitway for the whole war, and we're just in
Speaker 1: this very short term periods for the bumping periors. I
Speaker 1: guess one of the ways, and I've heard do you
Speaker 1: say that on one of the panels yesterday, is very
Speaker 1: interesting to point out that traders continue to grow and
Speaker 1: actually we know that the the other economic policies in
Speaker 1: the US at the moment, that the stimulus that came
Speaker 1: from tax cuts and other things, we're naturally going to
Speaker 1: increase the amount of US even as the administration was
Speaker 1: trying to cut it. Yeah, that's s and I basic economics.
Speaker 1: But the one thing that I think could change the game.
Speaker 1: And I think it's interesting, especially from your perspective understanding
Speaker 1: the banking side as you do. Um people do worry
Speaker 1: about the trade war spilling into the international financial markets,
Speaker 1: and we've seen, in fact, we had one of the
Speaker 1: bloomberg scoops of the last few months has been the
Speaker 1: news that in the administration people were talking about wanting
Speaker 1: to put limits on US investors investing in China as
Speaker 1: part of the trade war. Is that something that you
Speaker 1: Is that something people are worried about here officials here
Speaker 1: in China, And do you think it could spill into that? Right? Well,
Speaker 1: we were observed the US government proposed some sort of
Speaker 1: restruction on US financial in siting investing Chinese company in
Speaker 1: the Chinese market, right for that, But in the real world,
Speaker 1: in the past twelve months, US capital actually moved in
Speaker 1: more than ever before in Chinese financial market and particularly
Speaker 1: in the tex sector. It's a very interesting The Chinese
Speaker 1: money moved to the US tech sector slowed down dramatically,
Speaker 1: incurse specific, but US money moving into the China tax
Speaker 1: actor increased quite a bit. And the US not the
Speaker 1: only US that global capital moving into the Chinese financial
Speaker 1: market in terms of acting market and financial market double
Speaker 1: the market shares in the past turn month. Do you finally,
Speaker 1: I know that you were sitting in the IMF for
Speaker 1: much of the response to the global financial crisis and
Speaker 1: see in how people were able to coordinate. Policymakers were
Speaker 1: able to come together, For example, at the G twenty
Speaker 1: meeting in two thousand and nine in London in favor
Speaker 1: of fiscal stimulus at that time. Do you think there's
Speaker 1: been there has really been a change in the capacity
Speaker 1: for international cooperation or you know when you walk around
Speaker 1: events like this, do you think actually all the same
Speaker 1: people are still talking together even with some of the
Speaker 1: noises coming from the US, and there's a big structure change.
Speaker 1: I mean the first issues in twos age what are
Speaker 1: the high risk of sector is a banking sector. It's
Speaker 1: a household death sector, right because the market you know,
Speaker 1: sub ground things and the banking sector there's a bat
Speaker 1: after ten years the banking sectors and which is stronger
Speaker 1: than the saver and the household is okay, but risk
Speaker 1: shift to wear to non bank informational situes. The s
Speaker 1: S Manu companies ST. Manu Company in the yet in
Speaker 1: ideas it today it's almost the same size of a
Speaker 1: banking section now is absolutely amazing. There was only only
Speaker 1: thirty percent of banking secuting in tools on the old age.
Speaker 1: So you see how fires and that the company is
Speaker 1: investing in shares for people's questions and so the exposures
Speaker 1: are huge, right, so non benefits, the risk is a
Speaker 1: much higher higher land tools are not for sure sector.
Speaker 1: The risk exposure is higher ensures on the old age,
Speaker 1: you know, they have a higher desk solvent deaths risk
Speaker 1: is much higher the government the condess, right, I mean
Speaker 1: in tolson A, the government test is rather level, right,
Speaker 1: I mean, but today that everyone at a roughly death level,
Speaker 1: right GDP. So, so you're right, and we do have
Speaker 1: a very different risk structure compared to the age. The
Speaker 1: policy spaces rare limitings and most importantly in Tolson A,
Speaker 1: the global political corporation us alms apart. So I think
Speaker 1: that would be very, very difficult to the others. Let's
Speaker 1: say he doesn't shoo me in. Thank you very much,
Speaker 1: thank you the tap. I mentioned earlier that Bloomberg's economist
Speaker 1: did some original research for the New Economy Forum, including
Speaker 1: a new global Drivers and Disruptors Index, which we put
Speaker 1: in a report for the delegates and published online this week.
Speaker 1: Or we just had a panel session about that research,
Speaker 1: featuring our own economists and outside experts. I've just got
Speaker 1: time to give you a taste of it here. You're
Speaker 1: gonna hear first from Bloomberg's chief economist, Tom Orlick often
Speaker 1: on the podcast. He's going to be explaining the thinking
Speaker 1: behind the Drivers and Disruptors index, and we then have
Speaker 1: a response from the author and former chief economist of HSBC,
Speaker 1: Stephen King. The main takeaway from our search is that
Speaker 1: the path to development is getting narrower and harder to follow.
Speaker 1: In general, low and middle income countries are less well
Speaker 1: positioned to deal with the disruptive forces which are reshaping
Speaker 1: the global economy. Let's just think about why that is
Speaker 1: for a second um. In general, low and middle income
Speaker 1: countries try and develop by exporting in a world moving
Speaker 1: towards protectionism. That's getting harder to do. In general, low
Speaker 1: and middle income countries either have a big factory sector
Speaker 1: or they want to have a big factory sector. In
Speaker 1: a world where the range of tasks that can be
Speaker 1: performed cheaply and efficiently by machines is ever expanding, Having
Speaker 1: a big cheap workforce isn't the advantage that it used
Speaker 1: to be. In general, low and middle income countries don't
Speaker 1: have very good communication infrastructure and don't have a very
Speaker 1: strong services sector. So low and middle income countries are
Speaker 1: not well positioned to seize the opportunity of the digital economy.
Speaker 1: Many low and middle income countries are already quite hot
Speaker 1: and have a large agricultural workforce, which means that they
Speaker 1: face some significant risks from climate change. And many low
Speaker 1: and middle income countries have high inequality, low social mobility,
Speaker 1: ineffective institutions for government, and high crime rates, which in
Speaker 1: various configurations mean that they will find it more difficult
Speaker 1: to ignore the siren song of populism. So across automation, digitization, protectionism,
Speaker 1: climate change, and populism, low and middle income countries are
Speaker 1: less robust to the challenges and less well positioned to
Speaker 1: seize the opportunities. And we think that means the path
Speaker 1: to development is going to get harder to follow. There
Speaker 1: will be less countries moving from low to middle income
Speaker 1: and from middle to high income. Let me illustrate that
Speaker 1: by spending a couple of minutes speaking about the case
Speaker 1: of China. Um So, China scores extremely well on our
Speaker 1: drivers Index. If we think about the traditional drivers of development,
Speaker 1: there aren't many countries that have done it better than China.
Speaker 1: China has a modern infrastructure, China hasn't a can do government.
Speaker 1: China spends a huge amount of money on research and development.
Speaker 1: On our Driver's Index, China ranks as the fourth best
Speaker 1: economy and the best emerging market by a wide margin.
Speaker 1: But when we think about those disruptive forces that are
Speaker 1: reshaping the global economy, China faces some significant challenges. China
Speaker 1: is significantly exposed to the risk of protect action is um.
Speaker 1: China faces risks from climate change. China's relatively high degree
Speaker 1: of inequality and low social mobility could pose a medium
Speaker 1: term challenge to social stability. Does that mean China's development
Speaker 1: story is over? Absolutely not. China's policymakers in the past
Speaker 1: have proved to be extremely smart in finding solutions to
Speaker 1: difficult development challenges. What it does mean is that for
Speaker 1: China and other lower middle income countries, the path ahead
Speaker 1: is going to be harder than the path which they've
Speaker 1: just traveled. But I thought I just focused a little
Speaker 1: bit on the on the populism part of the story,
Speaker 1: because Tom, you were saying that one of the big
Speaker 1: areas of vulnerability was the popular isn't beginning to come
Speaker 1: through in lower middle income countries, And of course you can.
Speaker 1: It depends on your definition of populism. P P looked at, say,
Speaker 1: I know, Brazil or Argentina, or Mexico, maybe Turkey, maybe
Speaker 1: the Philippines. There are a whole range of countries where
Speaker 1: you might say that there are populous leaders in place
Speaker 1: who are pursuing policies, that it was a little bit
Speaker 1: different from what's happened in the past. But I think
Speaker 1: it's also striking is that some of the countries who
Speaker 1: identify as being in a stronger position overall also I
Speaker 1: think are beginning to experience feelings of populism. Um. In
Speaker 1: the case of the UK, admitally the political parties are
Speaker 1: just as strong as they always were, but the nature
Speaker 1: of those parties is different, I think from how it
Speaker 1: has been in the past, that both the Conservative Party
Speaker 1: and the Labor Party going into this coming general election
Speaker 1: both I think much more populous than was the case
Speaker 1: maybe ten twenty years ago. The same is true in
Speaker 1: parts of the rest of Europe, and you think look
Speaker 1: at the politics in Italy or France over the course
Speaker 1: of the last few years. Maybe the incumbents have remained
Speaker 1: non populous, but there's certainly underneath the sort of surface
Speaker 1: bubbling away a sense of populism beginning to come through.
Speaker 1: At the same as broadly true of the US. So
Speaker 1: I thought what I could talk about was was the
Speaker 1: idea that it's not just lower middle income countries that
Speaker 1: have suffered from populism, but it is countries whereby there
Speaker 1: are parts which have been left behind, where there's regional
Speaker 1: imbalances that have emerged that have led to this beginning
Speaker 1: of populism. And if you imagine the map of Europe
Speaker 1: and break Europe down into tiny little subregions and not
Speaker 1: looking at country by country comparisons, but tiny little subregion comparisons,
Speaker 1: and then think about those parts of Europe that have
Speaker 1: seen the biggest increases in living standards relative to everybody else,
Speaker 1: with the biggest increases in the League table of living standards,
Speaker 1: and those parts of Europe which have seen the biggest
Speaker 1: relative declines in living standards, you get a quite interesting map.
Speaker 1: The first part of the map, the biggest increases. Most
Speaker 1: of it is a kind of central spine right in
Speaker 1: the middle of Europe, like a kind of re built
Speaker 1: Holy Roman Empire or something like that. Of course, it's
Speaker 1: partly associated with the fall of the Berlin Wall, the
Speaker 1: removal of the Iron Curtain, and the creation of almost
Speaker 1: like new economic synapses in the middle of Europe, new
Speaker 1: markets being created which have led to tremendous gains over
Speaker 1: the course of the last twenty or thirty years. But
Speaker 1: also in Europe. It's a kind of geographical periphery um,
Speaker 1: a sort of literal geographical periphery of parts which have
Speaker 1: been left behind Greece most obviously for all sorts of
Speaker 1: sovereign reasons, big chunks of Italy, and interestingly quite big
Speaker 1: chunks of the UK. UM. So I come from Greater London.
Speaker 1: London has done incredibly well over the last twenty or
Speaker 1: thirty years. We became from the northeast of England, or
Speaker 1: from West Wales, you came from Cornwall or Devon. You
Speaker 1: haven't just fallen back relative to the rest of the UK,
Speaker 1: you've fallen back relative to the rest of Europe by
Speaker 1: quite a dramatic degree. So one example here is that
Speaker 1: twenty years ago West Wales in capita incomes was significantly
Speaker 1: richer than say, Bratislava, whereas today Bratislava is signal a
Speaker 1: frequently richer than West Wales and just dwelling on the
Speaker 1: UK for a few seconds more. And when you look
Speaker 1: at the patterns of voting in twenties sixteen for Brexit,
Speaker 1: it was largely those geographical regions that have been left
Speaker 1: behind voted to leave the EU, not because necessarily we're
Speaker 1: anti Europe, because they wanted to feel they wanted to
Speaker 1: have some sense of change, some sense of of shift.
Speaker 1: Other countries. France another good example, interesting example France, because
Speaker 1: French incomes overall are above the European average, as you'd
Speaker 1: probably expect, but if you actually break France down into
Speaker 1: its subregions, um, you find that of about thirty regions
Speaker 1: or so, only two have incomes above the European average.
Speaker 1: The Elder France, of course, dominated by Paris and ron Alp,
Speaker 1: which is dominated by Leon Courcheval other lovely ski resorts,
Speaker 1: which has done also very very well. But every other
Speaker 1: region of France has incomes below the European average. And
Speaker 1: you sort of think about the DJO, and you think
Speaker 1: about support for the PEN in parts of France, you think, well,
Speaker 1: that there's a reason for that in one sense, which
Speaker 1: is the sense of being left behind. Thanks Stephen, and
Speaker 1: I think you've highlighted some of the things that um,
Speaker 1: you know, we thought about and doing the report, but
Speaker 1: I think we would also revisit if we were thinking
Speaker 1: about how to develop this index, because the things that
Speaker 1: have been sort of lessons of the last ten or
Speaker 1: twenty years. Certainly, when I think of what we focused
Speaker 1: on when I was first learning economics, there was a
Speaker 1: lot of concern around the flow of goods and to
Speaker 1: some extent about the opening up of the capital, and
Speaker 1: we underestimated what the flow of even up till now,
Speaker 1: what the flow of labor was going to do in
Speaker 1: terms of its political impacts. If you look across Europe,
Speaker 1: if you look at the US, how that how immigration
Speaker 1: and flows of people have now unexpectedly been driving political dynamics.
Speaker 1: But I think the other the other two things that
Speaker 1: have kind of come back to bite us is the
Speaker 1: importance of the good and the bad bads of having
Speaker 1: agglomeration benefits, the fact that city these have become places
Speaker 1: that were successful have become more and more successful and
Speaker 1: as you suggest, leaving behind other parts of countries and regions.
Speaker 1: And I guess related to that just that there has
Speaker 1: been a really strong geographical dimension to growth and to
Speaker 1: the political impact of of growth. And if you look
Speaker 1: at as you said, if you look at Europe, you
Speaker 1: know it was one of the things that the British
Speaker 1: used to sort of say, gosh, the Eurozone such a
Speaker 1: bad idea. How can you have these different countries with
Speaker 1: the same currency with such large gaps of income? Of course,
Speaker 1: the gaps of income between the poorest and the richest
Speaker 1: region in the UK there is actually a larger gap
Speaker 1: than between or as large as any gap between other
Speaker 1: different parts of the Eurozone, and at least to the
Speaker 1: Eurozone had and albeit very painful mechanism for trying to
Speaker 1: narrow those gaps. In the UK, those gaps were never
Speaker 1: really addressed successfully and festered and worsened um and one
Speaker 1: of the consequences, as you suggest, was at least a
Speaker 1: significant chunk of the votes for Brexit, which which made
Speaker 1: the difference in that In the end, thanks for listening
Speaker 1: to Stephanomics. We'll be back next week with more on
Speaker 1: the ground insights into the global economy. In the meantime,
Speaker 1: you can find us on the Bloomberg Terminal, website, app
Speaker 1: or wherever you get your podcast. We'd love it if
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Speaker 1: so it can reach more listeners. And for more news
Speaker 1: and analysis from Bloomberg Economics during the week, follow at
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Speaker 1: my Stephanomics. This episode was written and reported by b
Speaker 1: Stephanie Flanders. It was produced by Magnus Hendrickson and edited
Speaker 1: by Scott Lamman, who is also the executive producer of Stephanomics.
Speaker 1: Special thanks this week to Lord Nicholas Stern, Tom Marlick,
Speaker 1: Chang Hu, Stephen King, mar Jun, Kelly Bell Nap, Pete Chan,
Speaker 1: and everyone involved with the Bloomberg New Economy Forum. Francesca
Speaker 1: Lee is the head of Bloomberg Podcast. Mm hmmm.