No Ordinary Disruption: the four global forces breaking all the trends

but even in everyone and welcome to the London School of Economics my name is Silvana Tancredo I'm a professor of economics and member of the Center for macro economics here at the LSE and I'm very pleased to be here today to welcome Richard Dobbs Jonathan would sell and Stephanie Flanders authors Richard Dobbs and Jonathan would sell will be introducing their new book no ordinary disruption and Stephanie Flanders will be their discussant let me say a few words about the speakers Richard Dobbs is director of the McKinsey Global Institute which is McKinsey & Company's economics and Business Research arm and he's the senior partner at McKinsey he joined McKinsey in 1988 and from 2008 to 2009 he co led its corporate finance practice from 2009 Richard has co-directed McKinsey Global Institute first from South Korea and then from London where he is currently based he is a co-author of value the four cornerstones of corporate finance and his work has appeared in several books including Korea 2020 global perspectives for the next decade his golfer Jonathan Woodson is the director of the McKinsey Global Institute in Shanghai and he leads McKinsey research on China Asia and global economics and business trends as leader of the firm's cities initiative he has conducted more than 60 projects for governments throughout China to supporting local economic development and transformation he also supports a transformation of Chinese companies into global leaders responding to Richard and Jonathan will be on Stephanie Flanders who is managing director and chief marketing strategies for the UK and Europe at JP Morgan Asset Management Stephanie was previously the economic economic saira editor at the BBC and prior to this she worked as a reporter at The New York Times speechwriter and senior advisor to US Treasury secretaries Robert Rubin and Larry Summers Financial Times leader writer and columnist and an economist at the Institute for Fiscal Studies and the London Business School so we're all looking forward to hearing about the book and I'll make just a few on logistical points before we get started please put your mobiles on silent right now so that we don't disrupt the event the top will be recorded and we hope a podcast of the event will be made available online for those on twitter the hashtag is LSE McKinsey and the plan is the following we'll have the author's speaking first making highlights of all the books stephanie will respond to them and after that the we will have a Q&A session there will also be a book signing event after the talk and finally copies of the book will be available just outside the theater for now please join me in welcoming Richard we're first speaking speaker 2 tonight well I'm afraid I want to actually start with a little bit of bad news bad news for all of you here whether you be business executives students or academics the bad news is that the intuition that many of you have built up over your lives could get you to the wrong answer making decisions and however fact base you think you are on making a decision intuition plays a really important role and the reason that intuition is wrong is we are seeing for large disruptions hitting the global economy each of those disruptions are larger than anything we've ever seen and we have four of them hitting the world economy together such that our intuition that we built up about how the world's can work going forward the intuition we use to make family decisions business decisions the career decisions may actually get us the wrong answer so I'm going to talk a little bit about this but this is not a new phenomenon people have had intuition about how the world's worked in the past which are well known UK scientists said this ok well that was a little Kelvin so you know he had an intuition about how the scientific world worked but also the business world had a pretty good intuition 5 computers well I have all five and my briefcase actually the moment you know he said that yeah that's right Thomas Watson though the IBM historian came up and told me it wasn't the case but I'm still sticking with this load the arts community had a view as well who the hell wants to hear actors talk that was Harry Warner politicians - this one's pretty well-known that's right she's actually unique on those Lister's and the mone was her intuition Ron she was the one who actually proved her in Jewish was wrong and how about the forecasting thing market cell phone penetration in the u.s. 900,000 in the year 2000 out by a factor of hundred yeah that's absolute right that was us so lots of people went out and forecast the world and they base their forecasts on their intuition they've grown up with and they got to the wrong answer as a result now if you think about the period we will built up our intuition it's actually been an incredibly benign period for the global economy if you look at global growth if you had sort of been living in the Year 1700 and thought about global growth a good growth rate was 0.3% tell that to the eurozone good growth here 0.3% and then we had the Industrial Revolution and we saw growth rates of going up to about 2% up to the second world war but what we've seen since the end of the Second World War has been an extraordinary growth period we've grown between 3 & 5 percent and we've been driving growth through two big engines we've been driving through demographics a growing workforce but we've also been driving at through productivity so we've had a wonderful greater and implicit in many of the decisions we make about the future is the fact that we've lived in this world of this growth and we'll come back and talk about why that might not be the case we've also lived in a world where capital has got progressively cheaper this chart shows real interest rates both real and nominal across the selectional countries so you can see it fell from about 12 14 percent in nominal terms de about four and in real terms to about two that has underpinned a lot of the asset price growth we've had a wonderful period of asset price growth driven by this falling interest rates capital has got progressively cheaper that asset price growth that we've grown up with let's say London property whether let's say you know equities bonds won't necessarily be sustainable because we're unlikely despite what the Swiss are trying to do to have this type of growth going for our falling interest rates going forward we've also seen despite the 20 fold increase in commodity up in GDP over the last century commodities and this is a basket including food energy and raw materials commodity price is actually hard in real terms so commodities actually got cheaper despite this growth and we've seen a wonderful world for business this chart shows a bit dar a bit no black net income both you can see as a percentage of global GDP but also the absolute numbers at the bottom now a bit dark grew faster than GDP a bit grew a bit faster no Platts net operating profit less adjusted taxes where we've adjusted taxes to say what would you have paid a tax wise if it hadn't been for the tax shield on the debt grew 29% faster and for corporations with interest rates dropping profitability grew seventy-nine percent faster than GDP so we've been in a wonderful world for the profit profitability of the Western corporation so it's been a pretty easy world we've lived in and we borrowed we've actually enjoyed the benefit we've benefited from falling interest rates and we've been able to borrow more this shows up the total debt outstanding and death as a percentage of global GDP and you can see up to the financial crisis debt grew and then we had a financial crisis caused by too much debt and since the end of that financial crisis which was caused by too much debt we borrowed an extra 60 billion or 60 trillion rather in terms of our debt debt so we've been able to borrow more despite the fact that you know we had a financial crisis too much debt so we really enjoyed ourselves we had very benign environment we had interest rates falling good growth and we were able to borrow more now this world is being disrupted being disrupted by for disruptions none of these disruptions will be surprised to anyone in this room the challenges the speed and scale of which they're happening I'm going to try and over to my colleague co-author Jonathan who's going to talk through a little bit about some of these disruptions it's it's very hard to follow Richard on his home turf so so I'm going to talk about China which is where I live and we'll talk about these disruptive forces giving some examples from other parts of the world I hope they'll also resonate with you the first is industrialization and urbanization now as Richard said this is nothing new we've been seeing urbanization for some time today over half the world lives in urban cities we have 65 million every year coming into cities sitting in China I feel like they're all coming to my city at the same time but you know it is it is a long-term trend now what we've why is this happening this is sort of the world's economic history on a page economic development versus urbanization and I think everybody can sort of see the relationship here suffice it to say there are no rich countries which aren't urbanized there are urban countries which are not rich but there are no rich countries which aren't urban it seems to be a necessary step a necessary process of specialization high-density high-frequency interactions that enable us to learn to develop and to deploy technologies which in turn allow us to become that much more productive so how big a deal is this you saw the video I'm going to just sort of remind people about the numbers here the cradle of Industrial Revolution roughly it took about a hundred and fifty years to double income during this period of industrialization and that affected 10 million plus people that was roughly what happened he back in the 1700s the US did it a little bit faster so 250 million 50 years in Germany 60 years 10 million people 28 million people Japan a little faster South Korea a little faster you see where we're going with this so China 12 years to double income a billion people and that's the math this is about a hundred times as fast sorry 100 times as large and ten times as fast so a thousand times the impact and if we extend that to the rest of the emerging markets you get three thousand times the impact of the UK Industrial Revolution that is an asteroid hitting the planet in the terms of consumption in terms of resource requirements in terms of competition and that is why we call it a disruption now where is it happening this is it's not random we do observe patterns and clusters so here we have the the China map and as you can see you know 46 out of the top 200 cities by 2025 will be Chinese and a large number of them will be close to where I live in Shanghai I see we see a pattern of cluster development where there are hubs and spokes so but it's not only of course China we see a similar pattern in India in the Middle East in Africa we can look at Africa and see 50 countries you can see 30 urban clusters and the 30 urban clusters is closer to an economic representation of the continent so what does this mean sometimes we're accused of being short term so take us back 2,000 years where was the economic center of the world somewhere between India and China reflecting economic activity and demographics largely and for 1,500 years not much change we had war we had plague we had famine we had the Crusades but still the economic center of the world was between China and India somewhere there and then we had the Industrial Revolution so we move up a little bit then all of a sudden we go left and we keep going left we keep going left all the way out to almost Greenland and that was where we had the impact of the industrial of revolution urbanization Western Europe North America you see the pull what is happening today we're making the big round trip so we're going back to Novaya Zemlya I believe and then somewhere in Siberia and you ask where will it all wind up well Kazakhstan so our friends in Astana are very excited about this the the jog South has to do incidentally with demographics which are about to talk about because that actually reflects urbanizing industrializing Africa and the Middle East what is the implications this is probably the single most obvious one we are about to have three billion people more in the consuming classes we say that we use that term advisedly as opposed to middle class or a flowing class because these are the class that they'll actually buy things they will buy televisions they will buy cars they will take trips because they can they can afford it at lower levels of income than their oacd predecessors this this poses a conundrum for suppliers to the consumer classes of goods and services that they want but may not pay the same amount as their predecessors did how many people do how many people are studying piano today in China do you think I make any guesses how many piano players are there aspiring piano players yeah somewhere 50 70 million I do you think they're playing Steinway or Yamaha they're playing the Pearl River Delta piano companies piano it has keys it has a string it makes noise but there 50 million of them and sooner or later the suppliers of those pianos are going to figure out how to make a better piano and ultimately they will have a competitive advantage so that's the challenge three billion more new consumers first one second one disruptive technologies the alphabet soup we see a lot of technologies how do we know which ones are actually the ones that make a difference well as you might have started to feel like we're not giving you the answer but we are telling you what it's likely to look like or what is the trend and the one thing we can say is that things are speeding up first phone call 1876 first website 1991 115 years first iPhone 16 years things are going faster the Internet of Things is with us already today if we look at robotics same thing 200 years from Hargreaves to unum 8 factory automation 250 years to shaft to be able to go into a into a nuclear power station after Fukushima to AI my favorite is the printing press it took 400 years from the printing press to the laser printer it took 30 years from the laser printer to the 3d printer let's see how fast things are going and it's not just on the invention side it took approximately 75 years for 50 million people to pick up the phone and talk to each other 75 years that's quite a long time it took 38 years for people to so for 50 million people to listen to the radio 13 years for television four years for the iPod three years of the Internet one year for Facebook nine months for Twitter and the winner 35 days for Angry Birds so you see the consumption in sumer side picking up just as fast as the inventor side 50 million is no longer a big deal we could have puts yummy there but people know Angry Birds and it's unfortunately having some externalities this looks like a law professors office or a legal office that that's what it might that's what it used to look like today it sort of looks like that all that paper is being replaced by one person if that is being screened it's being digested it's being spit back as being organized it's being automated so it's not just the cashier at the checkout counter or the teller that is losing their jobs because of Technology it's the journalist down the street they the is the repairman it's it's whoever it is whose work can be thought of as a series of discrete tasks that could be split up automated and then put back together again so third one aging something that unfortunately many of us are personally familiar with does anybody know this building yes I heard it that china pavilion is that this is the Chinese Pavilion at the Shanghai Expo this is a beautiful pavilion but no that is not the right answer the right answer this is the Chinese demographic pyramid in the year 2030 as is illustrated by this chart so today we will have one person one small child supporting two parents supporting four grandparents and that is one of the fastest progressions towards an aging society the world has ever seen and why is this happening fertility rates have been coming down for a long time this is partly an income function but it's also education and availability so and it's not clear it is clearly not linked to ethnicity or anything like that it's simply a reality that we actually know pretty much what's going to happen on the demographic side now of course that might be the cue for a great new disruption but this is the way the world looks and this is what has been happening but we can also say is that given public health one out of four people in advanced economies plus China will be over the age of 65 by 2040 so good news for me lots of friends then that's an amazing thing it has some implications though we think about China as having a billion people in the workforce not so fast it will actually have 850 million in the workforce by 2050 it's going to lose a hundred and fifty million people out of the workforce and so on and so forth so 10 15 20 % declines in what's available this has a real implication particularly if you live in a country which has a defined benefit program a friend of mine said when faced with this kind of reality there are three options you have work harder save more reset your expectations that is if that is a very real consequence of this disruption this is what we think roughly the global workforce will peak at the end 2030 some some earlier some soon at some sooner some later this patek us back to what Richard said before but half of the world's growth came out of population growth that three point six four percent of growth that we had over the last 50 years about half of that was from new people coming into the workforce if that's going to peak there's nobody knew what's going to happen well you're going to lose half our growth so that's the opportunity inhere is can we make up for that demographic decline with increases in productivity the work harder work smarter option we hope of those first three options I mentioned so those are the three first of all big disruptions going to pass it back to Richard now to talk about the the fourth and then some of the implications so maybe the the fourth one of these disruptions is a bit less intuitive we have connected the world up in ways that we're not used to I'm going to use some examples of this in some ways the most obvious one is the fact that we've had increasing flows as you can see flows growing faster the percentage of GDP numbers growing the factory doubling as percentage of GDP financial flows flows in services we can also see the impact of where the flows are working this shows the world trade in 1990 very much centered around Europe as a hub but as we can see where the trade has moved in 2013 we're getting a different type of network we're getting a lot of south-south connection in terms of trade trades happening around different ways but this is only one example of the connectivity we've also connected things together that didn't use to be connected this chart shows the correlation of various commodity prices with oil prices corn in the 1980s had very little correlation there was some but it wasn't much that correlation has gone up much higher we've connected it food prices and energy prices together because of things like biofuels if energy prices go up farmers grow more biofuels pulls food prices up as well so we've connected those together an action another example of connectivity is all the stuff we're seeing about Greece at the moment now Greece as a country has actually been in default on their government debt 50 percent of the time since they became independent from the Turkish Empire or the Ottoman Empire now it didn't matter 20 years ago where the Greece was in default or not unless I mean obviously if you were banker lending to Greece that may have mattered but for most of the rest of us it really didn't matter we've now connected Greece up to the world economy through the euro such an event and an event that happened 50% of the time can hardly be described as a Black Swan event such that this non-white I mean almost white Swan event happens suddenly we're in a major crisis because we connected sup another example is we connected up systems through the internet it is now possible for a hacker sitting in a basement in Moscow to take down the electric system in the west coast of the United States because we connected things that meant that we weren't connected so I think we can see the consequence of some of these connections obviously if you do the maths as correlation goes up so does volatility you can see the number of 3 Sigma days for the stock exchange we could also see the impact on the world's economy this shows global growth since the 1950s and we threw some pretty big shocks at the global economy oil price shock some of the wars we had and actually while that may have hit some countries it didn't hit the global economy the global economy didn't ever have a recession since the Second World War but we connected it up and then we throw a shock and the Lehman shock was quite a big one but really when you do the mass was not much bigger than any of the other shocks but we can see the impact of it because the world was more connected we had our first global recession because of this connectivity and understanding some of this connectivity is one of our challenges so what does this mean well I'm going to give you just a few examples of the types of things you need to do on your intuition reset I want you just do a quick survey has anyone in this room been to Tianjin so we've got about you know 2 3 % the audience has been changing it's a city just outside Beijing I'm changing at the moment currently has a GDP of about 130 billion dollars put that in context that is about the same as Stockholm so everyone have been to Stockholm ok so um so here is a city that has about the same GDP of soccer now Stockholm is one of the fastest growing country cities in Europe because of demographics and other things and by 2025 Stockholm we think will have a GDP of about two hundred and ten billion uhm changjun does even better 600 billion at fact Stockholm snow longer is a good compare you actually need to compare Stockholm Tianjin to Sweden so this city that no two percent of you have been to will end up you know under this scenario by 2025 with the same GDP as all a Sweden now for those of you from a corporation think about who's responsible for growth into your arm in Stockholm or Sweden normally when you are some executive they say oh yeah we know who that is that's Fred or Joe whatever you are some who's responsible for change in may get their map out and look at where Tianjin is then they get the file out and he's five or six levels if there is someone five or six levels more junior than the person who's responsible for Sweden corporations are resetting their investment very very slowly when we look at what actually happens there's a huge inertia you invest where you used to be this is not just an issue for um our corporations you look at where the diplomats are Wuhan will have ten times the growth of Auckland you look at the US State Department they have 10 times more diplomats in Auckland than they have and move that wrong way around for where the growth is going to be they have to also reset their expectations and where they put their people if you want to play around these numbers we have a free app called urban world you can download it for your on your iPhone or your your samsung galaxy or whatever and play around with these numbers we've have all the sort of data there to try to help people reset their intuition about cities so that's the first example of how expectations about how the world is going to be may be wrong second example is the impact on commodity prices that the growth we're seeing remember I started with this chart showing how commodity prices are fallen over 100 years we've seen the impact despite the fall-off recently we've seen the impact of the growth in the terms of the number of consumers so this fall-off that we'd seen as we went from a billion to two billion consumers we've seen that the increase in terms of commodity prices now when you talk to politicians about this they get annoyed that utilities are increasing energy prices why are they not cutting the prices why they not worrying about it in some of the investment in insulation well because we've lived in a world action commodity prices have historically fallen but that's not the case going forward another example is who are the companies that are going to be competing many of us have sort of you know a mental model that the large companies in the world come from the developed world this is actually you know a snapshot in 2000 there were only 24 members of the fortune 500 that came from emerging markets and that's who we think covers the large corporations in the world we did some research a few years ago and we came up with forecasts at roughly half of the fortune 500 by the year 2025 are going to come from emerging markets and when we came up with that number some people said you know you must be smoking dope to come up with that number but actually you can see we're already halfway there by 2014 half a quarter of the 130 of the fortune 500 were already from emerging markets and these companies bring a different way of behaving if I look at the the types of companies that I worked with when I was in Asia they have a degree of brutality they will have two competing R&D centers and they will put the R&D centers against each other they will study their competitors particularly their Western competitors to a micro level we would view that in the West as of almost not cricket to spend too much time spying on our competitors we want to be brilliant on our own we don't want to spend time they will understand to a micro level and the sources of weakness to go after the competitors and they will work very hard we did a piece of strategy where we changed the R&D pipeline for a client their R&D people set four hours a night for six months next the R&D center to get the new product out to the market we think our client was able to do it twice as fast as their Western go best their Best Western competitor and four times faster than the average competitors through that type of brutality so the world of competition is going to change it isn't just Chinese companies companies from Latin America an Heiser Bush was arguably one of the best run beer companies in the world the Brazilian is now running it or running it better brazilians running one of the best American beer companies better terms of behavior it's going to be a shock but it's also not just about large corporations if you were in Thailand and you were to search on Thai Google for a two kilowatt electric motor the paid site at the top comes up the old traditional supplier of electric motors they had a supply chain they had Rd and they had the ability to produce these products and sell them into manufacture them in places like China and deliver them Thailand through their Wales the first free site that comes up on Thai Google is actually Alibaba and you can click on it and you can see that there's actually choice of 48 thousand different electric two kilowatt electric motors and you can click on individual ones you can see that they're being manufactured here you can contact the supplier you can look at the ratings you can compare different electric motors something remarkable is happening here a technology Alibaba marketplace is shifting the world such that these small manufacturers in China are able to compete just as effectively with the likes of Siemens the old economy of scale that seems used to have has disappeared and this isn't just an Asian business if you look here the UK government has introduced the G cloud for all IT services to the UK government half of the activities being one now on G cloud are coming from SMEs SMEs are able to go in and compete to work for the DVLA to rewrite their website in a way that was impossible when you had to go around and call on the different agencies so we're seeing the shift to balance we're seeing the shift by the rise of emerging market companies changing competitors but also seeing some of these platforms allowing SMEs to come in and compete in a different way going forward as a result of the disruptions the workers are going to have a shock to this chart shows us wages for male full-time work and as you can see since 1975 or sort of the 1963 the the graduate school workers have generally gone up in terms of salaries but what is quite interesting is when you look at unskilled and we're using here a measure of education as a measure of skill it's not perfect we know but since 1975 salaries have actually been in decline in real terms for the male unskilled worker and that's because of the disruptions coming through and they've already been coming through they've been replaced by technology a lot of them were building cars and things like that the cars are now being built by robots they're being displaced by trade and they're being displaced by migration so we have a cohort of people who were growing up being paid less than the previous generation now at the time this happened we didn't notice it because women participation marks part of it and we also had a big asset price boom because of the falling interest rates I talked about earlier if interest rates can't fall any further that's going to stop masking it and the ability to stretch participation is going to become a problem so we're going to be in a world where there's going to be increasingly a cohort in the developed world that is going to be growing up less well-off than the previous generation and how we deal with that politically is going to be one of the challenges and that finally brings me to the final sort of political area about how we deal with this and there's a lot spoken today about you know the real political leader in Europe Angela Merkel and everyone talks about all the structural forms that Germany's done and why aren't the Greeks doing those structural reforms why on the French why aren't you at cetera et cetera we know the story because the challenges it wasn't Angela Merkel that did those structural reforms those strategist reforms were done by him and when he came to his election to get reelected he lost to her so I think we have a challenge in terms of dealing with these structures and these disruptions in our political system of how we manage to avoid the troika problem or as young Cosette you know we all know what we need to do we just don't know how to do it and get reelected afterwards so hopefully I haven't depressed you too much about the world what the leadership attributes were going to need going forward well we think they're three first one is external focus you need to understand some of the changes that are happening outside and need to be able to understand what that means now for those of you who may need a heart transplant you need to listen quite carefully for the next few minutes the Google driverless car is going to be a great invention it has been a great invention it is now driven around close to well seven hundred thousand miles without actually having any accident as this rolled sorry there was one axe and someone drove into the back of them hmm okay so someone drove into the back of them anyway it's been a great success the consequence of this car as it rolls out is that we have many fewer road accidents now you need to understand this and if you're a need a heart transplant or if you're a heart surgeon you need to understand the consequences is because the second-order effects of this a fabulous car is there'll be fewer accidents the third order effects as a traditional source of hearts for transplants will disappear now maybe we'll be able to 3d print them in time so first attribute of leaders is they look outside understand the world's changing understand what this means to their organization and I'm amazed how inwardly focused many large corporations still are people have spent time understanding their internal politics and maneuvering this and getting change to happen in their company and that's been a big area of distinctiveness we think the challenge going forward is to be externally focused the second attribute of winners is going to be agile to be able to respond an example of this agility is the Indian Space Program now many people in dia had a space program but they do they successfully put an orbit around Mars but what is most staggering is they the price they did that for India put on orbit around Mars and they were first base program to get their first orbiter to work first time they did it for 75 million dollars but that in context the film gravity cost 80 million to make so the Indians were able to get a real orbiter going around Mars for less than the cost of the film gravity and the last time the US government space program bought a orbiter they bought a driving cost 750 million so the second attribute is going to be agility and low cost ability to still take ideas from different places and assemble them and then the third attribute of the winners is how we view all this change it is very easy to say we're in a world where computers are going to be replacing our jobs we're going to see the rise of the machine you could even get further as they artificial intelligence now you can get into a world of Terminator where artificial intelligence is going to go and start trying to killing humans you get a world where you talk about all the environmental problems you talk about government deficits you go talk about a group of people that are poor on their parents etc you can paint a very pessimistic view of the world you could also take a different view of the world you could say this is a world where we'll be able to have tailored drugs to our genome that comes after cancer it's a world where we've already taken a billion people out of poverty through urbanization it's a world where you and your house are able to search anything that has ever been written and find stuff it's a world where we actually have the ability to sell to four billion consumers rather than 1 billion we think the winners are going to be the ones who actually see this as the positive world see the opportunities it's going to be disproportionately the optimists we're going to win so the three attributes of winners external focused be able to understand how the world's change and bring it into their company their family secondly agile low cost be able to do that and finally optimism to be able to realize that their opportunities being created and we should be going after them rather than to struggle to try and retain the world we used to grow up in thank I'm going to I'm going to sit over here to sort of get you into discussing mode and we'll all be will be sitting here as reminded about what I really like well two things that go together that I really like about the McKinsey Global Institute s-- work and it's that they start with the data and they turn the data into really cool charts and those of us who were always looking for cool charts to Nick I mean to take and then attribute that very small writing at the bottom the the MGI has always been a very good source for this instead but I noticed I was saying to Richard as I left I was looking for one of the reports that this book is based on as I was leaving my house and I have very few things that I have kept in hardcopy because of course we are all in our paperless studies and our I had to move all the stuff from the BBC and all this stuff and of the hand of the not very many external sort of reports and things that I had kept and thought were worthwhile having my bookshelf about a depressing number about half a dozen were McKinsey report and those of you who might have noticed in fact even my boss Jamie Dimon at JPMorgan he so much likes the McKinsey Global Institute he's decided to buy his own he's very recently created an institute which really bears quite a lot of similarity to the McKinsey Global Institute and has hired to run it someone who used to run the McKinsey Global Institute so and but just to kick off some things that I was struck me about the report when I was reading it and I had read the at least bits of some of the reports that's based on you can get into an argument about is this period really so special don't we always think that our time is special I've decided that's kind of a silly argument I mean historians can have that argument but we know we all know that there's something very special about this time it's the only time that you get to live in so I think the fact it doesn't really matter whether historians are going to say you know what it was slightly more disruptive when the electricity was coming in in the 19th century or this that the other it feels like there are a lot of things coming together and it's what we're living with we're not living in the 19th century we're not living in the 22nd century so it seems I'm quite happy with it thinking of it is the most special time that we need to handle is it very important to recognize and understand this stuff with as much data as you possibly can absolutely and I think that's what's so great about these reports I think bringing the data to bear I remember one of the earlier reports that the Institute did which is not in this book but about how could we meet the environmental challenges where you refer to it in the book of it just that just the simple fact of bringing together all the global data and thinking through global best practice and what the implications would be of just applying that best practice let alone doing any other exciting innovation how far that helped you solve the problem I think was a really useful contribution which you've now made in a lot of other areas you know you look at variation in anything whether it's health outcomes or productivity or this and you can say what would happen if we just limitate eliminated the worst of that and got everyone up to best practice how much would we gain and I think you know that is really helpful and the way that you bring together the data on productivity you know as an economist of course I never really stopped thinking about productivity at the moment it's the most important factor driving real living standards and income and you know the a paul krugman thing in the productivity is not everything but in the long run it's pretty much everything and I think one fact you didn't say it directly but you had it in some of your opening charts the idea that even if we just managed to maintain the productivity growth we've had over the last 50 years is still going to mean much slower growth for the world because of the lower labor force growth I think is a really important one for people to get their heads around and in fact when we think we're dealing with a time when productivity growth is going to be lower as well I mean the ability to make more stuff with the same number of people is going to be lower and we're also going to get less growth in the number of people just focusing people's minds on that I think is is really helpful I also thought I was really interested in the way that you brought that growth discussion into the conversation about the cost of capital now I'm sitting in the sort of asset management side of the world I'm looking in a slightly different way at this question of interest rates which of course was everyone's obsession when I was at the BBC as well if I used to have all my colleagues used to ask me people I didn't think really understood economics would come up to me and ask me very complicated things about if you do you think if the if the Chinese central bank responds unexpectedly to this that in the other will that mean that and I would think about the question for a minute and then I would ask are you about to get a new mortgage and really every question I was asked was usually because someone was facing the decision whether to get a variable or a fixed rate mortgage and they wanted to know where the rates were going to go up or not but as you say the story of the last quite a long time has been a falling rate even when we weren't expecting them to and I think almost a source of Solace for some of us maybe has been the idea that this slower growth and low interest rates would cut we're kind of going together so once we got to the higher interest rates and we had to maybe worry a bit more about the price of our house or the cost of our mortgage we would also be in a world where economy was growing faster and things would be better from that even if we were paying more for our mortgage and I what was kind of disturbing about I'm not sure I completely agree with it but what's interesting about your chapter on this is you actually pose the possibility that we could have the cost of capital go up but actually that not go with faster growth in the developed world and we might at least in the developed world and we might be then dealing with that as a real dilemma that things get worse on both things become harder to finance and we have less growth as well so I thought that was interesting of course I would say do McKinsey have all the answers you know I think luckily I think I'd say you don't so it gives something else for the rest of us to do I think there's a specific thing which maybe is a sort of tension in the report which is as I said you classic if you don't mind me saying so McKinsey report is hears lots of numbers and then here's all the variation and then here's what you can gain from getting back to best practice if the world is changing so bloomin fast I'm not sure even you know what best practice is and that met I wondered a bit about that because you were sort of citing some of the quite traditional recipes for improving productivity or improving growth which may or may not still apply in this very fast changing world so I was noticed for example buried in the small print of an IMF World Economic Outlook which I know you all queue up to get the latest IMF World Economic Outlook but they actually had some rather interesting analysis of the impact they looked at productivity looked at how growth is being affected by long-term factors or by the crisis and then they looked at how much you could improve total factor productivity so the efficiency with which you use inputs doing various things like the standard recipe for example labor market flexibility and they found that actually labor market increasing labor market flexibility didn't improve total factor productivity at all and I thought given that they've been telling and indeed the OECD and everyone else has been telling governments to do this ad nauseam for 20 years that was a major conclusion to have in box twenty five point two of chapter eight of the World Economic Outlook but they and there were other things which you also mentioned in your report which did actually did actually help increase productivity making service making the service sector more flexible actually doing things which is quite which are quite hard which irritate a lot of big companies that actually had more of an impact than these things we tend to talk about when we talk about structural reforms when we tell the Greeks to do structural reforms we telling them usually to get rid of labor market regulations make it easier to hire and fire people but the message of that research and some of this other research is that doesn't really help you very much actually you need to do more of this increasing competition and things like that so I guess that's an example where the best practice what we were told was bet practice fifteen or twenty years ago has not changed very quickly in response to the evidence and we're still sort of piling out these prescriptions saying do this do that and actually we don't know necessarily whether it worked I mean for me you know I'm not going to say a lot more about this but I think on again on this question of productivity the experience of the last few years has thrown up a real conundrum about how do you best maximize your growth over the long term how do you preserve your human capital and your productivity you know the US and the UK on paper both very flexible labor markets they did all the same labor mark well the US was always quite flexible but we had all of our reforms all the things that now Greece is being told to do we did in the 80s and 90s that seems to have in response to a similar shock flexibility in the u.s. meant loads of people got fired in fact more than you would expect given the fall in the economy flexibility in the UK actually meant real wages fell and we had continued actually very strong employment growth over the course of this cycle much stronger than we expected what's happened then is we've had a lot more people employed we haven't been producing that much stuff our productivity is tanked so we've done a poorly on your productivity measure but we've kept all these people in work and it is that possibly better in the long term for our growth than our productivity that we've kept people and work and if it is better what does that say about what companies should be doing and what government should be doing it's it's some kinds of flexibility but not other kinds of flexibility so I think it's it's those kind of things you know in a way as I said it's reassuring that you don't have the answers but I think we also have to be what we have to be careful ourselves about thinking we know what best practice is and what the what long-term improvement in productivity means when you could actually have short you could be damaging productivity short term but benefiting the long-term I only other thing I said I mean in terms of what I would like to have more on I guess I'd like to have a bit more on some of the conflicts and tensions between your prescriptions and possibly also where the where your advice to companies might be at odds with what you would tell governments I was struck reading it you had an example of best practice or innovative practice that amazon has manages it's working capital very well partly by taking money from customers instantly but not paying suppliers for a month and you said if all the top 10 US retailers applied this practice they would win I think they'd save one hundred and fifty billion dollars in working capital and I sort think well yes but that 150 billion is going to come from someone oh yes it's going to come from those small suppliers and how should I feel about that if we want to be encouraging the small supplier so I some of that I'd like bit more I think more positive as you had a suggestion of the positive ways that governments that it's not just about cutting costs of government but actually enabling some of this innovation and I feel like again we're not very good at talking about that we're very good at pointing out how governments could save money but not necessarily so good on the sort of positive and actually if you're reforming government with a goal of improving growth and improving productivity maybe that's a bit easier than just telling people you're doing it because we haven't got enough money anymore and we need to cut costs and finally I thought maybe if you're talking about the major trends in the world to have only three pay if you look up inequality I think it's pages 186 to nine three pages seemed like not very much any dots seemed you don't have the answers to that so I get anxiety on that tack you've done you've done all of this you know you've summarized all the major trends affecting our world but what have you done for us lately I guess would be my company quality is out of the way comeback right gonna solve inequality good well that's okay then but I do I mean I think as always starting with the data is a great place and that's what I particularly like about this okay thank you all three for your sides have our to respond to Stephanie first for a few minutes and then we open the floor to questions or go ahead with a public okay so please tell us your name and affiliation and then the stever's will get to you the microphone so let's start on the back yeah yep hi so my name is Jake Sumner and I just wanted to get your view on what you see is the importance of the type of country and and say democratic regime or not otherwise of driving some of these changes and also of the nature of the company which you've tended to view is quite a Western view of a company as opposed to say state-owned enterprises in China which have a different ownership structure and similarly you know China's not a democratic country and so the large cities and all of that as a growth and all the rest of it has been done with and different political structures which lead to different economic structures or directions and similarly in those type of actors in that which are the state-owned enterprises yeah we'll take two more questions and then we have a return Jonathan replied yeah back back yet hi my name is Lola um I'm a master's student here my question really is about international institutions so I'm wondering what role do you think international institutions are going to play in either facilitating this destruction disruption or hindering it so whether that's the WTO or any other organizations that's being formed in the East a final question from the back yet hello I'm guys Vincent a documentary and a very very decayed economist um I earlier in your presentation the McKinsey presentation talked about urban growth as a cause of increasing prosperity I wonder if that's correct you said not a sufficient you implying I think not a sufficient cause but a necessary cause and you found just wonder if it couldn't be more of a symptom in that people tend to like urban life and related to that in your presentation today and I know I'm trying to be optimistic because that's the way to be a leader and I appreciate that however there's no mention of the limitations of the planet you know we all know all heard about at least climate change and the huge growth in population which we all accept really does imply that we might come up against agricultural limitations and I wonder if if you're not talking about that perhaps is um connected to this interest in urban growth and just trying to link that in a haphazard way to Stephanie's last point about I think you're encouraging or think she's saying you're really encouraging companies to play a zero-sum game with late late payment and early charging um I are you a bit blind when it comes to the quasi zero-sum game which a limited planet as particular agricultural resources it tends to imply ok so I'm going to have a go and then Jonathan's going to have a go at some of these um first of all that this environmental thing we have more in the report and I talked about and there was limited time um I think it is a huge concern it's not actually the nup growth in the number of people that is the big factor is the growth of consuming class the fact is you can add a billion people if they're living in subsistence farming you know actually the footprint is small if you take someone from a subsistence farming to living in the city they're going to eat meat three times a week rather than just rice and that's the challenge so I think there is a huge challenge there's a challenge on food water and particularly when we put the the impact of climate change on top we find that the water availability becomes a huge challenge and a lot of areas that we're agriculturally ok suddenly not but you know unless we have new irrigation schemes is an issue so I agree with a dish now that's the bad news part of the story the good news is that there's a huge productivity opportunity particularly the agricultural sector around over 30 percent of the food that gets picked fails to make it to the shop because it's just the supply chains are not there when we look at the ability to be more using water through micro drip irrigation etc etc when we look at our ability to be less wasteful on energy by building our buildings better so that they are they have proper insulation there's a huge prize so so we think the challenge on the the environment is going to be about making some of these investments on productivity and also renewables and you look at the some of the technology that's where technology potentially comes to bear remember that chart I started with we had a 20-fold increase in GDP during the last century but we were able to actually have commodity prices because productivity of getting resources out of the ground and to the end consumer actually went faster than our growth in GDP and I think when we add renewables when we add some of the ability to build things better and to run supply chains and modern agricultural techniques etc I think that we can actually offset this and I don't think that we're destined for a crisis on this I think the challenges whether we move fast enough early enough so you know g7 today announced they want to get rid of fossil fuels by the end of the century I mean that's great it's not moving fast enough today in terms of some of this thing and the risk is that we go through a series of very big pice price spikes and it's only by having these very big price spikes do we get the movement directors I mean there are a few others in Jogja I well yeah I mean I'm in no particular order international institutions the the post Bretton Woods institutions were established at a time when most communications was and travel was done by ship and this is reflected in their governance structures so it is quite likely that there will be reform and I think there is a quest for relevance and a part of many of them in the current paced of disruption and hastened by the emergence of new multilateral institutions endeavouring to take up the slack we there it's the Asian infrastructure investment bank note infrastructure investment not Development Bank or the BRICS bank or what have you so I think there's a general sense that the multilateral context is evolving quickly much quicker than it has for the last 50 years and we will see with that an important role to catch up and to provide the benefits that multilateral cooperation can provide whether it's capital or technology or simply help on the urbanization I I think it's an interesting question and this is what I do so I permit me for a moment I mean we I think when I look about our disruptive trends I think that these are fundamental characteristics of human beings the you know we we seem to be the species that build cities it's just a thing that we do and there is no recorded instance in human history of the urbanization on a sustained scale plague war and famine not responding it is in fact really hard to kill a city the Mayan we bombed them we dropped nuclear weapons on them we we have plagues they still come back and we the Pol Pot tried the it is a it is an interesting and ultimately perhaps unknowable question as to why we do this but it is it it seems to be a characteristics of the human race along with the urge to invent the urge to trade and the undeniable reality of Aging these are fundamental characteristics of who we are so do we we are lucky that it seems to generate wealth it seems to create value and that how does it do that well essentially it forces us to make choices over and over again rapidly and we become more resilient because of the choices we make and they're not always good choices but we see the consequences of them and I think that is how urbanization works so it's a it is net a positive story and we in fact note some very interesting facts did you know that for example as we grow older as we go heavier we of course move slower that is a biological law but if when we were in a city as the city grows bigger in fact it becomes faster walking speeds go up and that is why people in London do walk faster than people in the village it seems to be interested it's an interesting reality that cities encourage raise our metabolic rate so are there limits to this no doubt and occasionally we discover them notably when we have storms or perhaps when we when we encounter a shortage of something that is an that is a cause for concern but it's also a cause for invention and again where do we see innovation and where do we see an event invention there are clear relationships between technology and density and proximity effects so that is again perhaps you know this is a necessary part of our process of learning and development but urbanization seems to be intimately tied to the progress of the species finally we don't have I think a point of view on the merits of democracy at this point the rich are doing things I we haven't quantified that yet but there was one question just on the corporate and maybe you had a comment as well do you answer a cabin does on the corporates we are we're actually trying to do some research at the moment looking at the changing nature of corporations I think the emerging market corporation has typically two types of corporations that have I think a source of advantage over the Western one is the state-owned enterprise but is also the family controlled business and when we look at both of those you know and and I worked with a lot of families when I lived in South Korea and you would ask them what they thought their biggest source of advantage over their American competitors they would say no we as a family are here for 20 years or 50 years and we have that duration in our thinking but we're also not worrying about next quarters earnings and they really felt that was a huge advantage and you look at the returns that these businesses and prepared to make in the short term to build long-term it is quite striking in Samsung's some semiconductor business lost money for 20 years and now that the largest memory manufacturer in the world but they were read to invest on that I don't think I know many Western executives get away with that I guess in yeah no no I just I mean the problem with this of course is it you can also it's a very time specific judgment because 10 or 20 years ago you would have looked at those same companies and in fact we did you know when I was at the US Treasury one of the things we did was try and prevent South Korea from defaulting in the Asian financial crisis and there that was precisely that they've been they had this awful loss-making family companies that had been propped up by inefficient government policy and implicit guarantees and everything else so I want you know it wouldn't necessarily say it was a recipe for success that you can lose money for decades and then eventually make money we have requesters and here hi can you hear me I'm Amanda suetilley author of the agility advantage how to identify and act on opportunities in a fast changing world I'm really interested in your third point here about optimism the first two points seem obvious enough but optimism is a really interesting choice for your third recommendation so I'm interested in why you picked it and if you've had put any thought into how to be optimistic besides just saying wow everything's changing so fast somehow I'm going to take advantage of this are there any other interesting concepts that you come up with around optimism you have a question here live in the middle seventh row huh I'm David wood from London futurists wanted to ask you about a trend which I thought would be present but you seemed not to be looking much of it which is the trend of technological unemployment after all you do look to what may happen to the workforce and what may happen to productivity and you're basically assuming that the most people will still have jobs provided the fit and healthy enough for us there seems to be many projections that as robots say have better compute computer vision as they have better data analysis they can increasingly do many many more jobs than have done presently so isn't this actually a bigger trend and it might have a big impact on productivity as well because robots could be much more productive than we humans but then there's a big question well what are we all going to do and how we are going to be paid if we don't have a work a second row here if I got the Swazi in it um I I like how he described the four disruptions but I'd be interested in your predictions on the next big disruption what do you see as I know it's a tricky one you look into your crystal ball and tell me what what is the next one to expect Thanks what one example on the optimism thing um a lot of corporations sit there and they have for the potential to new launch new business and they sit there and say well we don't want to launch that new business because it's going to cannibalize our existing business I think that that is the the myth of cannibalization is probably destroyed more value than back to any other thing corporate world because what then happens is the corporation doesn't launch the new product their competitor does in that business goes through so I think you know if we talk about optimism it's actually the the mindset at the corporate level of I could actually succeed it something new I think that would be the the bit that I would encourage and for management teams those are management teams here stop having the good discussion of cannibalization because if you don't do it someone else is going to do it in terms of that I think this issue on technology unemployment is very real but it's not you the monks that used to write the Bibles out by hand had their jobs disappeared because of the printing press the typing pools that any of you went into an office 30 or 40 years ago used to exist or any of you too young to that see on Mad Men whatever you can see those typing pools those didn't exist days don't exist now there aren't a lot of unemployed monks around in the world saying you know where there aren't a lot of unemployed typists they have got redeployed so you know we have successfully done that so there is a chance that we can do that I think the risk is that it's going to happen into quicker pace we certainly have to do it in our lives now the difference is the monks who will replace the next generation of monks were trained up to do something else what sell pardons or whatever they went on to do you know they have those different versions of what they were doing so they were able to do something different we have to do this in our life and that is a challenge and part of that is how we teach people on agility to be able to be redeployed in terms of doing that and there is you know always the scenario that we may be able to take a bit more leisure and actually we've already done that if you look at working hours those have been in decline we are taking a bit more leisure because technology is replacing some of the jobs so you know the question is can we get people redeployed into activities that require people and obviously you know the demographics help because we actually have fewer workers so we that may help in the situation the question is whether we can see that all come together and I actually wanted to build on something that Stephanie had said before which actually I found quite interesting this why must productivity be lower I actually see we see the reverse when we looked at the growth and productivity that there is far more potential for productivity than we have taken advantage of and it's in most of that simply comes by yes catching up so helping the Chinese auto industry consolidate that much faster to become more productive so that the opportunity is there but what it implies is a rate of change perhaps double than what we've had before so a rate of technological unemployment perhaps higher double what we've had before so there is a question of does the center hold and that that may be the issue sort of I how do we get comfortable as an urban world with this higher and more more faster rate of productivity which is and a question do we want it maybe we should be better off with a lower rate of growth and where the consequences that are in our benefits I think that is a question of governance and a conversation but you know why be an optimist well because there doesn't seem to be much point in being anything else I believe that was Winston so I I think there is a there is an opportunity here and is it more more about how we as collection of societies and individuals choose to take advantage of it wearing bearing in mind the important questions of unemployment and to that point yes clearly people are talking about negative income taxes as ways of offsetting some of the issues related to technological employment structural changes negative interest rate funds so now there there's there there is going to be a longer conversation about that and as to the next disruption as I said well the ìiî ìiî don't we will come back to you on that we'd love to have your ideas actually what you see from from the global perspective we have time to for three more show questions so what here well when they're in the back and one at the top again hello my name is Johnny from Royal College of Arts service design and thank you for sharing the inside the recommendation gave us at the end of the presentation seems very similar to the discussion around design and design thinking I just wondering and we have seen various impact front design on private sector and public sector ie policymaking and government transformation and very interesting to hear some of your views on design and its impact on organization and its transformation thank you Banbury I work at the International Institute for Strategic Studies it seems to me there's a dark side to each of these individually and in aggregate for example urbanization and increased connectivity enables the have-nots to see much more what the halves are urbanization can produce places like Harrogate Cheltenham or Vancouver it can also produce places like Karachi and Kabul and you seem to ignore geopolitics a particularly resource competition I mean take the South China Sea enormous friction there which isn't unconnected to the fact a million people make their living millions more depend on its products and competing energy prospecting the last question in the work hi my name is Christine and I'm a former Elysee student not the Bank of England my question is about inequality because at the LSE recently the new international inequalities Institute was opened and there's been Stiglitz Atkinson and Piketty here last couple weeks to talk about why inequality is such a disruptive force or will be such a disruptive force and maybe it's because your book and the presentation is geared towards a certain audience first or for a certain purpose but I would like to know why you don't see this as a force that could kind of even have either an intermediary or a competing effect on these four forces that you mentioned shall I start with the inequality um first of all I did put a chart up there that showed rising inequality for the male us worker as an illustration you know technology had meant that skilled worker got an increasing salary the the unskilled were being replaced by trade labor the late migration and and technology replacing it so I completely agree this is an issue however globally inequality isn't going up think about it inequality actually is falling globally because we're taking a billion people out of poverty within a country inequalities going up but globally we are actually seeing falling inequality but I think we actually an even bigger issue and we're trying to do some work on this at the moment and you know we'd love you anyone as here's come and help us on this that's this issue about in some ways inequality matters a bit but there is something that we think is going to be much more politically challenging and that's intergenerational inequality if I'm ten percent better and someone in Canary Wharf is thirty percent better yeah I'm really be relatively happy you know if I'm temperature better in my parents generation and someone else is thirty percent but I'm going to mind it a lot less you obviously don't work in Canary water but if you're in a situation where a generation is going to be worse off than the previous generation we're going to have a real problem and the trouble is we are now getting to the point where that's beginning to happen up to now you've been able to tell everyone now the system works for you the system works the system being immigration Brussels trade globalization because you're getting everyone is getting better Austin's do island world the problem is we're now reaching a point where that's no longer the case and there's a group of people and depending on your labor structural labor market it may be the old older people in the countries like you get it may be the young in countries like France and Germany France and Italy and that group is then going to say we're no longer better off than the previous generation and I think that's the inequality problem we really need to be focusing on and how we address that and that's what we're trying to size at the moment we built a database but Stephanie's point about data we have two thousand segments and we're looking at how those segments have gone up and down over time and we're trying to understand which of the segments been really at risk of growing up worse off and what are the measures required to actually address that micro level but I agree it is it's a major consequence I think is actually inequality the fallen inequality and the rise in inequality actually the result of these poor disruptions yes I certainly so I think that's exactly right that this is a outcome and it's an outcome in some ways I think that links maybe do the question around design good design is more important than ever and designed by good design design that incorporates externalities be they environmental or social or economic and an externality simply put as a consequence that was not intended a negative one so if we are encouraging making economic decisions based on an incomplete understanding of the consequences we are going to wear that we're those consequences and I think you're fair to point out this issue around the receivables manage supplier management that would be an example of a decision made in a system which is not recognizing that externality and will ultimately wear it in the form of declining health in those communities so good design is really important when systems are at the point of change and we see systems changing faster and faster so design is that much more important and thinking that through it's a great task and an obligation and opportunity all we're glad I'm doing this at LSE today and I do hope that this is incorporated in the curriculum the the urban geopolitics one would be again I think kind of linked to that is that's the outcome of bad design there's a design of dispute resolution mechanisms which have simply outlived their usefulness again the post Bretton Woods institutions are due for a do for a long overdue rehaul and sort of ways of thinking about how to establish this communication and this better set of partnerships so we'll see if that doesn't happen then we will have disruption we will have disruption within our cities within our countries and within our within our regions and of course that is not a view of the world that any of us would be better off in imagine a world with a bad us-china relationship imagine a world that there where there is actual harm in that relationship that's not a good world we need to find a way of avoiding that and making it a better world just what other thoughts on this geopolitics point am i I'm not sure geopolitics is necessarily going up I mean remember we have the Cuban Missile Crisis we had a period maybe of less geopolitics you know we've been throwing geopolitical shocks of the world the difference now is because we're so interconnected we see the impact more of them and I think that there is a substantial risk of this but I think we could also end up in a mutually assured destruction world of geopolitics as an example you know people are pissed off that the Russians have done something Ukraine so we put sanctions on but we haven't done real sanctions real sanctions would be switching off the Swift system for the Russians so their banking system no longer works you know it would be stopping buying Russian gas you know we've done level three sanctions because we're in a mutually assured destruction world that if we switched off Swift suddenly a hacker would take down the u.s. power system and that Americans they want that to happen and so we're in a world where we get end up with that so I think there is a at least a chance because of this connectivity we can find a way of dealing with the geopolitics that the connectivity can spread the impact of geopolitics so a small geopolitical shock shock or or a natural disaster to actually becomes a much bigger effect but they can also provide a a way of even near out producing this mutually assured destruction world in terms of some of that and the question is whether we're going to end up in that world or whether we're going to end up in the the dark world you talked about I can't help just from the way you've just described it of course makes me think of the grand illusion I mean the book that was written in 1913 that settings made exactly that argument that we couldn't possibly have another war because we were all so interconnected so of course we made a real thing I mean I do think it's interesting the way that political economy is sort of creeping into lots of different bits of this conversation you know and I mentioned I thought we needed more on inequality and it was mentioned again I mean I I often spout will make the point about into overall global equality going down it going up even as we've had rising inequality within countries and I actually put that to Joe Stiglitz in the self-similar events at what wouldn't we still look back on this as a period of falling inequality and he made he just made the point well that's true but we don't live in the world we live in countries and within every country whether it's India or Britain or America inequality has been going up and if we think some of the economic costs of inequality are actually costs that come from the proximity from within country inequality and we don't really comfort ourselves very much the knowledge that they're now lot fewer poor people in China then these issues are quite important and I'm not sure I would even comfort myself if it is comfort that it's generational inequality rather than something that sounds a bit more Marxist and a bit more classroom because we know how the generational you know any quality can be generational in another sense in the sense that it's passed down you know older older people these baby boomers are actually not very good at making sure they have no money when they die so they will tend to pass it on to the next generation and those students that look very poor actually some of them will turn out to be not very poor because they'll inherit a house and you know all those there so I think and it makes a huge difference to whether you can pass some of these whether you can do these difficult things to get your productivity growth you mentioned in the book that most of the gains most of the productivity growth has gone to the highest skilled and the higher income people as long as that continues to be the case if the if the higher income people are capturing the gains of productivity growth you're not going to be able to persuade everyone else to do all this stuff so I think that you know the political economy ends I being at the heart of it I sound like Piketty I didn't expect to sound like he still needs a lesson in good data from you that's only up but I do it I do agree with the optimism and what was it that the other the other great phrase on this is that we have to be optimistic because pessimism is for easier times under note let me thank Richard Jonathan and Stephanie for a fascinating talk you

Channel: LSE

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Keywords: LSE, London School of Economics and Political Science, London School of Economics, University, College

Id: hp0IRAW8xL4

Length: 83min 44sec (5024 seconds)

Published: Tue Jun 09 2015