There are several problems facing the global economy.
I think it's fairly clear that there is going to be a gross slowdown
that the economy was given what is now generally called a sugar high
by the combination of a tax reform bill in December of 2017 and then
the expenditure increases in January 2018 creating a very large
increase in the deficit when the deficit was already very large and
that provided some short term stimulus to the economy.
It was not well-designed and the money didn't go into long term
investment it went into share buybacks.
The result of all that is it didn't provide the foundations of
sustainable growth.
There are several problems facing the global economy.
Europe. remains very weak.
Part of the reason has to do with some fundamental flaws in the euro.
Their political problems.
Italy has not had growth and the euro doesn't have -- give it a
framework within which to restore growth.
So you're really having near stagnation in Europe.
Meanwhile China is also having problems.
What I describe what's going on is that they alternate putting their
foot on the accelerator and then on the brake because the only way
they goose their economy is through debt.
I don't see the basis of stable growth in China.
The third obvious concern is Trump's protectionism and we're talking
about China.
We're talking about a trade war with Europe over automobiles.
We're talking about sort of the global rules based system which he has
systematically attacked.
The WTO this year will wind up without having an effective appellate
body because the United States refuses to allow new judges to be
elected. So the WTO which was the basis of the rules based global
system is is going to be facing difficulties.
So all these are significant headwinds confronting the global economy
and we're part of the global economy.
So we will feel some of the bumps that we ourselves have created.
Many of us who were critics of the WTO and I think correctly didn't
really appreciate the virtues of the WTO until we actually confronted
the reality of a world without rules.
You can't imagine how any economy American economy could operate
without the rule of law it's sort a the foundation of our economy of
our society.
We talked about the rule all the time.
The same thing actually applies internationally.
You need a rule of law.
It's much more bare bones rule of law and that's what the WTO
provided. Some of the rules were not well designed.
There were rules that were written by the advanced countries for
their corporate interests.
And that's really been my.
complaint. that to to a large extent the rules were dictated by
American and European corporations.
For instance access to drugs.
They made it more difficult to get access to lifesaving drugs drove
the prices of drugs up and it seemed so unfair that we had an
international regime which allowed the advanced countries to
subsidize their agriculture goods like cotton.
Billions of dollars going to a few thousand maybe twenty five
thousand rich American cotton farmers putting deeper into poverty
tens of millions of people in Africa to India and to me I found that
abhorrent. And so that's what I criticized.
Manufacturing is not going to come back to the United States.
We're not going to recreate the golden era of capitalism the 1950s or
60s. Even if China didn't export as much manufacturers goods to us
we're not going to make mostly apparel in the United States.
We're going to be importing it from Vietnam or Bangladesh and to the
extent that manufacturing goes back the United States would process
which is called on-shoring.
It's going to be robots.
It's not going to be jobs in the Midwest isn't jobs in South
Carolina. So in the end for all the rhetoric Trump is not delivering
. Manufacturing jobs have come back a little bit as our economy
recovers from that long and great recession.
Some of those jobs are coming back and I think there's more that we
can do to bring them back.
But the basis of that is going to be research is going to be
strengthening our universities.
But these are the things that Trump is trying to undermine.
He's trying to defund research to defund the policies that actually
bring those jobs back in a sustainable way and make sure that the
industrial jobs that are brought back are really good jobs.
What Trump did was to recognize that we have not managed the process
of structural transformation of our economy.
We were going from a manufacturing economy into a service economy
into an innovation economy and the process of deindustrialization
associated both with globalization and with technological change is a
difficult process and we left a lot of people without help to move
into the new economy.
You see it in so many dimensions.
We didn't give them the education that they needed but Trump
University is not the kind of education they need.
They need real education and we've been cutting back on the kinds of
real education they need.
So while he grass you might say that the despair you grasp the
concerns he's a populist in the sense there are no real solutions
that he's offering and actually made things worse.
I'm not a big UBI person.
I understand that there are some advantages to providing a single
program guaranteeing a basic income to everybody but to me the basic
responsibility of our society of our government is to make sure that
there's a job for everybody who's able and willing to work.
And if we had a job with decent pay for everybody able and willing to
work then the concerns about UBI wouldn't be there.
We will still need of course to have social protection systems for
the disabled for you know a whole set of people who can't work but
that should be the core of a program that provides a system of social
protection for our society.
It's especially important for two reasons I think and I may be a
little old fashioned on this.
I think there's a certain dignity from work younger students say oh
there can be a lot of dignity from meditation and from other ways of
spending time.
But I think for most people there will be a real desire to work and
this will be a big challenge going forward.
We don't know exactly when driverless cars and trucks are going to
arrive. We know that even high tech jobs like radiologists are not
immune. Computerized radiology is actually better than most humans.
So there's a lot of areas where machines in one way or another will
be not only stronger can do data processing faster but actually can
learn in certain limited domains and even be creative in certain
ways.
So this is going to be one of the big challenges of the next quarter
century. I titled my book people power and profits.
It was trying to say the only balance is going to be mass movements
people engaged in politics because in the end the way our economy and
the way our society functions is determined by rules that are set
publicly. There is a real concern that the problems of inequality
that I've been so concerned with for so long will be getting worse.
And part of the reason is the problems of unemployment
that it could give rise to but also part of it is the ability of A.I.
in the new technologies to be more efficient in exploitation.
They can target prices at exactly what each person pays.
It actually undermines the basis of a market economy as we've known
it in the past a price system where your standard courses in
economics. It's about how prices make sure that the marginal benefit
of a good is the same for all individuals.
The marginal cost is the same in all uses of production but with the
new technologies everybody's paying a different price.
Every firm is paying a different price and it actually undermines the
efficiency of the market economy and it takes we call economist
called producer surplus surplus from individuals and adds it to the
profits of some of the wealthiest people in the country.
Over the last 40 years corporate power profits have been
driving the rules.
We've become a more corrupt politics more money driven politics and
we've lost the balance in our politics.
Not surprising given that we've lost the balance in our politics
we've lost the balance in our economics.
There's been an erosion or evisceration of worker power over the last
50 years.
We have to get the rules of globalization right.
They've contributed to the weakening of worker bargaining power.
We have problems in our corporate governance where CEOs are taking a
larger and larger share of the corporate pie and dancing themselves
at the expense of their workers and of investment.
And that's one of the reasons why investment rate is so low and our
overall growth rate is so low.
Now when it comes to the particular problem of innovation.
I think we have to realize at the core of our innovation system is
government funded basic research and government funded education
programs. And those are absolutely essential for making a dynamic
economy. The irony is that while the basis of all the innovation our
economy is government funded.
too little of the proceeds go back to the public.
So there has to be a better sharing of the proceeds of the innovation
and that may be done through taxation and may be done through
adjustment of our intellectual property regime.
There are many ways to do it.
It may turn out to to vary across industry and over time.
But what is very clear is there has to be a better system of
sharing of these proceeds.
I've been a great advocate of moving to an electronic payments
mechanism. There are a lot of efficiencies.
I think we can actually have a better regulated economy if we add all
the data in real time knowing what people are spending.
It would enable the Federal Reserve to actually set interest rates in
a much more efficient way.
We would have I think better macroeconomic management.
It also would curb some of the illicit economic activities and it
disturbs me a great deal.
The attention that was given to crypto currencies.
because those were moving things off of a transparent platform into a
dark platform.
We know about the role of real estate and money laundering.
We know from the paradise papers and the Panama Papers the extent of
this money laundering.
We know from research in recent years for instance the work of
Gabriel Zucman the large percentage of global wealth that is held in
these dark havens.
So if we want a more efficient economy without these illicit
activities I think we're going to have to move to more of an
electronic payments mechanism and we will have to figure a way out to
have the transparency of electronic payments mechanism without the
dangers of the surveillance and the surveillance state.
We have a very good currency.
So far the currency has been run in a very stable way.
There is no need for anybody to go to a cryptocurrency you know in
our standard courses in economics we talk about the attributes of a
good currency and the US dollar has all those attributes.
The crypto currencies do not have those attributes.
I actually think we should shut down the crypto currencies.