Speaker 1: Hello, and welcome to Stephanomics, the podcast that brings the
Speaker 1: global economy to you. How will we all keep busy
Speaker 1: when we only have to work fifteen hours a week?
Speaker 1: That's the question the great economist John Maynard Canes asked
Speaker 1: nearly ninety years ago, thinking ahead to the possibilities of
Speaker 1: his grandchildren. By the end of the twentieth century, he
Speaker 1: thought the economy would be so productive we'd scarcely have
Speaker 1: to work at all. It didn't work out that way.
Speaker 1: The economy is a lot more productive, and we do
Speaker 1: spend a lot less time collectively on chores like washing
Speaker 1: clothes and dishes, collecting water. But in most advanced economies,
Speaker 1: the daily grind, if anything, has become even grindeer. So
Speaker 1: much for modern technology letting us all spend more time
Speaker 1: in the garden or at the opera. But that might
Speaker 1: all be about to change. In a minute, I'm going
Speaker 1: to talk about a possible revolution in our work week
Speaker 1: with one of Bloomberg's most read economic columnist, Noah Smith.
Speaker 1: I'll also be checking in on the latest on the
Speaker 1: US trade wars. But first, here's UK Treasury reporter Jes
Speaker 1: Shankleman to tell us what's been happening in the UK.
Speaker 1: What if you never went to work on a Friday,
Speaker 1: not because you're ill or pretending to be, not because
Speaker 1: you have to look after the kids, or because you're
Speaker 1: on vacation. This is the four day week and maybe,
Speaker 1: just maybe it could be coming to your workplace. The
Speaker 1: lighting designers Elektra in London. It became a reality at
Speaker 1: the start of this year when they stopped working Fridays
Speaker 1: and added an extra hour to Monday through Thursdays. Director
Speaker 1: Neil Knowles now spends his newly extended weekends perfecting his
Speaker 1: sour dough bread and visiting galleries. One of his colleagues
Speaker 1: has taken up welding. He says output has remained broadly
Speaker 1: the same, and both his team and his clients are
Speaker 1: happy with the switch. I think the biggest surprise would
Speaker 1: be quite how much difference it makes personally it makes.
Speaker 1: It's not I think I think it's going to make
Speaker 1: a little bit of difference going from two day weekends
Speaker 1: to three, but actually it makes an enormous difference, massive
Speaker 1: difference in the UK. It's something Jeremy Corbyn's opposition Labor
Speaker 1: Party is looking at in a bid to kickstart productivity
Speaker 1: and boost well being. The idea is just one of
Speaker 1: a series of radical left wing economic policies that increased
Speaker 1: Corbyn's popularity since the financial crash, an event that caused
Speaker 1: people to question the fairness of capitalism. Some of his
Speaker 1: other ideas include nationalizing utilities, giving employees a stake in
Speaker 1: large companies, and delist businesses from the Stock Exchange if
Speaker 1: they don't do enough to tackle climate change. John McDonald,
Speaker 1: Labor's economic spokesman, who commissioned a review into the idea,
Speaker 1: I think shorter working weeks will be a vote winner.
Speaker 1: The influential grassroots socialist group called Momentum wants Labor to
Speaker 1: adopt a four day week as an official policy in
Speaker 1: its next manifesto, and with the ruling Conservative Party in
Speaker 1: turmoil over its failure to deliver on Brexit, a general
Speaker 1: election seems perpetually on the horizon. I asked John McDonald
Speaker 1: recently in Parliament about his latest thoughts on a four
Speaker 1: day week. It's about making sure that people have a
Speaker 1: quality of life or work life balance, and it's all levels.
Speaker 1: And I think the idea of the way in which
Speaker 1: we can shape the work and week being more flexible
Speaker 1: about it I think will be incredibly proper. Since the
Speaker 1: Industrial Revolution, the length of the work week has taken
Speaker 1: center stage labor relations. In the eighteen sixties, workers averaged
Speaker 1: about sixty or seventy hours a week, and that gradually
Speaker 1: fell to about forty hours a week thanks to improvements
Speaker 1: in labor laws and technology. Now the question of workers
Speaker 1: rights is coming back into the spotlight. Part of the
Speaker 1: reason workers could be left behind amid greater automation and
Speaker 1: use of technology. The consultancy McKinsey estimates of all hours
Speaker 1: work today could be automated using already existing technologies. The
Speaker 1: Trade Union Congress an umbrella group for unions once workers
Speaker 1: as well as companies to reap the benefits of enhanced
Speaker 1: productivity from robots. The group says the march of technology
Speaker 1: so far seems to have increased hours rather than cutting
Speaker 1: them back, so employers increasingly expect people to log on
Speaker 1: all times of the day and as a result, it says,
Speaker 1: British workers currently rack up t two billion pounds of
Speaker 1: unpaid overtime or about forty billion dollars. Here's the Trade
Speaker 1: Union Congress is Kate Bell. We're calling for shorter working
Speaker 1: time with no loss of pay. But I think it
Speaker 1: is important to remember the context we're talking about this in.
Speaker 1: You know, we're hearing all these kind of promises about
Speaker 1: new technology. You know that it's going to give a
Speaker 1: significant boost to our GDP. We've got people like Jeff
Speaker 1: Beesl saying that he's got so much money the only
Speaker 1: thing he can think to do with it is to
Speaker 1: put a man on the moon. You know, we are
Speaker 1: talking about the possibility of getting richer and what we
Speaker 1: know has happened historically over kind of you know, in
Speaker 1: the last Industrial Revolution was when trade unions fought for it,
Speaker 1: we were able to deliver higher pay and shorter working time.
Speaker 1: So that's very much our goal. Labor asked Robert Skidelski,
Speaker 1: an economist at the University of Warwick best known for
Speaker 1: his biography of John Maynard Kines, to study if and
Speaker 1: how the government could cut the working week, and his
Speaker 1: report is set to be published in July. He doesn't
Speaker 1: think capping working hours across the economy is the answer,
Speaker 1: as France's plural Left party did at the turn of
Speaker 1: the century. Instead, he says the UK government should set
Speaker 1: an example. As an employer he found investing in automation
Speaker 1: and improving flexibility in the civil service, health service and
Speaker 1: schools could be a starting point. By now. Skidelski says
Speaker 1: people in Britain should be working about thirty two or
Speaker 1: thirty three hours a week, but actually those hours stopped
Speaker 1: falling in the nineteen eighties, So does that mean a
Speaker 1: more drastic approach from politicians could hold the key? The
Speaker 1: question to to raise is what are the most effective
Speaker 1: forms of government intervention in order to move the whole
Speaker 1: economy to you to increase the denicity of automation, Well,
Speaker 1: the government can do something in the public sector. It's
Speaker 1: the employer and it's got a workforce, and you know
Speaker 1: there are there are seven million, seven million public public
Speaker 1: sector employees. It's about twenty five percent of the workforce.
Speaker 1: You can start doing something there. Don't start planning your
Speaker 1: long weekends quite yet, though. He's keen to avoid the
Speaker 1: trap of using the term four day week and says
Speaker 1: we need to think about shorter working hours overall. So
Speaker 1: that could mean a parent working smarter than leaving at
Speaker 1: three in the afternoon so they can pick up their
Speaker 1: children from school, not just everyone having Fridays off and
Speaker 1: the economy virtually shutting down. You've got to organize in
Speaker 1: such a way, and I know it's difficult, and it
Speaker 1: may be, it may be that there are cost to this.
Speaker 1: You've got organized in such a way that the service
Speaker 1: isn't interrupted because people aren't people aren't at at work.
Speaker 1: And key to making all of this work is increased
Speaker 1: investment in technologies that can do monotony us and repetitive tasks,
Speaker 1: freeing people up to spend more time on innovation and
Speaker 1: creative thinking that might help boost productivity in Britain, where
Speaker 1: the metric is among the worst in Europe, the average
Speaker 1: American worker gets as much done by Thursday afternoon as
Speaker 1: their British counterpart currently does in an entire week. According
Speaker 1: to the International Monetary Fund, The nation also has the
Speaker 1: lowest use of robots in manufacturing of any G ten country.
Speaker 1: But despite promises for getting a better work life balance,
Speaker 1: shorter working hours don't necessarily boost the economy. The UK's
Speaker 1: biggest business lobby group, the Confederation of British Industry, isn't
Speaker 1: convinced a rigid reduction in ours will help productivity or
Speaker 1: works well being. Rain Newton Smith for c b i
Speaker 1: S chief economist, said forcing everyone to move to compressed
Speaker 1: ours could make it harder for people to have the
Speaker 1: work life balance they want or need. Back at Electra,
Speaker 1: the lighting design company, Neil Knowles says the decision to
Speaker 1: shift to a four day week wasn't easy. It does mean,
Speaker 1: as the CBI says, less flexibility on the days they
Speaker 1: are at work. So there's a lot of sorting out
Speaker 1: when we started it, which we kind of started in
Speaker 1: about January February this year. A lot of discussion on
Speaker 1: things and a lot of kind of agreement on things.
Speaker 1: For example, that we don't let people take time off
Speaker 1: to get deliveries, which I used to used to be
Speaker 1: fairly small. We're kind of flexible that people say, I'm
Speaker 1: getting a washing machine delivered kind of coming two hours later.
Speaker 1: The answer is now, no, you can't do it on Friday.
Speaker 1: You want to go to the dentist to do it
Speaker 1: on Friday. And while it might work for their small company,
Speaker 1: four day weeks may not be so easy to implement
Speaker 1: in a ret staunt or a shop. He says. The
Speaker 1: answer would be it works for consumpcy companies where you've
Speaker 1: got an output you're charging for, but if you're charging
Speaker 1: for your time rather than for your services. It's not
Speaker 1: going to work for you. Yeah, so works for the
Speaker 1: professional classes, which is nice for us, isn't it for
Speaker 1: Bloomberg News. I'm Josh equl Well. I'm was quite happy
Speaker 1: to have that segment because it reminds listeners that there
Speaker 1: are some people who are occasionally getting to talk about
Speaker 1: things other than Brexit in the UK. But the idea
Speaker 1: of a four day week and having more flexibility around
Speaker 1: working patterns is also something you hear a lot in
Speaker 1: the US, and I wanted to talk about the economics
Speaker 1: of it and the possible implications of all that with
Speaker 1: one of our most read economic columnists, Noah Smith. Um. No, uh,
Speaker 1: You've written a bit about issues related to this. I mean,
Speaker 1: do you think it's the future that more companies will
Speaker 1: move to a four day week or some version of that.
Speaker 1: You know, it's a really good question. I think that
Speaker 1: what you've seen in European countries that have sort of
Speaker 1: forced their people to take lots of vacation, you've seen
Speaker 1: a rise in productivity per hour, which makes sense because
Speaker 1: number one, you need to get more stuff done within
Speaker 1: the small time allotted. Number Two, you're just more sort
Speaker 1: of alert the question is whether a four day work
Speaker 1: week is actually the right way to accomplish that, or
Speaker 1: whether it would be better to do sort of shorter
Speaker 1: working days across the work week, because you know, I
Speaker 1: liken it to um, you know, full year school versus
Speaker 1: year round school. I think that the United States has
Speaker 1: very long summer vacations in school and sometimes, yeah, there's
Speaker 1: research showing this is bad and basically people start forgetting.
Speaker 1: So there's a question of will constant three day weekends
Speaker 1: cause people to you sort of get out of the
Speaker 1: rhythm of working and really hate coming back to work
Speaker 1: on Monday. Um, would it be better to simply have
Speaker 1: shorter working days and more you know, sort of vacation
Speaker 1: days out of the year. And I think that's a
Speaker 1: debate that people are going to have. Another possibility is
Speaker 1: to have a four day work week but have only
Speaker 1: a two day weekend and then another off day in
Speaker 1: the middle of the week. So that's another model people
Speaker 1: can experiment with. And I think people are going to
Speaker 1: experiment with these models because we haven't seen much of
Speaker 1: a hit to GDP per person from you know, sort
Speaker 1: of shorter work weeks over the years, and and I
Speaker 1: think people are realizing that it can boost productivity to
Speaker 1: how does that sound, Well, there's some of the people
Speaker 1: who are being who are earning the most we know,
Speaker 1: are also the people who are doing the longest hours.
Speaker 1: So somehow it doesn't always um work out. People don't
Speaker 1: seem to make that choice, or at least they're they're
Speaker 1: choosing jobs that have um, that have the money, and
Speaker 1: then they're not able to sort of trade the money
Speaker 1: against hours. But it does sound like you think there
Speaker 1: is a kind of economic free lunch somewhere here, whether
Speaker 1: it's a four day week or shorter hours that you
Speaker 1: could have uh quite dramatic changes to our sort of
Speaker 1: nine to five, five day a week culture, or even
Speaker 1: the bit the longer hours that lots of us have
Speaker 1: got used to working without having a significant hit to
Speaker 1: the economy and maybe making people happier into the bargain.
Speaker 1: That's absolutely right. You know, the key to getting a
Speaker 1: free lunch is to stop throwing away your lunch, always say,
Speaker 1: and you know, I've I've studied Japan a bit and
Speaker 1: lived there, and it's almost certainly true that Japanese people
Speaker 1: at many many companies work much longer than's necessary for
Speaker 1: productivity and The reason that they do is because of
Speaker 1: you know, essentially poor management. Management doesn't know how to
Speaker 1: evaluate their work output, so instead it simply evaluates their
Speaker 1: work inputs. So staying there at your computer till late
Speaker 1: at night doing essentially useless busy work is counted as
Speaker 1: work when in fact nothing is getting done because that's
Speaker 1: the only way that managers know how to monitor it.
Speaker 1: And so the Japanese government has been trying to crack
Speaker 1: down that. The question is where a country falls along spectrum.
Speaker 1: I mean, obviously, if you enforce a one day work week,
Speaker 1: then nobody's going to be able to get their work done,
Speaker 1: and companies are going to have big problems because they're
Speaker 1: going to have to hire many more people to do tiny,
Speaker 1: fragmented days of work, and there's going to be just
Speaker 1: mass confusion and chaos and unproductivity. So there's there's a
Speaker 1: happy medium in there in each country, and to a
Speaker 1: certain extent, each company really has to find it. We
Speaker 1: have these mechanisms that push against finding that happy medium
Speaker 1: because everybody wants to look good for the boss. You know,
Speaker 1: everyone wants to look like they're putting in a lot
Speaker 1: of hours, especially when there's a recession. Or weak economy.
Speaker 1: People don't want to be the first to get fired,
Speaker 1: so they're all sort of competing with each other to
Speaker 1: look like they're putting in the you know, they're they're
Speaker 1: burning the midnight oil. And so I think, you know,
Speaker 1: it does take government to sort of, you know, push
Speaker 1: against these things. One other possible plan that I didn't
Speaker 1: mention is to to go to a four day work
Speaker 1: week temporarily during recessions to encourage companies to retain staff
Speaker 1: and encourage them not to do layoffs, because layoffs are
Speaker 1: very damaging instructive, and that does happen in Germany really well.
Speaker 1: Places where you have closer relationships between the unions and
Speaker 1: the particular factories or the companies, you can often have
Speaker 1: shared limited limiting of hours in exchange for holding onto
Speaker 1: more more people. That's been over the years, that's been
Speaker 1: something that unions have negotiated. One of the reasons why
Speaker 1: sometimes you feel like unions can actually play a positive
Speaker 1: role as as well as sometimes a negative one. But
Speaker 1: it sounds I mean, so you actually think the government
Speaker 1: could sort of play a positive nudge role here and
Speaker 1: help people to solutions that the market wouldn't necessarily lead to. Well,
Speaker 1: I definitely do. But you know, there's a caution, which
Speaker 1: is that, you know, the hammer and nail problem. When
Speaker 1: all you've got as a hammer, everything looks like a nail,
Speaker 1: and there's the possibility that sort of over zealous bureaucrats
Speaker 1: will simply say, Okay, well, you know, because this works sometimes,
Speaker 1: it works all the time, and we should just restrict
Speaker 1: people from working as much as possible. And I think
Speaker 1: that very quickly degenerates into this this negative, one size
Speaker 1: fits all solution that would then end up, you know,
Speaker 1: hurting more than it helps. The other The other problem
Speaker 1: is ideology. If you have a government that's ideologically committed
Speaker 1: to the idea of of you know, forcing people to
Speaker 1: work less work is bad, we should lead lives of leisure,
Speaker 1: or simply the more rules we can make, the better. Well,
Speaker 1: then that's a danger too, and that's you know, I
Speaker 1: certainly worry about this in the context of Bernie Sanders
Speaker 1: and and some of his allied people in the United States,
Speaker 1: and I don't know as much about Corbin in the UK,
Speaker 1: but I'd say you might want to think about is
Speaker 1: this move being done for ideological reasons, or you know,
Speaker 1: is it really being done for practice. If there's an
Speaker 1: interesting form here because the Labor when the Labor Party
Speaker 1: came in in the seventies, they created the May Day
Speaker 1: Bank holiday in the UK, which previously we've had across
Speaker 1: Europe but not in the UK. So there's a sense
Speaker 1: of which they're also just trying to recreate the idea
Speaker 1: of giving everyone a holiday. Um, but I think there
Speaker 1: is also there's a kind of I've seen some work
Speaker 1: by unions, but also some academics on both sides of
Speaker 1: the Atlantic which talks about this in a slightly different
Speaker 1: way and says we should see it as a potential
Speaker 1: opportunity for workers to have more of the benefits of
Speaker 1: the coming automation revolution. So instead of just a chunk
Speaker 1: of workers losing their jobs because everything is more efficient
Speaker 1: and automated, and shareholders doing very well out of the
Speaker 1: extra profits for companies, this is how they would put it. Instead,
Speaker 1: you have all workers do less work and they're still
Speaker 1: able to be paid the same because of that. If
Speaker 1: you like automation dividend, does any is any of that coherent?
Speaker 1: Do you think from ancon economist standpoint that idea and
Speaker 1: of course I immediately think it sounds great in principle,
Speaker 1: but how would it work on a kind of company
Speaker 1: to company level? But sort of if you're taking a
Speaker 1: very macro view, is that a coherent thing to think about?
Speaker 1: So I think that you have to look at it
Speaker 1: in terms of productivity and not in terms of automation.
Speaker 1: The thinking about it in terms of automation will get
Speaker 1: you in trouble because automation is difficult to measure and
Speaker 1: even more difficult to produce. In other words, suppose that
Speaker 1: automation comes in and drives a lot of people's wages
Speaker 1: down because suddenly the technology is substituting for people instead
Speaker 1: of complementing them. Then no wages are going down. And
Speaker 1: then you're asking, okay, so wages went down, should we
Speaker 1: actually make people work fewer hours? Well that's a double whammy, right,
Speaker 1: Your wages went down and you can't work as much.
Speaker 1: But if you look at it through a productivity lens,
Speaker 1: you say, okay, would making those people work less actually
Speaker 1: increase their productivity, which would increase their wages and partially
Speaker 1: counteract the effect of automation, So they could be doing
Speaker 1: fewer hours for the same productivity and the same wages.
Speaker 1: I guess that's the model. Well, right, I'm saying that
Speaker 1: if you if you don't increase for our productivity and
Speaker 1: you restrict hours, if people are paid by the hour,
Speaker 1: you're reducing pay. Only if people are paid to sort
Speaker 1: of a fixed monthly or weekly salary, will that maintain
Speaker 1: their incomes for less work. You've also got to think
Speaker 1: about how these people are getting paid and what what
Speaker 1: the pay structure is there. As for you know, automation,
Speaker 1: there's the question of what automation will do. If automation
Speaker 1: starts actually reducing aggregate employment and there's a whole bunch
Speaker 1: of people who are just unemployed in the street, well
Speaker 1: then you might want to cut people's hours or days
Speaker 1: of work just to force companies to sort of overstaff.
Speaker 1: You hire hire two people to do the job you'd
Speaker 1: hire one person to do before, and if you want
Speaker 1: to keep everybody in work. And of course then there's
Speaker 1: also the answer question of do we actually want work
Speaker 1: to be the model going forward of who deserves what
Speaker 1: in a society. Do we want to go to a
Speaker 1: universal basic income where people get paid just for being themselves,
Speaker 1: or do we want to sort of stick with the
Speaker 1: traditional industrial age model of those who do not work
Speaker 1: neither shall they eat. I think that's a biblical quote
Speaker 1: and a quote from the Soviet Constitution, so well, I
Speaker 1: think it's it's a reminder. It is like we've almost
Speaker 1: come back to some of the issues that that John
Speaker 1: Maynard Kane's mentioned in the essay that I mentioned at
Speaker 1: the beginning of the podcast, which was thinking about how
Speaker 1: the world would change when where we've had all this
Speaker 1: increase in productivity and he felt we just wouldn't need
Speaker 1: to work very much. You know, all of these debates
Speaker 1: about automation and the future structure of the economy do
Speaker 1: make us think about the place of work in our
Speaker 1: lives as well as wages, although I think we're probably
Speaker 1: still pretty focused on them too. Noah Smith, thank you
Speaker 1: very much. I hope we get you on the podcast again.
Speaker 1: We we've we've enjoyed that, We've enjoyed having you, and
Speaker 1: we'll continue debating. Thank you very much. I really appreciate
Speaker 1: you having the Well, it wouldn't be Stephanomics without some
Speaker 1: more breaking news on trade wars. Donald Trump opened a
Speaker 1: whole new front in his trade wars in the last week,
Speaker 1: this time against Mexico or Mexico. Economy reporter Eric Martin
Speaker 1: was on his way. He was on a plane from
Speaker 1: Mexico City to New York when the news broke. Eric,
Speaker 1: What on earth has happened, Stephanie. It's been fascinating, really
Speaker 1: astonishing turn of events last Thursday with this teriff threat.
Speaker 1: Now that tariffs don't actually go into effect until next Monday,
Speaker 1: June tenth. So what's happening now is Mexico has a
Speaker 1: delegation of the highest level in Washington meeting with the
Speaker 1: US Trade representative, with Agriculture, with Department of Commerce, with
Speaker 1: Homeland Security, trying to convince them to get the President
Speaker 1: not to actually follow through with this teriff threat. Just
Speaker 1: remind us what he said sort out of the blue. Well,
Speaker 1: the President on Thursday afternoon said that he plans to
Speaker 1: impose a tariff beginning at five percent next week, in
Speaker 1: ratcheting up to twenty five percent by October. A less
Speaker 1: Mexico does more to stop undocumented immigration to the US. Now,
Speaker 1: this issue has been a thorn in the side of
Speaker 1: the president for years. It's been an irritant something that
Speaker 1: he mentioned even in his campaign launched speech in But
Speaker 1: this is one of the first times we're seeing a
Speaker 1: very clear linking of the trade in immigration issues. And
Speaker 1: you're normally you're in the US at the moment, but
Speaker 1: you're normally sitting in Mexico City. How has this gone
Speaker 1: down in Mexico. Well, it's been an absolute bombshell. Uh.
Speaker 1: Mexico had just sent the updated naft and after two
Speaker 1: point oh the U s m c A to its
Speaker 1: Senate for debate and ratification. And in fact, the Deputy
Speaker 1: Minister of Foreign Relations for North America was already scheduled
Speaker 1: to speak to the press in what was supposed to
Speaker 1: be a celebratory event about this document, this treaty having
Speaker 1: been sent to lawmakers. Complete change of plans with the
Speaker 1: president's tweet. This came out of nowhere. Mexico was not
Speaker 1: expecting this, There was no warning. We saw a significant
Speaker 1: drop off in the selloff in the peso on Friday,
Speaker 1: the currency at its worst day since October. Just a
Speaker 1: really remarkable turn of events. And what does this mean
Speaker 1: for the US Mexico Canada trade agreement that we're not
Speaker 1: allowed to say is just like NAFTA. Well, it certainly
Speaker 1: poisons the well. Uh, this was an agreement that Mexico
Speaker 1: was not thrilled about. There was a defense of the
Speaker 1: gains that Mexico had through NAFTA. So there was already
Speaker 1: some concern about the agreement or thinking that this is
Speaker 1: not the ideal scenario, but trying to protect the advantages
Speaker 1: one through the NAFTA process in the early nine nineties.
Speaker 1: This certainly poisons the well and makes it much harder
Speaker 1: for Mexico and for Canada, and frankly for the US
Speaker 1: to go forward with Trump's agreement. There was already significant
Speaker 1: US opposition among Democrats in the House and the idea
Speaker 1: that they would give the president of victory a political
Speaker 1: victory by being able to say that he fixed NAFTA
Speaker 1: the problems the first and after at a time when
Speaker 1: he's putting taxes on Mexico. In what one analyst said
Speaker 1: is it's really like taxing Texas. I mean, Mexico is
Speaker 1: so integrated with the US economy. People refer to it
Speaker 1: in a kind of facetious way, but as the fifty
Speaker 1: first state economically, and you know, to be putting these
Speaker 1: kind of levies on an economy that has so much
Speaker 1: integrated production with the US, to most economist makes no sense.
Speaker 1: And I guess if you're looking from the outside and
Speaker 1: maybe even not not sitting in the US, but sitting
Speaker 1: in Europe or even China. You know, what does this
Speaker 1: tell us about President Trump's attitude to trade wars? You know,
Speaker 1: there was a time when we thought he'd be very
Speaker 1: keen to He's keen to have a deal, and he
Speaker 1: just wanted a deal, even if it wasn't necessarily a
Speaker 1: good deal. That seems to have changed certainly with regard
Speaker 1: to China over the last few months. He seems to
Speaker 1: be a bit nervous of doing a deal that would
Speaker 1: then maybe played badly on the political campaign trail moving
Speaker 1: onto to the next year's election. Does this tell us
Speaker 1: that he's just he doesn't mind how many fronts he
Speaker 1: opens a trade war on, or do you think this
Speaker 1: is a specific short term play for Mexico. Well, absolutely
Speaker 1: worsens the outlook for a deal with China. That if
Speaker 1: Trump is capable of withdrawing from essentially this is a
Speaker 1: de facto withdrawal from NAFTA, at least on a short
Speaker 1: term basis, to be putting five percent tariffs up to
Speaker 1: against a partner with whom he has an existing free
Speaker 1: trade agreement. So the idea that if he's capable of
Speaker 1: doing this with one of America's closest commercial allies. He's
Speaker 1: capable of anything in terms of going back on his
Speaker 1: word or good faith agreements with Europe or with China
Speaker 1: down the line. So a lot of people looking at
Speaker 1: the signal that this sends. And even if this happens
Speaker 1: in the short term, which is what most economists who
Speaker 1: Bloomberg spoke with expect, even if this only happens for
Speaker 1: a period of months, or tariff's only rise to ten percent,
Speaker 1: could have a significant impact on the Mexican economy, potentially
Speaker 1: put an already weak Mexican economy into recession. And that's
Speaker 1: counter to what President Trump wants in terms of the
Speaker 1: migration pattern that so much immigration has been coming from
Speaker 1: Central America. Mexico has not been the problem on undocumented
Speaker 1: immigration in recent years. But if the economy goes into recession,
Speaker 1: that increases the impulse or the allure of the US economy,
Speaker 1: the US labor market for Mexican workers looking for a livelihood.
Speaker 1: And I guess we should say I mean, there's a
Speaker 1: lot of things that President Trump does where there's an
Speaker 1: outrage that he's not playing by the rules, and he's
Speaker 1: saying things that people in the past haven't said, and
Speaker 1: then sometimes in retrospect we say, you know what, he
Speaker 1: shaped things up, and actually he revealed that some things
Speaker 1: were possible that we didn't think we're possible. Is there
Speaker 1: any chance that this could fall into that category? And
Speaker 1: actually you would see a significant change in illegal immigration
Speaker 1: into the US from Mexico as a result of this. Well,
Speaker 1: the concern along analysts is that we've already seen uh
Speaker 1: tens of thousands of undocumented immigrants arriving to the US
Speaker 1: in the current year. And the idea that if the US,
Speaker 1: the world's biggest economy, one of the wealthiest countries in
Speaker 1: the world, could not stop illegal immigration, what is to
Speaker 1: make one think that Mexico will be able to achieve that. Well,
Speaker 1: it's really nice to have the perspective of someone sitting
Speaker 1: in the US, but also with such good insight into
Speaker 1: what's happening in Mexico. Eric Martin, thanks very much, Thank you, Stephanie,
Speaker 1: thanks for listening to Stephanomics. We'll be back next week
Speaker 1: with more on the ground insights into the global economy.
Speaker 1: In the meantime, you can find us on the Bloomberg
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Speaker 1: for more news and analysis from Bloomberg Economics, follow at
Speaker 1: Economics on Twitter. It's that's simple. You can also find
Speaker 1: me on at my Stephanomics. The story in this episode
Speaker 1: was reported and written by Lucy Meekin and jess Shanklman,
Speaker 1: was produced by Magnus Hendrickson and edited by Scott Lanman,
Speaker 1: who is also the executive producer of Stephanomics. Be sure
Speaker 1: to read Lucy and Jessica's article on this topic, which
Speaker 1: was edited by Brian Swint. Special thanks to Noah Smith
Speaker 1: and Eric Martin. Francesco Levy is the head of Bloomberg Podcasts.