it's great it's great to have this what it what a great overflow crowd but not a surprise it's my pleasure to introduce this keynote session on globalization what's next to my left R is a pretty esteemed crowd not sure what I'm doing here actually with this kind of crowd but I'm delighted to introduce Bruce Greenwald who is the professor the Robert Kyle brand professor of asset management and finance and co-director of the Highland Center for Graham and Dodd investing and professed to his left professor joseph stiglitz who really needs no no it no introduction but is technically executive director and co-founder of the initiative for policy dialogue and use university professor of finance and economics and Dean who is famous being Glenn Hubbard you Russell the Russell Carson professor of finance and economics but who is our leader and team team director and and who you know we're in awe of pretty much so teams thank you so anyway I'm in two minutes I'm not again I mean that I'm not this a crowd that is far beyond my stand my standing in life but you know my background for one minute I I spent 20 years ago with Zach's I was a partner running the private debt trading business bank loans distressed investing etc and now I am managing partner TBC which is the largest private equity firm in Europe and I run their credit investing business as the CIO a managing partner and as I was thinking about why the Dean may have may have asked me to do this I was just you know looking at the agenda and thinking I'm not exactly sure what I'm doing with with this team except that I started to think about what my business really involves and hopefully it will stimulate you all to think about your own business in this topic really the business I'm in in alternative credit investing involves two pretty simple things you go around the world globally and meet with investors who are pre sophisticated pension funds and sovereign wealth funds and trying to convince them to give you money to invest for them and then you turn around and look at the global markets and try and figure out in my case in debt in distressed and stressed investments where globally to deploy that capital and earn the targeted rate of return that you promised these super sophisticated institutional investors the one word that comes up in my life almost beyond what I ever thought I would be doing is this word of global this is the concept of low globalization what does it mean how do you connect with your clients globally and be meaningful to them and how do you source investments and evaluate management teams and find value investments okay in my particular case in the dead area so all I can say is prior to being at Columbia I was nowhere on these topics I mean literally nowhere vague understanding of economics and and from an undergraduate degree but that was about it the network that I developed here the connections the appreciation the constant theme around you have to connect globally and you have to alter your mindset from in my case the Midwest New York City and the United States and you have to get out there and think about not only what what you're going to do for them but also how they can add to your own firm's business is what I spend all my time thinking about so I'm going to be in the front row listening to every word and that with that Thank You Dean for having me and I'll turn it over to the B thank you thank you maybe I shouldn't have to ask sophisticated people for money and I don't even give any back now I appreciate how hard that must be this is a panel that probably some years ago you would have asked why we were bothering because the transfer globalization in the world are so inevitable for all the reasons that Steve said but of course globalization is not just today if you ask me to think about Peaks 1913 would have been a peak year of globalization wasn't four decades after 1913 that the world was as integrated as it was then so this is not something that you should take for granted as manna from heaven we have two people here to talk with today we're special in so many ways both of them I've known for decades Bruce for many years going back to Harvard days I think if Joe is my teacher he wasn't literally but I grew up in an era where Atkinson and Stiglitz was the Bible for young geeks like like myself so despite some political differences I still so learn my economics from Joe another thing that I'll come back to later in in our discussion these two guys aren't just very smart people on an important subject actually teach on this in the MBA program I'm going to ask them to circle back to that as we go but let me start with the elephant in the room tomorrow something interesting or not is going to happen in France the United States had an election in November I think it surprised many people I'll tell you a little story Ray Horton some of you know is a faculty colleague here he and I did an event for students just before the election and I felt the students I thought there was a decent chance that Donald Trump could win and I said that for two reasons one were just undercurrents in the electorate the second the fact that my brother is a very successful country-western singer and he travels to all the parts of the country I never see and his view of what America wanted was so different from what I saw it was jarring to me and I think we now have brexit we now have the Trump election we now have potentially frecks it so I want to start with a big discussion for you too about globalization and discontent to borrow from one of the two of you what are the big structural issues you think led to the rise of this populism would maybe you think of Trump as the apotheosis but the populism we're seeing generally about globalization Bruce or Joe you want me to start our way okay I'll go first we just reacted because I'm going to say all the right words to talk about globalization it is not about globalization and what is going on is much more fundamental in that it's been going on now for between 25 and almost in the United States 30 years and globalization at various stages has exacerbated it but has not in fact been the decisive what's going on is that a hugely important and important not only economically but emotionally segment to the global economy but also all the local economies is dying and the transition out of manufacturing which is going away and it is nobody's fault it is not globalization it is the fact that productivity growth in manufacturing is 5 to 7% a year properly measured and global demand is maybe 2 to 3 percent and that's been going on for a long time that is created a situation where economically now services are completely dominant and the demands of a service economy are very different from the demands of a traditional manufacturing economy it's much better for women than for men it's much better for educated people who are good at human relationships than people who have physical skills it's actually much more unequal because people typically work in services on a much more individual basis than collective manufacturing processes and it's been incredibly difficult for people to adapt to now the reason I say globalization doesn't matter is services are locally produced and consumed so that what you're seeing and I'm going to talk sort of broadly is that what happens in the United States is increasingly determined by what happens in the United States microphone yeah oh you okay what happens in normally by the way I teach in this room and I don't need a microphone so I'm gettin old forgiveness that what services means is that because they're locally produced and consumed countries individually make their own fates and what that means in turn is that there's much less patience because there's much less benefit from outside interference and that has happened both in the composition of businesses and in the nature of businesses and what I want to talk about to bring this home is one business that has successfully made this transition that people are probably not particularly aware of and the company I want to talk about because I think it will illustrate what's going on is John Deere John Deere was for years a global manufacturer what's happened to John Deere's product line is that the cost of making the tractors the cedars the harvesters has shrunk steadily over time and they last longer so that cost has become a decreasing ly important part of what they do but the package that they offer consists of service support you still have to have those tractors work all the time it's crucial they get fixed rapidly increasingly there's nobody in those machines that in fact nobody does deep plowing anymore that seeds are individually put into the ground and there is local software that governs that process because it is customized to local soil conditions and to local weather that because the machines last longer there's a big secondhand market which is a local market because you don't sort of exporting import to use machines and financing is still important and financing is based at that level overwhelmingly on local knowledge of the credit reliability of your customers that means that if you are in a region where 90% of the tractors are D or the machinery is Deere machinery you're going to go with deer because they have the local economies of scale and the local infrastructure and the local knowledge and there's almost nothing that Kubota and ADCO and the others can do to break into that market what's made deer so successful in the face of a complete collapse by historical standards in their demand and their sustained their profits is the fact that they have now a global strategy that consists of a very disciplined series of local initiatives they dominate individual local markets one at a time what that is meant among other things is that these local monopolies are much more profitable than traditional globally competitive manufacturing markets so on top of everything else that firms and capital are also doing much better than workers in this environment because you've increasingly got these local markets that are dominated and that is an enormous change and it is a change that has overwhelmed everything else that you've read about and is going to overwhelm Donald Trump along with it before before Jo turns to that we asked an unmanned young shirring so why is it that countries keep the obsession with manufacturing describe what you see in terms of capacity issues in manufacturing why does this problem well maybe you know a lot of countries are obsessed about agriculture agriculture is 2 or 3 percent it's you know countries look towards the past you know why you have Europe the only common thing they could agree on is subsidizing agriculture even though it's 2 or 3 percent of their economy you know it you can say that there's a kind of nostalgia for it you know I don't know why people want to be golden coal miners or why you would want to create a lot of jobs for coal mine but you know which blue you have all other kinds of problems but that's what he's focusing on the numbers Bruce always talks about the the numbers of coal miners versus uh people in sports professional sports oh well okay so but just I'm not ready to talk about it if you invite me but I advise you not to but the other thing you know the loss of retail jobs as shopping malls have closed down is bigger than the loss in in coal mining you know it is peculiar how certain things start to resonate and other things don't end it and uh well so it's a political question of why certain things resonate but not from an economic point of view it doesn't make a lot of sense and what's your take on the structural issue oh there's one more comment which is sometimes people look at Germany and they say look at Germany has succeeded in keeping manufacturing and the answer is in a global economy you may be able to carve out a little niche it's a smaller economy than the United States they invested a lot in apprenticeship and other you know the structure they're interested they could keep they were able to keep that we might have 25 years ago 30 years ago been able to do it but would have cane require big changes in the way we ran our education system and our manufacturing but even Germany is likely to find it increasingly difficult as China moves up its production scale Germany was lucky in producing machine goods and next you might say the late last stage countries like Spain that we're producing apparel were hit first and as China gets moves up the learning scale I think Germany is going to find a difficult remaining competitive he got on a machine words but on the structural issues do you share Bruce's view that this is really a story about technological change and productivity growth of manufacturing supposed to factors related to globalization Excel I think what Bruce said was that globalization may have exacerbated so there are two thought experiments that you might do would we have a problem if we had not had any globalization that is to say we were isolated country the answer is yes but there's another thought experiment which is if we had had no technological change and we had the degree of global integration and wakes to manage that we had would we have a problem I think the answer is yes so each of them alone is a strong enough force that it would have created a problem did you so you know yeah let me start you can actually calculate which it is that is causing the trouble and it is extraordinary to me that nobody bothers to do these numbers and I'm going to go back to Ross Perot because we are after all many years out of school and that was when we started talking about the giant sucking sound of jobs going to Mexico if you look at the period from 1980 to 1991 and Perot ran in 92 US demand for manufacturers Rises by 32 percent in real terms US production of manufactures Rises by 26% u.s. employment and manufactures Falls by 8 percent the difference between plus 32 and minus 8 is 40 percentage points the fraction of that that's due to imports and globalization is the difference between 26 and 32 which is 6 and that is 15 percent of the problem even today with everything going on in China 70 percent of the problem is technology and about 30 percent of the problem is globalization but and here's where I think I would defer on importance of this issue to Glenn jobs don't just have economic importance there are jobs that historically have always had huge sociological and political importance people did not believe that you could run a society successfully without yeoman farmers so that when agriculture started to disappear for exactly the reasons that manufacturing is disappearing today there are enormous efforts to save agriculture and that's the sort of problem that you see this digitally today and you see it has by the way no effect agriculture is basically gone but people want to make things they have an image of a worker as a guy in shirtsleeves working the way like sweating hard exactly and producing sartorially difference by a large margin hahaha and what they've tried to do therefore is to preserve those jobs and you can't do it on domestic demand you have to do it by exporting and that means that we have a chronic problem with international imbalances because the Japanese are trying to export the Germans are trying to export the Chinese are trying to export and you add up over all countries the exports and the imports have been net out so somebody's got to eat those exports and you cannot export your way out of the problem and in trying to do so you create enormous pressure in the international system both as countries like Japan and China try and game it but also as the flows backwards the financial flows that offset these chronic trade imbalances put a lot of money in the hands of I hate the country that dar introducer stupid foreign money that buys things like you ask more management doesn't necessarily endorse all of the panel to show you incoming interject a part of the problem is the growth of inequality and one of long-standing results in economics is that globalization global integration between a developed country and a less developed country lowers the wages of unskilled workers in the developed country and so if to the extent that you're worried about inequality not just jobs and not just particular kinds of jobs manufacturing jobs but you're worried about the wages of unskilled workers which are you know basically the same now where have gone it lower than they were thirty forty years ago adjusted for inflation that is affected by globalization an axis section which I I think the globalization is part of the problem yeah can I give you the numbers on that one because Joe actually gave me a chance to do this the total number in the US economy of not just miners but non professional which is non degreed extractive workers is about a hundred and thirty thousand the total number of professional athletes in the u.s. is about two hundred and forty thousand that should tell you a lot about the nature of work in the US economy but think next about the distribution of both performance and wages among coal miners versus that distribution among professional athletes that today the job market is dominated by service jobs and the inequality shows up as or more importantly in those service sectors where like the professional athletes you see individual performance because they don't work in big factories where you get a joint product where it's hard to identify who's doing what they we're kind of goldman sachs trading floor where you can see what goes on and historically we've seen professions like that Bohr and so on and they are very unequal so again I would be careful about what you ascribe to globalization here and what you ascribe to the changing nature of the economy which is ultimately driven by technology and is not going to change but but it is still the case that when you have a global integration as we have you know think about the experiment of what would happen if we had full global integration we're not there but if you had full global integration it's very clear that you know and and markets worked as perfectly as sometimes we pretend which they don't then unskilled workers everywhere in the world would get the same wage and the implications of that are very profound it would mean unskilled workers in the United States and Mexico workers in China will get the same same wage so we're not anywhere near that but that's a strong force lowering wages at the bottom and that is part of you know the unhappiness that you see both in Europe and America but Jim that assumes there is this thing called unskilled workers all of whom are the same men which are economic models but in reality there are vast range of ability among those workers and that's going to show up but before we get into a professorial smack let me let me let me try to before and I want to segue to talking about what we might do about things in policy but I want to frame something I heard you all mentioned jobs I heard you all mentioned compression or depression in some areas of wages but I want to put a face on this we both we all three know Angus Deaton minion case in their work and we know that is what is happening to many low income people in the America in America particularly low skilled men is not simply a collapse in income but a collapse and other things and I'm going to get your take on that before we turn to policy so so what Glenda's referring to is this very important study that they began first a year ago and then they updated last December we showed that uh mortality you know life expectancy among white males in each age category for those who were not college graduates was plummeting and if you look at the rest of the world life expectancy is is going up and when the the most dramatic I guess numbered actually didn't come from the case Deaton study it was actually the number that came out for the United States as a whole and the average life expectancy in the United States is in decline that's really unusual to have these kinds of statistics and then you looked at what was the source of it and it wasn't like there was a disease going around a virus the Zika virus or something else it was social diseases suicide drug overdose and alcoholism and so these these kinds of diseases you see in the latter the time I saw that before when I was chief economist the World Bank at the collapse time the collapse of the Soviet Union when all the so you know social structures fell apart and again interestingly it showed up much more strongly among men and among that particular cohort as they lost their job and you saw all the strain that that had oh yeah I mean there are big negative consequences from these technological forces I mean jobs are not just about incomes although incomes are a huge part of it they're about self perception they're about standing there about having someplace to go where you socialized I mean in the United States especially they are the center of people's identities and unfortunately nobody is going to save the jobs that created those identities for these kinds of men who did not have some college education in this environment when the jobs that they've traditionally regarded as good jobs for them are just disappearing yeah so let me let me just make one more comment which is I agree completely with Bruce the thing is that the way it's often perceived is there are very inefficient and costly things that could be done and when I say costly they even are things that could do that would destroy more jobs than they say the example that is being discussed right now is they steal the action and steal tariffs that that from just talking about you know ignoring the legality whether he could actually get it whether a WTO whether it's WTO compliant you know one of the statistics that people point out you know if you if you restricted imports Oh pouring steel enough you would create more jobs in the steel industry in the United States I'm next that's pretty clear on the other hand there are 60 times as many jobs using steel as producing steel and if you protected the steel industry it raises the price of steel making all the guys who produce export steel intensive products uncompetitive so you destroy jobs and the still using industry so so he's focused on a you know by focusing on the the steel producers you have a very clear example something you could do but you don't see the full effects as they get dispersed throughout the economy but since I probably the only wasp on the panel I like this Calvinist resurrection of Protestant work ethic and what will come we'll come back to that but well that is a distinctly non global common success but I want to come to what we can do about this in policy I'm taking from your discussion you don't think building walls around America and protectionism the right answer so what is okay can I begin with with a part of the misconception here the focus you know come talked about the trade deficit and his view is that the trade deficit is because I these other countries are not buying our goods because they're engaged in protectionism and that extent unfair deals we're buying their book they're not buying our goods and that's the reason there's a great deficit that's basically the the simple and simplistic diagnosis but basically I hope you all learn when you were here is that trade deficits have to our macroeconomic phenomena they are the result of the imbalance between domestic savings and domestic investment if we as a country domestically invest more than we save it's going to be filled by borrowing from abroad and the flipside of borrowing from abroad is a trade deficit so if and and the mechanism by which the trade deficit deficit gets equilibrated who gets to be what it has to be is an adjustment of the exchange rate the value of the dollar almost all secretaries of treasure you usually talk about these things but presidents eventually learn that there is no little machine in the closet that allows them to set the exchange rate you know usually they come in and they think you know the problem our dollar is too weak or too strong is the guy who was there beforehand turned the dial right now that they're there they're going to set the dial right and we'll get a strong dollar Rubin won the strong dollar and Trump after a while he didn't know whether a strong dollar was good or a weak dollar it was good and it was finally explained to him that if you are worried about a trade deficit you want a weak dollar so he said you know you ordered the the market to have a weak dollar and those of you who prayed know that your trades don't really depend on what he tells you and the value of the dollar you know at most what the President or Secretary Treasury says has an effect for three days but normally for about three seconds and that was I think the case this time and had zero effect so what is going on is that if what he has talked about goes through tax cuts infrastructure expenditure increases other expenditure increases the fiscal deficit will increase and omma surely that will mean the trade deficit will increase and so the problem that he's diagnosed will get worse but what what should we be doing about the factors you and Bruce have identified if you were to advise President Trump on what the policies of the US should be to deal with these but not in general but these factors we've been talking well let's simplify this forget the global dimension of the problem why do I say that manufacturing is coming back to the United States from China China has a very tough road ahead of it why because the amount of labor involved in manufacturing is going to zero when General Motors got in trouble in 1980 they had 360,000 workers in North America making cars these days they're under 20,000 and they're gone to zero and you see manufacturing coming back with no manufacturing jobs coming back because it's all because the labor has gone out of it and as the labor goes out of it the value of cheap labor disappears and transportation costs are not falling so actually these trends are going to take care of the global problem I think you've got to focus on the internal dynamic within the United States in this emerging service economy and what that means is that all the trends that I think Joe and I are concerned with of income inequality and in particular specific populations being devastated are not going away and you've got to deal with them domestically and I think you've got to deal with them in the spirit of Chinese hard work that means we have to have really serious earned income tax credits so that you can work at a job that is satisfying for you at a wage that may seem low like $9 an hour for a thousand hours a year and we will add to that 9000 dollars as long as you do that amount of work another 18,000 which by the way we can afford given all the other welfare programs that we have so you will be able to make a decent living doing that and I think that's the inevitable adjustment that you're going to have to make because these trends aren't going away and the global part of the problem is not what's driving it any thoughts show a map I see I agree that it you know if you're going to be concerned about inequality which is the underlying problem in equality manifesting itself in in the health statistics that we're talking about it's not when I say inequality what's manifesting self in United States is really the problem at the bottom in a very stark way you know and now when you bottom I should say the middle because it's even median income of a full-time male worker today is at the same level it was 42 years ago so a next full-time and and a lot of the people are not full-time so things have not gone very well particularly for male that has to do a lot with the restructuring of our economy so it is a domestic problem largely and there you know part of it is income in the way that Bruce described many of the key service sectors are things like health education and the value of those services are really socially determined not market determined that is say the government plays a central role in education and health and for good reason and if we decide the value that we associate with the caring of our children or the coloring of our literary or the caring of the sick are higher we devote more money to public to education to health and we pay higher wages but if we decide we want you know the bottom of the barrel to be teaching our children then we'll pay low wages so if you paid higher wages to a lot of these jobs that itself would mean that there would be less inequality and the middle would be stronger and it would be more respect for a lot of these jobs I would agree that I think one of the things all three of us have written on is the desire to support work in very material ways Earned Income Tax Credit United States as a practical program but there other schemes of wage insurance or direct subsidies for work an alternative would be these universal basic income but those don't support work a fixed income but they don't fix the social issues and I like it Jo the e referred to inequality at the bottom as opposed to a fixation at the top that is a learning thank you I'm going to take I'm going to take that now I want to pivot a little bit given all the structural problems you've talked about where do you see the biggest global risks and opportunities right now and from a policy perspective what what you do about it well I think one of the you know we are still part of a global economy and we will be and I did pompous thrown a hangar and hesitant Trump and president Rob okay as has thrown a hand grade into the global system and that has effects both on [Music] economic relations but into a whole broader set of relations you know you're talking about dealing with people in different countries and part of that is affected by how they view us as Americans and if they you know and thankfully they don't blame all of us for what goes on in the administration but there is a little spillover and and so I think that in some ways I view is a major risk you know if if you're a business and you're worrying about what happens if you're caught in the middle of a trade war you're diverted from other other things of you know producing better products or innovation so I think I think we're going through a very difficult period Oh unnecessarily created high levels of uncertainty at the you might say the micro economic level as well as the macro economic level first yeah I think actually if you look at the experience since the financial crisis what you seen should be surprising to people because what were the two big financial economies in the world they were the United States and the United Kingdom if you look at the three big economies that have done the best by far since the crisis it is the u.s. the UK and Germany and Germany has clearly done it at the expense of other manufacturing economies in Europe so I actually think the United States in this context if we can make the structural adjustments that we have to make in the United States is in pretty good shape I think we're better situated to take advantage of services we have huge surpluses and exporting services as opposed to manufacturers and it's just going to get tougher and tougher out there to try and make an export manufacturing on the other hand we do live in a global world and one of the things that it's going to take to make that global world sustainable is people outside the United States but mostly in Africa are going to have to stop having babies if we can't control population there's going to be a world of hurt out there now what has controlled population is development so we actually care a lot about economic development outside the United States that has been driven historically by a model of export-led growth and I think there's a reason for that which is the big manufacturing institutions and the associated financial institutions that service them create a business community in that business community creates the effective service operations that are essential going forward export-led growth is what creates those manufacturing institutions and relatively poor developing economies if I'm right and I think all the evidences I've been right so far for those of you have sat through Odyssey at the globalization class that in fact exports and globalization is going to get smaller and smaller that model is going to go away and that means if you don't get on this train in the next 20 years as a developing economy you may never develop and that's a problem that I think on a global level you really want to think about because China and Asia may be the last sort of people who succeed in doing this and we may have a future of high population growth and essentially incurable poverty for as far as the eye can see in the rest of the non-asian nine European sort of world and that's what I think is the biggest challenge today captain can I just make it even a little bit gloomy er which is it'll Malthusian contest here then I'm going to change gears but which is that where you know we're already in a situation where even if all the jobs in manufacturing in China were to go to Africa which won't happen it would not create it would create just a small fraction of the jobs needed for the new entrants into the labour force in Africa as currently occurring so the challenge in Africa is really in a demographic sense is is the global challenge and this challenge of how they're going to make the transition that East Asia made Asia made and is making it is a big question of course I see the Bruce could become president of the World Bank if he could just stop saying stupid foreign money I could see that this is this is a career but thank God for that I want to I want to before I open it up to you so that's your cue to be thinking a final question for you to you teach an enormous Lee popular course in the MBA program together on globalization you teach it in this room is always packed could you give a scent how many of you have taken that course okay so get some alumni from that course here give a quick sense for those you haven't been so fortunate what are you doing there and related to the kind of discussion we're having it's actually very similar I mean changes every year we've been teaching a number but we do disagree all the time and that is I'm not on everything by they're not on the basic economics but certainly on the dimensions of policy and it seems to me that's probably the most valuable part of the experience for the students yeah the Bruce says that I'm an optimist I come from Gary Indiana and Midwest where where we have we are and the other thing about I'm more involved in public policy and if you're not an optimist you wouldn't be doing it you would he would have left long ago next like Bruce says he never went into it but they the the issues that we deal with have changed but the underlying theory hasn't so when we began we didn't have the euro crisis on our hand oh no but we saw coming but we saw coming and his cave I mean this was predictable going back to 2002 when we first taught the course that there was going to be this huge problem with manufacturing where every huge problems with global imbalances they were going to be exacerbated by the euro because they couldn't adjust the exchange rate and they were going to create huge financial dislocations where's the next crisis then before I open up Express I think you're in it I think that this level of growth and this level of growing inequality and the consequently look a period in human history since 1820 when managers like you actually started to have a huge impact on human standards of living in which life expectancy falls in developed economies is an extraordinary phenomenon and to ignore that as a crisis is to really ignore what's really going on and I think that's going to continue and get worse if we don't do these structural Corrections to wages and other opportunities okay floor is open to all of you to ask our panelists a question Bob use the microphone sir okay the politicians know what you're saying [Laughter] Hyosung and and and there's another element some of them may know and and feel constrained that they feel that they can't explain it you know i think politics is complicated and and and course so it yes the answer is i think some of them do you know it but the question is can they persuade others of it I think the number who know it is that small and I'll say why in public discourse different people did I do though that is fair in the public discourse it is all about human agency it's all about good guys and bad guys and politicians frankly to put up with other politicians have to believe that so it's all about self definition I'm a good guy they're bad guys and I've got to do something to stop the bad guys certainly that's the discourse around the financial dimension of the crisis but the reality is here there's no bad guys it is forces of productivity growth that are driving this and that is a very unappealing story for people who have gone into public service at substantial human cost to do good and I think that's the biggest problem here I think people are not interested in sort of disembodied structural solutions they want to slay their enemies and here let me make the thing about Trump in the global scheme of things if in his four years Trump manages to successfully order a chicken salad sandwich from the White House mess I will be impressed [Laughter] it would add to that chicken salads actually not that good in the white house mess I was right but I would I would add to that Bob this that the problem is on the left people have long just felt like the right answer is to put anyone hurting on the dole on the right people don't white people don't want to talk about it and say you have this problem we're supporting work the kinds of things we're talking about it is expensive it would require conservatives moving off their dime and liberals moving off their dime and they're not ready to do it yet will they someday I hope so but they're not ready now other questions yes talks about that the problem is beyond just globalization but it is the permanent search by capital of cheaper sources of labor you can call it productivity so slavery end of slavery deflation of wages in the industrial north colonization in its set of indentured labor deployed in agriculture throughout the world by the British and other colonial powers that it has always been the primacy of capital over labor is where we are today we can call it productivity growth and automation but it is still a search for cheaper or as you said zero labor right so if you are an inefficient user of capital such as the Chinese supported steel mills that create labor the expense of inefficient use of capital is that really one way to support jobs while we transition from the you know to the utopian future all right so first the narrative that you've just produced has literally nothing to do with human history what you have to under the suits are you're going to have to reframe it perfect if you look at human history from Roman times when we have the first good data on standards of living until roughly 1800 1820 when the Industrial Revolution and capital starts to play a big part in human activity there is no net improvement in human standards of living the vast majority of the human race for that whole period is essentially expensive livestock they eat only staples they live with their animals and on and on starting in 1820 human life is transformed by productivity growth and in practice the jobs have occurred so literally the people who suffered and continue to suffer today are the people who are outside that system of capital it's the people in Africa it's the people in parts of Latin America so I think thinking that there is some sort of systemic problem here with market economies and capitalist systems is just wrong I think there are very special problems that we confronted in the depression with the death of agriculture we actually solved by the second world war moving everybody off the farms at government expense that were confronting now with this transition to services and I think they're solvable in a market context no matter what capital does I think if you valorize and subsidize jobs that people want to do of the sort that Joe talked about you're going to have plenty of jobs here you're going to have people living actually acceptable lives in the face of the downward pressure on low income wages and the increase in inequality so I wouldn't despair at that structural level I think we're in a transition and frankly being a professional athlete even a golfer tennis pro that doesn't pay that much but with a decent earned income tax credit would enable you to have a decent life is a pretty good job thanks to capital for that yes I mean look market economies are not perfect that therefore you can run them without any intervention is not what I think anybody on this panel is arguing about but don't underestimate the value of those market economies for the fact that everybody in the developed world today lives as well as they do and you can see it by the way just go to North Korea so before we have a tour guide to Pyongyang let's suggest me about Africa but are there parts of the world where population control would be a detriment when I was young there were this was how old I am I said now you're a little older than Jesus he's a child much younger right when I was young there were two and a half billion people in the world and that seemed a pretty good number today there are what eight billion going up so I think almost anywhere population decline is not such a bad thing provided as I say you provide support for the kind of jobs that will take care of the old people which will mean by the way fewer young people in schools so the dependency ratios actually don't go up that much so so the one country where brings to a large country where there's a discussion of this issue is is Japan and whether the workforce is in decline already and to me you know the issue is not the GDP number what's happening GDP it's the quality of life and what you care about is qdp per capita and that doesn't really incorporate the feeling of congestion and lots of other things and I have not seen any good argument that having a deeper you know a moderate depopulate of Japan would be a would be a bad thing there are some countries where the problem is rather different where there's no economic opportunities and all the young people leave and then you get an unbalanced exodus from the country the problem there is not the overall level of population it's the fact that the young people have been tau you know talento are able to work have left the country because there are no opportunities question over here on this sighs I'm looking for your insert Africa which may be the last continent that that's open in my opinion but what do you foresee in Africa with all its mineral resources and his workers for opportunities for American technology know-how since it has all the natural resources again natural resources in modern developed economies are not what it's about well could you focus on the 200,000 African millionaires that receive identified I sure I mean great fantastic how many people are in Africa 1.8 1.8 billion so 200,000 is not a lot of that that's natural but a michael is a identified market opportunity with those one of the 250,000 African million is I mean there may be market opportunities here but this is and I really want to get it's probably a good idea to refer back to the very important point about population Africa is basically the only continent or only part of the world where fertility rates are still substantially above replacement and it's pretty crowded and that that is what I think the issue is and I think to get those fertility rates down the evidence is there has to be broad-based development and I don't think that you know as encouraging it as is as it is to have those hundred thousand millionaires that that's going to solve the development now anyone going back to the population the density of population in Africa has converted the continent from a land abundant where they had to use slash and burn very inefficient land use to a continent where there's real Lang scarcity and that itself is a major structural transformation of how you organize land markets so the there and the natural resources to go back to the theme don't create jobs the natural resources if they the value of those resources are appropriated within the country can be used to create development but if they're stolen out of the country then next not the case and the concern is that in recent years there's that or or they're appropriate by a small number of people keep their money in in a outside the country and the concern is that you know literally hundreds of billions of dollars they bleed out of Africa every year more than the amount of money that's that's coming in and and the question is how to stop that other questions Freyr in the front yeah with the wealth transfer with a wealth transfer mechanism that I presume we agree Earned Income Tax Credit is and a growing population of people receiving those credits and as a percentage of the population a decreasing percentage of people who can supply the money for those credits how is that sustainable and and if it's if it's it will it not structurally increase the amount of inequality because you'll need more people at the upper end making more money to distribute to people at the lower end I mean if you look at what governments collect now that go into a huge variety of overlapping and unfocused programs you don't have to increase government spending especially in Europe and similar places by that much to have a seriously meaningful Earned Income Tax Credit I mean that I think the idea that we don't collect enough taxes to do this by a wide margin I think is just false the second thing is that these trends and inequality don't seem to be because people say oh I want an after-tax income of X and therefore I'm somehow going to raise my pre-tax income if you raise my tax rate because you know when I was again I keep coming back to when I was a kid and the spirit of this reunion marginal tax rates in the United States were 91% and they have come down steadily by a lot so that for most of what you're not working harder how did that work I thought good but you're supposed to that's my point exactly other quill take one from way over here in the back there education in all of this Jo Bruce yeah well I mean obviously education is absolutely critical and if you look again one the major sources of inequality is inequality you might say in endowments of quality education so and and there are you know analyses of why that is the case the fact that we have a local based education system and over the last 35 years we've had more economic segregation so that people who who are poor are more likely to live in a poor school district and therefore get a poor education so so yes I mean I think it's you know it is an important part the notion that just you know giving a little bit better education is the panacea I think is wrong there one more thing about education two more things about education I think our work one is I think there's a growing recognition that preschool education is very important and particularly for those at the bottom and the evidence is is pretty overwhelming and we have not invested very much in preschool education the other one is United States system of financing SEC financing a tertiary university education is different and and student loans now are 1.2 trillion dollars and are increasingly viewed as an impediment for access to education and then just maybe one final point that that highlights the point that you made you know at Columbia and other selective universities we have needs blind emission so we we pride ourselves in accepting students on the basis of their their how well they do in exams and and yet we have I don't know about numbers for Columbia but in general for the selective schools most of them are similar only about 8 or 9 percent of the student body comes from the lower half of the population in terms of income and that's because they haven't gotten that kind of education that would enable them to do well on those exams that would qualify them for for Gloam do ramp one of the other selective schools ok I got a very different take on education I'm going to do this really quickly both education is the most badly discussed issue there are two educational systems in every society one of them is very general it isolates people it teaches them subject with no immediate relevance to what they're going to do with no meaningful rewards that are immediate for success or failure the second system embodies embeds people in purposeful activity it focuses them on learning very particular things that they actually have to know to perform economically useful functions and there are very meaningful rewards and punishments for not doing well one of those systems is called school and the other is called on-the-job training overwhelmingly the most important systems surprise surprise is the second one and that's the one that you want to have work well and that's why jobs and the nature of jobs and actually is actually the institutional structure of work that supports on-the-job training is so important so actually we've been talking about education here by default the evidence on school and this is something I actually learned from Joe when he was at the World Bank is that the purpose of school is to do three things one is it's to teach people to be normo be diat and the societies that do that well and here I come back to Glenn's Scandinavia Stern glass typically have very quote successful school systems although they don't do all that much better when you look at productivity after on-the-job experience the second thing you have to teach people to do increasingly and here there is a big problem because women are much better at this than men is navigate complex social interactions and as a result of that sixty percent of college graduates in the United States are women and that's going to be hard to correct if the population that's in trouble is men the third thing you need out of school is a good eighth grade education the development literature indicates that when people have that they can succeed in the on-the-job training system so I think the critical thing is to develop a system consistent access to that second educational system and focus the first system on those three things that are really important can't you speak one more about that that highlights an aspect of economic policy that we haven't talked about which is good macroeconomic policy keeping the unemployment rate very low and the reason for that in part is that only when you have the unemployment rate very low do you bring into the labor force a lot of the groups that are marginalized so if army job drop training is important the only way you're going to get that on the job training is if they're working and unfortunately if we run an economy where there's a high level of unemployment those people the bottom not only begin at the bottom they then don't get the on-the-job training and they fall further behind okay right here just wanted to throw another topic in the mix um energy and environment I mean nothing short of a revolution in the United States with oil and gas hydraulic fracturing and also you know climate change you could argue that sort of the the countries that are the least able to cope with it are maybe the hardest hit just want to know where energy environment hit certain your mix there gentlemen uh you talk about this in the course are you going yeah so I I think you know climate change as you said is very serious and it is affecting the developing countries Africa certain parts of India much worse I'm in Canada the joke is actually benefits from getting a little warmer climate and Newfoundland might actually instead of that picture of the iceberg you could have a beach in new phone I don't know but but for but and there are broader consequences I mean there's a strong view that disease burdens will be increasing because the kinds of insects that are you know viruses that survive are will be different and at least in a transition period will be and we won't be in a transition period for a very long time will be different and so there are very serious consequences also climate change has increased weather variability and that means you're going to have more natural disasters that natural disasters and the cost of that is going to go way up climate change is a quintessential global problem so you need global cooperation you know you the molecules don't care carry passports so what we produce a molecule over the United States or China does it doesn't know it's supposed to stay right above China mixes with everybody else and so there has to be really global cooperation and that's why I think a lot of us very concerned about the u.s. pulling out of the Paris agreement it didn't achieve the objective of getting all the way down to two degrees or 1/2 degrees centigrade but yeah created a momentum where a very large number form a large fraction firms have actually been changing their technology thinking about this is the way they have to think about technology in the future they you know the scarce the scarce resource is no longer labor as Bruce is point out the scarce resource is our planet and we don't price our planet of the scarcity of atmospheric scarcity or water predominant and and therefore there's a very big movement now going on find it if you believe in the price system you ought to think about pricing carbon and as I say there I was just down at World Bank and IMF meetings the last three days and there are a lot of discussions now about how to how to do that okay let me look up right here I'll probably take one more question I was wondering if the panel could give me an idea the next five years the technological changes that will bring to the world the comparison the last 20 years and how will that affect the world the rate of yet the rate of technological change is slowing if you go back 31 years from today we would be in 1986 most of the big companies that underlie the personal computer and ultimately therefore the internet revolution were in place Microsoft Oracle Adobe they had without Google no no that's too I got four he's going to go there in place and they've been in place for 31 years the reason I think that 31 year comparison is important is that in 19 and I've said this before a 1914 the world went to war on horses in 1945 which is 31 years later they dropped the atom bomb that is rapid technological change and by the way that is mirrored in the rate of productivity growth which in those periods was about three percent three and a half percent and since then has fallen to about one and a half percent a year so I think a lot of this discussion partly because the media and media industries have been so importantly impacted by recent technological change but if you think about housing you think about food you think about things like that which were the predominant products of human economic activity those changes took place a long time ago and they're not changing so rapidly anymore so let me just is an active debate in the economics profession the first thing you can you're sure is we can't predict because we don't know what innovations are going to occur 30 years from now because we don't know what they are I think the next nature of innovation the there Bob Gordon has written a an influential book where you basically sides very strongly with Bruce and I think it's probably right Eve says look at innovations like electricity or the toilet are much more important than Facebook that one effect you know these affect your life expectancy and I just of the market value of Facebook's higher than Toto well which I will water fair enough so so I don't even use Facebook so I'm other words anyway that's an egg deck so so Joel MOOC you're also at Northwest and this is the better side of the debate but yes well but I actually says that there are actually a lot of dynamic things going on and that we may not be capturing in our GDP statistics all of what is going on the value of connectedness you know we we talked about the value of work next not capture but also there are other things that are not well captain our GDP statistics and it is observable that a lot of young people like to be connected I don't understand this I like sitting there writing and being disconnected but but I I look around and I see even do it while I'm lecturing that they are that day they seem to be enjoying being connected more than listening to me so but I think that they may not be learning as much from this so anyway it is an active debate and okay I'm going to take one more question in the back right there it does and I'm not going to argue that but you have to understand what the big services are the biggest service by far is housing and the incremental cost of housing has not been reduced by the Internet the second biggest service by far is medical care and medical care still involves and I think will involved for the foreseeable future a lot of human intervention simply because that's what human beings like to see the third biggest service is education and you guys are all sitting in this room now maybe Joe's students are learning something from being on the computer but by the ways the theory of Education the theory of Education is that it does take a human interaction to have it worked really well then there's personal services and then there's financial services so the sort of things that you're talking about are pretty far down the service food chain so I think they are those effects are there but in the broad scheme of what and especially if you want to see what people are going to spend money on the future look at rich families I mean you have to understand that even though incomes have not risen that far that human consumption is changed along there are a couple very prominent sectors for it particularly high-tech for which what you say is true and more broadly innovation has that characteristic once you discover something the value you know the mark the the value using the cost of using that knowledge is zero you can replicate so if we discover a new drug the cost of the drug is relatively small so there are parts of our economy for which that is very important what you do and that part is governed by very different rules than the standard manufacturing with diminishing returns and those sectors are likely to be highly non-competitive and because they're on competitor they are contributing to inequality and you see that in Silicon Valley very strongly and so what is very clear is like Silicon Valley gets a lot of attention one way of thinking you know when you think about the the capitalization of face drug Phoenix so large you shouldn't think of that necessarily as all a new [Music] value added if you what they've done is they've captured the capitalization of conventional publishers which have gone down to zero so they're doing you know so so as they've gained others have lost and so it's not not all of what they've done has been - on the basis of increasing the value the vet you know their value their valuation the capitalization is not just the increase of the value that I've added to our economy some of what they've done is because of their role relative to other industries that they've had some adversities are all they are growing sectors admittedly that Joe is described and you've described and that's important but they're not big in the overall scheme of the economy I think you'll pay for a long time I think you can see why ideas and impact are in our wheelhouse join me in thanking Bruce Greenwald Joe [Applause]
