Is the world's economy heading towards a decade of depression? | The Bottom Line

hi i'm steve clemons and i have a question well the corona virus pandemic be the tipping point that takes us into years of joblessness and poverty let's get to the bottom line well we look around we see a lot of people who can't find work and a lot of businesses that have gone bust but there are some winners out there it seems like the financial markets are always winning at least from my vantage point economists usually say that they saw what was coming after the fact there are always rationalizations for the ups and downs of markets or of jobless rates of consumer and business confidence but let's take a look at the big picture my guest today is not afraid to go where many economists won't and to look at the key factors out there that predict a really serious financial and to some degree even social and environmental meltdown affecting each and every one of us all over the world he's not known as Doctor Doom for nothing Nouriel Roubini predicted the u.s. real estate market crashed three years before everything came tumbling down in 2008 professor Roubini teaches economics and International Business at New York University and he joins us from New York today Nouriel thanks so much for joining us I was very very taken with Main Street manifesto it seemed to sort of break through the noise that there is a stacked deck against people on a lot of fronts well before the pandemic hit and the pandemic is in a sense sped up history and you continue to find people that are not going to be winners in this and the system slowly coming undone even if there are flirtations with what looks like you know growth etc tell us what the the real message behind Main Street manifesto was well the reality is that globalization trade migration technology and many factors have led to an increase in the income and wealth inequality after the global financial crisis firms slash jobs and when they started to rerp 'pl they were not full-time jobs with formal employment and full benefits there were mostly contractors freelancers gig workers hourly workers artim workers so we had the huge amount of a job and income uncertainty for labour the share of profit has gone up the share of labor income has fallen and this time around I think is going to be even worse because the conditions of the corporate sector today are much worse than they were after the global financial crisis so we have shared in three months and us more jobs than we create in the previous ten years and I think you'll be a repeat of the same if and when firms are gonna start to hire again it's gonna be in ways that essentially are precarious jobs to that part time that are hourly to their gig work and so on and so on so we've created a vast underclass of what an economist guy standing called the precariat instead of the proletariat the young people and they're not just necessarily minorities like african-americans or Latinos there is a vast underclass of white America that is a jobless income less skilled less hopeless helpless with that no asset and these are actually struggling as much as anybody else where they appear the epidemic in the United States with 80,000 young people dying every year of opioid overdose and a majority of them are actually this part of these white underclass so when I saw these protest and demonstration even riots after the killing of George Floyd yes it was about black lives matter it was also about racial justice but was also about economic justice live enabled in New York where every day were demonstration with thousands of young kids going and protesting and actually almost 80% of them were white were not black and Latino only because there is this vast underclass of young people that are alienated are frustrated they don't have jobs at precarious jobs and they feel there is no future for them so it's a revolution of the precariat rather than marginal proletariat well you and Thomas Piketty and there are a number of other writers as you just mentioned who would that the writer who mentioned precariat have seen these tensions economic tensions but the means that the mainstream of economics those are out there every day investing in the markets talking about you know 4 million new jobs being created even though 44 million people are unemployed officially from this what does it take the economics profession to get beyond these blind spots so that that they see what you see well you know many people looking only at the stock market but Wall Street and Main Street have different interests Wall Street represents a big firms big tech a big banks one Main Street is households his workers and his as small businesses and what's good for Wall Street unfortunately is made for Main Street because the way most firms are gonna survive and thrive and achieve the earnings target of Wall Street or the city is by slashing a cost and what are the cost are slashing the initially labor costs but your labor cost is my labor income in my consumption and you know an S&P 500 is going to newer highs because the big firms are going to become bigger while millions of small businesses retail shops small enterprises are gonna go bust in the market share of big track and big knees less is gonna rise so people usually think that what's in the means they'd have the same interest well whoever really a social cost conflict right now what's good for Wall Street is beta bad for Main Street and unfortunately if we don't have changes in economic policy in a more direction that is progressive and inclusive then the success of Wall Street is going to come at the expense of Main Street and what's happening right now is that those who are suffering our workers our consumers our households are small businesses one big business is becoming even more powerful even more an oligopolistic even more concentration of economic financial and other types of political power now you have written the globalization is coming apart that nationalism is rising walls are back it's gonna be harder to move people and ideas and money and institutions across lines like used to be the case is this not a possible fix for the Main Street problem doesn't this move an economy to begin looking at what you need in your own economy as opposed to buying it cheaply somewhere else or in a place that has low environmental regulations well it can if it's done in a progressive and intelligent way in many ways that protection is first of all hurts workers as consumers because it increases the price of imported goods cheaply from China and Asia so as a consumer you're gonna be worse off so is a very regressive tax a tool even if we are gonna have a reshoring of economic activity from China to the United States big business is gonna decide to our factories that are fully automated with robots so we may create more production more profits I'm not sure we're gonna create jobs unless we have seen incentives to create a labor and jobs in this kind of things and a migration in many ways is good for America has brought intrapreneurship abroad people that that initiative is pro people like myself any others were contributed to society so putting a wall of terrace and a wall of block immigration doesn't resolve the fundamental problem that people need education need skills need the human capital and need to survive and thrive in a digital and globalized economy and by the way even if tomorrow we were to have a wall so nobody can get in the United States even if we're the under percent tariff on foreign goods technology in the future is going to disrupt many jobs more than migration or globalization on trade and give you an example even when we have out on most vehicles you'll have millions of uber or lyft drivers they're gonna be without jobs you'll have millions of truck drivers are not gonna have jobs so the next ten years technology rather than trade on globalization migrations gotta be the big disruptor of income and jobs and working incomes so we have to think about how we make sure that people can survive and thrive in this digital economy otherwise we're fighting the wars of the past rather than the words of the future look you worked in the Clinton White House if I I think I first met you when you worked in the National Economic Council in the Clinton White House I was in the Senate at the time so you know how this town works you know about policy and politics and I've been fascinated by you know the bravado of Donald Trump on one hand being the populist president ostensibly responding to these workers you just talked about who fear for their jobs he fear for their families but yet you've said he's not that at all well you know Iran is a populist but once in power is govern as a plutocrat so it's not a populist is a clue to populist essentially a plutocrat is pretending it to be a populist if you look at the economic policies they've been all against the economic interests of his a blue-collar phase that voted for him his policies on taxation reducing corporate taxes and taxes for the wealthy his policies of trying to repeal Obamacare his policies of loosening up a regulation that the fan labor in unions his policies about the environment everything he has done has been against the working class and the income and jobs of the working class and he has pretended that if we have a little of a fight on trade with China or if we restrict migration were going to resolve the American carnage that we created but to resolve that we need inclusive growth we need progressive taxation we need to invest into infrastructure roads ports bridges that are crumbling we have to invest into our green future but to do things that provide the workers with the skills and education they're going to be able to survive and thrive in this globalizing digital world he has done nothing of that he has been talking about the infrastructure plan not the time has been spent so is it true the populace is really a plutocrat wearing the ships cloth of a populace but it's not the populist well he's been blasting China as you pointed out he's been blasting Huawei and and saying we can't have their 5g embedded into American communications infrastructure or in the cities and there's got to be other choices but there are no other options that we make these we don't make these systems in the United States Europe makes them but but I'd be interested in in in where we go with that when you look at these this next wave of just a certain degree opportunity you know that Internet of Things vast movement of data that America has no players in it while it's shutting down one of the key providers it's embedded in that business no you're right you know we need to build the 5g network but there's either the Chinese one day one way and we worry about the back door to the Chinese government but the alternative is only Nokia and Ericsson that are European and by the way the Chinese one is 30% cheaper and 20% more efficient so to build the 5g network without Y way by having a tech divided in US and China is gonna cost us 50% more and we lost the technological lead that we had of course we have many private sector tech company are doing well but I think that whoever's gonna be president for the next decade we have to think about an industrial policy for the United States you know Germany as industrial policy 4.04 a world is going to be based on robotics automation AI machine learning Big Data internet of thing so this the revolution is gonna occur regardless off but web provide people with the skills to be able to be successful we don't have work that have the right types of skills and therefore they're in marginalized jobs like hamburger flipping or low low wages services so you have to invest into your people you have to invest into your physical infrastructure you have to invest in your digital infrastructure we have a plan we need a plan to make sure that people can succeed otherwise work is gonna be left behind even more than the past I would advise my viewers to go look at your Twitter stream I do it most every day and you get snapshots of other subterranean things that could come and and dislodgement you know most recently you wrote you referenced Antarctica and so it's not just an economic fragility that you're dealing with we're looking at environmental fragility even social fragility and you're predicting that we're gonna have a very very hard decade that we're going to enter in a period which is you know catastrophic ly worse in some ways than the Great Depression tell us what you see coming well I do worry that where the very severe recession that maybe for a quarter since we start from a very low base it's gonna look like a rapid recovery something like Fe but by next year is gonna be like a you because there is this burden of private and public debts that are affecting economic uncertainty risk aversion and people not wanted to spend very much and we can have a first wave and a second wave and so on and therefore the V is gonna be coming you and the you can eventually become a W a double-dip recession especially if you have a severe second wave and that W canned up into an L into a greater depression and I've discussed in some of my recent writing there are ten deadly drivers of disruption and of potentially a depression we have what I call ten deadly DS one is diet and deficits the revenge are going to lead to the fault the second one is demographic in aging that is increasing lots of implicit liability of governments including those from having to take care of covet and other pandemics then we have the basement of currencies as we monetize large fiscal deficits to avoid the deflation initial is deflation but eventually is going to be speculation where this digital disruption is going to radically disrupt ops and income an entire industry is coming from technology where these the mall a democracy backlash as we have a return to populist the empower and inward oriented policies we have also digital warfare the words of the future are going to be based on cyber warfare not on conventional war and then we have these deadly man-made disasters and I call them mind me rather than natural disaster because there is nothing natural about the global climate change there is in nothing natural even about the pandemics and this fandom is gonna become more virulent in the future in the last thirty years we've had first HIV then the Czar's than wet mares swine flu Ebola Zika now covet and were destroying because of global climate change they are batard of many animals and then animals are encroaching on other animals and then they're getting closer to human beings and the AFD sonic transfer of diseases from the animals to human this is not not wrong it is a game having to do with the destruction of our natural environment so the combination of all these deadly forces may imply that unless we change radically our policies we could end up into not just a greater recession like the one we read this year greater than the global financial crisis but we have the risk of a greater depression a depression worse than the one with in the nineteen thirties well I think one of the questions I have because you know I remember the 1990s I remember working in the Senate and we had the benefits of a fast-growing IT economy but you saw people losing benefits you saw people and being asked to live in a turbocharged economy without turbocharged protections and so this has been going on for quite a while and so I guess the unfair question is as you're going very quickly over the cliff what can stop going over the cliff when so many forces have come together to do that but I'm going to ask you that if you were to be in charge and begin looking at how you undo some of the trends that are taking us into this terrible place what are some of those things we could seriously consider well I think the first thing as I said that we have to invest into human capital where there is globalization or technology that be disruption to entire jobs skills industries and firms so you have to provide the skills to people so they can be able to deal with globalization and with these technological disruption everybody should be starting some variant of stem science technology engineering math computing coding you name it it was just start teaching coding to kids as soon as we teach them English or whatever language they're learning is the language of the future we've had crumbling infrastructure United States and rebuilding this infrastructure is going to be important to increase the private sector productivity we know that doable climate change is going to lead to massive cost and losses and actually many of the technologies that can change global climate change can be labor-intensive if we have solar panels on every building in every home around data those are kind of labor intensive jobs like many other types of green jobs by them adjust up made a commitment to spend two trillion dollars on infrastructure and on the green economy so way to invest into our people in a human capital into the physical infrastructure into the green infrastructure into the digital infrastructure and also in our institutional infrastructure because the social capital in the United States is spraying as we have a social division deriving from rising income and wealth inequality by so many people being left behind becoming angry alienated frustrated and even violence in in some cases so unless we rebuild our own social fabric will be even more divided so there is a huge amount of investment we have to do to avoid the depression that would occur if we don't do that I mean you and I have both been around for a long time I'm sad to say but we've been around we've seen a lot we've seen protests and I guess and and you know history and and I guess one of the questions when I read your material and say well you know inequality has been building for a while we've seen revolutions in the past we've seen plutocrats and and you know oligarchy established in the past what do you think is making this particular time different than these other moments where we've had protests but not change well it makes it different is that I think that the amount of income and wealth inequality expression United States a rich level that are really politically and socially unsustainable and you have both on the right side people who were maybe socially and religiously conservative they are left behind we're very high school degree they used to vote for Trump because they thought it was a true populist but they've been disappointed and of course even on the left side the people that vote for Bernie Sanders for Elizabeth Warren for AOC on Democratic Party are and looking for change so I think that progressive policies are necessary because the number of people that are left behind our losers were feeling frustrated alia nated when they worry about their own income about their own jobs about their own children but the future is rising the share of profit is rising the share of labor income is falling economic and social uncertainties are increasing there is not really economic opportunity and social mobility in the United States those who have skills and their capital are doing well everybody else is being left behind and it's not just in United States for the last year within demonstration and protests and riots all over Latin America in the Middle East in parts of Asia in advanced economies like in France and Italy in emerging markets so I think that we have globally a phenomenon in which there is massive disruption coming from both technology from trade from globalization and there are some winners and some losers and now the losers are becoming a majority and they are either voting for populist parties or they're disrupting traditional establishment parties and they want change the ones a a world in which capital is not the one who's winning but labour as a hook and unless we do it eventually social unrest we could have civil wars we could have evolutions that's what happened in the past so we have to do something to avoid social and political instability Nouriel I want to ask you to be a futurist about your future ISM to look past the 2020s and the really gloomy prognosis that you've given this time to the 2030s is there someone out there some nation that impresses you that's beginning to get these show social cohesion questions right to merge in technology the trends that you think will emerge out of that gloom and come in stronger and I'm really asking will the US have had its Suez moment will another nation or region demonstrate a very different model than we're seeing today well there are some countries that doing the right things I think that some of the Nordic country the Scandinavian ones are adopting radically new technologies like in Sweden caches disappeared payment system are all digital there's adoption of all these technologies but they have also very very wide social welfare system so that if you are losing your job you're negate Education Skills retraining your pension your healthcare your free education and therefore if just by bad luck you're falling down you're not a chance to rebound so some of the Nordic country are doing the right thing some countries in emerging age also have policies like Singapore and others that are investing in the future of their people while adopting technology Japan has declining population but is investing a lot in robotic and automation and the decline in populations can be compensated by using more machines so you have to be creative but provide people the skills that allow them to be able to use technology as opposed to having a greater digital divide between the ABS and that's not so there are models you can work on well Nouriel Roubini thank you so much for sharing your insights with us today on the bottom line and I look forward to seeing where all this goes hopefully better than you predict but you know III by your prognosis and I want to encourage people to check out Main Street manifesto it was real eye-opener for me thank you so much pleasure being with you today it's Steve so what's the bottom line there were already bad trends piling up against folks trying to hold their lives together before the global pandemic hit and destabilize them even more some things are never gonna change the middle class they're always going to be squeezed the rich they'll get richer and the poor even when they do everything they're supposed to be to get ahead they just can't catch a break inequality is gonna remain with us pugnacious nationalism is going to keep rising our quality of life is gonna fall as isolationism takes over and oh yeah Antarctica is melting my guest is right that it would take a massive systemic correction to turn around this ship and the chances of that happening right now are highly on likely we're going to have rough waters buckle up and that's sadly the bottom line [Music] you [Music]

Channel: Al Jazeera English

Views: 310,573

Rating: 4.7324867 out of 5

Keywords: economist, al jazeera, business, nouriel roubini, great depression, jobs, covid-19, aljazeera, coronavirus, financial crisis, aljazeera english, economy, employment, al jazeera english, covid19, economics, aljazeera news, the bottom line, global recession, stock market crash, stock market

Id: cnTPCOqguus

Length: 24min 41sec (1481 seconds)

Published: Thu Jul 16 2020