Speaker 1: This is Bloomberg wool Street Week. What's the state of
Speaker 1: corporate governance? The deficit is a real issue. The US
Speaker 1: economy continues to send mixed signals to the financial stories,
Speaker 1: the cheap our word fed action to con concerns over
Speaker 1: dollar liquidity and encouraging China data. The town's reaction to
Speaker 1: news on Brexit. Through the eyes of the most influential
Speaker 1: voices Larry Summers, the former Treasury Secretary, star Ward CEO,
Speaker 1: Kevin Johnson sec Chairman, Jake Clayton, Bloomberg Wall Street Week,
Speaker 1: we've David Weston on Bloomberg Radio. It all started out
Speaker 1: so well, a new year with bright prospects for markets
Speaker 1: and renewed global growth. But even as we began, there
Speaker 1: was a virus growing in central China that would soon
Speaker 1: infect tens of thousands and kill hundreds, and so trade
Speaker 1: and commerce and travel began to shut down, adding the
Speaker 1: prospect of reduced economic growth to the tragic human toll.
Speaker 1: And so we start our program with the economic effects
Speaker 1: of the coronavirus, where our contributor Zanny Minton Betto, she's
Speaker 1: editor of the Economist, and Glenn Hubbard of the Columbia
Speaker 1: Business School, Dr Hubbard served as the Chairman of the
Speaker 1: Council of Economic Advisors under President George W. Bush. So
Speaker 1: welcome both of you. Great to have you here. Thanks.
Speaker 1: Is any gonna start with you? Because last week the
Speaker 1: cover of The Economist was rather clever. It was a
Speaker 1: globe with the surgical mass in the form of the
Speaker 1: Chinese flag on it. Where are we right now and
Speaker 1: this what are the economic effects likely to be? Well,
Speaker 1: we we don't really know, but my suspicion is that
Speaker 1: they are going to be quite a lot bigger, even
Speaker 1: than those numbers that you cited. And let me tell
Speaker 1: you why. And I'm very struck how little reaction there
Speaker 1: has been in particularly this week, where I think they've
Speaker 1: basically kind of shrugged off any any concerns about the coronavirus.
Speaker 1: And the reason I worry a bit is that the
Speaker 1: prism through which many analysts are looking at this is
Speaker 1: the prism of the SARS virus which in two thousand two,
Speaker 1: two thousand and three hit China and parts of Asia.
Speaker 1: And the impact then was a very sharp decline in
Speaker 1: Chinese GDP, but very quick, and then a very dramatic
Speaker 1: bounce back the following quarter. So by the when you
Speaker 1: looked at it over a year, it was a kind
Speaker 1: of blip. I think there are several reasons why this
Speaker 1: time is different. One is people infected already a lot larger,
Speaker 1: It's traveled further, and we aren't anywhere near the peak
Speaker 1: yet we don't know with how far we are from
Speaker 1: the peak. But more importantly, China is a very different
Speaker 1: economy than it was in two thousand two three. It's
Speaker 1: much bigger then, it was about four pc of global
Speaker 1: GDP now it's about six It's much much more integrated
Speaker 1: into global supply chains. You know now there are huge
Speaker 1: number of global companies that rely on Chinese supply chains,
Speaker 1: which is why you're seeing car companies outside of China
Speaker 1: already having to think about shutting down there. Their factory
Speaker 1: is well away from Wuhan. And thirdly, it's the Chinese
Speaker 1: themselves are much much more mobile. There's much more movement.
Speaker 1: I was really struck before they shut all the flights down.
Speaker 1: I think it's two hundred thousand people go in and
Speaker 1: went in and out of China every day. That's six
Speaker 1: times more than two thousand to two thousand and three.
Speaker 1: As Jenny says, the markets just keep going up, and
Speaker 1: they took a hit for a couple of days, but
Speaker 1: they're back up now again. Are the markets getting wrong
Speaker 1: and our economist getting wrong, our kondomist underestimated and possible
Speaker 1: fact Well, I think what economists done in the market
Speaker 1: is focused on the near term GDP effects that you mentioned,
Speaker 1: and I have no reason to quarrel those numbers, but
Speaker 1: I agree with Zanny. First of all, China is starting
Speaker 1: off in a much weaker economy going into this than
Speaker 1: was true during Stars. It's, as Zanny point out, four
Speaker 1: times the share of world output that it once was,
Speaker 1: and the global connections are important. I also think another
Speaker 1: casualty here is fueling china skepticism around the world. I
Speaker 1: think the markets maybe shrugging a bit too much. We
Speaker 1: don't know where it's going, is any but is there
Speaker 1: a risk but perhaps the very globalization that makes China
Speaker 1: a larger part of the world economy. Yeah, I think
Speaker 1: there is a risk. And don't forget this is coming
Speaker 1: on top of what was already a very tandentious relationship
Speaker 1: between the U. S and China. You know, we did
Speaker 1: have that Phase one trade deal a few weeks ago,
Speaker 1: which has made it one sort of heat aside relief,
Speaker 1: but really underlying that is a shift in both countries
Speaker 1: to seeing the other as a strategic competitor, a concern
Speaker 1: about the particularly in the technology sphere that you know
Speaker 1: that the U S des are to not have Huawei
Speaker 1: in five G and vice versa. If this goes on
Speaker 1: for months rather than weeks, I think you have a
Speaker 1: really profound impact. People will say, can we rely on
Speaker 1: a Chinese supply chain? What does it do the economy? Well,
Speaker 1: I think for the U. S economy will be very
Speaker 1: modest in terms of a g D effect in the
Speaker 1: near term. But again, if global supply change fracture, that
Speaker 1: is a big change for business. And don't forget the
Speaker 1: Chinese economy itself, internal problem in the Chinese economy or
Speaker 1: perceived lack of legitimacy as big global implications. So again
Speaker 1: shrug is not what I'd be doing. That's another question.
Speaker 1: What how how does Spain handle this and what is
Speaker 1: the impact on him? And part of the last few
Speaker 1: years has been, you know, the very very dramatic centralization
Speaker 1: of power. It went from being as a collective authoritarianism
Speaker 1: to a one man authoritarianism. He's got a huge amount
Speaker 1: at stake, and I think that very very draconian response,
Speaker 1: which I think increasing new people are going to question you,
Speaker 1: is the cost of the response of trying to shut
Speaker 1: down whole parts of the country sustainable and worth it?
Speaker 1: And are we gonna do this again and again and again?
Speaker 1: In fact, we have these viruses come up more and
Speaker 1: more often, I guess, particularly in part because the human
Speaker 1: occupation infringes nature. I mean, you know, for example, in China,
Speaker 1: people are saying they're living closer to bats now as
Speaker 1: a practical matter, and so they come into contact with
Speaker 1: one another. So we're gonna have it more and more often.
Speaker 1: Zany's got a great question, are we going to take
Speaker 1: these draconian steps every time? I don't think we can,
Speaker 1: and I think politically the regime would be in trouble
Speaker 1: if it did. So. I think these longer term questions
Speaker 1: are the one to be focused on. But in the meantime,
Speaker 1: there are these really interesting kind of butterfly wing consequences.
Speaker 1: You know, coffee prices tumbling because all the Starbucks is
Speaker 1: being closed, Chilean exports of wine up to see more
Speaker 1: of those, Because I think a lot of people aren't
Speaker 1: really you know, I I certainly am not aware of
Speaker 1: the very details of these supply chains. So there's going
Speaker 1: to be really surprising consequences. The world's plastic flowers made
Speaker 1: in China? Is that right? I didn't know that. So
Speaker 1: it's another aspect of this globalization as a pract matter
Speaker 1: we can't even anticipate. Well, that's absolutely true. And of
Speaker 1: course right now globalization has skeptics among elected leaders, including
Speaker 1: in the United States, and so these all feed that skepticisms. Well,
Speaker 1: it's a fascating point. It's not just among leaders. The
Speaker 1: globalization has skeptics. You see it in the United States,
Speaker 1: you see it in Western Europe. There are a lot
Speaker 1: of people in the populace who say, I'm not sure
Speaker 1: I like this globalization so much. That's absolutely true, and
Speaker 1: I'm interested in this country. What happens. Let's let's just
Speaker 1: imagine I hope it doesn't, but let's imagine this goes
Speaker 1: on for a few months, and let's say we have
Speaker 1: a bigger outbreak here in the US too. What is
Speaker 1: the president going to do in terms of his relationship
Speaker 1: with the Chinese leader and the reaction to China. It's
Speaker 1: also reinforcing this sense of division between the US and China,
Speaker 1: So I'm kind of interested. I think it certainly would
Speaker 1: feed the President's skepticism. And let's remember that the president's
Speaker 1: opponents in this race or is at least a skeptical
Speaker 1: as China, not more so. In fact, he may be
Speaker 1: the China friend among our contributors will be staying with us,
Speaker 1: and you can check out what's coming up next week
Speaker 1: on Wall Street Week by heading to Bloomberg Market's official
Speaker 1: Twitter account. We're gonna have a poll each week focused
Speaker 1: on what you'd like to hear from our contributors. That's next.
Speaker 1: This is Bloomberg Wall Street Week. This is Bloomberg Wall
Speaker 1: Street Week with David Weston from Bloomberg Radio. We welcome
Speaker 1: now Larry Summers coming to us from Newton, Massachusetts. Zanny Minton,
Speaker 1: Beddos and Glenn Hubbard are still with us here in
Speaker 1: New York. So Larry, thanks so much for joining us.
Speaker 1: I know that you think that basically any of the
Speaker 1: Democrats would be better on economic policy than President Trump.
Speaker 1: But among the Democrats, is there much of a variation. Look,
Speaker 1: I think the Democrats are all much better than President Trump.
Speaker 1: They don't have the same truculence, they don't have the
Speaker 1: same willingness to give away They don't have any willingness
Speaker 1: to give away money UH to rich people. They don't
Speaker 1: have the same resisting of alliance. They all recognize that
Speaker 1: saving the environment is an economic issue, not just an
Speaker 1: aesthetic issue, and President Trump doesn't understand any of that.
Speaker 1: In general, I prefer the Democrats who recognize that inequality
Speaker 1: and fairness are crucial issues, but not the only crucial issues,
Speaker 1: and who also understand how important it is to grow
Speaker 1: our economy more rapidly, because only with a growing economy
Speaker 1: and a more rapidly growing economy can we afford to
Speaker 1: provide early early childhood education for all our kids. Only
Speaker 1: can we afford enough scientific research, make the necessary investments
Speaker 1: and renewables to lead the world with respect to climate change.
Speaker 1: Only with more rapid growth can we raise middle class
Speaker 1: standards of living at a rapid rate. So I prefer
Speaker 1: the more moderate UH Democrats, people like UH, like former
Speaker 1: Vice President Uh Biden, the candidates whose names begin with
Speaker 1: B Basically they're less UH names, who recognized importance of
Speaker 1: having a stronger economy in order to make it possible
Speaker 1: to do all the necessary public investments and to do
Speaker 1: all the necessary things to support UH the middle class,
Speaker 1: and the approach UH frankly taken by Senator Sanders and
Speaker 1: Senator Warren that acts like there's no constraint on how
Speaker 1: much the government can spend, that the government can add
Speaker 1: up as spending, that there's no limit to how high
Speaker 1: the taxes that can be placed on affluent people are.
Speaker 1: That thinks the only issue is tearing down the people
Speaker 1: who are most successful UH in our country. I don't
Speaker 1: think that's nearly as productive an approach. You know, there's
Speaker 1: an important philosophical question that people have to ask about economics. Yes,
Speaker 1: no question, our highest priorities standing with the middle class.
Speaker 1: But do you believe that if we have more massively
Speaker 1: successful people in the United States that will be good
Speaker 1: because it will be part of a process of strengthening
Speaker 1: our economy that will benefit UH everybody, That it will
Speaker 1: create more exports, that it will create more jobs, that
Speaker 1: will create more opportunities. Or do you believe that if
Speaker 1: we just don't have successful people that's better. Everybody agrees
Speaker 1: on the Democratic side that success needs to be shared
Speaker 1: and shared much more than it has been in recent decades,
Speaker 1: and certainly vastly more than it has been with the
Speaker 1: Trump tax cuts. But is the objective to really regard
Speaker 1: somebody who does enough stuff to make a billion dollars
Speaker 1: almost a criminal? As Senator Sanders sugget, I don't think
Speaker 1: those are the values of the American people. I don't
Speaker 1: think those are values that will help our economy succeed. Okay,
Speaker 1: so let's turn to somebody who served in the Republican administration.
Speaker 1: What Larry just said, is that a democratic point of view?
Speaker 1: Because pro growth for the Democrats, pro growth should be
Speaker 1: everybody's point of view. It's not a democratic or Republican phrase.
Speaker 1: Certainly hardened to hear the attacks on what I would
Speaker 1: call freely extreme views from Senator Sanders and Senator Warren.
Speaker 1: I would give the president a little more credit in
Speaker 1: economic policy. While he has made some steps that I
Speaker 1: don't agree with, I think by and large the corporate
Speaker 1: tax plan was very good. Has bent towards lighter, smarter
Speaker 1: regulation also very good to me. The real frustration in
Speaker 1: this campaign is that we're going to talk about very
Speaker 1: big things like socialism yes no, as opposed to really
Speaker 1: what works? How are we actually going to fix healthcare?
Speaker 1: How are we actually going to have an infrastructure plan,
Speaker 1: and how do we prepare people for the modern world.
Speaker 1: We didn't hear much about that in the State of
Speaker 1: the Union address. Ms A. Let me take you on
Speaker 1: a little bit uh there. There is no evidence of
Speaker 1: any kind that we have seen any substantial increase in
Speaker 1: investment because of cutting the corporate tax rate to but
Speaker 1: we've seen a huge gain two people at uh the
Speaker 1: top end. I don't know what the light smart regulation is,
Speaker 1: but I'm more worried that we'll get ourselves into financial
Speaker 1: trouble again sometime in the next several years that I
Speaker 1: have been any time in a very uh long time.
Speaker 1: So I'm disappointed to see you um while adopting I
Speaker 1: think a valid of philosophy endorsed the specifics of much
Speaker 1: of what the President has done. I mean, corporate tax
Speaker 1: rates maybe expensing maybe in hundreds of billions of dollars
Speaker 1: more expensive than you thought. I think has Yeah, just
Speaker 1: one quick denim, Larry. I think the early evidence from
Speaker 1: the corporate tax plan was an investment did go up
Speaker 1: relative to trend. What has happened is a very large
Speaker 1: increase in uncertainty, some of it frankly due to our
Speaker 1: own public policies, but the tax plan itself. I don't
Speaker 1: think it's the problem. So I've been enjoying watching this
Speaker 1: between the two esteemed former members of two administrations. I
Speaker 1: might take we can have a long discussion about the
Speaker 1: merits or otherwise of Trumpet and own policy. I think,
Speaker 1: I think there is there are some good things in it, Larry.
Speaker 1: I think there has been some tax reform that was
Speaker 1: useful to have. I think some of the regulation was
Speaker 1: probably sensible. I think, broadly, the size of the fiscal deficit,
Speaker 1: I'm sure Glenn you would agree, is not where one
Speaker 1: would want a deficit right now, and the nature of
Speaker 1: much of the tax cut also left a lot to
Speaker 1: be desired. But for me, the striking thing about the Democrats,
Speaker 1: and we in our cover story this week have called
Speaker 1: them the repair faction and the radical fact radical faction
Speaker 1: obviously Elizabeth Warren, Bernie Sanders, the repair oriented moderates are
Speaker 1: the others. I think it's not just the ones beginning
Speaker 1: with B. Actually, I think there's probably somebody beginning with
Speaker 1: Kay who might might kinda back too. But for me,
Speaker 1: the interesting thing is, even amongst them, how far the
Speaker 1: center of gravity amongst what is now the moderates in
Speaker 1: the Democratic Party is to the left of where you know,
Speaker 1: certainly President Clinton was and President Obama was in many areas.
Speaker 1: So the scale of the spending plans, the attitude to trade,
Speaker 1: which I think is really really interesting. Trade skepticism is
Speaker 1: now entrenched in the Democratic Party, and trade skepticism towards
Speaker 1: China is probably stronger actually there than even at least
Speaker 1: the strongest President Trump. There's not much daylight there. It
Speaker 1: would be more desired to work multilaterally, but the skepticism
Speaker 1: is absolutely there. Many thanks to Larry Summers from Newton, Massachusetts.
Speaker 1: We're gonna be back with our contributors, and we should
Speaker 1: know Michael Bloomberg is also seeking the Democratic nomination for president.
Speaker 1: Bloomberg is the wounder and majority owner of Bloomberg LP,
Speaker 1: the parent company of Bloomberg News. This is Bloomberg Wall
Speaker 1: Street Week. This is Bloomberg Wall Street Week with David
Speaker 1: Weston from Bloomberg Radio. And we're back with our contributors now.
Speaker 1: Z Any Minton, Beddos and Glenn Hubbard are still with
Speaker 1: us here in New York, so we're gonna ask them
Speaker 1: what caught their eye. And I know, Glenn, you were
Speaker 1: particularly taken by the fact that the British government appears
Speaker 1: to be changed their position towards internal combustion engines. Yes,
Speaker 1: there was an announcement of an aspiration to phase out
Speaker 1: internal combustion engines for sale by instead of and in
Speaker 1: concert with all the stories recently about stranded assets and
Speaker 1: climate change, it just strikes one that the pace of
Speaker 1: this may move more quickly than people think, and it
Speaker 1: may be quicker in Europe than it is here. Definitely
Speaker 1: be quicker in Europe than it is I think. One
Speaker 1: of the striking things and every time I crossed the
Speaker 1: Atlantic now is how big the differences between the focus
Speaker 1: in Europe on climate and here and here it's changing,
Speaker 1: but in Europe it's really changing. This is absolutely front
Speaker 1: and center on the European political agenda. And one of
Speaker 1: the things I hear timent again is that may may
Speaker 1: address the fiscal issues in Europe through the green process,
Speaker 1: that in fact investment will be required and that will
Speaker 1: actually help the growth over there. That makes sense, I
Speaker 1: think it does. I mean a carbon tax can also
Speaker 1: be part of a fiscal reform for the United States too,
Speaker 1: so we know how to do this. The question is
Speaker 1: just getting the consensus behind it, but I don't think
Speaker 1: the discussion is absent in the US. Many prominent investors
Speaker 1: like black Rock have really weighed in on this in
Speaker 1: a very serious way. Certainly is now e s G
Speaker 1: is I think becoming fo real in boardrooms around the world.
Speaker 1: I think that's really interesting. How does that translate into
Speaker 1: sort of meaningful change beyond the financial community? And I
Speaker 1: think one place to look would be what happens through
Speaker 1: the financial sector regulation? Is that are the central basa.
Speaker 1: Mark Karney, the former government of the Bank of England,
Speaker 1: has been pushing this very hard that maybe somewhere I
Speaker 1: think we see will change. The UK is obviously going
Speaker 1: to be the host for the next cop meeting this year.
Speaker 1: That's going to be a very very big priority. I
Speaker 1: think this is your right. This is an area where
Speaker 1: there's traction. But there's obviously a big difference when you've
Speaker 1: got a government that is a federal government that is
Speaker 1: really not paying any attention whatsoever exactly. That's the big difference.
Speaker 1: If you look about Europe and the United States. We're
Speaker 1: talking about the government in Europe doing this private industry actually,
Speaker 1: if anything, doing despite the government in the face of
Speaker 1: the government, Can it really work in this country without
Speaker 1: the government getting behind it. No. I mean, in the
Speaker 1: long run, we're going to have to have some sort
Speaker 1: of price on carbon and so no, that's a public
Speaker 1: policy matter. Corporations can't solve it. But I do think
Speaker 1: the American business community is very heavily engaged as our
Speaker 1: American investors, so I wouldn't count out the political questions.
Speaker 1: He I think it's less. I mean there's there's some
Speaker 1: are very very heavily engaged, but I think not everybody
Speaker 1: on the side of the antea. There's definitely some who
Speaker 1: think growth is what it's all about. This economy is
Speaker 1: doing very well, it's dynamic. Those Europeans they're not even growing,
Speaker 1: and they're focused on the climate. I mean, I've heard that,
Speaker 1: so I wouldn't I wouldn't get too complacent about what's
Speaker 1: on here. There you have it. Many thanks our contributors,
Speaker 1: Glenn Hubbard, ends any Mint, and Bettos. We welcome now
Speaker 1: Larry Summers coming to us from Newton, Massachusetts. So, Larry,
Speaker 1: big news this week obviously is the spread of the coronavirus.
Speaker 1: A lot of talk about what the economic effects are,
Speaker 1: what do you make the economic effects out to be David.
Speaker 1: No one knows, but I think the risks are very large.
Speaker 1: Experience suggests that major pandemic events are events that take
Speaker 1: place somewhere between once every half century and once every century.
Speaker 1: The fact that this one has gone so far has
Speaker 1: to mean there's a substantial chance that it's the one
Speaker 1: for this half century or this century. And the events
Speaker 1: that take place that infrequently, the worst of them kill
Speaker 1: a number of millions, quite possibly as many as ten
Speaker 1: million people, and they disrupt commerce and transportation and the
Speaker 1: ordinary doing of business not for weeks, but for many
Speaker 1: months or even a period approaching a year. So I'm
Speaker 1: not certainly confident UH that this is gonna be a
Speaker 1: historic UH disaster, but I think there is a risk
Speaker 1: that we are still in the top of the second
Speaker 1: inning with respect to UH. This tragedy. Some time ago
Speaker 1: I looked at in some detail with collaborators our research
Speaker 1: UH paper suggested that every so often they were quite
Speaker 1: catastrophic UH magnitude, and that if you took the cumulative
Speaker 1: risk over a century from global epidemics and global pandemic,
Speaker 1: it was in the same broad range, perhaps less but
Speaker 1: not less by anything like a factor of TED than
Speaker 1: UH global climate change, and unfortunately the issue hasn't received
Speaker 1: nearly the same degree of attention that global climate change
Speaker 1: has rightly received, and I suspect that will get repaired
Speaker 1: uh in the wake of the current tragedy. Many thanks
Speaker 1: to Larry Summers from Newton, Massachusetts. We're gonna be back
Speaker 1: with our contributors. Head to Bloomberg dot com for more
Speaker 1: exclusive thoughts from our weekly contributors, along with full episodes
Speaker 1: and the official Bloomberg Wall Street Week podcast. And coming
Speaker 1: up next, Dan's Rullo, his former Federal Reserve Board of
Speaker 1: Governors member. This is Bloomberg Wall Street Week. This is
Speaker 1: Bloomberg Wall Street Week with David Weston from Bloomberg Radio.
Speaker 1: Over two hundred years ago, Benjamin Franklin said that it
Speaker 1: was work that makes us happy. But now, for the
Speaker 1: first time in history, we run the risk of running
Speaker 1: out of those jobs that make us so happy. According
Speaker 1: to an Oxford economic study from last year, the world
Speaker 1: stands to lose millions of jobs to automation, with China
Speaker 1: potentially having the most to lose as many as twelve
Speaker 1: and a half million over the next decade, followed by
Speaker 1: two million lost in Europe and one and a half
Speaker 1: million in the United States. It's the lower skilled workers
Speaker 1: that may take the biggest hit, at least initially, but
Speaker 1: none of us should be feeling too complacent. It turns
Speaker 1: out that those holding bachelor's degrees are particularly vulnerable, and
Speaker 1: some of the most sophisticated and highest paying jobs may
Speaker 1: go the way of the buggy whip maker. So the
Speaker 1: next time you complain about having to roll up your sleeves,
Speaker 1: you might want to take a look over your shoulder
Speaker 1: to see if there's some contraption that doesn't need sleeves
Speaker 1: waiting to take your place. To talk about what technology
Speaker 1: may mean for jobs. Welcome up, Daniel Tarullo of Harvard.
Speaker 1: Dan was the member of the Board of Governors responsible
Speaker 1: for reguling financial institutions, and our contributors Zanni Mitton Battos
Speaker 1: and Glen Hubbard are still with us. So, Dan, I
Speaker 1: know you've taken a real hard look, particularly artificial intelligence,
Speaker 1: what it means for jobs United States, for the workplace.
Speaker 1: What have you concluded? Well, I haven't not sure if
Speaker 1: concluded much, David, other than to believe that it's an
Speaker 1: issue that has been underappreciated and under analyzed in public
Speaker 1: policy terms and I think there are three sorts of
Speaker 1: considerations here. First is the potential share magnitude of the impact,
Speaker 1: maybe well be millions, and I've seen estimates that are
Speaker 1: not alarmist, estimates that go well above a couple of million. Secondly,
Speaker 1: that those losses will not just be at the lower
Speaker 1: end of the wage scale, but could go all the
Speaker 1: way up to what we now think of as professional jobs,
Speaker 1: contributing to further hollowing out of the middle in the
Speaker 1: American and other mature economies. Second consideration is that even
Speaker 1: if you take a fairly optimistic view of where this
Speaker 1: all may end up, that is, the technology will end
Speaker 1: up creating as many jobs as it eliminates. As has
Speaker 1: been the case in the past, the transition may be
Speaker 1: an extremely difficult one. You know, we think transition temporary.
Speaker 1: Therefore it's kind of okay. But if a transition is
Speaker 1: long enough, and if it's dramatic enough, there can be
Speaker 1: permanent scars to the people who lose their jobs. But
Speaker 1: I think also to the to the economy as a whole.
Speaker 1: You know, Bill Gates is no technopho. He's the furthest
Speaker 1: thing from it, but he's expressed concern about the pace
Speaker 1: of the change. And the third consideration I think is
Speaker 1: the intersection of the economics and the politics. You know,
Speaker 1: since if you go back to the enclosure movement in
Speaker 1: the early Industrial Revolution in Britain, when there is substantial
Speaker 1: placement that has a social as well as an economic effect,
Speaker 1: there is a high correlation with political consequences, including more polarization,
Speaker 1: more disaffection, uh, more movement away from the center towards
Speaker 1: more dramatic alternatives. And I think to some degree we
Speaker 1: saw we've seen some of that in this country. I
Speaker 1: mean the we lost almost twenty of manufacturing jobs in
Speaker 1: the United States in the decade before the financial crisis.
Speaker 1: I'm from Flint exactly, and I think we don't know
Speaker 1: for a fact, obviously, but I think there's a pretty
Speaker 1: good chance that those losses at the pace, the pace
Speaker 1: of the losses, the sense of of of being displaced,
Speaker 1: has contributed to the polarization and the disaffection that we
Speaker 1: that we see today. Glenn, You've done some more in
Speaker 1: this area. I have, And let me agree with Dan,
Speaker 1: I do think this is a huge problem in our
Speaker 1: political class. Isn't that aware? But let's start with good
Speaker 1: news to the artificial intelligence movement will enable people to
Speaker 1: be far better at many of their jobs. It compliments
Speaker 1: the skills of many workers at the top, uh and
Speaker 1: the bottom, hopefully not replacing economics professors in the in
Speaker 1: the middle of that. But we're not really prepared, you know,
Speaker 1: Dan mentioned Bill Gates. Bill Gates idea was taxing robots.
Speaker 1: We don't need to build walls against the future. What
Speaker 1: we need to do is build bridges to it. And
Speaker 1: so we need to help people get ready. But our
Speaker 1: public policies are stuck in a labor market set of
Speaker 1: policies from the nineteen thirties. They're not ready for today.
Speaker 1: And there I really agree with Dan, so I this
Speaker 1: is going to be a very dull conversation because we're
Speaker 1: all going to agree. But but two perspectives on this
Speaker 1: one is I'm struck actually in the last few years
Speaker 1: about how more, much more slowly this is happening than
Speaker 1: people were anticipating. The study you cited at the beginning
Speaker 1: of this segment had a kind of an earlier version,
Speaker 1: which I think came out in an Oxford study that
Speaker 1: caused a huge stu that's I think said forty seven
Speaker 1: percent of jobs were vulnerable to being automated within the
Speaker 1: next couple of decades, cited thousands of times, and that
Speaker 1: and that really started the robots are about to take
Speaker 1: all of our jobs. Mean, if you actually look what's
Speaker 1: happened to labor markets in the last few years, we
Speaker 1: have unemployment at record lows across the rich world. We
Speaker 1: have employment record highs in many places. And this is
Speaker 1: not all you know, gig jobs, it's not all terrible jobs.
Speaker 1: It's actually sustainable, real jobs. And so I think it's
Speaker 1: happening much more slowly, and I'm sort of comforted that,
Speaker 1: as Glenn said in the end, history every time we've
Speaker 1: had of technological innovation has created jobs as well as
Speaker 1: destroying them, in fact, more of the creation than of
Speaker 1: the destruction. But where you're completely right is that the
Speaker 1: transition for particular people who don't have the right skills
Speaker 1: for the new kinds of jobs are traumatic. And we've
Speaker 1: definitely seen that over the last twenty years in manufacturing
Speaker 1: in the US and across the advanced world. And so
Speaker 1: for me that the question is what do we do
Speaker 1: about it? And the lesson historically is that the US
Speaker 1: did it so much better a hundred years ago. In
Speaker 1: the last big industrial revolution because you had a revolution
Speaker 1: and education at the same time, you had the creation
Speaker 1: of universal secondary education in a sense provided people with
Speaker 1: the skills they needed when they came off the land
Speaker 1: to work in factories. And we haven't had that revolution
Speaker 1: and education and training now, and we need it well.
Speaker 1: And then it strikes me employments very very high, unemployments
Speaker 1: ver very low, but wages have not increased the way
Speaker 1: we would have thought given that employment situation. How much
Speaker 1: of that is being suppressed actually by technology? Uh, It's
Speaker 1: surely technology is playing a role. It's surely globalization has
Speaker 1: played a role as well. Um. I think where I
Speaker 1: probably disagree some with both Glenn and Zanni is more
Speaker 1: predictive than factual. But I'm skeptical about the capacity of
Speaker 1: public policy to manage a truly substantial displacement, even over
Speaker 1: a trans transitional period. I don't think we did a
Speaker 1: very good job at all with trade displacement, and trade
Speaker 1: displacement itself could be um uh, smallish compared to what
Speaker 1: happens in technology is an It makes an important point,
Speaker 1: the tendency towards alarmism, towards getting your tweet and all.
Speaker 1: I think it's probably exaggerated certainly the point at which
Speaker 1: will have a kind of critical mass of job losses
Speaker 1: and maybe even the eventual magnitude of it. But when
Speaker 1: you think when it's not just individuals but whole groups
Speaker 1: of people, whether it's geographic communities or um classes of people,
Speaker 1: I don't I don't think that a system that's set
Speaker 1: up more or less for individual assistance is actually going
Speaker 1: to be particularly applications. At least it raises two questions,
Speaker 1: what should we do about it? And how do you
Speaker 1: pay for it? What you should do about it? I
Speaker 1: mean this this issue that where David and I started
Speaker 1: speaking about this issue was exactly around the campaign, with
Speaker 1: our saying you know what's not being talked about and
Speaker 1: I Andrew Yang has talked about it, something that the
Speaker 1: leading candidates have not. I suspect part of the reason
Speaker 1: is they don't have a great solution, you know, to
Speaker 1: the degree that it intersects with trade, and it will
Speaker 1: intersect with trade, particularly with trade and services. I think
Speaker 1: that one political response is going to be further constraint
Speaker 1: on on globalization. But I don't think, you know, how
Speaker 1: do you how do you deal with a progressive development
Speaker 1: of AI that is not closing down factories. That's unlikely
Speaker 1: to be the way it plays out. Instead, it will
Speaker 1: be within ongoing businesses. You'll have a displacement. Well, I
Speaker 1: think that there are things that we could be doing.
Speaker 1: Austin guls Being, Penny Pritzker and I suggested a block
Speaker 1: crant for community colleges, which are the workhorses for these
Speaker 1: training programs, and something I used to be quite skeptical
Speaker 1: of it. I'm a little bit less so today, place
Speaker 1: based actually going into communities for income relief, for shoring
Speaker 1: up those communities capacity to cope with change. If we
Speaker 1: don't do this, I worry as d end those that
Speaker 1: were going to wreck the social fabric then on ju
Speaker 1: wise change in the golden goose of our economic system.
Speaker 1: I think I think it is hard to overstate how
Speaker 1: dysfunctional the US political environment is right now, and thus
Speaker 1: how unlikely the US is to be a place where
Speaker 1: this is catalyzed. I agree with you in terms of
Speaker 1: one of the areas where we have had. Where I
Speaker 1: also have changed my view is that is the whole
Speaker 1: question of left behind areas and place based age. Because
Speaker 1: it used to be a view that you think what
Speaker 1: people would move to where the dynamic new jobs were,
Speaker 1: and I think we underestimated the kind of corrosive impact
Speaker 1: of a really large scale hit to particular geographic areas. Interestingly,
Speaker 1: that's actually an area where the UK is now doing
Speaker 1: a huge, great experiment. Boris Johnson's Leveling Up agenda, which
Speaker 1: is the sort of big post brexit agenda for the UK,
Speaker 1: is very much about helping the regions. So you know,
Speaker 1: as in nineteen seventy nine, maybe you know Britain will
Speaker 1: forge some new social contract and we can export it
Speaker 1: back to you. But the the bit that I think
Speaker 1: is less likely. I don't think it's going to be well,
Speaker 1: there's already protectionism in the US. But the area that
Speaker 1: worries me where I think you will simply see a
Speaker 1: slowing of the technological change. So, for example, one of
Speaker 1: the examples, people always uses truck drivers. Right now, you
Speaker 1: can't get enough truck drivers in this country. But it
Speaker 1: is an industry where those people who think robots will
Speaker 1: take our jobs say, well, within a decade, there will
Speaker 1: be no more jobs for truck drivers. If that were
Speaker 1: really to be the case, I think there would be
Speaker 1: huge political pressure simply to stop driverless trucks and we
Speaker 1: would just be preventing progress that way. That's what really is.
Speaker 1: That is the center though I think it's that's the
Speaker 1: issue on that uh, where the politics may be fought
Speaker 1: out in the not too distant future. That is, is
Speaker 1: there going to be an effort to intervene directly to
Speaker 1: at least slow down the source and pace of the change,
Speaker 1: or is there going to be more or less complete
Speaker 1: reliance on adjustment mechanisms. And that's why I was making
Speaker 1: the point earlier that adjustment mechanisms, at least in the
Speaker 1: United States have proven woefully inadequate with trade. We ever
Speaker 1: done it well, uh not, not in a well organized fashion. No,
Speaker 1: And what we've done is to put enormous pressure on
Speaker 1: the few sets of programs that exist. Its disability insurance
Speaker 1: was not designed to deal with fifty five year old
Speaker 1: people who have lost a job and are not totally disabled.
Speaker 1: But that's the only thing that exists, which is why
Speaker 1: you have an entire industry of people who are on
Speaker 1: late night TV saying they can get you a full
Speaker 1: disability point. Okay, okay, many thanks to Dan, to Rulo,
Speaker 1: many thanks our contributors. Glenn Hubbard, ends any Minton beddos.
Speaker 1: This has been another edition of Wall Street Week. See
Speaker 1: you next week.