WEBVTT - Can Technology Actually Save Jobs? 0:00:04.080 --> 0:00:07.200 Hello, and welcome to Stephanomics, the podcast that brings the 0:00:07.200 --> 0:00:15.480 global economy to you. Today, we're talking to the Harvard 0:00:15.480 --> 0:00:19.400 economist and former U. S. Treasury Secretary Larry Summers about 0:00:19.400 --> 0:00:22.439 the state of the economy and economic policy making, and 0:00:22.640 --> 0:00:25.680 especially looking for his take on the spread of automation 0:00:25.880 --> 0:00:28.360 and the impact it could have on employment and the 0:00:28.360 --> 0:00:31.880 whole global economy. But first, we've got a report from 0:00:31.880 --> 0:00:35.720 one of Bloomberg's most experienced US economy reporters, Craig Torres, 0:00:35.960 --> 0:00:39.320 who's based in Washington, d C. He couldn't help noticing 0:00:39.360 --> 0:00:43.000 that despite all the talk of robots destroying jobs, the U. S. 0:00:43.040 --> 0:00:45.520 Economy still seemed to be creating a lot of them. 0:00:45.520 --> 0:00:48.320 It made him want to see for himself how technology 0:00:48.400 --> 0:00:51.040 was affecting the world of work and what it might 0:00:51.120 --> 0:01:04.920 mean for the future of jobs. So, you know, a 0:01:05.080 --> 0:01:08.240 real busy Monday, or a Tuesday like today after holiday 0:01:08.720 --> 0:01:15.160 US in a day could be a certainly very busy Monday's. 0:01:17.000 --> 0:01:20.600 I recently visited Washington Hospital Center, the biggest in the 0:01:20.720 --> 0:01:24.639 nation's capital, with an emergency room that handles two forty 0:01:24.680 --> 0:01:28.120 patients a day. I went there because I thought it 0:01:28.160 --> 0:01:30.400 would help us start to solve one of the big 0:01:30.480 --> 0:01:34.119 riddles in the US economy today. Why have we been 0:01:34.200 --> 0:01:40.480 hiring so many people in recent years? Last year, the 0:01:40.600 --> 0:01:44.440 US added two point seven million jobs. That happened at 0:01:44.480 --> 0:01:48.480 a time when we hear a lot about artificial intelligence, robots, 0:01:48.960 --> 0:01:52.680 and human less tasks in a variety of industries. I 0:01:52.800 --> 0:01:56.440 suspected that there was something about technology that was labor 0:01:56.480 --> 0:02:04.720 intensive and labor creating. I found it at Washington Hospital, 0:02:04.880 --> 0:02:07.480 which is part of med Star Health, a big chain 0:02:07.560 --> 0:02:11.880 in the d C region. They found a technological solution 0:02:11.960 --> 0:02:14.519 that let them double the number of e ER patients 0:02:14.560 --> 0:02:18.680 they could triage. It made doctors more efficient, but it 0:02:18.760 --> 0:02:22.120 also created the need for more jobs, texts and nurses 0:02:22.160 --> 0:02:26.520 to process the higher volume of patients. I met an 0:02:26.560 --> 0:02:30.200 e R doctor named Ethan Booker who helped apply this 0:02:30.320 --> 0:02:37.280 technology with strong results. So how many patients do you 0:02:37.280 --> 0:02:42.359 see an emergency here every year? Eighty seven thousand patients? 0:02:43.200 --> 0:02:46.919 Because that was a lot of humans and pain one 0:02:46.919 --> 0:02:51.200 way or another. Med Stars emergency room has this role 0:02:51.320 --> 0:02:55.080 known as the p I T or PIT that stands 0:02:55.120 --> 0:02:59.360 for provider and triage. The pit physician's job is to 0:02:59.400 --> 0:03:01.400 make a call all on the condition of a patient 0:03:01.560 --> 0:03:04.840 rolling into the e R and get them routed into care. 0:03:05.639 --> 0:03:10.520 Do they have a broken bone or just to sore back. Imagine, however, 0:03:10.600 --> 0:03:13.960 trying to process more than two hundred patients a day 0:03:14.680 --> 0:03:18.040 any e RS by definition somewhat chaotic with lots of 0:03:18.120 --> 0:03:22.360 urgency in the air and distractions can be huge. You know, 0:03:22.400 --> 0:03:25.880 the patients came in the nurse, the doctors got their 0:03:25.960 --> 0:03:28.720 orders started, but that work over there, as you can imagine, 0:03:28.800 --> 0:03:31.680 kind of embedded in right in the front door of 0:03:31.680 --> 0:03:34.680 the emergency department was It was an entire nine hour 0:03:34.760 --> 0:03:38.920 shift on your feet. Um there was tons of interruptions, 0:03:39.760 --> 0:03:43.360 helping people with wayfinding, people coming back to you to 0:03:43.440 --> 0:03:45.840 kind of understand where they were in the process, that 0:03:45.960 --> 0:03:49.400 kind of stuff. So what they did was used technology 0:03:49.440 --> 0:03:53.000 to create a remote pit. I walk with Dr Booker 0:03:53.040 --> 0:03:56.520 through a maze of hallways. He opens a door and 0:03:56.640 --> 0:04:00.680 inside I see Dr Jasmine Mallock quietly using a headset 0:04:00.720 --> 0:04:04.520 to talk with a patient on the video monitor. It 0:04:04.640 --> 0:04:08.360 is only about a five minute walk from the emergency room, 0:04:08.400 --> 0:04:11.440 but it is a world away. There are no patients 0:04:11.480 --> 0:04:16.159 on stretchers here, nobody's bleeding. The remoteness isn't the only 0:04:16.200 --> 0:04:19.640 efficiency of this system. If the patient has been to 0:04:19.680 --> 0:04:23.320 the hospital before, Malik has a medical record in front 0:04:23.320 --> 0:04:26.960 of her, she can also order follow on testing immediately 0:04:26.960 --> 0:04:30.200 with a click of a mouse. I talked to Booker 0:04:30.240 --> 0:04:35.000 about the difference between working downstairs versus here upstairs in 0:04:35.080 --> 0:04:38.080 a nine hour shift, going flat out on your feet 0:04:38.120 --> 0:04:40.840 the whole time, UM, you might be able to get 0:04:40.839 --> 0:04:44.360 to ninety patients. UM. The peak speed that you can 0:04:44.400 --> 0:04:47.760 do on this is is. I've seen some hours where 0:04:47.800 --> 0:04:50.720 patients where physicians of process twenty two patients in an hour. 0:04:51.040 --> 0:04:54.599 Twenty two patients an hour. That would amount to around 0:04:54.640 --> 0:04:58.719 two patients during a nine hour shift, more than double 0:04:58.760 --> 0:05:03.120 what a doctor on the R floor could do. More 0:05:03.160 --> 0:05:07.440 patients passing through triage means the hospital needs to hire 0:05:07.480 --> 0:05:11.039 more people to process all of them. Here's Booker again. 0:05:11.360 --> 0:05:15.560 I think it's labor enhancing. Certainly didn't replace anybody, and 0:05:16.440 --> 0:05:19.240 in places in which we were successful with this, there 0:05:19.240 --> 0:05:31.279 there's a need for more labor. There is another myth 0:05:31.360 --> 0:05:34.880 to bust here, one that is also about technology and jobs. 0:05:35.960 --> 0:05:39.000 Very rarely does a company like MedStar buy a piece 0:05:39.000 --> 0:05:42.440 of technology off the shelf, plug it in and turn 0:05:42.560 --> 0:05:46.599 it on a complex organization like a healthcare system, has 0:05:46.680 --> 0:05:50.039 to adapt tech to its own needs, and in healthcare 0:05:50.279 --> 0:05:54.080 there is a very high bar for security. So for 0:05:54.200 --> 0:05:59.039 all the alluring stories about technology being instantly productivity enhancing 0:05:59.600 --> 0:06:02.640 it rare, really is it takes hours of human labor 0:06:02.680 --> 0:06:06.800 to configure it and make it safe. Med Star has 0:06:06.800 --> 0:06:10.239 a whole innovation institute that is always looking for ways 0:06:10.279 --> 0:06:15.000 to use technology to help doctors and patients. I spoke 0:06:15.040 --> 0:06:18.240 with an executive there named John Locke. This is how 0:06:18.279 --> 0:06:21.680 he describes that process. We have teams of people across 0:06:21.680 --> 0:06:24.320 that organization working on kind of the next five to 0:06:24.400 --> 0:06:26.919 ten years. And then how do we give people in 0:06:26.920 --> 0:06:29.640 a big health system, and we're talking about plus people 0:06:30.320 --> 0:06:33.279 a big organization, how do we give people room in 0:06:33.360 --> 0:06:36.159 that to actually experiment and build some of these things out? 0:06:37.240 --> 0:06:42.280 This technology strangely labor intensive. Yes, creating something new is 0:06:42.320 --> 0:06:46.000 full of dissonance. It's not smooth and easy. If it 0:06:46.080 --> 0:06:49.479 isn't smooth and easy, then why are millions of companies 0:06:49.520 --> 0:06:53.680 working so hard to put technology in place? I wanted 0:06:53.720 --> 0:06:57.560 to take that question to Lonnie Jaffee, a guy with 0:06:57.640 --> 0:07:00.720 a long career and technology firms who was now at 0:07:00.760 --> 0:07:05.000 Insight Venture Partners in New York. They invest about twenty 0:07:05.000 --> 0:07:09.320 billion dollars spread over a hundred and fifty companies, many 0:07:09.360 --> 0:07:12.720 of them makers of software. In the technology industry, we 0:07:12.840 --> 0:07:19.040 see continuous enormous levels of deflation at all times. So 0:07:19.240 --> 0:07:23.040 you know, in the cost of a gigabyte of storage 0:07:23.040 --> 0:07:25.800 was something like five hundred thousand dollars per gigabyte, and 0:07:25.840 --> 0:07:29.440 today it's less than three cents per gigabyte. It's hard 0:07:29.480 --> 0:07:32.120 to wrap our minds around that level of a price drop. 0:07:33.240 --> 0:07:36.640 But if you are a user of technology like that, 0:07:36.960 --> 0:07:41.080 as the prices drop below certain thresholds, entirely new business 0:07:41.120 --> 0:07:44.640 models get unlocked that we're not previously feasible. And those 0:07:44.680 --> 0:07:48.480 can not just unlock new pools of revenue and opportunity 0:07:48.520 --> 0:07:51.360 with your end customers, it can also unlock new pools 0:07:51.360 --> 0:07:57.520 of labor. The interesting takeaway from me is that cloud 0:07:57.560 --> 0:08:00.640 computing is making it cheaper and easier to put powerful 0:08:00.720 --> 0:08:04.040 software into the hands of a lot of employees wherever 0:08:04.080 --> 0:08:08.680 they are. Low cost pervasive technology might actually tilt the 0:08:08.720 --> 0:08:11.960 mix of capital and labor we need to produce GDP 0:08:13.000 --> 0:08:17.400 in favor of labor. That suggests America's tremendous job growth 0:08:17.640 --> 0:08:23.160 might not be such a riddle after all. But before 0:08:23.280 --> 0:08:26.840 ending my search, I wanted to explore how technology might 0:08:26.880 --> 0:08:29.920 be affecting another part of the economy that's been creating 0:08:29.920 --> 0:08:40.840 more jobs than most, the hotel sector. Here Well, I'm 0:08:40.840 --> 0:08:51.319 good chorus from Bloomberg the Well. Eater is the chief 0:08:51.360 --> 0:08:56.560 Information and Digital officer at Hilton, the hotel group. I 0:08:56.640 --> 0:09:01.240 met her at their headquarters in McClean, Virginia. Lodging is 0:09:01.280 --> 0:09:05.680 an incredibly labor intensive industry. I have a son, a cousin, 0:09:06.000 --> 0:09:08.760 and a close friend in the business, and everything they 0:09:08.760 --> 0:09:12.079 tell me suggests that getting the customer experience just right 0:09:12.480 --> 0:09:16.120 is very human intensive. But Eater told me it was 0:09:16.200 --> 0:09:19.800 also a business in which technology could be truly transformational. 0:09:21.040 --> 0:09:25.320 I think what's possible with technology in for Hilton is 0:09:25.760 --> 0:09:31.200 nothing short of staggering. Technology, in my mind, has yet 0:09:31.240 --> 0:09:35.640 to truly immerse itself into the integrated experience for customers 0:09:36.080 --> 0:09:39.199 in as profound a way as is available to us. 0:09:39.960 --> 0:09:43.480 Eater describes the options she wants to see widely available 0:09:43.520 --> 0:09:47.200 to hotel guests in a digital age, such as checking 0:09:47.200 --> 0:09:49.960 in on your smartphone app, which can also set your 0:09:50.040 --> 0:09:54.200 room temperature or order a meal before you've arrived. That 0:09:54.360 --> 0:09:59.120 personalized experience is only possible if customers share their preferences, 0:09:59.440 --> 0:10:02.040 which means eater has to win their trust. On the 0:10:02.080 --> 0:10:06.520 front of digital security, an area that also takes a 0:10:06.520 --> 0:10:09.240 lot of labor, the thing that we have to perfect 0:10:09.960 --> 0:10:13.680 is the ability for humans to interact around this technology, 0:10:13.720 --> 0:10:17.560 so there isn't a stark contrast between the digital engagement 0:10:17.640 --> 0:10:20.240 and the human engagement, so that the front desk team 0:10:20.240 --> 0:10:23.880 member knows what you ask for within the application or 0:10:23.920 --> 0:10:28.800 in the message, etcetera, and can respond above and around them. 0:10:29.800 --> 0:10:32.600 So technology can be labor enhancing in a high touch 0:10:32.679 --> 0:10:36.240 business like lodging, and there might also be a sweet 0:10:36.240 --> 0:10:41.040 spot when human labor and technology come together and employees 0:10:41.080 --> 0:10:44.480 are freed from rope tasks such as check in and 0:10:44.480 --> 0:10:46.480 can use their time to tell you about a good 0:10:46.600 --> 0:10:51.400 lunch spot or maybe about a nearby music festival. Hilton's 0:10:51.440 --> 0:10:55.400 business is about people serving people. It is very much 0:10:55.400 --> 0:10:57.440 the culture of the business. It is very much the 0:10:57.520 --> 0:11:02.640 culture of the experience, and we believe that humans. I 0:11:02.679 --> 0:11:08.920 believe that humans provide that unique differentiation. It's the it's 0:11:08.960 --> 0:11:14.360 the human connection based on empathy, really warmth and generosity 0:11:14.840 --> 0:11:18.600 that makes a hotel experience stand apart. So we are 0:11:18.640 --> 0:11:22.640 not designing technology to replace humans. That will not be 0:11:22.720 --> 0:11:25.640 Hilton's business. Um, and I'm pretty happy about that. I 0:11:25.760 --> 0:11:43.400 haven't a lie humans for Bloomberg News. I'm Craig trust Now. 0:11:43.440 --> 0:11:45.880 I'm delighted to say I'm joined by my friend and 0:11:45.960 --> 0:11:49.760 former boss, Larry Summers, the Harvard professor and former US 0:11:49.840 --> 0:11:53.000 Treasury secretary who also served as the director of President 0:11:53.000 --> 0:11:57.600 Obama's National Economic Council. Welcome to Stephanomics. Good to be 0:11:57.679 --> 0:12:02.160 with you, Stephanie. We have just heard from Craig Torres, 0:12:02.240 --> 0:12:05.120 who had a fairly upbeat view of the impact of 0:12:05.200 --> 0:12:08.240 new technology on jobs. And I know from talking to 0:12:08.280 --> 0:12:10.000 him that the reason that Craig got into this was 0:12:10.040 --> 0:12:12.040 that he had just been looking week after week with 0:12:12.080 --> 0:12:15.120 the US very strong job growth and as we know, 0:12:15.360 --> 0:12:19.280 going with that weak productivity growth. But at the same 0:12:19.360 --> 0:12:22.640 time as we've had all of this argument and concern 0:12:22.760 --> 0:12:27.839 around technology and automation, and it just felt like it 0:12:27.880 --> 0:12:30.640 was going against the sort of robots are coming for 0:12:30.720 --> 0:12:33.640 your job's rhetoric that we hear about so much. So, 0:12:33.800 --> 0:12:37.320 where do you come out on this ongoing debate about 0:12:37.320 --> 0:12:40.960 the impact of technology on jobs, I think your reporter 0:12:41.120 --> 0:12:46.000 is more wrong than right. Um. I take the long view. 0:12:47.120 --> 0:12:51.000 I was involved in discussions of automation when I was 0:12:51.040 --> 0:12:53.800 an undergraduate in M I T in the nineteen seventies, 0:12:54.360 --> 0:12:58.000 and then we heard the view that Craig Torres takes 0:12:58.160 --> 0:13:03.240 that technology would create more productivity, and I would create 0:13:03.280 --> 0:13:06.040 more spending power, and I would create more jobs and 0:13:06.480 --> 0:13:10.440 all would be well. Um. When people were saying that 0:13:10.520 --> 0:13:15.280 in the nineteen seventies, five percent of men between the 0:13:15.360 --> 0:13:19.760 ages of twenty five and fifty four we're not working. 0:13:21.040 --> 0:13:25.560 Now about thirteen percent of men between the ages of 0:13:26.240 --> 0:13:32.600 five and fifty four are not working. And so technology 0:13:32.679 --> 0:13:38.080 actually on net has led to a substantial amount of displacement. 0:13:38.880 --> 0:13:41.560 Whenever has happened in the last few years, I don't 0:13:41.559 --> 0:13:45.120 think proves that much. And by the way, since productivity 0:13:45.120 --> 0:13:47.520 growth has been very slow for the last few years, 0:13:47.840 --> 0:13:50.440 I don't think it's been a period of particularly active 0:13:51.040 --> 0:13:55.439 uh technological change, So I don't think that proves very much. 0:13:56.040 --> 0:14:00.280 I think looking forward, we've got to recognize that almost 0:14:00.320 --> 0:14:04.680 any activity that can be routinized can be mechanized, and 0:14:04.960 --> 0:14:09.560 that has to put substantial pressure on many different job 0:14:09.640 --> 0:14:13.120 categories and many different people. Now, there'll certainly be some 0:14:13.200 --> 0:14:15.720 new jobs created, and probably some of the new jobs 0:14:15.720 --> 0:14:19.320 that will be created will have high productivity and support 0:14:19.400 --> 0:14:23.760 high wages. But for people who are really set up 0:14:23.800 --> 0:14:26.440 to do routine work and not to do other work, 0:14:27.120 --> 0:14:29.640 I think it's likely to be a very difficult period 0:14:30.760 --> 0:14:33.440 going ahead. And do you think I mean to defend 0:14:33.440 --> 0:14:36.240 Craig a little bit? Of course, he's not claiming that 0:14:36.320 --> 0:14:41.480 the overwhelming effect of technology um will be positive for labor. 0:14:41.640 --> 0:14:43.720 He was just he was kind of highlight he's highlighting 0:14:43.760 --> 0:14:49.360 some examples where you could see technology kind of complimenting late. 0:14:49.560 --> 0:14:53.360 And there's certainly people talk about these cases where now 0:14:53.400 --> 0:14:55.320 you will have you know, there'll be more demand for 0:14:55.360 --> 0:14:58.200 the very human jobs, and the very human jobs will 0:14:58.240 --> 0:15:02.960 be more prized because you have all this sort of 0:15:02.960 --> 0:15:07.440 technology supporting those human qualities. Your view is there doesn't exist, 0:15:07.520 --> 0:15:09.160 and maybe we'll have more of them down the road, 0:15:09.280 --> 0:15:11.440 But the ELVM, they're not going to be more than 0:15:11.480 --> 0:15:14.080 a small piece of the story in this short I 0:15:14.120 --> 0:15:16.720 take the long view. Five or some of the people 0:15:16.800 --> 0:15:20.240 weren't working in the group where you'd expect everybody to 0:15:20.280 --> 0:15:23.160 be working and then thirteen for some of the people, 0:15:23.840 --> 0:15:27.720 uh weren't working. And it's been a pretty inexorable trend. 0:15:28.120 --> 0:15:30.840 If you take that trend back to the nineteen forties, 0:15:31.640 --> 0:15:38.240 the trend is even stronger. So I don't dispute the 0:15:38.320 --> 0:15:43.120 idea that there will be some sets of jobs that 0:15:43.200 --> 0:15:47.160 will become more productive, and that there will be some 0:15:47.320 --> 0:15:52.200 jobs created, you know, being an eBay merchant, being a 0:15:52.240 --> 0:15:59.760 Facebook programmer, building building sites. But I think the to 0:16:00.000 --> 0:16:02.880 mentality of it, and particularly for the people who were 0:16:03.280 --> 0:16:06.760 most on the margin of working versus not working, I 0:16:06.760 --> 0:16:10.920 think it's likely to be difficult. You know, twenty years ago, 0:16:11.360 --> 0:16:14.760 the big change that was happening in the global labor 0:16:14.840 --> 0:16:18.640 market arguably was China and globalization. You know, was the 0:16:19.080 --> 0:16:22.000 was the arrival of the Chinese labor force, if you like, 0:16:22.080 --> 0:16:24.320 into the global economy. And I remember when I was 0:16:24.960 --> 0:16:28.520 studying at Harvard and elsewhere, there was a consistent underestimation 0:16:29.080 --> 0:16:31.160 of the impact that was going to have on the 0:16:31.200 --> 0:16:33.800 global labor market. Now we have all of this evidence 0:16:33.800 --> 0:16:36.320 from David Ort and all these other academic evidence about 0:16:36.800 --> 0:16:41.440 how that wave of competition from China cost jobs here 0:16:41.480 --> 0:16:45.120 in the US, and people didn't immediately bounce back, and 0:16:45.160 --> 0:16:49.680 the costs were concentrated in a way that theory doesn't predict. 0:16:50.360 --> 0:16:54.040 Now we have that data, how is it. Does it 0:16:54.120 --> 0:16:57.640 help us be more aware of what's coming down the 0:16:57.640 --> 0:17:01.480 track with this new wave of technological change or do 0:17:01.520 --> 0:17:03.960 you think a whole lot of different lessons are going 0:17:04.000 --> 0:17:07.120 to come out of that. I'm not sure. I think 0:17:07.119 --> 0:17:11.600 the David Otter work that you refer to is about 0:17:11.640 --> 0:17:15.560 to be and is already being subject to a wave 0:17:15.640 --> 0:17:19.879 of revisionism. UH. People are taking account of the extra 0:17:19.960 --> 0:17:24.080 exports as well as the extra imports. People are taking 0:17:24.119 --> 0:17:25.879 account of the fact that a lot of the goods 0:17:25.920 --> 0:17:29.879 that we import from China then become part of products 0:17:29.920 --> 0:17:33.320 that we sell that are cheaper because of the imports 0:17:33.359 --> 0:17:36.639 from products so China. So we import, so we use 0:17:36.760 --> 0:17:41.040 more people because we sell more of the product. People 0:17:41.040 --> 0:17:44.040 are taking account of the fact that the imports from 0:17:44.119 --> 0:17:47.560 China held the price level down and that enabled the 0:17:47.600 --> 0:17:51.960 FED to pursue easier policies. None of those effects were 0:17:51.960 --> 0:17:56.400 really contained in the David out Tour research that's so 0:17:56.520 --> 0:18:01.080 frequently UH cited. So I think you're going to see 0:18:01.160 --> 0:18:08.640 some revisionism towards blaming China rather less for the problems 0:18:08.720 --> 0:18:20.800 that have existed in the United States. Moving on from this, 0:18:20.840 --> 0:18:22.840 we should talk about, you know, where you think the 0:18:22.920 --> 0:18:25.280 US economy is right now. I mean, there's a lot 0:18:25.320 --> 0:18:29.080 of debate about how much structural change there's been in 0:18:29.160 --> 0:18:33.720 the labor market and how much further unemployment can go. 0:18:34.680 --> 0:18:38.399 The recent FED change in its attitude towards that in 0:18:38.440 --> 0:18:40.840 a sense, you know, seemingly willing to give it more 0:18:40.920 --> 0:18:45.359 time before continuing to raise interest rates. Where do you 0:18:45.400 --> 0:18:46.879 stand on that? Do you think the FED should be 0:18:46.920 --> 0:18:51.639 even slower, even more cautious. I'm glad to see the 0:18:51.760 --> 0:18:57.560 FED embrace the kinds of ideas of secular stagnation that 0:18:57.680 --> 0:19:02.200 I've been talking about for some years now. I think 0:19:02.240 --> 0:19:07.159 they've recognized that in an economy where fundamentally there's a 0:19:07.240 --> 0:19:10.200 higher propensity to save than there used to be and 0:19:10.320 --> 0:19:13.720 a lower propensity to invest than there used to be, 0:19:14.359 --> 0:19:18.040 interest rates that once would have been very stimulative now 0:19:18.160 --> 0:19:23.480 actually can be consistent with UH contraction, and therefore they've 0:19:23.520 --> 0:19:27.520 got to be very careful about overly contracting the economy. 0:19:28.000 --> 0:19:31.240 I think that's a good recognition by the FED. It's 0:19:31.320 --> 0:19:37.720 also been good that the FED has recognized that inflation 0:19:37.880 --> 0:19:43.480 looks awfully quiescent, and that the combination of no increases 0:19:43.520 --> 0:19:50.119 in the minimum wage and forever huge restraints on union power, 0:19:51.000 --> 0:19:57.320 the ability of companies to outsource more ruthlessly, aggressive shareholders 0:19:57.440 --> 0:20:04.760 maximizing profits, all that has operated to put downwards pressure 0:20:04.800 --> 0:20:08.640 on wages. And ultimately it's very hard to generate very 0:20:08.720 --> 0:20:13.959 much product price inflation without having wage price inflation. And 0:20:14.440 --> 0:20:16.360 so I think J. Powell has been in the right 0:20:16.400 --> 0:20:20.440 place on that as well. I wish he'd gotten there 0:20:20.920 --> 0:20:26.879 before they raised rates UM in UH December. And I 0:20:26.960 --> 0:20:31.639 wish the President wasn't making it harder to do the 0:20:31.760 --> 0:20:35.359 right thing by making doing the right thing look like 0:20:35.480 --> 0:20:39.439 it's a craven political act, as he puts pressure on 0:20:40.560 --> 0:20:43.640 the FED. But the Fed has to do what's right, 0:20:45.359 --> 0:20:50.560 whether it makes politicians happy or whether it makes politicians unhappy. 0:20:50.800 --> 0:20:57.120 And on balance, I think the risks of excessive restraint 0:20:57.800 --> 0:21:01.800 on the economy are are greater than the risks of 0:21:01.920 --> 0:21:09.240 insufficient restraint. In addition to the considerations I already raised UM, 0:21:09.280 --> 0:21:11.399 our goal in the United States is to have a 0:21:11.400 --> 0:21:16.680 two symmetric inflation target. Symmetrics an important word. It means 0:21:16.720 --> 0:21:21.080 that inflation is supposed to average two Why I ask 0:21:21.160 --> 0:21:27.400 you the question if after ten years of recovery, when 0:21:27.400 --> 0:21:30.679 the unemployment rate is lower than it's been in fifty years, 0:21:31.720 --> 0:21:35.439 and we're in the eleventh year of expansion, if that's 0:21:35.480 --> 0:21:38.520 not the time when we're gonna have inflation above two 0:21:38.520 --> 0:21:42.600 percent after ten years, when we've had it below two percent, 0:21:43.240 --> 0:21:46.159 when would such a time ever be? And it's like 0:21:46.320 --> 0:21:49.399 the credibility of the FED with respect to an inflation 0:21:49.480 --> 0:21:53.920 target actually depends on its ability to generate a bit 0:21:53.920 --> 0:21:58.520 of acceleration of inflation and inflation expectations from here. I'm 0:21:58.520 --> 0:22:00.200 not sure they're going to be able to do way, 0:22:00.600 --> 0:22:03.600 but they should at least be quite trying. Larry Summons, 0:22:03.640 --> 0:22:05.679 thanks very much for being on Stephanomics, and maybe one 0:22:05.720 --> 0:22:07.800 of these days we'll get you back on the program. 0:22:07.800 --> 0:22:16.760 Good to be with you. So I'm joined now by 0:22:17.080 --> 0:22:20.960 one of our top FED reporters, Gina Smellek, who's based 0:22:21.080 --> 0:22:24.480 in New York and she has the important job, among 0:22:24.600 --> 0:22:28.840 many other things, of writing our economic research rap every 0:22:28.840 --> 0:22:33.919 week for Bloomberg, and recently she wrote about poor Man's 0:22:33.960 --> 0:22:37.320 monetary policy. Tell us about that, Gina, Right, So this 0:22:37.400 --> 0:22:40.280 is this idea from city groups. Will Embroider in a 0:22:40.320 --> 0:22:43.119 recent research note that central banks are not going to 0:22:43.160 --> 0:22:46.000 have a lot of ammunition at their disposal come the 0:22:46.040 --> 0:22:48.720 next procession. And the point he's making here is that 0:22:48.880 --> 0:22:51.880 rates are still pretty low around the world. The US 0:22:52.000 --> 0:22:54.960 is obviously a little bit above zero, but you look 0:22:55.000 --> 0:22:57.560 at the euro Area in Japan and they're still sort 0:22:57.560 --> 0:23:01.600 of lingering below And so come the next crisis, the 0:23:01.680 --> 0:23:04.000 central banks are really going to be forced to rely 0:23:04.119 --> 0:23:06.320 heavily on their balance sheets, sort of tinkering around the 0:23:06.400 --> 0:23:09.119 edges of composition in size, and aren't going to have 0:23:09.160 --> 0:23:11.040 a lot of the tools that have traditionally been at 0:23:11.080 --> 0:23:14.840 their disposal, which you know, most centrally includes rate cuts. 0:23:15.880 --> 0:23:18.159 And I guess what's interesting about this, and you mentioned 0:23:18.200 --> 0:23:21.399 a few other bits of research, including the recent paper 0:23:21.480 --> 0:23:26.000 that that Larry Summers um co wrote and produced for 0:23:26.040 --> 0:23:29.719 the Brookings Institute conference, that it's sort of this debate 0:23:29.760 --> 0:23:32.320 about not having enough ammunition for the next crisis is 0:23:32.400 --> 0:23:37.040 kind of clashing, sort of colliding with debates around what 0:23:37.200 --> 0:23:39.879 the best economic policy is right now in the US 0:23:40.080 --> 0:23:43.959 and the sort of more progressive thinkers um talking about 0:23:44.400 --> 0:23:48.680 modern monetary theory and wanting to run big, bigger deficits, 0:23:48.720 --> 0:23:51.480 you know, in a sense for political reasons, but you've 0:23:51.520 --> 0:23:55.000 got economists saying you might want to do it to 0:23:55.119 --> 0:23:57.399 help prevent the next crisis as well. Is that that 0:23:57.440 --> 0:24:00.119 must be kind of interesting for you to see the 0:24:00.119 --> 0:24:03.480 sort of everyone's coming for coming to the same conclusion, 0:24:03.520 --> 0:24:05.840 which is we need to borrow more, just at a 0:24:05.880 --> 0:24:08.080 time when I would have thought that President Trump was 0:24:08.080 --> 0:24:10.880 already borrowing quite a lot, right. It's so interesting. These 0:24:10.880 --> 0:24:14.240 conversations are also closely interconnected. And there's I think this 0:24:14.400 --> 0:24:18.240 growing idea that central banks are dealing with what's called 0:24:18.280 --> 0:24:20.639 a very low neutral interest rate. So that's the one 0:24:20.680 --> 0:24:23.760 that neither stokes nor slows growth. It's really low for 0:24:23.880 --> 0:24:27.280 demographic reasons because populations are aging and people tend to 0:24:27.280 --> 0:24:30.320 save as they age, and that pushes that sort of 0:24:30.400 --> 0:24:32.680 rate setting that they can achieve down a little bit. 0:24:33.160 --> 0:24:35.600 One way to get that higher is by running a 0:24:35.600 --> 0:24:38.600 bigger budget deficit, especially if it can if doing so 0:24:38.760 --> 0:24:41.159 results in sort of infrastructure spending and other things that 0:24:41.160 --> 0:24:44.359 can raise the productive capacity of an economy. But that's 0:24:44.359 --> 0:24:45.919 hard to do in a world where you already have 0:24:45.920 --> 0:24:49.360 really high to GDP ratios, and so I think there 0:24:49.359 --> 0:24:52.640 are all these conversations around what does fiscal responsibility mean 0:24:52.880 --> 0:24:55.199 in the world of twenty nineteen, and what is it 0:24:55.200 --> 0:24:57.520 going to mean come the next recession? Like how much 0:24:57.560 --> 0:25:00.320 can we play with this stuff around the edges? And 0:25:00.600 --> 0:25:02.240 at what point do we push ourselves to a point 0:25:02.280 --> 0:25:04.840 where we're just overextended on this fiscal front. And I 0:25:04.840 --> 0:25:08.600 think that conversation is really reaching a fever pitch in 0:25:08.640 --> 0:25:11.400 places like the US now, and I don't think it's 0:25:11.400 --> 0:25:13.560 going to fade in any way come the next crisis. 0:25:13.600 --> 0:25:15.480 I think this is this is a debate that we're 0:25:15.480 --> 0:25:18.000 going to have with us for the foreseeable future, and 0:25:18.080 --> 0:25:19.840 I suspect we are going to be talking about it 0:25:20.000 --> 0:25:30.840 many times. Thanks very much, Gina Smellick. Thank you, thanks 0:25:30.840 --> 0:25:33.760 for listening to Stephanomics. Please join us next week for 0:25:33.800 --> 0:25:37.560 another episode about the forces shaping the global economy. In 0:25:37.560 --> 0:25:39.959 the meantime, you can find us on the Bloomberg Terminal 0:25:40.040 --> 0:25:44.000 website or app, and wherever you get your podcasts. We'd 0:25:44.000 --> 0:25:45.760 love it if you took the time to rate and 0:25:45.800 --> 0:25:48.840 review the show so it can reach more listeners. For 0:25:48.920 --> 0:25:52.760 more news and analysis from Bloomberg Economics, follow as economics 0:25:52.800 --> 0:25:55.639 on Twitter. You can also find me on my Twitter 0:25:55.680 --> 0:25:59.600 handle at my Stephanomics. The story in this episode was 0:25:59.640 --> 0:26:02.760 reported and written by Craig Torres. It was produced by 0:26:02.800 --> 0:26:06.280 Magnus Hendrickson and edited by Scott Lanman, who is also 0:26:06.400 --> 0:26:10.480 the executive producer of Stephanomics. Craig's original article on this 0:26:10.560 --> 0:26:13.879 topic appeared in Bloomberg business Week. It was edited by 0:26:13.920 --> 0:26:17.800 Ben Holland and Christina lind Black Special thanks to Larry Summers. 0:26:18.400 --> 0:26:21.560 Francesco Levy is the head of Bloomberg Podcasts.