Speaker 1: Hello, and welcome to Stephanomics, the podcast that brings the
Speaker 1: global economy to you. Today, we're talking to the Harvard
Speaker 1: economist and former U. S. Treasury Secretary Larry Summers about
Speaker 1: the state of the economy and economic policy making, and
Speaker 1: especially looking for his take on the spread of automation
Speaker 1: and the impact it could have on employment and the
Speaker 1: whole global economy. But first, we've got a report from
Speaker 1: one of Bloomberg's most experienced US economy reporters, Craig Torres,
Speaker 1: who's based in Washington, d C. He couldn't help noticing
Speaker 1: that despite all the talk of robots destroying jobs, the U. S.
Speaker 1: Economy still seemed to be creating a lot of them.
Speaker 1: It made him want to see for himself how technology
Speaker 1: was affecting the world of work and what it might
Speaker 1: mean for the future of jobs. So, you know, a
Speaker 1: real busy Monday, or a Tuesday like today after holiday
Speaker 1: US in a day could be a certainly very busy Monday's.
Speaker 1: I recently visited Washington Hospital Center, the biggest in the
Speaker 1: nation's capital, with an emergency room that handles two forty
Speaker 1: patients a day. I went there because I thought it
Speaker 1: would help us start to solve one of the big
Speaker 1: riddles in the US economy today. Why have we been
Speaker 1: hiring so many people in recent years? Last year, the
Speaker 1: US added two point seven million jobs. That happened at
Speaker 1: a time when we hear a lot about artificial intelligence, robots,
Speaker 1: and human less tasks in a variety of industries. I
Speaker 1: suspected that there was something about technology that was labor
Speaker 1: intensive and labor creating. I found it at Washington Hospital,
Speaker 1: which is part of med Star Health, a big chain
Speaker 1: in the d C region. They found a technological solution
Speaker 1: that let them double the number of e ER patients
Speaker 1: they could triage. It made doctors more efficient, but it
Speaker 1: also created the need for more jobs, texts and nurses
Speaker 1: to process the higher volume of patients. I met an
Speaker 1: e R doctor named Ethan Booker who helped apply this
Speaker 1: technology with strong results. So how many patients do you
Speaker 1: see an emergency here every year? Eighty seven thousand patients?
Speaker 1: Because that was a lot of humans and pain one
Speaker 1: way or another. Med Stars emergency room has this role
Speaker 1: known as the p I T or PIT that stands
Speaker 1: for provider and triage. The pit physician's job is to
Speaker 1: make a call all on the condition of a patient
Speaker 1: rolling into the e R and get them routed into care.
Speaker 1: Do they have a broken bone or just to sore back. Imagine, however,
Speaker 1: trying to process more than two hundred patients a day
Speaker 1: any e RS by definition somewhat chaotic with lots of
Speaker 1: urgency in the air and distractions can be huge. You know,
Speaker 1: the patients came in the nurse, the doctors got their
Speaker 1: orders started, but that work over there, as you can imagine,
Speaker 1: kind of embedded in right in the front door of
Speaker 1: the emergency department was It was an entire nine hour
Speaker 1: shift on your feet. Um there was tons of interruptions,
Speaker 1: helping people with wayfinding, people coming back to you to
Speaker 1: kind of understand where they were in the process, that
Speaker 1: kind of stuff. So what they did was used technology
Speaker 1: to create a remote pit. I walk with Dr Booker
Speaker 1: through a maze of hallways. He opens a door and
Speaker 1: inside I see Dr Jasmine Mallock quietly using a headset
Speaker 1: to talk with a patient on the video monitor. It
Speaker 1: is only about a five minute walk from the emergency room,
Speaker 1: but it is a world away. There are no patients
Speaker 1: on stretchers here, nobody's bleeding. The remoteness isn't the only
Speaker 1: efficiency of this system. If the patient has been to
Speaker 1: the hospital before, Malik has a medical record in front
Speaker 1: of her, she can also order follow on testing immediately
Speaker 1: with a click of a mouse. I talked to Booker
Speaker 1: about the difference between working downstairs versus here upstairs in
Speaker 1: a nine hour shift, going flat out on your feet
Speaker 1: the whole time, UM, you might be able to get
Speaker 1: to ninety patients. UM. The peak speed that you can
Speaker 1: do on this is is. I've seen some hours where
Speaker 1: patients where physicians of process twenty two patients in an hour.
Speaker 1: Twenty two patients an hour. That would amount to around
Speaker 1: two patients during a nine hour shift, more than double
Speaker 1: what a doctor on the R floor could do. More
Speaker 1: patients passing through triage means the hospital needs to hire
Speaker 1: more people to process all of them. Here's Booker again.
Speaker 1: I think it's labor enhancing. Certainly didn't replace anybody, and
Speaker 1: in places in which we were successful with this, there
Speaker 1: there's a need for more labor. There is another myth
Speaker 1: to bust here, one that is also about technology and jobs.
Speaker 1: Very rarely does a company like MedStar buy a piece
Speaker 1: of technology off the shelf, plug it in and turn
Speaker 1: it on a complex organization like a healthcare system, has
Speaker 1: to adapt tech to its own needs, and in healthcare
Speaker 1: there is a very high bar for security. So for
Speaker 1: all the alluring stories about technology being instantly productivity enhancing
Speaker 1: it rare, really is it takes hours of human labor
Speaker 1: to configure it and make it safe. Med Star has
Speaker 1: a whole innovation institute that is always looking for ways
Speaker 1: to use technology to help doctors and patients. I spoke
Speaker 1: with an executive there named John Locke. This is how
Speaker 1: he describes that process. We have teams of people across
Speaker 1: that organization working on kind of the next five to
Speaker 1: ten years. And then how do we give people in
Speaker 1: a big health system, and we're talking about plus people
Speaker 1: a big organization, how do we give people room in
Speaker 1: that to actually experiment and build some of these things out?
Speaker 1: This technology strangely labor intensive. Yes, creating something new is
Speaker 1: full of dissonance. It's not smooth and easy. If it
Speaker 1: isn't smooth and easy, then why are millions of companies
Speaker 1: working so hard to put technology in place? I wanted
Speaker 1: to take that question to Lonnie Jaffee, a guy with
Speaker 1: a long career and technology firms who was now at
Speaker 1: Insight Venture Partners in New York. They invest about twenty
Speaker 1: billion dollars spread over a hundred and fifty companies, many
Speaker 1: of them makers of software. In the technology industry, we
Speaker 1: see continuous enormous levels of deflation at all times. So
Speaker 1: you know, in the cost of a gigabyte of storage
Speaker 1: was something like five hundred thousand dollars per gigabyte, and
Speaker 1: today it's less than three cents per gigabyte. It's hard
Speaker 1: to wrap our minds around that level of a price drop.
Speaker 1: But if you are a user of technology like that,
Speaker 1: as the prices drop below certain thresholds, entirely new business
Speaker 1: models get unlocked that we're not previously feasible. And those
Speaker 1: can not just unlock new pools of revenue and opportunity
Speaker 1: with your end customers, it can also unlock new pools
Speaker 1: of labor. The interesting takeaway from me is that cloud
Speaker 1: computing is making it cheaper and easier to put powerful
Speaker 1: software into the hands of a lot of employees wherever
Speaker 1: they are. Low cost pervasive technology might actually tilt the
Speaker 1: mix of capital and labor we need to produce GDP
Speaker 1: in favor of labor. That suggests America's tremendous job growth
Speaker 1: might not be such a riddle after all. But before
Speaker 1: ending my search, I wanted to explore how technology might
Speaker 1: be affecting another part of the economy that's been creating
Speaker 1: more jobs than most, the hotel sector. Here Well, I'm
Speaker 1: good chorus from Bloomberg the Well. Eater is the chief
Speaker 1: Information and Digital officer at Hilton, the hotel group. I
Speaker 1: met her at their headquarters in McClean, Virginia. Lodging is
Speaker 1: an incredibly labor intensive industry. I have a son, a cousin,
Speaker 1: and a close friend in the business, and everything they
Speaker 1: tell me suggests that getting the customer experience just right
Speaker 1: is very human intensive. But Eater told me it was
Speaker 1: also a business in which technology could be truly transformational.
Speaker 1: I think what's possible with technology in for Hilton is
Speaker 1: nothing short of staggering. Technology, in my mind, has yet
Speaker 1: to truly immerse itself into the integrated experience for customers
Speaker 1: in as profound a way as is available to us.
Speaker 1: Eater describes the options she wants to see widely available
Speaker 1: to hotel guests in a digital age, such as checking
Speaker 1: in on your smartphone app, which can also set your
Speaker 1: room temperature or order a meal before you've arrived. That
Speaker 1: personalized experience is only possible if customers share their preferences,
Speaker 1: which means eater has to win their trust. On the
Speaker 1: front of digital security, an area that also takes a
Speaker 1: lot of labor, the thing that we have to perfect
Speaker 1: is the ability for humans to interact around this technology,
Speaker 1: so there isn't a stark contrast between the digital engagement
Speaker 1: and the human engagement, so that the front desk team
Speaker 1: member knows what you ask for within the application or
Speaker 1: in the message, etcetera, and can respond above and around them.
Speaker 1: So technology can be labor enhancing in a high touch
Speaker 1: business like lodging, and there might also be a sweet
Speaker 1: spot when human labor and technology come together and employees
Speaker 1: are freed from rope tasks such as check in and
Speaker 1: can use their time to tell you about a good
Speaker 1: lunch spot or maybe about a nearby music festival. Hilton's
Speaker 1: business is about people serving people. It is very much
Speaker 1: the culture of the business. It is very much the
Speaker 1: culture of the experience, and we believe that humans. I
Speaker 1: believe that humans provide that unique differentiation. It's the it's
Speaker 1: the human connection based on empathy, really warmth and generosity
Speaker 1: that makes a hotel experience stand apart. So we are
Speaker 1: not designing technology to replace humans. That will not be
Speaker 1: Hilton's business. Um, and I'm pretty happy about that. I
Speaker 1: haven't a lie humans for Bloomberg News. I'm Craig trust Now.
Speaker 1: I'm delighted to say I'm joined by my friend and
Speaker 1: former boss, Larry Summers, the Harvard professor and former US
Speaker 1: Treasury secretary who also served as the director of President
Speaker 1: Obama's National Economic Council. Welcome to Stephanomics. Good to be
Speaker 1: with you, Stephanie. We have just heard from Craig Torres,
Speaker 1: who had a fairly upbeat view of the impact of
Speaker 1: new technology on jobs. And I know from talking to
Speaker 1: him that the reason that Craig got into this was
Speaker 1: that he had just been looking week after week with
Speaker 1: the US very strong job growth and as we know,
Speaker 1: going with that weak productivity growth. But at the same
Speaker 1: time as we've had all of this argument and concern
Speaker 1: around technology and automation, and it just felt like it
Speaker 1: was going against the sort of robots are coming for
Speaker 1: your job's rhetoric that we hear about so much. So,
Speaker 1: where do you come out on this ongoing debate about
Speaker 1: the impact of technology on jobs, I think your reporter
Speaker 1: is more wrong than right. Um. I take the long view.
Speaker 1: I was involved in discussions of automation when I was
Speaker 1: an undergraduate in M I T in the nineteen seventies,
Speaker 1: and then we heard the view that Craig Torres takes
Speaker 1: that technology would create more productivity, and I would create
Speaker 1: more spending power, and I would create more jobs and
Speaker 1: all would be well. Um. When people were saying that
Speaker 1: in the nineteen seventies, five percent of men between the
Speaker 1: ages of twenty five and fifty four we're not working.
Speaker 1: Now about thirteen percent of men between the ages of
Speaker 1: five and fifty four are not working. And so technology
Speaker 1: actually on net has led to a substantial amount of displacement.
Speaker 1: Whenever has happened in the last few years, I don't
Speaker 1: think proves that much. And by the way, since productivity
Speaker 1: growth has been very slow for the last few years,
Speaker 1: I don't think it's been a period of particularly active
Speaker 1: uh technological change, So I don't think that proves very much.
Speaker 1: I think looking forward, we've got to recognize that almost
Speaker 1: any activity that can be routinized can be mechanized, and
Speaker 1: that has to put substantial pressure on many different job
Speaker 1: categories and many different people. Now, there'll certainly be some
Speaker 1: new jobs created, and probably some of the new jobs
Speaker 1: that will be created will have high productivity and support
Speaker 1: high wages. But for people who are really set up
Speaker 1: to do routine work and not to do other work,
Speaker 1: I think it's likely to be a very difficult period
Speaker 1: going ahead. And do you think I mean to defend
Speaker 1: Craig a little bit? Of course, he's not claiming that
Speaker 1: the overwhelming effect of technology um will be positive for labor.
Speaker 1: He was just he was kind of highlight he's highlighting
Speaker 1: some examples where you could see technology kind of complimenting late.
Speaker 1: And there's certainly people talk about these cases where now
Speaker 1: you will have you know, there'll be more demand for
Speaker 1: the very human jobs, and the very human jobs will
Speaker 1: be more prized because you have all this sort of
Speaker 1: technology supporting those human qualities. Your view is there doesn't exist,
Speaker 1: and maybe we'll have more of them down the road,
Speaker 1: But the ELVM, they're not going to be more than
Speaker 1: a small piece of the story in this short I
Speaker 1: take the long view. Five or some of the people
Speaker 1: weren't working in the group where you'd expect everybody to
Speaker 1: be working and then thirteen for some of the people,
Speaker 1: uh weren't working. And it's been a pretty inexorable trend.
Speaker 1: If you take that trend back to the nineteen forties,
Speaker 1: the trend is even stronger. So I don't dispute the
Speaker 1: idea that there will be some sets of jobs that
Speaker 1: will become more productive, and that there will be some
Speaker 1: jobs created, you know, being an eBay merchant, being a
Speaker 1: Facebook programmer, building building sites. But I think the to
Speaker 1: mentality of it, and particularly for the people who were
Speaker 1: most on the margin of working versus not working, I
Speaker 1: think it's likely to be difficult. You know, twenty years ago,
Speaker 1: the big change that was happening in the global labor
Speaker 1: market arguably was China and globalization. You know, was the
Speaker 1: was the arrival of the Chinese labor force, if you like,
Speaker 1: into the global economy. And I remember when I was
Speaker 1: studying at Harvard and elsewhere, there was a consistent underestimation
Speaker 1: of the impact that was going to have on the
Speaker 1: global labor market. Now we have all of this evidence
Speaker 1: from David Ort and all these other academic evidence about
Speaker 1: how that wave of competition from China cost jobs here
Speaker 1: in the US, and people didn't immediately bounce back, and
Speaker 1: the costs were concentrated in a way that theory doesn't predict.
Speaker 1: Now we have that data, how is it. Does it
Speaker 1: help us be more aware of what's coming down the
Speaker 1: track with this new wave of technological change or do
Speaker 1: you think a whole lot of different lessons are going
Speaker 1: to come out of that. I'm not sure. I think
Speaker 1: the David Otter work that you refer to is about
Speaker 1: to be and is already being subject to a wave
Speaker 1: of revisionism. UH. People are taking account of the extra
Speaker 1: exports as well as the extra imports. People are taking
Speaker 1: account of the fact that a lot of the goods
Speaker 1: that we import from China then become part of products
Speaker 1: that we sell that are cheaper because of the imports
Speaker 1: from products so China. So we import, so we use
Speaker 1: more people because we sell more of the product. People
Speaker 1: are taking account of the fact that the imports from
Speaker 1: China held the price level down and that enabled the
Speaker 1: FED to pursue easier policies. None of those effects were
Speaker 1: really contained in the David out Tour research that's so
Speaker 1: frequently UH cited. So I think you're going to see
Speaker 1: some revisionism towards blaming China rather less for the problems
Speaker 1: that have existed in the United States. Moving on from this,
Speaker 1: we should talk about, you know, where you think the
Speaker 1: US economy is right now. I mean, there's a lot
Speaker 1: of debate about how much structural change there's been in
Speaker 1: the labor market and how much further unemployment can go.
Speaker 1: The recent FED change in its attitude towards that in
Speaker 1: a sense, you know, seemingly willing to give it more
Speaker 1: time before continuing to raise interest rates. Where do you
Speaker 1: stand on that? Do you think the FED should be
Speaker 1: even slower, even more cautious. I'm glad to see the
Speaker 1: FED embrace the kinds of ideas of secular stagnation that
Speaker 1: I've been talking about for some years now. I think
Speaker 1: they've recognized that in an economy where fundamentally there's a
Speaker 1: higher propensity to save than there used to be and
Speaker 1: a lower propensity to invest than there used to be,
Speaker 1: interest rates that once would have been very stimulative now
Speaker 1: actually can be consistent with UH contraction, and therefore they've
Speaker 1: got to be very careful about overly contracting the economy.
Speaker 1: I think that's a good recognition by the FED. It's
Speaker 1: also been good that the FED has recognized that inflation
Speaker 1: looks awfully quiescent, and that the combination of no increases
Speaker 1: in the minimum wage and forever huge restraints on union power,
Speaker 1: the ability of companies to outsource more ruthlessly, aggressive shareholders
Speaker 1: maximizing profits, all that has operated to put downwards pressure
Speaker 1: on wages. And ultimately it's very hard to generate very
Speaker 1: much product price inflation without having wage price inflation. And
Speaker 1: so I think J. Powell has been in the right
Speaker 1: place on that as well. I wish he'd gotten there
Speaker 1: before they raised rates UM in UH December. And I
Speaker 1: wish the President wasn't making it harder to do the
Speaker 1: right thing by making doing the right thing look like
Speaker 1: it's a craven political act, as he puts pressure on
Speaker 1: the FED. But the Fed has to do what's right,
Speaker 1: whether it makes politicians happy or whether it makes politicians unhappy.
Speaker 1: And on balance, I think the risks of excessive restraint
Speaker 1: on the economy are are greater than the risks of
Speaker 1: insufficient restraint. In addition to the considerations I already raised UM,
Speaker 1: our goal in the United States is to have a
Speaker 1: two symmetric inflation target. Symmetrics an important word. It means
Speaker 1: that inflation is supposed to average two Why I ask
Speaker 1: you the question if after ten years of recovery, when
Speaker 1: the unemployment rate is lower than it's been in fifty years,
Speaker 1: and we're in the eleventh year of expansion, if that's
Speaker 1: not the time when we're gonna have inflation above two
Speaker 1: percent after ten years, when we've had it below two percent,
Speaker 1: when would such a time ever be? And it's like
Speaker 1: the credibility of the FED with respect to an inflation
Speaker 1: target actually depends on its ability to generate a bit
Speaker 1: of acceleration of inflation and inflation expectations from here. I'm
Speaker 1: not sure they're going to be able to do way,
Speaker 1: but they should at least be quite trying. Larry Summons,
Speaker 1: thanks very much for being on Stephanomics, and maybe one
Speaker 1: of these days we'll get you back on the program.
Speaker 1: Good to be with you. So I'm joined now by
Speaker 1: one of our top FED reporters, Gina Smellek, who's based
Speaker 1: in New York and she has the important job, among
Speaker 1: many other things, of writing our economic research rap every
Speaker 1: week for Bloomberg, and recently she wrote about poor Man's
Speaker 1: monetary policy. Tell us about that, Gina, Right, So this
Speaker 1: is this idea from city groups. Will Embroider in a
Speaker 1: recent research note that central banks are not going to
Speaker 1: have a lot of ammunition at their disposal come the
Speaker 1: next procession. And the point he's making here is that
Speaker 1: rates are still pretty low around the world. The US
Speaker 1: is obviously a little bit above zero, but you look
Speaker 1: at the euro Area in Japan and they're still sort
Speaker 1: of lingering below And so come the next crisis, the
Speaker 1: central banks are really going to be forced to rely
Speaker 1: heavily on their balance sheets, sort of tinkering around the
Speaker 1: edges of composition in size, and aren't going to have
Speaker 1: a lot of the tools that have traditionally been at
Speaker 1: their disposal, which you know, most centrally includes rate cuts.
Speaker 1: And I guess what's interesting about this, and you mentioned
Speaker 1: a few other bits of research, including the recent paper
Speaker 1: that that Larry Summers um co wrote and produced for
Speaker 1: the Brookings Institute conference, that it's sort of this debate
Speaker 1: about not having enough ammunition for the next crisis is
Speaker 1: kind of clashing, sort of colliding with debates around what
Speaker 1: the best economic policy is right now in the US
Speaker 1: and the sort of more progressive thinkers um talking about
Speaker 1: modern monetary theory and wanting to run big, bigger deficits,
Speaker 1: you know, in a sense for political reasons, but you've
Speaker 1: got economists saying you might want to do it to
Speaker 1: help prevent the next crisis as well. Is that that
Speaker 1: must be kind of interesting for you to see the
Speaker 1: sort of everyone's coming for coming to the same conclusion,
Speaker 1: which is we need to borrow more, just at a
Speaker 1: time when I would have thought that President Trump was
Speaker 1: already borrowing quite a lot, right. It's so interesting. These
Speaker 1: conversations are also closely interconnected. And there's I think this
Speaker 1: growing idea that central banks are dealing with what's called
Speaker 1: a very low neutral interest rate. So that's the one
Speaker 1: that neither stokes nor slows growth. It's really low for
Speaker 1: demographic reasons because populations are aging and people tend to
Speaker 1: save as they age, and that pushes that sort of
Speaker 1: rate setting that they can achieve down a little bit.
Speaker 1: One way to get that higher is by running a
Speaker 1: bigger budget deficit, especially if it can if doing so
Speaker 1: results in sort of infrastructure spending and other things that
Speaker 1: can raise the productive capacity of an economy. But that's
Speaker 1: hard to do in a world where you already have
Speaker 1: really high to GDP ratios, and so I think there
Speaker 1: are all these conversations around what does fiscal responsibility mean
Speaker 1: in the world of twenty nineteen, and what is it
Speaker 1: going to mean come the next recession? Like how much
Speaker 1: can we play with this stuff around the edges? And
Speaker 1: at what point do we push ourselves to a point
Speaker 1: where we're just overextended on this fiscal front. And I
Speaker 1: think that conversation is really reaching a fever pitch in
Speaker 1: places like the US now, and I don't think it's
Speaker 1: going to fade in any way come the next crisis.
Speaker 1: I think this is this is a debate that we're
Speaker 1: going to have with us for the foreseeable future, and
Speaker 1: I suspect we are going to be talking about it
Speaker 1: many times. Thanks very much, Gina Smellick. Thank you, thanks
Speaker 1: for listening to Stephanomics. Please join us next week for
Speaker 1: another episode about the forces shaping the global economy. In
Speaker 1: the meantime, you can find us on the Bloomberg Terminal
Speaker 1: website or app, and wherever you get your podcasts. We'd
Speaker 1: love it if you took the time to rate and
Speaker 1: review the show so it can reach more listeners. For
Speaker 1: more news and analysis from Bloomberg Economics, follow as economics
Speaker 1: on Twitter. You can also find me on my Twitter
Speaker 1: handle at my Stephanomics. The story in this episode was
Speaker 1: reported and written by Craig Torres. It was produced by
Speaker 1: Magnus Hendrickson and edited by Scott Lanman, who is also
Speaker 1: the executive producer of Stephanomics. Craig's original article on this
Speaker 1: topic appeared in Bloomberg business Week. It was edited by
Speaker 1: Ben Holland and Christina lind Black Special thanks to Larry Summers.
Speaker 1: Francesco Levy is the head of Bloomberg Podcasts.