- [Robin] My name is Robin Albing.
I'm the Director of Lifelong Learning
in Alumni Relations here at Dartmouth.
Matthew J. Slaughter is the Paul Danos Dean
of the Tuck School of Business at Dartmouth.
The Earl Daum 1924 Professor of International Business,
and the founding faculty director of the Center
for Global Business and Development.
He is also currently a Research Associate
at the National Bureau of Economic Research,
an Adjunct Senior Fellow at the
Council on Foreign Relations,
a member of the Advisory Committee
of the Export/Import Bank of the United States.
A member of the Academic Advisory Board
of the International Tax Policy Forum,
and of Economic Innovation Group,
and an Academic Adviser to the McKinsey Global Institute.
He told me this morning he doesn't
care if we give the long introduction,
but I think it's important for all of us
to put everything in context, and
know from whom we're going to be hearing.
From 2005 to 2007, Dean Slaughter
served as a member on the Council of Economic Advisers
in the Executive Office of the President
where he advised the President,
the Cabinet and many others on issues
including: international trade and investment,
currency and energy markets, and
the competitiveness of the US economy.
Dean Slaughter's area of expertise
is the economics and politics of globalization.
He has published dozens of articles
in peer reviewed journals and books,
and has coauthored four books,
including: "The Squam Lake Report:
"Fixing the Financial System" and
"Globalization and the Perception of American Workers."
Prior to joining the Tuck faculty in 2002,
since 1994 Dean Slaughter had been
on the faculty of the Economics Department at Dartmouth.
In 2001 he received Dartmouth's
John M. Manley Huntington Teaching Award
and in 2012 he received Tuck's Class of 2011
Teaching Excellence Award.
He received his Bachelor's degree
summa cum laude and Phi Beta Kappa
from the University of Notre Dame in 1990
and his doctorate from MIT in 1994.
Please join me in welcoming Dean Matt Slaughter.
(clapping)
- So, thanks everybody, good morning.
That's very kind.
Robin thank you for that very kind introduction.
And for those of you coming in late,
there's some seats down here, and I
promise I won't cold call on the front row.
So if you wanna sit (laughter)
you can come sit down here.
There's a few seats down here, so come on in.
So, thank you, it's great everybody's back.
Welcome back to all the alumni.
And you know, go Big Green, beat Yale.
So, we don't want to stand in the way of that.
I just put together a handful of slides
in talking with Robin and her colleagues
about what to talk about.
Just kinda thinking about where the world economy is,
and kind of where the US economy is.
So, I've got some slides I put together.
I've got five topics that we'll talk about.
I wanna talk about economic--
I'm an economist, sorry.
So, we'll talk about the economy and public policy.
And I'm happy for this to be a conversation,
so I wrote down conversation.
So, if you've got questions, or I'm not being clear,
just raise your hand or shout it out,
and it'll be lively and we'll have it all figured out
by 11. (laughter)
I wanna talk about economic growth.
So, that's kind of thinking about,
you know 'member,
John Kennedy gave a couple of lovely economic speeches,
talking about the rising tide lifting of all the boats.
So, the rising of the tide is economic growth.
The lifting of all the boats will be the second topic,
which you think about income distribution
and think about what's happening
and who's earning income in the US
from what growth we've got.
I want to look at the rest of the world a little bit.
I want us to think about how the US government is.
A lot of economic issues depend on what policies are set
in the state and national governments.
So we'll focus on Washington for a minute,
in some sense, do we have the fiscal means
as a country to meet the aspirations we might have.
And then I wanna just, I'll kinda draw all that together
by looking at what people think these days.
As was kindly said, I've done a lot of
research over the years with an old college
roommate who's a political scientist.
On kind of looking at how people feel
and how they think about the economy.
How they think about globalization and things like that.
So, but like I said, if I'm unclear,
or if you have questions, just let me know.
And I hadn't thought, Robin, but
if people want these slides, not that you do,
but if you do, you can have them.
I'll email them along.
'Cause I just have some pictures.
So, we'll go through each of the topics.
First we'll talk about economic growth.
And then we'll go through them.
But, I just want to stress to people two things.
One is I'm an Independent Tigger.
So, independent means I'm a lifetime independent.
I'm not a Republican or a Democrat.
That also means here I'm not working for
any campaign right now, so you're not gonna
hear some sort of, I will gently say, partisan line.
And the other thing that I'll stress is Tigger.
So in the Winnie the Pooh stories,
if you remember the characters when you.
My wife and I have two boys, sons now.
When you read those stories as an adult,
you realize that there was a lot of intelligence
written into the different characters in the 100 Acre Wood.
So, I tend to be an optimistic person.
But I stress that 'cause frankly
though we're not in a world financial crisis,
the economy isn't all that great.
So, some of the numbers I'm gonna show us
actually are a little, mmm
let's call them Piglet like, (laughter)
or, you know, frankly Eeyore like, okay.
(laughter)
So, but that's where we are.
But as I say to my Tuck students all the time,
that's just a huge opportunity.
Us, involved in education for the undergraduates
here and the professional schools.
Like, what addresses these problems is knowledge.
Not that you have to know the answers perfectly,
but that you're thoughtful about how to approach them.
So, some of the numbers aren't Tigger-like.
That just reinforces all the great things
that happen on campus here at Dartmouth, okay?
Good.
So let's start with economic growth.
The rising tide.
Another metaphor that sometimes gets used
is the speed limit for countries.
If you think about driving a vehicle.
So, some countries grow very quickly.
Some countries grow slowly.
I just want us to think about, for the United States,
what seems to be happening with our speed limit.
And the way that economists typically look at this
is they look at the average rate of growth,
of what's called gross domestic product, GDP.
That's the total value of goods and services
that a country produced.
Add up the value of all the educational services,
and automobiles and everything else,
that gets you GDP.
If you can't read these numbers,
I tried to make the pictures as big as I could.
This is just average annual growth of GDP
in the United States for a number of decades.
Starting with the 1950s and counting through to the 2000s.
The message I want you to see here is these
blue bars are getting shorter.
The average speed limit rate of growth,
how much the tide is rising,
if you wanna mix metaphors, and English,
your English faculty here can correct you on that.
We're not growing as quickly as we used to.
So, our speed limit seems to be slowing.
There's a bunch of measurement issues
here that we won't go into.
I'm happy to talk about afterwards.
But, even if you discount in some sense,
or eliminate the years of the financial crisis,
and depending on how many years you put in the 2000s,
whether you want it through last year or just through 10.
Doesn't matter.
The speed limit rate of growth for
the United States is slowing.
And that's not great.
Now the question is why is that happening?
There's two main things that determine
the speed limit rate of growth for a country.
One is what's the growth in the labor force.
And the second is what economists call
growth in productivity.
Kind of how many goods and services,
what's the productivity of each one
of those workers in the labor force?
So, if your mind thinks as an accountant, or mathematically,
you can kind of see the total growth in output
is a combination of growth in people working in some
sense interacted with the productivity of those people.
So, why the speed limit is slowing
could be either of those things.
So, let's look at a picture of each one of those.
Part of it is the slowing growth in the labor force.
That's this picture.
This is growth in the US labor force.
The dark blue bars are data, decade by decade.
And then the light blue bars are projections
of the current US government right now.
You saw there was a period where
the labor force grew dramatically.
And then it's been waning.
That dramatic acceleration in the
growth of the labor force was the Baby Boom.
That was 76 million people being born
in the United States between 1946 and 1964.
Aging and entering traditional plummet years.
Along with that, the socio-economic change
of rising female labor force participation.
Yeah?
- [Voiceover] In the previous slide, what impact
if any has there been on the growth rate
of frequency and severity of the economic crises?
- [Voiceover] Could you repeat the question?
- Yeah, I'll repeat all the questions.
The question was when I talk about the
slow down in GDP growth, how do you
take account of business cycles and crises.
- [Voiceover] Severity and frequency.
- Yeah, and severity and frequency.
Great question.
The short answer is the slow down in
the speed limit for the US is independent
of what you think about business cycles.
Now, we could talk about business cycles.
'Cause that relates to the Fed
and it relates to fiscal policy too.
So, I'll come back to crises when I show us
the fiscal status of the US in a few minutes, okay.
But this, you should think of this as,
if you think like economists, a supply side statement.
The kind of productive capacity
and potential for the US is slowing.
And it's a basic sense, like oh, mmm, that
doesn't sound like a Tigger thing.
Like economic growth generally is good.
'Cause it speaks to the growth in income for people
and families, which I'll show us in a minute, okay.
So great question.
So there's the Baby Boomers entering
the labor force and then, I know my hair's gray,
but at 46 I'm a Baby Buster, so I'm on the wrong
side of this generational divide.
There's not as many people like me,
who've come cohort by cohort behind.
And now what's been happening and started
a few years ago, independent of the crisis,
is Baby Boomers have aged and are reaching
traditional retirement years.
They don't have to, but traditionally
there's kink points of retirement at
60, 62, 65, based in part on Federal law
in the US for Social Security.
Though part of the slow down is driven
by Baby Boomers being followed by Baby Busters.
And by the way, the best guess of the United States
government right now is that isn't going to change
very much.
The big wild card with projections of labor force
are projections about immigration.
And yet, if you look at the dysfunction in
Washington, DC, do we think we have anything
coming any time soon on comprehensive immigration reform?
That's a little bit of editorializing.
The short answer is no. (laughter)
I'll come back to that at the end.
But when you think about these projections,
that's the big wild card.
Not to be crass, but productions of the
labor force growth are pretty easy to do.
They're largely a function of actuarial tables
of birth rates and death rates.
And then some, calculation and judgement
about labor force participation choices.
Yes.
- [Voiceover] What about the Millennial generation?
That's huge too, and it's starting
to come into the workforce.
- It's not as huge relative to the Baby Boomers
is the short answer.
It's huge relative to my generation.
But it's not huge enough.
So, the point is, the message to have is,
this slow down in the speed limit,
part of it is a slow down in the labor force.
But the keyword here is part.
The biggest thing that's driving the slow down
in the speed limit rate of growth
is actually a slow down in productivity growth.
So, I'm gonna show us that picture right now.
That's this picture.
I don't have decades here, 'cause I wanna stress
here the technology cycles are a little more important.
Okay.
So a lot of this has to do with
how innovative the country is.
So, part of what I want you to see here is,
this is growth rates of average
annual labor productivity in the US.
From the end of World War Two up until
the first oil crisis, we had booming
productivity growth in the US of almost 3% per year
in growth in the non-farm output worker hour.
That was great.
That was, many of you, I know I'm gray,
but I see some people who were in the labor force
and living in that time.
That was a sense of American economic excellence.
As I'll show us in the income side too.
But then we had this lost generation
of very slow productivity growth,
and economists don't know much,
so we don't know why the heck that was happening exactly.
But then, notice that third bar got taller.
What industry was driving that productivity boom?
(crowd murmurs)
Awesome. IT.
So that was a massive acceleration
in that productivity growth in
IT hardware in particular and some related software.
Globalization had a great deal to do with that.
The back of your iPhone says designed by Apple
in California, assembled in China.
That's a great anecdote of how globalization
contributes to acceleration in productivity.
But notice unfortunately this slump
back down in productivity growth.
Especially post-financial crisis.
The past four years, growth in output
per worker hour in the US has been less than 1% a year.
It's the worst four year stretch in productivity
growth we've had in like 60 years.
As long as we've been measuring the data basically.
That's really bad.
Because historically most of the growth
in total output for countries like the United States
comes from growth in productivity,
not growth in workers.
Yes.
- [Voiceover] Productivity growth is dependent
on the cost of good and services.
A lot of technology is now going toward free services.
- Yep.
- [Voiceover] How do you account for those.
- I'm not, so great questions.
I'm gonna give you a short answer, on the fact that.
The question was, with a lot of the growth
in IT, especially late with social and mobile
and things, how do we measure that?
Especially if stuff is free.
It's harder to measure, but it gets measured
is my short answer.
So, maybe it's gonna be the case
that the technology optimists say,
you know what, Uber and things like this,
we're mismeasuring things so much,
and it's a golden age of productivity.
I think the jury is, to put it politely,
very much still out on that.
And importantly, if you thought that was true,
and we were undermeasuring productivity growth,
you would see it on the income side
in surging income growth.
And as I'm gonna talk about in a minute,
we're just not seeing that.
So, maybe that's going to change.
But, it hasn't so far.
So the first message I want to convey then,
on message number one for the US
is we've had this dramatic slow down
in productivity growth that we don't fully understand why.
But that makes all the kind of policy
and life choices harder when you
have slower economic growth.
Slower economic growth is not a panacea for everything.
But when it's slower, in some basic sense,
society gets more fragile and more factious, okay.
And that's just, I don't like this, but this is
a feature of the US that we should all be cognizant of.
Especially those that are involved in the campaigns
running around here in New Hampshire these days.
Alright.
I see two hands there. I'll take quick questions.
Then I'm gonna go on. First.
- [Voiceover] Very quickly.
Infrastructure, you know we have a--
- I'll come back to that in a slide
later about infrastructure.
But I'll answer it by saying,
what drives productivity growth?
We know in a broad sense, it's public investments
in infrastructure, public investments in early stage
research and development, investments in education.
It's how open are you to the rest of the world?
High skilled immigrants.
How open you are to the spur of international competition.
Do you have a sound tax policy to support growth
and innovative activities in your country?
So, there's no law of physics that determines
how much each of these drives productivity growth,
but the collection of all those things is
what determines the productivity growth potential.
And I'm previewing a little bit of one of the messages.
Which is in Washington, DC we are doing
a completely horrible job, I say this as an independent,
I fault all the parties, on doing the things we
should be doing, and I'll have two slides on this later,
to drive productivity growth.
And there was a hand in the back.
- [Voiceover] Yeah, what's the, have you
measured the impact of regulations,
especially in the past seven years, on productivity?
- Some have. That's harder to measure.
Because it's a lot of qualitative judgement.
But the regulatory environment
I will add to the list on things that
support or restrain productivity growth.
Okay.
So, everybody clear on the first fact?
Slow down in the speed limit, because
of slow down in productivity growth.
Alright.
And good former students remember all this, right?
(laughter) Of course.
The second number is income distribution.
So, if the rising tide is productivity growth
and economic growth, the lifting of all the boats
is a question of the workers, the people
that own, that provide the labor services
and the capital services, are their incomes going up?
I think most of us aspire to live in a society
where lots of people's incomes are going up.
Not necessarily equally and to the penny,
but I think there's a sense of a vibrant society
is one where a lot of people feel like
over time they're doing better economically.
So let's see whether that's been the case.
Let's go way back in time, and let's look at the
first three quarters of the 20th century of the US.
What we're looking at here is data
that come from tax returns.
So these are, the IRS, for better for worse,
the personal income tax was legalized
with a Constitutional amendment,
and the first year of collecting income tax
on people and workers was 1913.
So, you can go back in time, as some famous economists
have done, and look at tax filers
as the unit of observation.
So the data here are tax filers, on the individual side.
And I'm gonna forestall, all the questions,
there's a bunch of measurement issues around that.
S-Corps, whose income hits on the personal side,
and all sorts of stuff.
I'm not gonna take any questions on that.
'Cause qualitatively, the message is the same
regardless of what data you look at.
And so what I've got here is data points for each year.
The black diamond is average income of
the bottom 99% of the tax filers.
Ranked in terms of the level of adjusted gross income.
The white triangles is the 1%.
That's the top 1% of tax filers.
And hit the left axis here, it
corresponds to the black diamonds.
The right axis, which I'll show us in the next slide,
corresponds to the top 1%.
But the message I want you to see here,
and you can see on the question earlier,
you can see crises here.
We can see the Great Depression.
So, what happened in the Great Depression?
Everybody's incomes fall dramatically.
Alright, so that's just striking.
And here, if you had mini-crises before then.
Here's some after-effects of World War One.
But the general message I want you to see is
income growth was strong for a lot of people,
especially after World War Two.
Remember I showed you that high
productivity growth period of '47 to '53.
On the income side, a lot of boats were rising.
You can see this quite dramatically.
This is all inflation adjusted.
Average incomes went from about 20,000 dollars
to over 40,000 dollars, about a doubling
of average incomes of the 99 percenters during that time.
And again, the scale is different,
but there was some modest growth of the top 1% too.
But here's, over much of the 20th century, what
economic growth we had, that was lifting a lot of boats.
Now, let's look at what comes next.
So, let's go through to 2012, and what
I want you to see is there's some zigs and zags,
especially with the productivity boom of the late 90s.
But notice, relative to the peak here,
the bottom 99% income today is about
where it was about the year I was born in 1969.
I'm not saying that's good or bad.
This is what globalization and technological change
and a whole bunch of forces are delivering.
But at the very least, this rapid growth of incomes
over much of the 20th century has basically
stopped for most people in America.
Now that you can see the right axis for
the top 1% tax filers, the average incomes of people in
the top 1% of tax filers about tripled during that period.
From about a little over 300,000
dollars to over a million dollars.
I'm not saying that's good or bad,
(crowd murmur)
but I think some people, I'm hearing some murmurs,
saying, mmm, that's maybe not the greatest thing.
I care a lot about a lot of boats rising,
but the dynamic in more recent times is
a small number of boats are rising, and
most boats are flattish at best.
This is tax filers.
So, it's variation in the number of people
in the households that are working,
variations in the types of income they got.
'Cause it's not just labor income but capital income.
So I wanna show us one more data point,
which is what if we unbundle that 99%.
The skewness of income growth at the top,
what do we see if we break this apart by people?
That's what I'm gonna do in the next slide.
And this slide is the one that worries me the most.
So I put up here, you know (laughter)
people say hey your hair's gotten really gray.
I'm like, hey, thanks a lot.
It's good to see you too. (laughter)
But the fact is, the rising tide
hasn't been lifting a lot of boats.
Now let's look at individual people.
These are data that our US government collects,
kinda like the data in the decennial census,
but it's year by year.
We're gonna again, adjust for inflation so it's real.
It's the total money income earned by individuals.
All in money income, base salary, bonuses,
it excludes the about 18% of total labor comp
that is health insurance, stocks, stock option
grants, stuff like that.
Okay.
But this is the broadest measure of income
our US government collects, where I can
march up the skills ladder of people.
And there's many ways to measure skills.
But the single best measure, if you give me only one
is educational attainment, per being in
a wonderful institution like Dartmouth.
Right, it's not perfect.
You know, Bill Gates, dropped out of
college at Harvard, he's a college dropout.
He's done kind of okay in the labor market, right?
(laughter)
Mark Zuckerberg, people like that.
So let's march through, and the last year of data
that's finalized I can do this on is 2013.
So, let's start with high school drop outs.
8% of workers in recent years, in 2013.
Over that time period of those 13 years,
in inflation adjusted terms, the average
high school drop out in America, their earnings fell by 5.8%
That's a mean.
Those of you that remember or are taking statistics,
medians look almost identical.
But here's a boat that on average hasn't been rising.
High school drop outs.
Some did better, some did much worse, this is an average.
And then you can think, who cares?
Whose fault is it?
These types of questions arise,
especially in a public policy context, right.
But just as a matter of data,
here's a boat that wasn't rising.
So, let's keep going.
Here's high school graduates.
27% of workers.
An average earnings change of a decline of 6.7%.
Now let's pick up people with some college,
not a four year degree, maybe a two year degree,
but not a bachelors degree or above.
That's about 28% of workers.
A mean earnings change of a decline of 10.9%.
If you're tallying the middle column,
we're over 50%, so I've got at least half the labor force.
I've got the median voter probably in there.
These are all people 25 and above.
So when you think about the appeal of
people like Bernie Sanders and the
like, paradoxically, Donald Trump,
you start to think about the political dynamic
present in our country.
Now, over most of the 20th century,
if I kept clicking, if through hard work
or good luck, you earned a college degree,
over most time periods, your real earnings were rising.
But that even hasn't been happening in recent times.
Let's look at a four year degree only.
No advanced degree, but a four year bachelors
degree across all disciplines and all schools.
So this is aggregating a lot of things.
And Dartmouth students, don't drop out when you see this.
But we've got 23.4% of workers.
And mean earnings change of a decline of 11.2%.
Alright.
And I think if a lot of us reflect on friends
and family we have, we know examples
like this, of young people especially,
coming into the labor market of late.
Who are kind of struggling.
Part of this is the financial crisis.
But it's not all.
If I showed us these numbers through '07 or '08,
qualitatively the last column is identical
in terms of pluses and minuses,
and all I have so far is minuses.
- [Voiceover] Well, we had two crises in that 13 year span.
- Yeah. Right.
And now we're kind of thinking
about what's coming in the future, right.
But we'll come to that, 'cause I'm a Tigger.
Now, let's keep going.
Non-professional masters degrees.
So, masters in social work, masters in education,
masters in public policy.
That's 10% of workers.
A mean earnings change of a decline of 7.6%
If you're tallying the middle column,
I've got 96% of workers in the American labor force,
all of whom are in educational cohorts whose
earnings have been falling, not rising,
for now what's approaching a generation.
This isn't to say don't go to college
relative to high school, very importantly.
This is a statement of changes, not levels.
In present value terms, if you can earn a college
degree, especially at a wonderful place like Dartmouth,
you're still massively better off economically.
But, the returns to that in some sense,
are not growing like they used to, per this data.
Who's left by the way?
So, people with PhDs, 1.9% of workers.
An average earnings change of an increase of 4.5%.
And who else is left? Excellent.
The advanced professional degrees.
The doctors, the lawyers, the MBAs.
2.1% of workers.
A mean earnings change of an increase of 12.3%.
So this skewness of income growth we saw
in the tax return data shows up in the individual data.
What income growth we have had
in the United States in recent,
what output growth we have had in the US,
the tide lifting, on the income side,
where that has been accrued is
predominantly in a relatively small
scale of highly educated, highly talented individuals.
And the other things is returns, broadly speaking,
not to be Karl Marx, but to capital, to business.
Business income, broadly measured,
as a share of GDP in the United States is at record highs.
Again, that's not a judgment.
This is what, this is all pretax.
This is what globalization and technological
change and a whole bunch of dynamic forces
are delivering in terms of how our economy is working.
Yes.
- [Voiceover] Is this for college professors,
in the PhD group?
- Yeah, a lot of us are in there.
And so clearly - Deans?
- Deans as well, yes. (laughter)
You know, we need to start measuring deans,
and worry about the deans more.
Yeah, I'm in there somewhere, right.
So, if I switch to households, one more
data point as a unit of observation.
Every year the US government reports
the median household income.
It's a big report that comes out in September.
It came out about a month ago.
And they line up all the households
from the poorest, in God love 'em,
someplace like Appalachia, to Mr. Gates's household.
And they pick the median household
and they measure the total money income.
What do you think the total money income
of the median household was in America last year?
(murmurs)
Good, I heard somebody was almost on the spot.
Sorry this didn't show up well.
53,657 dollars.
But what I want to stress, and I can't stress enough,
that same level of median income was
first reached 25 years ago in 1989.
The median household in America today
has the same income it had 25 years ago.
And a big reason this growth in median income
hasn't happened is this slow down in productivity growth.
So, if you're a real geek like me,
you can go read the economic report
of the President earlier this year.
Chapter One had a good analysis,
and the biggest force that explains
this absolute slow down in growth
in household income is the slow down of productivity growth.
And if you're wondering why Bernie Sanders
is beating Hillary Clinton in Iowa and in New Hampshire
as we speak here, and paradoxically,
some of the biggest supporters in places
like Michigan with the auto industry blow out
in recent times, is Donald Trump.
Voters in America, I'm front-running some of the slides
in a minute, they don't feel all that comfortable when
they're sitting around the kitchen table
saying how we doing economically.
And they're looking for candidates that can
give voice to an explanation or
at least an awareness that this is happening.
And if you think it's otherwise,
you're completely kidding yourself.
There's a question there ma'am.
- [Voiceover] Yeah, what is the
inflation rate that same period?
- So this is all real, this is not nominal.
So it's adjusted for inflation.
But, over this 13 years, if I remember the data,
the consumer price index that I used
to deflate this rose by about 30%.
Now, within that though, there's high variation.
Over this 13 year period, what happened to the
the prices we in America see for
the price of personal computers?
Declined by 88%.
What happened to the overall CPI, about
30% during this period, maybe it was a few more.
Healthcare services, up by 72%.
Not to speak heresy, but you can go look at the data.
College tuition and fees. (murmurs)
118% increase.
- [Voiceover] Housing?
- Owner occupied housing I don't remember.
Sorry, I'd have to look it up.
- [Voiceover] Up, flat or down?
- Up, no up. Yeah.
Over this period.
It's not just, so careful.
The implied rental flow you get off this
in living expenses is very different
from the purchase price of a home.
Okay, so that's the second point.
Income, mmm, I'm not sure who you are.
But if you think this is Tiggerish,
let's have a talk afterwards, okay.
(laughter) This is not Tiggerish.
What's happening in the rest of the world?
Let's switch from data.
A picture is worth a thousand words.
So here's one thousand words.
Where's this in the world?
(murmurs) Excellent.
So that's the Huang Pu river looking
out to an area called Pu Dong.
This is the Peace Hotel, if you've ever been there.
This is the lovely pedestrian walkway the Bund.
Around in the 1900s, turn of the previous century,
this was a very, Shanghai was a very
vibrant international commerce exchange.
You can find cotton exchanges and gold exchanges
and old bank houses when you walk along the Bund there.
This was 12 years after, no 14 years after Mao died.
12 years after Gai Deng Xiaoping came to power.
And even back in 1990, people were like,
you know they had some agriforms
and they're opening up these special export zones,
but like, oh my God, it's China and this is
soon after Tiananmen Square.
And you could see a lot of just open parks
here in this area called Pu Dong.
Alright.
But China's been growing since the
open door policy started in 1978.
Yes, it's been slowing down now,
we're worried about how slow it is.
But from the 35 years of '78 through to 2013,
the average rate of growth, its speed limit
rate of growth in China was 10% per year.
And you just accumulate that math.
That's a doubling of GDP every seven years.
Does Shanghai look like this today?
(murmurs)
So, I, one of the things I've had the good
fortune to do at Tuck is be the faculty
co-director of an exec-ed program
where we take people to India and China,
after they come to Hanover for a while.
And a couple years ago, you could have taken a picture from
the 67th floor of the Viridian Hotel that looked like this.
(crowd murmurs)
Right.
So what's happening in the rest of the world
is amazing economic growth.
In this picture, literally and metaphorically,
there's millionaires and billionaires.
So that's the financial district now.
That's the Communist Party's communications
tower, the television station.
That's the Bottle Opener.
You can stand up here, it's like 110 stories, and it's
got glass, you can look down if you like to do that.
And now that's not the tallest building.
This is dated.
They built a building here that's like 147 stories tall.
Second tallest building in the world.
So that growth, on the one hand,
if we can have the smart public policies,
is a huge opportunity for workers and
companies in America if we can connect to that
dynamism and sell goods and services to them.
Editorial comment again, the Transpacific Partnership
absolute thumbs up, that should be approved
is my humble opinion.
Because we need to find ways to build jobs in America
connected to that kind of opportunity and growth.
It's not easy.
And you gotta be wise in doing it.
But where we could have some rising tide
has gotta be driven by where there's
growth and opportunity in the world.
And yet, if we don't have the wise policies.
What also this picture encapsulates
is hundreds and hundreds, cumulatively
across the world, more than a billion people
entering the effective global labor force now,
that aspire to have the same kind
of hopes and dreams like we all do.
And that does put pressure on the labor market
opportunities and outcomes for people here as well.
So, the global economy has opportunity,
but it has challenges as well.
Just for what it's worth, the US then as a
share of the global economic pie, on all kinds of measures.
This is GDP.
The US share of the global economy is shrinking.
I'm not saying that's a bad thing.
But we should all be cognizant of
in a policy sense, the ability and
or desire of others in the world to follow
US economic policy is in some broad sense attenuated.
Alright.
So the US share of global GDP has fallen,
yeah, by about a percentage point a year.
That's China and India growing so much
more quickly than we are, and some other countries.
Now we know from the recent news,
a lot of these emerging markets, it's slowing.
Or it's in recession in places like Brazil and Russia.
But, still, on the aggregate, almost surely,
given the slow speed limit rate of growth here,
there's much faster growth still
coming in the rest of the world.
Two more numbers real, or kind of items.
The budget, what can our government
do to address these global forces?
And then how do people feel about all this?
Well, what we can do today depends
in part on what we've done in the past.
So, let's look at the total fiscal
potential for the United States.
The best way that economists like to measure it
is to look at the total debt outstanding
as a country as a share of its GDP.
That broadly speaking, doesn't get to
the micro-regulatory capacity issues
that someone asked about earlier.
But in some broad sense, what governments
do most basically of all, is they
raise taxes and they can spend.
(murmurs) Exactly.
So that's independent of the Fed,
which prints money, central banks print money, right?
That's fun.
We do it, we go to jail, that's counterfeiting.
But (laugh)
I'm talking about fiscal policy here, right.
Fiscal policy is about the public purse.
What capacity is there for the sovereign
to levy taxes and use that, perhaps to
support public investments, or offset
income pressures for certain groups.
So, here's the historical data.
This is two centuries of America's
fiscal, kind of, strategy.
This is from the US Congressional Budget Office.
All the way from 1790 through to 2010 is the data.
This is debt outstanding as a share of GDP.
Gross debt.
This geeky measurement, things we can talk about later.
There's a couple thing that you see.
One is indebtedness of the US government,
like almost every other country around the world,
tends to go up during times of existential crisis.
Either during war.
The Civil War, World War One, World War Two.
Or financial crisis.
The Great Depression, and then here,
here's the world financial crisis of the past few years.
Debt outstanding as a share of GDP in the US
doubled in about a five year period.
Pre-crisis, it was about 35, 36%.
Post-crisis we've gotten up to about 72, 73%.
What the US has done historically,
is when it incurs large indebtedness
for the good of the order of the people,
over time then we run surpluses
and do other things to pay down that indebtedness.
So that's been our pattern.
And, there's a lot of sovereigns that default historically.
Greece, Argentina, we can talk
about all those types of countries.
But the pattern of in some sense,
healthy societies, is they run up debt
when they need to, but then they maintain
their access to capital markets in good times.
What is the current best guess of the US government
for what's the fiscal future for America?
Are gonna, is that dept to GDP ratio gonna fall?
No.
Ben Bernanke, when he was chair of the Fed,
gave a few speeches talking about us
being the calm before the storm.
The best guess of anybody in the public
and private sector in the US is indebtedness,
the calm is this little period here.
Actually he was talking before the financial crisis.
The calm was here.
That Ben was talking about.
But now the calm is a few years before
the indebtedness of the United States
goes up, up, up, up.
Are they predicting more financial crisis and turmoil?
No.
What is going to drive up the indebtedness
of the United States on all plausible forecasts?
- [Voiceover] Entitlements.
- Aging of the population.
But more fundamentally, interacting
with health care costs increasing.
It is the increase in expenditures on
Social Security, but especially Medicare and Medicaid.
And implied then, accumulated interest
payments that have to go up that's driving this figure.
I won't spend a lot of time on this.
But, when you break it out by spending programs,
what you see is the aging of America,
but especially aging interacted with
health care costs increase that are projected to continue.
That is gonna make the fiscal future
for the United States not great.
So, Social Security spending.
Major health care programs.
Net interest.
The average over the past 40 years
was about 4% on Social Security.
2.8% health care programs.
Net interest two two.
Here's where we are today.
As those leading cohorts of Baby Boomers
are already starting to reach traditional
retirement years exit, they uptake Social Security.
And no judgement, but as we all age,
the incidents and costs of the health care
services we take up tends to go up.
So, here comes Social Security,
projected to get to 6%, 6.3% of GDP in 2039.
Health care going up to 8%.
Net interest, this is a wild card too,
it depends on interest rates that we're able to command
or the world commands to us.
And everything else, non-interest spending
on everything else, gets squeezed and squeezed
and squeezed.
And in the shorter term, this is already happening,
because of this funky word called sequestration.
When the US government almost shut down
and we almost defaulted and all this stuff in 2011.
The President and Congress agreed
that for the next 10 years we would slow
the rate of growth in everything outside of
Medicare, Medicaid and Social Security.
That discretionary non-entitlement spending
is already getting squeezed.
Most programs are getting cut at 5% per year.
And that's been happening for five years running,
and nobody has the courage in Washington
to raise their hand and say maybe we
should do something a little differently.
Editorial.
- [Voiceover] What's the biggest chunk of that?
- What's the biggest chunk of what?
- [Voiceover] That spending.
- This? Defense.
Non-entite, so the federal government last year
spent about 3.5 trillion dollars.
Non-entitlement spending is only about a third of that.
So, non-entitlement spending in the US
is only about 1.2 trillion dollars.
Of that, defense is a little north of 800 billion dollars.
So, when you take out defense.
When you hear people intone and say,
I'm going to get serious about
non-entitlement, non-defense spending,
I get 400 billion dollars is a lot of money to you and me.
That's only a little north of 10%
of the total federal budget.
So, anybody that tells you they're gonna get tough,
or they're really gonna focus on that,
frankly they're being pretty loose and
not clear about the facts, I'll say.
I'm not saying I want to incite
a lot of conversation about the
inter-temporal issues that are raised here.
This is basically a generational issue.
I will frame it to you, I will suggest as,
how does society support the young versus the old?
And I'm not saying that we shouldn't be a
society that makes good on the desire
to provide income transfers and
health insurance support to people as they age.
I wanna do that.
But that means, somebody's gotta
pay more in taxes if we're gonna support that.
If we don't get faster productivity growth,
or smart people like Sherry don't figure
out how to slow the rate of growth of health care costs,
this is what's coming, with probability near one.
Forecasts are really noisy, I get that.
Especially when you're forecasting
out stuff like this like 20 years.
But, the data better start changing pretty quickly.
Because then, even if it changes,
the longer it doesn't change, the math just means
the adjustments have to be harder in the future.
This is the fiscal future that's coming.
Independent of whether we have another financial crisis.
Independent of whether, God forbid, we have another war.
Independent, God forbid, we have
some pandemic health crisis.
And yet, you know.
The only fiscal conversation the next few weeks.
Is the government gonna shut down again
on December 12th or whenever it is we
run out of money again and hit the debt ceiling?
So, I think I've kind of telegraphed this one,
and I'll be quick.
That's the sense of the citizenry
when you ask them about this?
Americans' sense of security has waned, to put it politely.
Focus groups are one way to do this.
Here's a quote from the FT recently.
This gentleman named, "People are more negative
"about our changes than they have been
"since our records began in 1946."
Coming from one of the main polling agencies in DC.
So when you look at the surveys,
you see things like this.
"Which best describes your family's financial situation?"
Getting ahead, 21%.
Have just enough to maintain or falling behind,
78% of Americans feel that way
when asked in an NBC/Wall Street Journal
poll a little over a year ago.
This gentleman, Stan Greenberg,
who's a Democratic pollster, in this FT piece
on this recently, says, "When we have focus groups,
"when ask people to come and they have
"free sandwiches and sodas, and we talk to them
"about who you gonna vote for and that.
"When we start to ask them about the economy,
"this has never happened in my career,
"but people start breaking down and crying
"in these focus group rooms."
So, that's I'd gently suggest, not great.
In particular, a lot of people voice unease
about the global jobs competition.
When you ask them what makes you worry,
they say the global economy.
And the pressure on my incomes.
And the pressure on the jobs.
I've had a lot of great Tuck students over the years
in class, but you want to find some of the
most sophisticated people in understanding
the global economy, go walk the plant floor
of any manufacturing place in the country.
And the people whose day to day jobs,
do I have a job and what's my W2,
who depend on prices of global commodities,
import competition from China and India,
those people live it everyday.
And they're anxious about it.
So, FT did a big thing, this is pre-crisis.
But they did this lovely survey of
about 12 countries, not just the US.
And in most advanced countries around the world,
people, they don't feel all that great about globalization.
A popular backlash against globalization
and the leaders of the world's largest companies
is sweeping all rich countries.
Large majorities of people in the US and Europe
want higher taxation for the rich.
And even pay caps for corporate executives
to counter what they believe are the
unjustified rewards and negative effects of globalization.
And as my Tuck students know in recent years,
we talk a lot about this, people in these countries,
between a third and a half said they had no
admiration at all for corporate bosses.
I don't like that, but it's the reality
in which our MBA students and other
executives are going into the world.
My view on that is high quality educational
institutions like Dartmouth, this is a huge
opportunity to create the principled, values-driven
leaders that people in the world are yearning for.
But, for better or for worse, they don't feel
that they're seeing a lot of that.
So, do our people feel empowered in this country?
Not really.
Ask people what are called thermometer questions.
Ask them how they feel.
"Do you think that America is in a state
"of decline, or do you feel that is not the case?"
Last time the Journal and NBC asked this
was a little over a year ago.
Two-thirds, 65 to 31%, say America is in a state of decline.
A similar thermometer question is,
Is America on the right track or the wrong track?
Last time this was asked by the Journal and NBC,
65% said off on the wrong track.
Only 28% said the right direction.
And if you really wanna get a sense of how people feel,
don't ask them about themselves,
ask them about whom?
(crowd murmurs)
Not their neighbors, who?
- [Crowd] Children. I mean they like
their neighbors, but, you know.
Their children.
"Do you feel confident or not confident that life
for our children's generation will be better
than it has been for us?"
They've asked this question a long time,
so you can go back, and on one of the questions earlier.
There is some business cyclicality to these answers.
So, I went back and looked, coming out of
the previous two recessions, before the financial crisis.
Even when the US was coming out of a recession,
a plurality or a majority of people said
I think the future's better for our kids.
October of 1990, 50% confident versus 45% not confident.
December of '01, 49% confident versus 42% confident.
But today, oh my God, it's just sobering.
The last time they asked this was again,
a little over a year ago, only 21%
of American today say they feel confident
that the children's generation is gonna
be better than it has been for us.
76% say they're not confident.
So,
if, and again, paradoxically, they're on totally different
sides of the policy aisle and political spectrum.
This is the commonality between Donald Trump
and Bernie Sanders in my mind.
They are speaking to this anxiety.
They offer wildly different prescriptions
for what they would do.
But at least those people in Michigan
and places like that, feel that someone
is acknowledging the anxiety which they are feeling.
Much, not all, much of which is driven by economic anxiety.
I'll gently suggest, that's the proper way
to think about what's coming in our country
with all the elections and things happening.
Yes.
- [Voiceover] Quickly, do you have a sense of how
these statistics measure up against other
economic powerhouses in the world?
- Yeah, good question.
So, these have been all good questions.
If you're really interested, the Pew Research Center,
does a set of lovely analyses like these.
Sorry, it's not on my computer.
They did a survey like this about a year ago.
And they did, they asked a question very similar to this one
in 10 advanced countries,
and in like 36
emerging markets and developing countries.
In the 10 advanced countries
the cross tabs on this question
was like 65%
30%.
So two-thirds of people in advanced countries
say I don't think the future's gonna be better for our kids.
And that's because, just,
these global force, a lot of this is technological change
and globalization and these issues
hitting the US are qualitatively very similar
to the ones that are facing Germany,
Japan, France, the UK.
And in the faster speed limit,
faster productivity growth emerging markets,
it's flipped around.
A slight or larger majority in these
emerging markets say, oh I think the
future is gonna be better for our kids.
So, if you want this global perspective,
that just is what it is.
The billions of people in the world
that now see literally, at zero cost
thanks to the internet, what the future
could be for them, I don't fault them.
They see, I could come to Dartmouth.
I could get a job at Google.
That is such an amazing opportunity for them.
Many in advanced countries see the same thing.
And yet, I'll suggest, again in closing,
because we don't quite have the policies
to make this work, they don't feel like
it's working for them, is how I would say it.
And I'll maybe just say two more things and then.
Yeah, okay, quick question and then
- [Voiceover] Going back to your
statement about confidence and corporate leadership.
How do you think about things like
the large corporations funding
climate denial science, I'll put it in quotes,
or Volkswagon's recent cheating
- Yeah - [Voiceover] situation.
- So, look the firms I do a lot of things with.
And when I teach, and in my dean's hat,
I'm like do you wanna be a part of this group?
Then go work for Volkswagon, I mean you know.
(chuckles)
Or do you wanna be one of the few visionary leaders
that can articulate points of view to the world
that says I and my organization are different.
We're going to be part of the solution,
not part of the problem.
We're going to create good jobs
connected to the global economy.
We're going to take care of the
stakeholders in our organization.
That's what we aspire to do at Tuck.
We're not perfect, but we do a pretty good job at it.
And all of us more generally at Dartmouth,
all of this is such an opportunity for educators
to give voice to the students that
want to make this world better.
Now, do I worry about global warming and climate change?
Absolutely, I'm a Tigger, so this is
an optimistic presentation. (laughter)
You know that, there's a bunch of other things.
On the fiscal stuff, if you live in the US,
my God, this is federal.
Look at Connecticut, look at Illinois.
Look at so many states that have unfunded pension
liabilities because people don't wanna take
responsibility and pay the taxes that they need
to create the society that's gonna work.
In the teeth of the financial crisis,
this picture was taken.
This is on September 29, 2008.
What happened on the floor of the House
on September 29, 2008?
They voted down a bill.
What was the bill?
Rhymes with harp.
(crowd murmurs)
Excellent, TARP.
So this is when crisis Lehman dies,
AIG almost dies, Hank Paulson
and Ben Bernanke go up to Congress.
Hank's a Dartmouth graduate.
I worked for them in the US government.
And get together all the Senate and House
leaders on both sides of the aisle.
Hank says, God love 'em, "It's really bad.
"Here's Ben." (laughter)
And turns it over to Ben.
And then Ben drains the blood out of
everybody's face explaining that the,
it's not just terminal and capital markets at banks,
but the the General Electrics and all those firms,
Jeff FIMA Oughton and people were
reaching out the government and saying
we can't roll over our commercial paper.
This is like, this is not just banks.
If this panic doesn't stop, all of economic
activity basically on the planet
is going to grind to a halt.
We will not be able to pay our vendors.
We will not be able to meet payroll.
And people realized we were literally
on the cusp of a Great Depression.
Very, very quickly.
History will show, rightly, hopefully,
Ben Bernanke, more than any other
human being on the planet, prevented a Great Depression.
I'm biased, I worked for him.
But then, what happened in the US,
was we said, well what do we do?
And Ben said, we'll do things at the Fed,
but we have to have a massive fiscal support for this.
They called it the TARP, the Troubled Asset Relief Program.
700 billion dollar allocation.
And all the people went out, all this
is in the public domain, right.
So, everybody went out, arm in arm,
US crisis, we'll pull it together.
Well, they dropped the bill on the House side,
and then, you know, got voted out of committee.
And then sure enough, the bickering starts again.
You know, I'm gonna vote for
this, but it's Republicans fault.
I'm gonna for this, but this's Democrats fault.
I'm gonna vote for this, but it's,
you know, whoever's fault.
And then, sure enough, in real time,
I did a little TV at the Dartmouth studio that day,
and I went back and a colleague came
and knocked on my door and said,
Hey, by the way, are you aware that,
are you watching the vote?
And it was on CNBC and CSPAN and all that.
And in real time, everybody around the world
began to realize, oh my God, the House of Representatives
is gonna vote down this 700 billion dollar allocation.
What happened to US stock prices
and pretty much every asset price on the planet?
In about 90 minutes, a trillion dollars
in market cap was wiped out in US equities.
And at the end of the day, the DOW closed down 777 points,
the single largest point decline ever in American history.
On the DOW.
Hopefully that will stay that way.
And that night, this isn't a partisan
this is not a partisan, you know.
That's Nancy Pelosi, that's James Clyburn,
that's Steny Hoyer, House Democratic leadership.
The Republicans were really gloomy that night too.
And then about a day or two later,
the FT ran a piece with this picture
saying will historians look back and say
this was the decline of the American economic empire,
sunset of the American economic empire.
Because the leaders couldn't kinda pull it together
on the question about leadership.
And so, you know, I read the piece,
you know I do these things.
I'm like, God, that's a striking picture.
Standing on the step of the Lincoln Memorial,
looking down the Mall, there's the Washington
Monument, the White House is over here.
Up the gentle upslope to the Capitol Hill, to Congress.
And I looked at that, and those who spent time
in Washington, DC, what did I notice about the direction?
What direction are you facing?
Actually, you're facing east not west.
It's sunrise, not sunset. (chuckles)
So, I knew the guys at the FT that wrote the piece,
so I sent them a little email saying,
hey, by the way, from a citizen of the country
that beat you in the Revolutionary War
(laughter) you know,
be a little careful before you say it's sunset
on my home country's empire, no disrespect.
(laughter)
But, how have we been doing in the seven years since?
Ahh, you know.
On the question about public investments.
We're just grinding down the share of
government spending as a share of GDP
that's allocated to public investment.
It's unfortunately been happening for a while,
but it's really happening now.
That's the funding of the NSF, and the road and bridges,
and NASA, and the National Institute for Health.
So we're not building out the productive capacity
to make the future better as a society.
And we're doing things that are literally
just shooting ourselves in the foot.
One of the ways we can build up
productivity growth, and jobs and potential.
Economists know very few things.
One of the things is you let high skilled immigrants
into your country, they bring all sorts of
productivity and job creating benefits.
I can give you a gazillion academic
studies that show this if you'd like.
That raise the incomes not just for native-born
skilled workers, but native-born less skilled workers also.
This slide is a snapshot from the US government
that describes the H1B visa program.
That's the main visa program our US government
uses to allocate each fiscal year
for how many new, at least bachelors degree
people come in with a job match.
How many new H1B visas did the
US government create every year?
(crowd murmurs) Good. Close.
85,000. 65,000 for bachelors.
And there's a 20 thousand tranche
for master's degree or above.
The window for the new H1B visa
applications for the next fiscal year opens every April one.
How many applications were received between
April one and April five of this year?
(crowd murmurs) Good.
233,000. At which point, they slammed shut
the visa window and like in earlier years,
they don't even read them and say, you know,
you're a Nobel Laureate, you get in.
Matt, you're a nice guy, you don't get in.
They hold a lottery is what they do.
And full disclosure, I work with a lot of firms on this.
It is mind-blowing the amount of time and energy
that our most innovative companies that are
trying to create new ideas and jobs and all that stuff.
They can't hire the people here.
Well, if you don't let the people in,
don't fault the companies when they export the jobs.
When Microsoft several years ago raised their hand and said
we can't get people in because of this binding visa cap.
We're opening a software facility across the border
from Seattle, in Vancouver, Canada.
And don't blame us.
This is kind of, you know we live
with the consequences of the choices that we make.
And there's no prospect.
The earliest this might change, frankly,
at this point, is fiscal '19, I think is the best guess.
We're gonna live through at least three more years of this.
Given the ridiculousness of Washington, DC.
So, you know, I write things about this.
And there's an op-ed I wrote a little while ago.
We lose a new job every 43 seconds
is a good ballpark number, in the US economy.
Because of the job creation potential lost by this.
And if you think it'll get better in Washington,
my last picture, and again, this is meant to be optimistic.
There's the hope for the future.
(laughter)
But here's a measure by some political scientists
on the degree of policy overlap in the House and Senate.
From the post-bellum period of 1879
through to the current Congress in 2014.
It's a measure of votes taken,
and in our American political parlance,
identifying how much overlap is there
between the most conservative Democrats,
and the most liberal Republicans.
And we had generations where there
was pretty substantial overlap.
In both the Senate and the House.
And today, in neither chamber is there
any measurable policy overlap between
the Republicans and Democrats.
And those of us,
some of the folks who I know who have
lived and worked in DC, it's a whole
subtle dynamic that's taken hold there, alright.
And now even the Republicans in the House
can't even figure out who's gonna lead them,
let alone reach across the aisle and talk to people.
Talk about things.
So, there we are.
I appreciate it, and go Big Green.
(clapping) But I just want to stress,
thank you.
And I'm happy to take a couple questions,
but then we gotta clear out for the next thing.
All this, in the context of us on campus here,
I can't stress enough, this is nothing but a massive
opportunity for all of us involved in higher ed.
Because what we need is more knowledgeable,
more motivated people to go out from formal
and informal education to be forces of change
to make this kind of stuff better.
So, I'm happy to take maybe one or two more questions.
But I appreciate everybody's time and attention.
And there's a hand there.
- [Voiceover] In productivity, what effect do
does high executive compensation and
corporate stock buy-backs have on that?
- High executive compensation on productivity?
Short answer, really don't know.
I don't know of any studies that
have been done on that.
In a geek academic sense.
In a broader sense, I'll ask the open question
about in firms...
I'll say this.
The SEC in the US just passed a rule
that will apply to all US-based
publicly traded companies where they're
gonna have to report the ratio
of the pay of the CEO to the median worker.
Okay.
Now, I see a lot of people nodding their heads.
This is where a little bit of education helps.
So, I write up ads, but I do this little Monday
morning missive called the Slaughter and Rees Report.
And a few weeks ago I wrote one for Matt and me.
His name is Matt too, saying, that rule,
as well intentioned as it might be,
will actually make it harder for those
CEOs to create jobs in America.
And the short answer is, because most of these companies
that this rule hits are global companies.
They hire people all over the world to take advantage of
China, which supports their job creation here.
- [Voiceover] Yeah.
- But when you hire people in China,
on average they earn a lot less than here in America.
And yeah, that drags down the median
compensation as measured in this rule.
So, like I said there, this is one where
you gotta put some time and energy
into being wise about what we do with public policy.
That rule is going to have the reverse effect
for all the people that applauded and said
that's gonna be great as a restraint on CEO
pay and help the basic workers.
It's gonna hurt the basic workers.
So, this, it's an example where you gotta be careful.
- [Voiceover] Corporate stock buy-backs?
- We can talk after.
Again, there's not a lot of, what we know about
productivity growth is limited.
I'll just be honest.
Yes.
- [Voiceover] What are you doing at Tuck
to improve the leadership development
capability of your students there?
- Yeah, that's like commercial,
we're doing a lot, we gotta do even more.
So, I used to teach a class where we would have
mock Congressional parliamentary hearings.
One of the former students here,
Byron's here.
Students would have to cross-examine each other.
I can't remember, what did you testify on?
- [Byron] Actually executive
compensation and global warming.
- So he had the answer on that one.
And then the students totally go at each other,
in the Tuck way of support and trust.
And really force each other to develop articulate opinions,
so when they go out into the world,
they've got answers to these kinds of questions.
It'll make it more likely that they become
the leaders that we aspire them to do.
More generally, we do a lot at Tuck.
But you know what, I mean, we're great,
but, you know.
Everyone should come to Tuck,
but you know, we're only one school. So.
Yeah.
- [Voiceover] In the broadest sense,
technology was supposed to be the
great hope of increasing productivity.
We're in the technology age and it
seems to have done the reverse.
And is that?
- Well, careful.
The one thing I'll say is, when you've got the ri--
When you've got the right policies it works well.
The one period where we had
good income growth in the US.
How do I do slideshow? There we go.
Ah, that didn't work.
Ah, here.
You can see this little blip up
in the late 90s into the early 2000s.
That was when you had the IT productivity boom.
But part of what was happening was that was,
I'll use just one anecdote.
That was the period of time where we
expanded the H1B visa window from 65,000 to 195,000.
Because of the demand from the IT companies.
And we did a bunch of other things that were
pretty prudent at that time, that--
Again, you never know this ex ante,
it's hard to predict, but that allowed growth to be fast.
And you had strong growth in the income distribution,
even for high school drop outs.
So, but the spirit of what you say is right.
Which is technology growth in and of itself,
there's no law of physics that says
innovations magically accrue to
lots of workers and raise lots of boats.
But we know in general, probabilistically
what we could do to make that more likely.
And that's, if you gave me the policy magic wand,
we'd be doing a lot more things like that, okay.
But good question.
Yeah.
- [Voiceover] When I see people glued
to their smartphones, I wonder if
technology's not the enemy of productivity.
- Well, yeah, so the, good question on that.
I mean part of what we know is just not to be
the task master but, if it's consumption of free
leisure activity, happening during the work hours.
I mean you know, (laughter)
I get it, we all check sports scores and things.
But, how technology interacts with work,
and compensation thereof is very subtle and very fluid.
And we just, we don't know a huge amount about that still.
Maybe one more hand here, the gentleman in red.
And then just, I wanna be prudent of time,
so I'll stop there and not drop anything else.
(laughter)
- [Voiceover] You cited political polarization.
- Yep.
- [Voiceover] Is that not skewed substantially
by the fact that the political parties
were not ideologically separated.
You had the Dixiecrat effect in the South
that put all the conservatives and all the
liberals in the same party so it's hard to read.
In your slide up there.
- Yeah, no, so what, I don't fully know what explains this.
I will gently point out, some people say,
oh the problem is gerrymandering.
But notice that's not true in the Senate.
The Senate partisanship is just like it is in the House.
So, it's not a function of just gerrymandering
of districts in the House.
You know, books and dissertations yet to be written
on what explains this and the consequences.
I just know from my limited purview,
you know I do a lot of Congressional testimony
in recent years, and I work with a lot of
members and their staffs on both sides of the aisle.
I just, the, what I see is, it's like a lot of
things we teach at Tuck and elsewhere.
You wanna make change, it requires
leaders that actually roll up their sleeves
and spend time with people.
That's happening less and less in Washington,
on both sides of the aisle.
But then collectively across.
Most members fly out Thursday at, you know.
Congress most, both chambers have votes just three days.
Tuesday, Wednesday, Thursday, typically.
It's 'cause the members are flying out on Thursday
and a lot of them are going to fund raise.
And then they'll go home to their districts,
or fund raise, and do that through Monday,
and they fly back Monday evening.
- [Voiceover] It's the rise of the political class.
- And it just erodes, it erodes the ability
of individuals there to have the physical time
to get to know members in their own caucus better,
let alone to reach across the aisle better.
I will, again, you hand me the magic policy wand,
there's a lot of things I'd do.
I've become a much bigger fan of term limits, and
you start to think about caps on spending for these things.
You know, Senate races now, in most states,
it's tens and tens of millions of
dollars that you have to raise.
So, unless you have that wealth personally,
or through your family, you have to spend
a non-trivial amount of your time fund raising.
And it, I'm just, I don't mean to be heretical,
but the other things is.
Like most, I tell you what, we don't teach at Tuck
assign key leadership positions based on seniority.
Now, it might be correlated with good outcomes,
right, per gray hair.
But (laughter)
You know, the way that the Congressional committees work?
I'm not anywhere near wise enough
to understand what's happening with this.
But just the outcome of the separation
of a sense of there being a civic space
where our elected members have the time
and the ability to talk with each other
to try to work some of these things out.
I don't know what mechanisms will change this.
I will gently suggest, this is not great
to address a lot of the interesting
topics we've talked about here.
And I want to be sensitive to the next group.
So, I appreciate the time of everybody.
(clapping) And thanks for coming.
And we gotta go.
(loud clapping)