Latest / Trumponomics / Driving the New Economy

Transcript

Driving the New Economy · Trumponomics

• 0:04
  Speaker 1: Hello, and welcome to Stephanomics, the podcast that brings the
• 0:07
  Speaker 1: global economy to you. And this week we're in China
• 0:14
  Speaker 1: for the Bloomberg New Economy Forum in an enormous conference
• 0:18
  Speaker 1: complex at Yankee Lake, which is about an hour northeast
• 0:22
  Speaker 1: of Beijing. It is truly vast. Took me ten minutes
• 0:26
  Speaker 1: to walk to breakfast this morning. When I got there,
• 0:28
  Speaker 1: I found myself battling for space at the breakfast buffet
• 0:31
  Speaker 1: with the chief executive of Goldman Sachs and the former
• 0:34
  Speaker 1: head of Google, Eric Schmidt. That was just breakfast. The
• 0:38
  Speaker 1: place is teeming with business leaders and global thinkers, along
• 0:42
  Speaker 1: with quite a large number of Chinese officials. To stimulate debate,
• 0:47
  Speaker 1: we at Bloomberg Economics produced a book of original research
• 0:50
  Speaker 1: on the global economy, including the Bloomberg Drivers and Disruptors Index,
• 0:55
  Speaker 1: working out which countries are going to succeed in the
• 0:58
  Speaker 1: new era for the global economy. In a minute, you'll
• 1:01
  Speaker 1: hear a lively session I hosted here talking about that
• 1:04
  Speaker 1: index and the research that went into it. But first
• 1:07
  Speaker 1: a chat with one of the many, many interesting people here,
• 1:11
  Speaker 1: Lord Nicolas Stern, an economist now and many years at
• 1:15
  Speaker 1: the London School of Economics, who was the head of
• 1:19
  Speaker 1: the Government Economic Service in the UK back in two
• 1:21
  Speaker 1: thousand and six, when he chaired what continues to be
• 1:25
  Speaker 1: a landmark review of the economics of climate change, the
• 1:29
  Speaker 1: Stern Review. Lord Nicolas Stern, it's great to see you.
• 1:35
  Speaker 1: I'm struck at this conference and lots of other things
• 1:39
  Speaker 1: I go to. Now it's a very different debate about
• 1:43
  Speaker 1: climate change than even a few years ago, let alone
• 1:48
  Speaker 1: when you were chairing the Stern Review, which came out
• 1:51
  Speaker 1: in two thousand and six. So and you're sitting here.
• 1:55
  Speaker 1: You've obviously remained involved in this debate. But if you
• 1:59
  Speaker 1: just sort of the perspective between now and then, would
• 2:03
  Speaker 1: you say things have genuinely got better in terms of
• 2:05
  Speaker 1: people's unders realistic understanding of what needs to be done
• 2:09
  Speaker 1: to combat climate change or is it just louder. Something
• 2:13
  Speaker 1: has got better, some things have got worse. Um, the
• 2:16
  Speaker 1: science has got worse in the sense that it's still
• 2:20
  Speaker 1: more worrying now, partly because things are coming through faster
• 2:24
  Speaker 1: than we thought, more severely than we thought, but also
• 2:27
  Speaker 1: that emissions have gone on rising, temperature has gone on rising,
• 2:33
  Speaker 1: so that's more worrying. The understanding of these issues. I
• 2:37
  Speaker 1: think is genuinely greater than it was before thirteen years
• 2:43
  Speaker 1: ago when the Stern Review came out. I doubt if
• 2:45
  Speaker 1: climate change was taught very much at schools and now
• 2:49
  Speaker 1: right across Europe, and I guess in many parts United
• 2:52
  Speaker 1: States and India and China it is taught at schools.
• 2:56
  Speaker 1: Greater Tunberg now sixteen say she started learning about climate
• 3:00
  Speaker 1: change at eight? Where from in school? So I'm university professor.
• 3:05
  Speaker 1: The students coming through have all seen the subject of
• 3:11
  Speaker 1: climate change discussed for several years of their education and
• 3:15
  Speaker 1: their formative years, and they're putting pressure on the rest
• 3:19
  Speaker 1: of us now. And there's some people who were a
• 3:21
  Speaker 1: bit skeptical thirteen years ago who thought it was the
• 3:26
  Speaker 1: best marginal Larry Summers, Bill Gates been. I remember I
• 3:35
  Speaker 1: spoke to Bill Gates in two thousand and six, two
• 3:38
  Speaker 1: thousand and seven, just after it come out, and he
• 3:41
  Speaker 1: thought it was in some sense a diversion from the
• 3:44
  Speaker 1: really big problem of poverty reduction. And it is absolutely
• 3:48
  Speaker 1: a big problem poverty reduction. But we're seeing that climate
• 3:52
  Speaker 1: change is a great destroyer of livelihoods, and that there
• 3:56
  Speaker 1: are different ways of doing things which are becoming increasingly attractive.
• 4:02
  Speaker 1: Restoring degraded land captures carbon in the soil, increases productivity,
• 4:09
  Speaker 1: makes you more resilient against difficult weather. So I think
• 4:13
  Speaker 1: that relationship between poverty reduction climate change is seen rather
• 4:19
  Speaker 1: positively now, where perhaps a dozen years or so ago,
• 4:23
  Speaker 1: good people who were interested in reducing poverty thought, oh goodness,
• 4:26
  Speaker 1: this is an environmental diversion from our real task that
• 4:30
  Speaker 1: I think has gone down enormously, and you pushed back.
• 4:33
  Speaker 1: Actually in the session we were just in, that was
• 4:35
  Speaker 1: quite a long session on climate change, and then there
• 4:37
  Speaker 1: was a conversation with Bill Gates. But in that earlier
• 4:40
  Speaker 1: session you pushed back on the implicit assumption of many
• 4:44
  Speaker 1: of the speakers that there was there continue to be
• 4:47
  Speaker 1: this trade off between economic growth and combating climate change.
• 4:53
  Speaker 1: How is it that people are misunderstanding that, because at
• 4:55
  Speaker 1: some level there is there can be a tradeoff. If
• 4:59
  Speaker 1: you think of the carbon content of human activity as
• 5:05
  Speaker 1: being in a fixed relation to the outputs of output
• 5:07
  Speaker 1: goes up by ten percent carbon emissions go up by
• 5:10
  Speaker 1: ten percent, then there actually there is a trade off.
• 5:13
  Speaker 1: But of course the whole point of this is to
• 5:16
  Speaker 1: dradic radically drive down the carbon content of what we
• 5:20
  Speaker 1: do now. As you do that, it comes with innovation, discovery, investment,
• 5:28
  Speaker 1: and growth. It drives down air pollution and water pollution,
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  Speaker 1: and that gives you cities where you can move and
• 5:33
  Speaker 1: breathe and be much more productive and much more cheerful
• 5:37
  Speaker 1: actually too. It um protects the natural capital and natural capital,
• 5:43
  Speaker 1: you know, our forests and our oceans and our water,
• 5:47
  Speaker 1: which are key parts of our productivity as human beings,
• 5:50
  Speaker 1: are health as human beings, happiness as human beings. So
• 5:54
  Speaker 1: if you see that process of driving down carbon in
• 5:59
  Speaker 1: relations into output as being creative and innovative in this way,
• 6:04
  Speaker 1: as bringing all kinds of benefits around health and so on,
• 6:08
  Speaker 1: which are good for productivity, then you see that actually
• 6:11
  Speaker 1: investing strongly in driving emissions down to zero is the
• 6:16
  Speaker 1: growth story the twenty one century. Well, it's interesting when
• 6:19
  Speaker 1: you talk about growth because we have lots of conversations
• 6:22
  Speaker 1: on this podcast about the state of the global economy
• 6:25
  Speaker 1: and particularly worries about slow down in the global recovery
• 6:29
  Speaker 1: leading to another recession, which policymakers won't have enough tools
• 6:34
  Speaker 1: to confront because we know we've sort of got closer
• 6:36
  Speaker 1: to maxing out MONETROSSI and A constant theme which has
• 6:40
  Speaker 1: also come up at this event is that governments are
• 6:42
  Speaker 1: going to have to lean more on fiscal policy. It
• 6:45
  Speaker 1: strikes me that a lot of ministers policymakers across Europe
• 6:51
  Speaker 1: who hear the demonstrators out in the streets talking about
• 6:55
  Speaker 1: the environment and can see the need for fiscal stimulus,
• 6:59
  Speaker 1: will now be looking for ways of having fiscal stimulus
• 7:03
  Speaker 1: that's also going to get you closer to that decarbonization.
• 7:06
  Speaker 1: Is that is that going to be Is that too
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  Speaker 1: good to be true? Or do you think there are
• 7:10
  Speaker 1: some genuine win wins there. It's an argument which we
• 7:13
  Speaker 1: have to make, and yes, I do think there's some
• 7:15
  Speaker 1: genuine win wins there. The world is demand deficient, interest
• 7:22
  Speaker 1: rates on the floor, we have wonderful investment possibilities, we
• 7:27
  Speaker 1: have loads of saving. So what we have to do
• 7:30
  Speaker 1: is to have economic policies which draws through the investments.
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  Speaker 1: That means good policies in relation to carbon investing in
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  Speaker 1: R and D, stable institutions and so on that will
• 7:42
  Speaker 1: draw through the investment. And we have to organize our
• 7:45
  Speaker 1: finances that we have the right kind of finance in
• 7:48
  Speaker 1: the right place, on the right scale, at the right time.
• 7:52
  Speaker 1: And we can do that, and we can see how
• 7:55
  Speaker 1: to make both things happen, and that will give you
• 7:58
  Speaker 1: an increase in invest men, very good kind of investment,
• 8:02
  Speaker 1: and the savings will come in the finance that investment.
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  Speaker 1: And it's a wonderful story of investment for growth, investment
• 8:10
  Speaker 1: for increasing demand, a Schumpeterian story, the rate economic his story,
• 8:15
  Speaker 1: and of innovation and discovery. It is a story which
• 8:18
  Speaker 1: increases demand, accelerates the rate of technical progress, and is
• 8:23
  Speaker 1: sustainable because it's a structure that doesn't turn in on
• 8:27
  Speaker 1: itself and destroy its environment like a high carbon growth
• 8:30
  Speaker 1: story would. So this is actually in our hands, and
• 8:34
  Speaker 1: it would be overwhelmingly negligent if we didn't take that
• 8:39
  Speaker 1: opportunity now. And I think that's increasingly seen And okay,
• 8:43
  Speaker 1: so what if I put another layer on this. You're
• 8:45
  Speaker 1: a policymaker who thinks, yes, I want to have more spending,
• 8:51
  Speaker 1: I want to do it in a way that helps
• 8:52
  Speaker 1: de carbonize. Oh and by the way, there's also a
• 8:55
  Speaker 1: lot of concern around rising inequality. So I have to
• 8:58
  Speaker 1: make sure that those investments have a progressive effect as well,
• 9:01
  Speaker 1: that they don't damage the poor the way lots relatively speaking,
• 9:05
  Speaker 1: the way lots of innovation and lots of other forms
• 9:08
  Speaker 1: of economic growth have in the last few years. Can
• 9:11
  Speaker 1: you give them that as well? Can you give them
• 9:12
  Speaker 1: a progressive, a pro poor way of supporting the environment.
• 9:19
  Speaker 1: We absolutely can, but it means we have to run
• 9:21
  Speaker 1: out of policies much better than they've been done in
• 9:24
  Speaker 1: the past. But we can see how to do that.
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  Speaker 1: Part of the story. Suppose you have a carbon price.
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  Speaker 1: In other words, you stop letting people to do very
• 9:33
  Speaker 1: damaging things for nothing, so you abolish the subsidy associated
• 9:36
  Speaker 1: with that, another way of looking at it. But you
• 9:38
  Speaker 1: have the carbon price and you have revenues. So what
• 9:41
  Speaker 1: do you do with those revenues. Well, one thing that
• 9:44
  Speaker 1: you should do is make sure that the poorer people
• 9:47
  Speaker 1: in the population are protected, and you can actually make
• 9:50
  Speaker 1: them better off. So if you return some of that
• 9:54
  Speaker 1: money to the population, but make sure more goes to
• 9:57
  Speaker 1: the poorer population and they are actually better off as
• 9:59
  Speaker 1: a result. But you have to do it, and you
• 10:01
  Speaker 1: have to do it consciously. Secondly, we're talking about a
• 10:07
  Speaker 1: restructuring of our industries. We're going driving down to zero
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  Speaker 1: carbon everywhere in the next thirty or forty years, and
• 10:16
  Speaker 1: that means that you do things very differently. Some things
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  Speaker 1: you stop doing, you stop coal mining, and these are
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  Speaker 1: the people who are specialized in making pistons for cars.
• 10:26
  Speaker 1: The car makers might employ the same people, but the
• 10:28
  Speaker 1: people who supply them with bistons would be having to
• 10:31
  Speaker 1: switch to other things. These are dislocations. This is radical
• 10:35
  Speaker 1: change and we've been really bad in the past. If
• 10:38
  Speaker 1: you think of the northern towns in the UK applies
• 10:41
  Speaker 1: to other countries too. But if you think of the
• 10:42
  Speaker 1: northern towns in the UK, movement from manufacturing to services,
• 10:46
  Speaker 1: that's what happens as people's incomes go up and they
• 10:48
  Speaker 1: go out to eat and they go on holidays. If
• 10:50
  Speaker 1: you look at labor saving technical progress, that's been fast
• 10:53
  Speaker 1: and it's going to be fast in the future with
• 10:56
  Speaker 1: a I and robotics and so on. If you think
• 11:00
  Speaker 1: of globalization and the changing international division of labor, three
• 11:05
  Speaker 1: trends which they'll have their ups and downs, but they'll continue.
• 11:09
  Speaker 1: And then you whack them with a global financial crisis
• 11:11
  Speaker 1: on top of all that, and you get dislocation which
• 11:15
  Speaker 1: is very geographically focused. And we have to take that
• 11:19
  Speaker 1: on directly. And it's not just from climate policies. It's
• 11:23
  Speaker 1: actually probably bigger from other kinds of things are there
• 11:26
  Speaker 1: happening as well. I am fascinated by what you think
• 11:30
  Speaker 1: when you look at the US presidential campaign as as
• 11:34
  Speaker 1: a serious economist who has also done all this serious
• 11:37
  Speaker 1: thinking around climate change. On the one hand, you have
• 11:40
  Speaker 1: almost a familiar site, although surprising in some ways, but
• 11:44
  Speaker 1: you have an administration that's kind of in denial about
• 11:46
  Speaker 1: climate change. But on the other side, you now have
• 11:49
  Speaker 1: a Democratic Party in Democratic candidates who are gathering behind
• 11:55
  Speaker 1: really very dramatic efforts to combat climate change that could
• 11:59
  Speaker 1: involve of destroying eliminating a large chunk of the U
• 12:04
  Speaker 1: S energy business almost overnight in the case of Elizabeth Warren.
• 12:08
  Speaker 1: When you see that, on the one hand, you've got
• 12:10
  Speaker 1: more serious proposals by leading presidential candidates than ever before,
• 12:14
  Speaker 1: certainly more radical ones, but um possibly a worry that
• 12:19
  Speaker 1: they are not realistic in what you can actually achieve
• 12:22
  Speaker 1: in a five year or ten year time frame. What
• 12:25
  Speaker 1: do you think. I think you can put in place
• 12:27
  Speaker 1: strong policies, and if you have strong policies that people
• 12:30
  Speaker 1: believe will continue, then investment comes behind those policies. So
• 12:36
  Speaker 1: I think good policies which people find credible over the
• 12:40
  Speaker 1: medium term, would inly would lead to important investment booms,
• 12:44
  Speaker 1: and that would lead to rising demand and stronger growth,
• 12:48
  Speaker 1: and it would be highly productive growth because a lot
• 12:49
  Speaker 1: of that sufficiency. But it would also, and this is
• 12:52
  Speaker 1: what we're discussing just now, it was also carry with
• 12:55
  Speaker 1: it dislocation. So your policies have to be not simply
• 13:00
  Speaker 1: bringing through this very attractive, highly productive, cleaner investment, but
• 13:05
  Speaker 1: at the same time they would have to be explicitly
• 13:08
  Speaker 1: oriented of our managing dislocation. And if you have one
• 13:12
  Speaker 1: without the other, well then you risk having neither. Well,
• 13:16
  Speaker 1: that's so, and that presumably is your concern when you
• 13:18
  Speaker 1: look at some of these more extreme proposals, if they're
• 13:22
  Speaker 1: not well thought. Through the Green New Deal, which has
• 13:24
  Speaker 1: a very short time frame on it, is there a
• 13:27
  Speaker 1: risk of a backlash if you try and do too fast.
• 13:30
  Speaker 1: Suppose you tried to go zero carbon by twenty ten
• 13:34
  Speaker 1: years from now. Would all the internal combustion cars be
• 13:38
  Speaker 1: off the road? Ten years from now, would all the
• 13:42
  Speaker 1: gas fired boilers be out? I think about eight million
• 13:45
  Speaker 1: of them in the UK. I don't know how many
• 13:47
  Speaker 1: there are in the US. Would all those be out
• 13:50
  Speaker 1: in ten years. I think it's hard, and thank you
• 13:54
  Speaker 1: very much, very good. Well, I'm delighted to have found
• 14:06
  Speaker 1: another eminent person in the corridors here at the New
• 14:09
  Speaker 1: Economy Forum. Ju Min, former Deputy Managing Director of the
• 14:14
  Speaker 1: IMF and former Deputy governor of the Chinese Central Bank,
• 14:18
  Speaker 1: now running a Sinkhwai University's National Institute of Financial Research.
• 14:22
  Speaker 1: I should say, we're hoping that this is going to
• 14:23
  Speaker 1: be quiet. That we've just found a corner of this
• 14:26
  Speaker 1: conference room, so it might not be quite the same
• 14:29
  Speaker 1: broadcast quality that we used to doctors. You you have
• 14:33
  Speaker 1: been and I have known you over the years observing
• 14:35
  Speaker 1: the international system, both from the I m F and
• 14:38
  Speaker 1: before that at the People's Bank of China. I spoke
• 14:42
  Speaker 1: to the chief economist of the World Bank a few
• 14:45
  Speaker 1: a couple of months ago, Penny Goldberg, who was a
• 14:49
  Speaker 1: great trade economist. She says she's changed her view recently.
• 14:52
  Speaker 1: She thought that this move away from globalization was temporary.
• 14:57
  Speaker 1: Now she's not so sure. Maybe we will we have
• 14:59
  Speaker 1: seen the peak period for global integration. What do you
• 15:03
  Speaker 1: think the globalization will continue? This is driven by the
• 15:09
  Speaker 1: human nature, driven by the product productivity and growth and
• 15:14
  Speaker 1: efficiency on the Yes. Currently, we saw so many things
• 15:19
  Speaker 1: in the sort of on the globalizations, particularly from some
• 15:23
  Speaker 1: major economies, and but I don't think they were stop
• 15:26
  Speaker 1: the tram if you're looking for the the statistics, he
• 15:31
  Speaker 1: was in the past eighteen months after US trying to
• 15:33
  Speaker 1: trade fractions the US inport from trying to drop ten
• 15:38
  Speaker 1: percents and trying to import from US drop ten percents.
• 15:41
  Speaker 1: That's that's the results. But both countries doing quite quite okay.
• 15:47
  Speaker 1: China still have a sweep percent of trade growth, US
• 15:49
  Speaker 1: still really more. That's the same US trade deficity even
• 15:53
  Speaker 1: wider from two point nine percent of GDP to sweep
• 15:55
  Speaker 1: on two percent GDP today on So it's just say,
• 16:00
  Speaker 1: I mean the whole water still in the course. Trade
• 16:03
  Speaker 1: slowing down, have its own course now because the technology movements,
• 16:08
  Speaker 1: because the service trading become more important than it then
• 16:11
  Speaker 1: the goods trading, right, And obviously the current populism has
• 16:17
  Speaker 1: an active impact on the globalition, but fundamentally I don't
• 16:21
  Speaker 1: think they would change because you know, sweet quart of
• 16:24
  Speaker 1: people living in the emerging market and income countries looking
• 16:27
  Speaker 1: for the better good life, and the people in the
• 16:29
  Speaker 1: rich country looking for a good quality and low prices
• 16:32
  Speaker 1: products as well, and the product surprise chair and become
• 16:36
  Speaker 1: longer with the technology, and I will see you will
• 16:40
  Speaker 1: see more labor divisions and in all these sections, um
• 16:45
  Speaker 1: So in their sense, I think that that's the the
• 16:48
  Speaker 1: bit tranpitway for the whole war, and we're just in
• 16:53
  Speaker 1: this very short term periods for the bumping periors. I
• 16:58
  Speaker 1: guess one of the ways, and I've heard do you
• 17:00
  Speaker 1: say that on one of the panels yesterday, is very
• 17:03
  Speaker 1: interesting to point out that traders continue to grow and
• 17:06
  Speaker 1: actually we know that the the other economic policies in
• 17:09
  Speaker 1: the US at the moment, that the stimulus that came
• 17:12
  Speaker 1: from tax cuts and other things, we're naturally going to
• 17:15
  Speaker 1: increase the amount of US even as the administration was
• 17:19
  Speaker 1: trying to cut it. Yeah, that's s and I basic economics.
• 17:26
  Speaker 1: But the one thing that I think could change the game.
• 17:29
  Speaker 1: And I think it's interesting, especially from your perspective understanding
• 17:32
  Speaker 1: the banking side as you do. Um people do worry
• 17:36
  Speaker 1: about the trade war spilling into the international financial markets,
• 17:42
  Speaker 1: and we've seen, in fact, we had one of the
• 17:45
  Speaker 1: bloomberg scoops of the last few months has been the
• 17:49
  Speaker 1: news that in the administration people were talking about wanting
• 17:53
  Speaker 1: to put limits on US investors investing in China as
• 17:56
  Speaker 1: part of the trade war. Is that something that you
• 18:00
  Speaker 1: Is that something people are worried about here officials here
• 18:03
  Speaker 1: in China, And do you think it could spill into that? Right? Well,
• 18:08
  Speaker 1: we were observed the US government proposed some sort of
• 18:11
  Speaker 1: restruction on US financial in siting investing Chinese company in
• 18:15
  Speaker 1: the Chinese market, right for that, But in the real world,
• 18:18
  Speaker 1: in the past twelve months, US capital actually moved in
• 18:21
  Speaker 1: more than ever before in Chinese financial market and particularly
• 18:24
  Speaker 1: in the tex sector. It's a very interesting The Chinese
• 18:29
  Speaker 1: money moved to the US tech sector slowed down dramatically,
• 18:32
  Speaker 1: incurse specific, but US money moving into the China tax
• 18:37
  Speaker 1: actor increased quite a bit. And the US not the
• 18:42
  Speaker 1: only US that global capital moving into the Chinese financial
• 18:46
  Speaker 1: market in terms of acting market and financial market double
• 18:49
  Speaker 1: the market shares in the past turn month. Do you finally,
• 18:53
  Speaker 1: I know that you were sitting in the IMF for
• 18:56
  Speaker 1: much of the response to the global financial crisis and
• 18:59
  Speaker 1: see in how people were able to coordinate. Policymakers were
• 19:04
  Speaker 1: able to come together, For example, at the G twenty
• 19:06
  Speaker 1: meeting in two thousand and nine in London in favor
• 19:11
  Speaker 1: of fiscal stimulus at that time. Do you think there's
• 19:16
  Speaker 1: been there has really been a change in the capacity
• 19:19
  Speaker 1: for international cooperation or you know when you walk around
• 19:23
  Speaker 1: events like this, do you think actually all the same
• 19:24
  Speaker 1: people are still talking together even with some of the
• 19:28
  Speaker 1: noises coming from the US, and there's a big structure change.
• 19:32
  Speaker 1: I mean the first issues in twos age what are
• 19:36
  Speaker 1: the high risk of sector is a banking sector. It's
• 19:38
  Speaker 1: a household death sector, right because the market you know,
• 19:42
  Speaker 1: sub ground things and the banking sector there's a bat
• 19:45
  Speaker 1: after ten years the banking sectors and which is stronger
• 19:48
  Speaker 1: than the saver and the household is okay, but risk
• 19:52
  Speaker 1: shift to wear to non bank informational situes. The s
• 19:56
  Speaker 1: S Manu companies ST. Manu Company in the yet in
• 19:59
  Speaker 1: ideas it today it's almost the same size of a
• 20:03
  Speaker 1: banking section now is absolutely amazing. There was only only
• 20:07
  Speaker 1: thirty percent of banking secuting in tools on the old age.
• 20:10
  Speaker 1: So you see how fires and that the company is
• 20:13
  Speaker 1: investing in shares for people's questions and so the exposures
• 20:18
  Speaker 1: are huge, right, so non benefits, the risk is a
• 20:22
  Speaker 1: much higher higher land tools are not for sure sector.
• 20:26
  Speaker 1: The risk exposure is higher ensures on the old age,
• 20:29
  Speaker 1: you know, they have a higher desk solvent deaths risk
• 20:33
  Speaker 1: is much higher the government the condess, right, I mean
• 20:36
  Speaker 1: in tolson A, the government test is rather level, right,
• 20:39
  Speaker 1: I mean, but today that everyone at a roughly death level,
• 20:43
  Speaker 1: right GDP. So, so you're right, and we do have
• 20:48
  Speaker 1: a very different risk structure compared to the age. The
• 20:53
  Speaker 1: policy spaces rare limitings and most importantly in Tolson A,
• 20:57
  Speaker 1: the global political corporation us alms apart. So I think
• 21:04
  Speaker 1: that would be very, very difficult to the others. Let's
• 21:07
  Speaker 1: say he doesn't shoo me in. Thank you very much,
• 21:09
  Speaker 1: thank you the tap. I mentioned earlier that Bloomberg's economist
• 21:18
  Speaker 1: did some original research for the New Economy Forum, including
• 21:22
  Speaker 1: a new global Drivers and Disruptors Index, which we put
• 21:26
  Speaker 1: in a report for the delegates and published online this week.
• 21:29
  Speaker 1: Or we just had a panel session about that research,
• 21:32
  Speaker 1: featuring our own economists and outside experts. I've just got
• 21:36
  Speaker 1: time to give you a taste of it here. You're
• 21:39
  Speaker 1: gonna hear first from Bloomberg's chief economist, Tom Orlick often
• 21:42
  Speaker 1: on the podcast. He's going to be explaining the thinking
• 21:45
  Speaker 1: behind the Drivers and Disruptors index, and we then have
• 21:48
  Speaker 1: a response from the author and former chief economist of HSBC,
• 21:53
  Speaker 1: Stephen King. The main takeaway from our search is that
• 22:01
  Speaker 1: the path to development is getting narrower and harder to follow.
• 22:06
  Speaker 1: In general, low and middle income countries are less well
• 22:10
  Speaker 1: positioned to deal with the disruptive forces which are reshaping
• 22:15
  Speaker 1: the global economy. Let's just think about why that is
• 22:18
  Speaker 1: for a second um. In general, low and middle income
• 22:22
  Speaker 1: countries try and develop by exporting in a world moving
• 22:27
  Speaker 1: towards protectionism. That's getting harder to do. In general, low
• 22:33
  Speaker 1: and middle income countries either have a big factory sector
• 22:37
  Speaker 1: or they want to have a big factory sector. In
• 22:41
  Speaker 1: a world where the range of tasks that can be
• 22:45
  Speaker 1: performed cheaply and efficiently by machines is ever expanding, Having
• 22:51
  Speaker 1: a big cheap workforce isn't the advantage that it used
• 22:54
  Speaker 1: to be. In general, low and middle income countries don't
• 23:00
  Speaker 1: have very good communication infrastructure and don't have a very
• 23:03
  Speaker 1: strong services sector. So low and middle income countries are
• 23:07
  Speaker 1: not well positioned to seize the opportunity of the digital economy.
• 23:13
  Speaker 1: Many low and middle income countries are already quite hot
• 23:17
  Speaker 1: and have a large agricultural workforce, which means that they
• 23:22
  Speaker 1: face some significant risks from climate change. And many low
• 23:26
  Speaker 1: and middle income countries have high inequality, low social mobility,
• 23:33
  Speaker 1: ineffective institutions for government, and high crime rates, which in
• 23:38
  Speaker 1: various configurations mean that they will find it more difficult
• 23:43
  Speaker 1: to ignore the siren song of populism. So across automation, digitization, protectionism,
• 23:52
  Speaker 1: climate change, and populism, low and middle income countries are
• 23:56
  Speaker 1: less robust to the challenges and less well positioned to
• 24:00
  Speaker 1: seize the opportunities. And we think that means the path
• 24:05
  Speaker 1: to development is going to get harder to follow. There
• 24:08
  Speaker 1: will be less countries moving from low to middle income
• 24:11
  Speaker 1: and from middle to high income. Let me illustrate that
• 24:14
  Speaker 1: by spending a couple of minutes speaking about the case
• 24:17
  Speaker 1: of China. Um So, China scores extremely well on our
• 24:22
  Speaker 1: drivers Index. If we think about the traditional drivers of development,
• 24:27
  Speaker 1: there aren't many countries that have done it better than China.
• 24:31
  Speaker 1: China has a modern infrastructure, China hasn't a can do government.
• 24:37
  Speaker 1: China spends a huge amount of money on research and development.
• 24:41
  Speaker 1: On our Driver's Index, China ranks as the fourth best
• 24:44
  Speaker 1: economy and the best emerging market by a wide margin.
• 24:49
  Speaker 1: But when we think about those disruptive forces that are
• 24:52
  Speaker 1: reshaping the global economy, China faces some significant challenges. China
• 24:57
  Speaker 1: is significantly exposed to the risk of protect action is um.
• 25:01
  Speaker 1: China faces risks from climate change. China's relatively high degree
• 25:07
  Speaker 1: of inequality and low social mobility could pose a medium
• 25:12
  Speaker 1: term challenge to social stability. Does that mean China's development
• 25:17
  Speaker 1: story is over? Absolutely not. China's policymakers in the past
• 25:23
  Speaker 1: have proved to be extremely smart in finding solutions to
• 25:27
  Speaker 1: difficult development challenges. What it does mean is that for
• 25:32
  Speaker 1: China and other lower middle income countries, the path ahead
• 25:36
  Speaker 1: is going to be harder than the path which they've
• 25:39
  Speaker 1: just traveled. But I thought I just focused a little
• 25:49
  Speaker 1: bit on the on the populism part of the story,
• 25:52
  Speaker 1: because Tom, you were saying that one of the big
• 25:55
  Speaker 1: areas of vulnerability was the popular isn't beginning to come
• 25:57
  Speaker 1: through in lower middle income countries, And of course you can.
• 26:00
  Speaker 1: It depends on your definition of populism. P P looked at, say,
• 26:03
  Speaker 1: I know, Brazil or Argentina, or Mexico, maybe Turkey, maybe
• 26:07
  Speaker 1: the Philippines. There are a whole range of countries where
• 26:10
  Speaker 1: you might say that there are populous leaders in place
• 26:13
  Speaker 1: who are pursuing policies, that it was a little bit
• 26:16
  Speaker 1: different from what's happened in the past. But I think
• 26:18
  Speaker 1: it's also striking is that some of the countries who
• 26:20
  Speaker 1: identify as being in a stronger position overall also I
• 26:23
  Speaker 1: think are beginning to experience feelings of populism. Um. In
• 26:28
  Speaker 1: the case of the UK, admitally the political parties are
• 26:31
  Speaker 1: just as strong as they always were, but the nature
• 26:34
  Speaker 1: of those parties is different, I think from how it
• 26:36
  Speaker 1: has been in the past, that both the Conservative Party
• 26:39
  Speaker 1: and the Labor Party going into this coming general election
• 26:42
  Speaker 1: both I think much more populous than was the case
• 26:45
  Speaker 1: maybe ten twenty years ago. The same is true in
• 26:47
  Speaker 1: parts of the rest of Europe, and you think look
• 26:51
  Speaker 1: at the politics in Italy or France over the course
• 26:52
  Speaker 1: of the last few years. Maybe the incumbents have remained
• 26:55
  Speaker 1: non populous, but there's certainly underneath the sort of surface
• 26:59
  Speaker 1: bubbling away a sense of populism beginning to come through.
• 27:02
  Speaker 1: At the same as broadly true of the US. So
• 27:05
  Speaker 1: I thought what I could talk about was was the
• 27:07
  Speaker 1: idea that it's not just lower middle income countries that
• 27:12
  Speaker 1: have suffered from populism, but it is countries whereby there
• 27:16
  Speaker 1: are parts which have been left behind, where there's regional
• 27:21
  Speaker 1: imbalances that have emerged that have led to this beginning
• 27:25
  Speaker 1: of populism. And if you imagine the map of Europe
• 27:28
  Speaker 1: and break Europe down into tiny little subregions and not
• 27:31
  Speaker 1: looking at country by country comparisons, but tiny little subregion comparisons,
• 27:36
  Speaker 1: and then think about those parts of Europe that have
• 27:38
  Speaker 1: seen the biggest increases in living standards relative to everybody else,
• 27:42
  Speaker 1: with the biggest increases in the League table of living standards,
• 27:45
  Speaker 1: and those parts of Europe which have seen the biggest
• 27:47
  Speaker 1: relative declines in living standards, you get a quite interesting map.
• 27:52
  Speaker 1: The first part of the map, the biggest increases. Most
• 27:55
  Speaker 1: of it is a kind of central spine right in
• 27:57
  Speaker 1: the middle of Europe, like a kind of re built
• 28:00
  Speaker 1: Holy Roman Empire or something like that. Of course, it's
• 28:02
  Speaker 1: partly associated with the fall of the Berlin Wall, the
• 28:05
  Speaker 1: removal of the Iron Curtain, and the creation of almost
• 28:08
  Speaker 1: like new economic synapses in the middle of Europe, new
• 28:11
  Speaker 1: markets being created which have led to tremendous gains over
• 28:15
  Speaker 1: the course of the last twenty or thirty years. But
• 28:17
  Speaker 1: also in Europe. It's a kind of geographical periphery um,
• 28:21
  Speaker 1: a sort of literal geographical periphery of parts which have
• 28:24
  Speaker 1: been left behind Greece most obviously for all sorts of
• 28:28
  Speaker 1: sovereign reasons, big chunks of Italy, and interestingly quite big
• 28:32
  Speaker 1: chunks of the UK. UM. So I come from Greater London.
• 28:35
  Speaker 1: London has done incredibly well over the last twenty or
• 28:38
  Speaker 1: thirty years. We became from the northeast of England, or
• 28:40
  Speaker 1: from West Wales, you came from Cornwall or Devon. You
• 28:43
  Speaker 1: haven't just fallen back relative to the rest of the UK,
• 28:46
  Speaker 1: you've fallen back relative to the rest of Europe by
• 28:49
  Speaker 1: quite a dramatic degree. So one example here is that
• 28:51
  Speaker 1: twenty years ago West Wales in capita incomes was significantly
• 28:55
  Speaker 1: richer than say, Bratislava, whereas today Bratislava is signal a
• 29:00
  Speaker 1: frequently richer than West Wales and just dwelling on the
• 29:04
  Speaker 1: UK for a few seconds more. And when you look
• 29:06
  Speaker 1: at the patterns of voting in twenties sixteen for Brexit,
• 29:10
  Speaker 1: it was largely those geographical regions that have been left
• 29:13
  Speaker 1: behind voted to leave the EU, not because necessarily we're
• 29:18
  Speaker 1: anti Europe, because they wanted to feel they wanted to
• 29:20
  Speaker 1: have some sense of change, some sense of of shift.
• 29:24
  Speaker 1: Other countries. France another good example, interesting example France, because
• 29:28
  Speaker 1: French incomes overall are above the European average, as you'd
• 29:33
  Speaker 1: probably expect, but if you actually break France down into
• 29:36
  Speaker 1: its subregions, um, you find that of about thirty regions
• 29:41
  Speaker 1: or so, only two have incomes above the European average.
• 29:45
  Speaker 1: The Elder France, of course, dominated by Paris and ron Alp,
• 29:49
  Speaker 1: which is dominated by Leon Courcheval other lovely ski resorts,
• 29:54
  Speaker 1: which has done also very very well. But every other
• 29:57
  Speaker 1: region of France has incomes below the European average. And
• 30:01
  Speaker 1: you sort of think about the DJO, and you think
• 30:03
  Speaker 1: about support for the PEN in parts of France, you think, well,
• 30:05
  Speaker 1: that there's a reason for that in one sense, which
• 30:07
  Speaker 1: is the sense of being left behind. Thanks Stephen, and
• 30:09
  Speaker 1: I think you've highlighted some of the things that um,
• 30:13
  Speaker 1: you know, we thought about and doing the report, but
• 30:15
  Speaker 1: I think we would also revisit if we were thinking
• 30:17
  Speaker 1: about how to develop this index, because the things that
• 30:19
  Speaker 1: have been sort of lessons of the last ten or
• 30:21
  Speaker 1: twenty years. Certainly, when I think of what we focused
• 30:24
  Speaker 1: on when I was first learning economics, there was a
• 30:26
  Speaker 1: lot of concern around the flow of goods and to
• 30:29
  Speaker 1: some extent about the opening up of the capital, and
• 30:31
  Speaker 1: we underestimated what the flow of even up till now,
• 30:35
  Speaker 1: what the flow of labor was going to do in
• 30:37
  Speaker 1: terms of its political impacts. If you look across Europe,
• 30:40
  Speaker 1: if you look at the US, how that how immigration
• 30:42
  Speaker 1: and flows of people have now unexpectedly been driving political dynamics.
• 30:47
  Speaker 1: But I think the other the other two things that
• 30:50
  Speaker 1: have kind of come back to bite us is the
• 30:51
  Speaker 1: importance of the good and the bad bads of having
• 30:57
  Speaker 1: agglomeration benefits, the fact that city these have become places
• 31:01
  Speaker 1: that were successful have become more and more successful and
• 31:05
  Speaker 1: as you suggest, leaving behind other parts of countries and regions.
• 31:11
  Speaker 1: And I guess related to that just that there has
• 31:13
  Speaker 1: been a really strong geographical dimension to growth and to
• 31:17
  Speaker 1: the political impact of of growth. And if you look
• 31:20
  Speaker 1: at as you said, if you look at Europe, you
• 31:23
  Speaker 1: know it was one of the things that the British
• 31:25
  Speaker 1: used to sort of say, gosh, the Eurozone such a
• 31:28
  Speaker 1: bad idea. How can you have these different countries with
• 31:30
  Speaker 1: the same currency with such large gaps of income? Of course,
• 31:33
  Speaker 1: the gaps of income between the poorest and the richest
• 31:36
  Speaker 1: region in the UK there is actually a larger gap
• 31:39
  Speaker 1: than between or as large as any gap between other
• 31:43
  Speaker 1: different parts of the Eurozone, and at least to the
• 31:46
  Speaker 1: Eurozone had and albeit very painful mechanism for trying to
• 31:49
  Speaker 1: narrow those gaps. In the UK, those gaps were never
• 31:53
  Speaker 1: really addressed successfully and festered and worsened um and one
• 31:58
  Speaker 1: of the consequences, as you suggest, was at least a
• 32:01
  Speaker 1: significant chunk of the votes for Brexit, which which made
• 32:04
  Speaker 1: the difference in that In the end, thanks for listening
• 32:12
  Speaker 1: to Stephanomics. We'll be back next week with more on
• 32:14
  Speaker 1: the ground insights into the global economy. In the meantime,
• 32:17
  Speaker 1: you can find us on the Bloomberg Terminal, website, app
• 32:20
  Speaker 1: or wherever you get your podcast. We'd love it if
• 32:22
  Speaker 1: you took the time to rate and review the show
• 32:24
  Speaker 1: so it can reach more listeners. And for more news
• 32:27
  Speaker 1: and analysis from Bloomberg Economics during the week, follow at
• 32:30
  Speaker 1: Economics on Twitter. You can also find me on at
• 32:33
  Speaker 1: my Stephanomics. This episode was written and reported by b
• 32:38
  Speaker 1: Stephanie Flanders. It was produced by Magnus Hendrickson and edited
• 32:42
  Speaker 1: by Scott Lamman, who is also the executive producer of Stephanomics.
• 32:47
  Speaker 1: Special thanks this week to Lord Nicholas Stern, Tom Marlick,
• 32:50
  Speaker 1: Chang Hu, Stephen King, mar Jun, Kelly Bell Nap, Pete Chan,
• 32:55
  Speaker 1: and everyone involved with the Bloomberg New Economy Forum. Francesca
• 32:59
  Speaker 1: Lee is the head of Bloomberg Podcast. Mm hmmm.