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'Wake Up!' Global Elites Confront a World Full of Risks at Davos · Stephanomics

• 0:00
  Speaker 1: If we are smart to keep that to the level
• 0:03
  Speaker 1: where we make the economy, the world economy, more resilient
• 0:09
  Speaker 1: and not it dragged the world into a place where
• 0:14
  Speaker 1: we will be all poorer and we would be less secure.
• 0:19
  Speaker 1: My fear is that we are sleepwalking into this world.
• 0:24
  Speaker 1: But hey, here is Davos, Wake up, do the right thing.
• 0:32
  Speaker 1: Hello Stephanomics here and this week we have an action
• 0:35
  Speaker 1: packed episode from the World Economic Forum in Davos, where
• 0:38
  Speaker 1: the Managing Director of the International Monetary Fund, Krystallina Gorgeva,
• 0:42
  Speaker 1: has been imploring the world's movers and shakers to resist
• 0:45
  Speaker 1: the forces of fragmentation, stop sleepwalking to a poorer, more
• 0:50
  Speaker 1: divided world. As a Bulgarian who grew up in the
• 0:53
  Speaker 1: Soviet Block, she also had some sombering words on the
• 0:56
  Speaker 1: West treatment of Russia after the Soviet Union collapse. We'll
• 1:00
  Speaker 1: get to that later. We will also hear why everyone
• 1:04
  Speaker 1: is excited about India and why businesses can afford to
• 1:08
  Speaker 1: give all of their employees a living wage without running
• 1:10
  Speaker 1: the risk of triggering inflation. While I told you it
• 1:13
  Speaker 1: was action packed, but first a taste of a high
• 1:16
  Speaker 1: powered panel I moderated here naturally on the subject of
• 1:20
  Speaker 1: Fiscal Policy, also known as what Governments Choose to do
• 1:24
  Speaker 1: with taxes and spending. Panelists, you're going to hear a
• 1:27
  Speaker 1: go give as number two at the i m F.
• 1:29
  Speaker 1: The economist key to GOP enough, the European Commissioner for
• 1:32
  Speaker 1: the Economy Paolo Glory, and the former governor of the
• 1:36
  Speaker 1: Indian Central Bank and celebrated economist who is now a
• 1:39
  Speaker 1: professor at Chicago Raam Rajan and I was introducing the panel,
• 1:44
  Speaker 1: I pointed out that when it came to fiscal policy, governments,
• 1:47
  Speaker 1: at least until recently, had had two luxuries. First, for
• 1:52
  Speaker 1: many years, they've been able to borrow more while spending
• 1:56
  Speaker 1: less on debt interest. Debt stocks in many developed economy
• 2:00
  Speaker 1: have roughly doubled since the global financial crisis, but thanks
• 2:03
  Speaker 1: to falling interest rates, the total cost of servicing that
• 2:06
  Speaker 1: debt had actually gone down. The second great advantage they've
• 2:11
  Speaker 1: enjoyed was that in responding to crises, there hadn't been
• 2:14
  Speaker 1: a big conflict between fiscal policy and monetary policy, and
• 2:19
  Speaker 1: the economy had a problem. Both monetary and fiscal policy
• 2:22
  Speaker 1: pointed in the direction of being looser. But in the
• 2:26
  Speaker 1: past year, both of those luxuries have been cruelly snatched
• 2:30
  Speaker 1: away as inflation as Hammond households, but also pushed central
• 2:34
  Speaker 1: banks to raise interest rates. So I started by asking
• 2:38
  Speaker 1: geter gob enough how governments were coping with this difficult
• 2:42
  Speaker 1: new era. You have an inflation problem, you have to
• 2:49
  Speaker 1: deal with that. You're still hit with shocks like food
• 2:54
  Speaker 1: shocks and energy shocks that require fiscal policies to step up.
• 2:58
  Speaker 1: And that's what's make in the current conjuncture particularly difficult.
• 3:04
  Speaker 1: And what's important to keep in mind though, is inflation
• 3:08
  Speaker 1: has helped a little bit with on the death story.
• 3:11
  Speaker 1: So if you look at what happened to public sector
• 3:14
  Speaker 1: there globally, in it went up to around of gdp
• 3:20
  Speaker 1: and now it's come down to around GDP, and that's
• 3:27
  Speaker 1: because of a combination of the recovery but also because
• 3:31
  Speaker 1: of the inflation inflating away some of that death Now
• 3:36
  Speaker 1: it's still around eight percentage points higher than it was
• 3:40
  Speaker 1: what it was pre pandemic. So there is still a
• 3:42
  Speaker 1: dead problem that countries have to deal with, but inflation
• 3:46
  Speaker 1: and the recovery has has reduced the size of that
• 3:50
  Speaker 1: increase in the debt. In terms of what countries need
• 3:53
  Speaker 1: to do to manage this difficult trade off. Right now,
• 3:56
  Speaker 1: I would say fiscal policy has to uh accomplished three things,
• 4:01
  Speaker 1: which is one it should be consistent with bringing inflation down,
• 4:08
  Speaker 1: which means at the minimum it should not be expansionary
• 4:13
  Speaker 1: at the overall level. The second thing that fiscal policies
• 4:16
  Speaker 1: should keep in mind is indeed to make sure that
• 4:18
  Speaker 1: you are protecting the most vulnerable and they need to
• 4:21
  Speaker 1: do that. And when it comes to food and energy,
• 4:23
  Speaker 1: these are very important fundamental essentials for for households, you
• 4:27
  Speaker 1: need to provide support for that. And the last thing
• 4:30
  Speaker 1: is it's absolutely essential this time to have a sound
• 4:34
  Speaker 1: and communicate a sound medium term fiscal framework, clarity on
• 4:39
  Speaker 1: bringing down debt all the time and building up buffers
• 4:42
  Speaker 1: in the medium term. Commissioner Gentle only, this is going
• 4:45
  Speaker 1: to be the toughest year for European governments. Uh, well,
• 4:49
  Speaker 1: we had a lot of tough it's always going to
• 4:52
  Speaker 1: be top next year. I think we had a three
• 4:56
  Speaker 1: or four years stress test for our records. On the
• 5:00
  Speaker 1: COVID crisis, it was a love affair between monetary and
• 5:03
  Speaker 1: physical policy. Now, of course the situation is completely different.
• 5:10
  Speaker 1: So the challenge now in my view are mainly two
• 5:14
  Speaker 1: If we want have this good coordination between monetary and
• 5:18
  Speaker 1: physical policy. First, how we are able to avoid that
• 5:27
  Speaker 1: the expenditure the measures to address the energy crisis remain
• 5:34
  Speaker 1: universal and time unlimited measures. Just to make you an example,
• 5:41
  Speaker 1: we spent at the EU level in twenty two one
• 5:46
  Speaker 1: point three of our budget on energy prices related measures.
• 5:54
  Speaker 1: If you look to the draft budgetary plan for twenty
• 5:57
  Speaker 1: twenty three, this one point three goes down to one percent.
• 6:03
  Speaker 1: But this decrease is based on the assumption that you
• 6:08
  Speaker 1: will gradually phase out these measures, limit them, go to
• 6:15
  Speaker 1: more targeted measures. If this doesn't happen, if we continue
• 6:21
  Speaker 1: the measures that we have in place, the overall burden
• 6:25
  Speaker 1: will be two percent. So we will go from one
• 6:28
  Speaker 1: point three twenty two not decrease into one percent, but
• 6:32
  Speaker 1: increasing to two percent. So this is our first issue
• 6:37
  Speaker 1: and we discussed. We discussed also with finance ministers. It
• 6:43
  Speaker 1: is not easy to phase out these measures, of course
• 6:47
  Speaker 1: from a social point of view, but if you keep
• 6:51
  Speaker 1: them in place for a too long time when you
• 6:54
  Speaker 1: will phase out, you could have a spike again in inflation.
• 6:59
  Speaker 1: So we have to phase out them, make them more targeted,
• 7:04
  Speaker 1: and this is a political challenge. Second challenges that we
• 7:08
  Speaker 1: need to keep a good level of public investments in
• 7:15
  Speaker 1: strategic areas. And this is what for me is very
• 7:19
  Speaker 1: encouraging looking to the budget that we have for twenty
• 7:23
  Speaker 1: twenty three, is that public investment is not decreasing, it
• 7:28
  Speaker 1: is increasing. It is exactly the opposite of what happened
• 7:34
  Speaker 1: after the financial crisis, when we had five or six
• 7:37
  Speaker 1: years of continuously decreasing public investments because we need The
• 7:44
  Speaker 1: other component of this difficult situation is that, yes we
• 7:49
  Speaker 1: have inflation, Yes we have to support the vulnerables, but
• 7:53
  Speaker 1: we have also to continue to support our transition investments
• 7:59
  Speaker 1: programmers just at the most sort of basic level. The
• 8:02
  Speaker 1: inflation has made it a little bit easier to see
• 8:05
  Speaker 1: debt stocks fall in nominal terms, but of course again
• 8:09
  Speaker 1: completely basic cost of borrowing has gone up. How is this?
• 8:14
  Speaker 1: How do you think fiscal policy makers should be thinking
• 8:17
  Speaker 1: about fiscal policy as a tool given these two things. Absolutely,
• 8:22
  Speaker 1: the size of the debt has gone up tremendously over
• 8:26
  Speaker 1: the last few years. And that's actually an interesting issue,
• 8:30
  Speaker 1: which is why has fiscal discipline broken down? And so
• 8:34
  Speaker 1: one argument is, soh we've had all these extraordinary crisis
• 8:37
  Speaker 1: and that is true. But we've had three once in
• 8:40
  Speaker 1: a lifetime crisis in the last twenty years, right, the
• 8:43
  Speaker 1: global financial crisis, we've had the pandemic, and now, of
• 8:47
  Speaker 1: course the consequences of the war. Part of the problem
• 8:50
  Speaker 1: that's going on is clearly there is a fractured political
• 8:53
  Speaker 1: consensus in many industrial countries. I mean that is part
• 8:57
  Speaker 1: of the reason the US overspent. Every constituency got a
• 9:02
  Speaker 1: share of the spending simply because they couldn't make choices.
• 9:05
  Speaker 1: So forget targeted spending. It's universal plus in the sense
• 9:10
  Speaker 1: that what you had was banks which should have suffered
• 9:14
  Speaker 1: losses during the pandemic, didn't suffer any losses. Why because
• 9:18
  Speaker 1: you have the paycheck protection program which went to the
• 9:21
  Speaker 1: small and medium firms correctly, but then it went out
• 9:24
  Speaker 1: through the back door directly to the banks to repay
• 9:26
  Speaker 1: the loans. So in some sense we've built out everybody, right,
• 9:30
  Speaker 1: and that is the problem. Spending today is highly on targeted,
• 9:34
  Speaker 1: including the energy spending, that is, the spending on power
• 9:39
  Speaker 1: that is happening in Europe. How do we bring it
• 9:42
  Speaker 1: back sort of under control? I think Mr Gentle only
• 9:47
  Speaker 1: expressed concern here. Now what does that mean for the
• 9:51
  Speaker 1: longer term. It means that fiscal and monetary will remain
• 9:54
  Speaker 1: more in conflict rather than coordination going forward. Central banks
• 9:59
  Speaker 1: are clearly did termined to bring inflation down, but with
• 10:02
  Speaker 1: spending still high, plus the prospect of spending not becoming
• 10:06
  Speaker 1: more targeted over time does imply that inflationary expectations inflationary
• 10:12
  Speaker 1: consequences will be higher for longer. Last point I will
• 10:17
  Speaker 1: make you know there's a lot of you know, need
• 10:20
  Speaker 1: for green investment. We heard again that you know, countries
• 10:25
  Speaker 1: need to do more of it. The real question is
• 10:27
  Speaker 1: who's going to bear the burden of green investment. The
• 10:30
  Speaker 1: more you focus on incentive structures given by the government,
• 10:34
  Speaker 1: subsidies here, subsidies there. Uh, what that does is put
• 10:38
  Speaker 1: the burden on the public sector balance sheet. The more
• 10:41
  Speaker 1: you focus on regulation, you know, carbon tax or or
• 10:45
  Speaker 1: emission controls and so on, the more it comes on
• 10:48
  Speaker 1: the private sector. Right now, it seems certainly in the
• 10:51
  Speaker 1: US the consensus is it's too hard to put it
• 10:54
  Speaker 1: on the private sector. It goes on the public sector
• 10:56
  Speaker 1: baron sheet. We just saw the Inflation Reduction Act full
• 10:59
  Speaker 1: of incentives of one kind or the other. So I
• 11:03
  Speaker 1: think this is yet another place where fiscal needs to
• 11:06
  Speaker 1: think very hard, given the breakdown in consensus, given the fracture,
• 11:10
  Speaker 1: are we going to take the easy route and not
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  Speaker 1: impose some of the costs of the transition on the
• 11:18
  Speaker 1: private sector? Take it all in the public sector bandsheet,
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  Speaker 1: which means the public sector bands has yet more burdens
• 11:23
  Speaker 1: going forward, which means yet more premium in unexpected places.
• 11:33
  Speaker 1: So undelighted now to be here in damoswit Nandandella County,
• 11:38
  Speaker 1: who is a co founder and chairman of the Indian
• 11:41
  Speaker 1: i T giant Emphasis Technologies, and here at damas of
• 11:45
  Speaker 1: the World Economic Forum. There's been so much negativity about
• 11:49
  Speaker 1: the world for very good reason. But I have to
• 11:51
  Speaker 1: say I've noticed there's a big exception whenever anyone talks
• 11:54
  Speaker 1: about India. Everyone seems to think India is only up,
• 11:59
  Speaker 1: are they? Well, I'm personally very bullish on India, Stephanie
• 12:04
  Speaker 1: and I think there are a number of reasons for that.
• 12:07
  Speaker 1: India is the only young country in an aging world,
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  Speaker 1: and therefore it's going to be the source of talent
• 12:14
  Speaker 1: around the world from many many professions and that's going
• 12:17
  Speaker 1: to have a huge economic impact. India also having showing
• 12:21
  Speaker 1: good growth is probably going to grow faster than most
• 12:25
  Speaker 1: countries in the coming years. And it's also stable politically.
• 12:30
  Speaker 1: It has great entrepreneurs, It has a very thriving startup ecosystem.
• 12:35
  Speaker 1: Now we have ninety startups in India. And of course
• 12:38
  Speaker 1: India's digital record of both exports as well as its
• 12:42
  Speaker 1: own infrastructure has been very good. So yes, I think
• 12:46
  Speaker 1: the style all aligned for India at the moment. And
• 12:49
  Speaker 1: we also we had this week, we had this news
• 12:51
  Speaker 1: about China's population shrinking. I mean, the flip side of
• 12:56
  Speaker 1: that is it seems very longly that India is now
• 12:58
  Speaker 1: the most populous country in the world. How does that feel? Well,
• 13:02
  Speaker 1: I'm sure, I'm not sure that maybe it is the
• 13:05
  Speaker 1: popular but more than that is about the proportion of
• 13:07
  Speaker 1: young people. You know, I think we all know about
• 13:09
  Speaker 1: the demographic David. And when there's a lot of young
• 13:11
  Speaker 1: people and less babies and less old people than countries
• 13:15
  Speaker 1: have economic growth. So India that that sweet spot of
• 13:17
  Speaker 1: demographics and therefore if it does everything right, it can
• 13:21
  Speaker 1: grow at five six percent a year for for many years,
• 13:24
  Speaker 1: and you know, compounded growth asiss values. So I think
• 13:27
  Speaker 1: that's why people are Polish in general. I also feel
• 13:29
  Speaker 1: that Indians are more optimistic and confident about the future,
• 13:34
  Speaker 1: and that adds to the energy in the country. Is
• 13:37
  Speaker 1: it possible that if you will get old before I
• 13:40
  Speaker 1: guess rich, Well, that's always a risk of developing country.
• 13:44
  Speaker 1: But I think I think if I think in the
• 13:49
  Speaker 1: next fifteen twenty years, if if it is able to
• 13:51
  Speaker 1: grow at a sustained pace of five six percent, and
• 13:55
  Speaker 1: then the compounding of that, we need to per capita
• 13:58
  Speaker 1: incomes rising from you know, three dollars to fifteen dollars
• 14:02
  Speaker 1: in the next three five years, and that's that's that's
• 14:05
  Speaker 1: much more than middle income country. One of the big debates,
• 14:09
  Speaker 1: and we talked about it a lot of stephonomics, is
• 14:12
  Speaker 1: the shift in the global economy, changing nature of globalization.
• 14:17
  Speaker 1: I don't tend to think of it as deglobalization, but
• 14:20
  Speaker 1: certainly businesses around the world thinking about their supply change,
• 14:24
  Speaker 1: thinking about fundamentally about the relationship with China, especially in
• 14:29
  Speaker 1: the I T world. How how are you thinking about that? Well,
• 14:32
  Speaker 1: I think, once again, I think some of the trends
• 14:34
  Speaker 1: in globalization and geopolitics is favoring India. First. Is the
• 14:39
  Speaker 1: China plus one strategy for many manufacturing companies because the
• 14:44
  Speaker 1: last rendy years they're you know, sort of highly constrated
• 14:47
  Speaker 1: their manufacturing in China and they've seen the implication of
• 14:50
  Speaker 1: that with zero COVID and so on, so they are
• 14:53
  Speaker 1: all actively looking at options in India is now emerging
• 14:56
  Speaker 1: as a country of manufacturing. So that's that's one thing
• 14:59
  Speaker 1: that's favored in India. And then the good thing is
• 15:01
  Speaker 1: that the ID business is going to grow continue to grow.
• 15:05
  Speaker 1: It's you know, the ID business. Just to us sense
• 15:07
  Speaker 1: of the speed and scale, it took a hundred It
• 15:10
  Speaker 1: took thirty years for the Indian I industry reach hundred
• 15:13
  Speaker 1: million dollars of revenue. It took ten years to go
• 15:15
  Speaker 1: from hundred billion to two hundred billion, and it will
• 15:18
  Speaker 1: take three years to go from two hundred billion to
• 15:20
  Speaker 1: three undi billion. So there's a sort of a change
• 15:22
  Speaker 1: of space and and increasingly with the PANDAMIC and the
• 15:28
  Speaker 1: realization that digital technology was central to the world. I
• 15:32
  Speaker 1: think a lot of that action will be in India.
• 15:34
  Speaker 1: Do you think India I don't think there's sounds passions,
• 15:37
  Speaker 1: I don't really passionism, But do you think India's ready
• 15:42
  Speaker 1: for the geopolitical implications of being one of the big
• 15:47
  Speaker 1: fastest growing economy's most important economies in the world. Had
• 15:50
  Speaker 1: India's response to the Russian invasion of Ukraine, which is
• 15:55
  Speaker 1: involved in ports of oil, Russian oil. I think traveling,
• 15:59
  Speaker 1: you know, but from nothing, you know, I think I
• 16:02
  Speaker 1: think we should. The fact of the matter is European
• 16:04
  Speaker 1: import of oil is much much higher and gas much
• 16:07
  Speaker 1: higher in India. They were done, so I think India
• 16:10
  Speaker 1: had hardly been an earlier importer before this, there was
• 16:12
  Speaker 1: no import of russtionally to India. But I think the
• 16:15
  Speaker 1: point is that India is I think, turning out to
• 16:17
  Speaker 1: be a very strategic country the world. It's growing markets,
• 16:22
  Speaker 1: is going to attract a lot of companies, Its role
• 16:25
  Speaker 1: in digital is going to be huge. Indias this year
• 16:28
  Speaker 1: is the host of the G twenty, so Prime Minister
• 16:31
  Speaker 1: Modi and other ministers are working on making the next
• 16:36
  Speaker 1: twelve months very hospitable environment for the G twenty to
• 16:41
  Speaker 1: come and visit. So I think, you know, it's it's
• 16:43
  Speaker 1: all about, you know, figuring out how to get there.
• 16:47
  Speaker 1: But I think, by and large, I think it's going well.
• 16:50
  Speaker 1: The other thing I was going to ask you, that's
• 16:51
  Speaker 1: very striking, certainly to all of my colleagues in India.
• 16:55
  Speaker 1: Is the fact that a Darling and embody are buying
• 16:59
  Speaker 1: for much every asset inside in India. Are we Is
• 17:03
  Speaker 1: there a risk that India is going to become a
• 17:05
  Speaker 1: sort of two company country. No. I think India's farmer
• 17:09
  Speaker 1: has a huge depth of companies. I mean, if you
• 17:12
  Speaker 1: look at the financial sector, you know you have great
• 17:16
  Speaker 1: companies like I c SC and HDFC. If you look
• 17:20
  Speaker 1: at the you have the Cutter Group, you have Enforces
• 17:24
  Speaker 1: sent with pro and many of the tech companies. The
• 17:27
  Speaker 1: India's farmer industries world class. So I think India actually
• 17:29
  Speaker 1: hear a very diversified business space. And I think, you know,
• 17:34
  Speaker 1: I think the the the investments in things like climate
• 17:39
  Speaker 1: technology which they are doing is going to be very
• 17:43
  Speaker 1: influential because they are really going to bring world class
• 17:46
  Speaker 1: entrepreneurship to bring energy cost slow, make green hydrosion. And
• 17:50
  Speaker 1: also I think everybody's doing their job in their own way.
• 17:55
  Speaker 1: And the one thing that someone said to me is
• 17:56
  Speaker 1: straight after the Russian invasion of Ukraine, and of course
• 17:59
  Speaker 1: there's the lots of debate about whether that has accelerated
• 18:04
  Speaker 1: the transition to zero carbon globally or actually retarded it
• 18:08
  Speaker 1: because everyone has been immediately reopening their power they coal
• 18:12
  Speaker 1: fired power plants and other things. But one expert in
• 18:17
  Speaker 1: this field said to me that he had hoped that
• 18:20
  Speaker 1: India's a lot of India's coal might stay in the ground,
• 18:23
  Speaker 1: and now he thought that was not going to happen. Well, no,
• 18:25
  Speaker 1: I think we said we should distinguish the shotgun From
• 18:27
  Speaker 1: the long term. I think the Ukraine crisis and the
• 18:31
  Speaker 1: whole Russian gas thing has demonstrated the dependence of Europe,
• 18:36
  Speaker 1: for example, on Russian gas, and many countries are going
• 18:39
  Speaker 1: in Europe are going back to coal and nuclear and song.
• 18:42
  Speaker 1: So that I think in the short term reaction to
• 18:43
  Speaker 1: energy security. But I definitely see that the fundamental shift
• 18:48
  Speaker 1: to renewables is now reaching scale. I mean, you know,
• 18:51
  Speaker 1: the other day I was in Abu Dhabi and they
• 18:53
  Speaker 1: were talking about building hundred gigabards of solar or so
• 18:57
  Speaker 1: they want to prepare for the future. I was talked
• 19:00
  Speaker 1: to some people from Denmark and they were talking about
• 19:02
  Speaker 1: the fact that's going to be having fritrigugar awards of
• 19:05
  Speaker 1: offshore wind in the next seven years. In India, we
• 19:08
  Speaker 1: have you know, a large entrepreneurs talking about going to
• 19:12
  Speaker 1: very low cost green hydrogen. So I do believe. Now
• 19:15
  Speaker 1: I see actually scale investments in renewable and definitely some
• 19:20
  Speaker 1: of them have been triggered by the crisis. But India
• 19:23
  Speaker 1: has a cop on elsewhere. India has insisted on its
• 19:26
  Speaker 1: right to use its call to fire its economic development.
• 19:33
  Speaker 1: It has that right, But do you think it should
• 19:35
  Speaker 1: exercise right? I think. I mean it has made a
• 19:37
  Speaker 1: huge commitment to solar. Solar is going to be huge,
• 19:41
  Speaker 1: and the solar mission in Indias is a massive mission.
• 19:44
  Speaker 1: Indians making a huge commitment to green hydrogen. Indians making
• 19:48
  Speaker 1: a huge kind of commitment to evis. I don't know
• 19:52
  Speaker 1: what they mean. But the fastest going cast today in
• 19:54
  Speaker 1: India evs or two wheelers, and the transie even much
• 19:57
  Speaker 1: faster than we think. So I think it's doing all
• 20:00
  Speaker 1: that by at the same time, you know, you have
• 20:02
  Speaker 1: to deliver developed people. Is that the same thing? Why?
• 20:04
  Speaker 1: Why are there we really starting called plants in Europe?
• 20:07
  Speaker 1: The same reason? Right? I'm delighted I managed to grab
• 20:18
  Speaker 1: in the hallways. Dr Nila Richardson, who's chief economist of
• 20:22
  Speaker 1: the Payroll and Human Capital Management Company a d p UM.
• 20:26
  Speaker 1: I think that ADP. You also produced the main Street
• 20:29
  Speaker 1: macro blog. Is that right? That's right, that's right right
• 20:32
  Speaker 1: up as street. Um, so you're hearing Davos and I
• 20:36
  Speaker 1: saw you were speaking on a panel here about the
• 20:39
  Speaker 1: living wage and you have some access at ADP to
• 20:43
  Speaker 1: some fantastic data. We love big data on stephanomics. So
• 20:47
  Speaker 1: have you done some research on on the living wage?
• 20:50
  Speaker 1: And what were you what were you saying on the panel? Well,
• 20:53
  Speaker 1: we track wages very closely at ADP, and I do
• 20:57
  Speaker 1: as an economist, because we know that inflation has morphed
• 21:00
  Speaker 1: over its lifespan over the last three years. It's started
• 21:03
  Speaker 1: in the good sector, it's now very present in the
• 21:06
  Speaker 1: service sector in the form of wages and all of that.
• 21:10
  Speaker 1: People get lost in it because there's the sense that
• 21:13
  Speaker 1: since waged growth has been so robust that wages workers
• 21:17
  Speaker 1: are actually in the driver's seat. They're not. That is
• 21:20
  Speaker 1: a myth that unravels when you look at real wages,
• 21:24
  Speaker 1: which globally has declined by UH many global researchers viewpoints
• 21:32
  Speaker 1: for the first time in decades. It's a real problem.
• 21:35
  Speaker 1: But this problem of living wages started before the pandemic.
• 21:38
  Speaker 1: There is a sense that market wages. The wages that
• 21:41
  Speaker 1: companies pay and even governments pay, don't always keep track
• 21:45
  Speaker 1: with necessities housing, food, transportation costs, clothing, education. For many workers,
• 21:52
  Speaker 1: they're not making the bare minimum to have a decent
• 21:55
  Speaker 1: standard of living and enter the living wage panel. It's
• 21:59
  Speaker 1: always important because it's a perpetual problem for the world,
• 22:03
  Speaker 1: but it's even worse in a context of high inflation.
• 22:07
  Speaker 1: And I think that is something we forget when we
• 22:09
  Speaker 1: see these high numbers that looking through looking through the
• 22:14
  Speaker 1: nominal um to see the real governments all around the
• 22:18
  Speaker 1: world of facing this trade off, right that they, in
• 22:20
  Speaker 1: theory do want to help households potential voages, but they
• 22:25
  Speaker 1: don't want to set off a wage price spiral. So
• 22:28
  Speaker 1: how do you see the living wage as part of
• 22:31
  Speaker 1: that argument. First of all, it's demystifying the fact that
• 22:34
  Speaker 1: if you raise wages for a small portion of your
• 22:38
  Speaker 1: workforce that you are going to set out a spiral.
• 22:42
  Speaker 1: I think that is a myth that we need to
• 22:43
  Speaker 1: test um. Secondly, and you say a small portion, you
• 22:47
  Speaker 1: mean those at the lower end, right, So if you
• 22:50
  Speaker 1: look at ADP data, we pay over twenty five million
• 22:53
  Speaker 1: workers in the United States, only three point four percent
• 22:56
  Speaker 1: of those workers make at or below the minimum wage,
• 22:59
  Speaker 1: So there is room too, and states are doing the
• 23:01
  Speaker 1: cities are doing this, Some companies are doing this to
• 23:04
  Speaker 1: increase the minimum bar for pay without stoking an increase
• 23:09
  Speaker 1: in overall UH wage gains. And so we can't throw
• 23:14
  Speaker 1: the baby out with the bath water. But also there's
• 23:18
  Speaker 1: there is a benefit to companies to providing fair living wages,
• 23:23
  Speaker 1: and that is productivity. Workers that are paid fairly or
• 23:27
  Speaker 1: more productive. And if you look at globally at labor
• 23:30
  Speaker 1: force protect productivity, it's been on the decline over the
• 23:33
  Speaker 1: past decade. So here here's the great thing about raising wages.
• 23:37
  Speaker 1: Not only do you fit provide a fair and living wage,
• 23:40
  Speaker 1: you can also help your company's bottom line by having
• 23:43
  Speaker 1: a more productive workforce when you think about the cost
• 23:46
  Speaker 1: of living and food insecurity. Is the living wage debate
• 23:50
  Speaker 1: different when you think about low income countries where there
• 23:54
  Speaker 1: will be a higher number of workers in that vulnerable category.
• 23:57
  Speaker 1: It is. It is more felt in developing countries. But
• 24:02
  Speaker 1: we're here at DAVAS and the point of this planel
• 24:05
  Speaker 1: is to elicit discussion from global decision makers who actually
• 24:11
  Speaker 1: can impact from their perch. Maybe it's in an advanced
• 24:14
  Speaker 1: country in New York City or in Munich, but from
• 24:16
  Speaker 1: their perch they can affect the lives of workers around
• 24:20
  Speaker 1: the world. Um. And so that's what I hope that
• 24:23
  Speaker 1: we draw out in the panel, the benefits to multi
• 24:26
  Speaker 1: national countries of paying a living wage everywhere they do business.
• 24:31
  Speaker 1: And finally, I mean there's a lot of talk care
• 24:33
  Speaker 1: and certainly and we on Ephonomics have talked about how
• 24:35
  Speaker 1: some of the main drivers of globalization, of of global
• 24:39
  Speaker 1: capitalism over the last few decades seem to be going
• 24:42
  Speaker 1: into reverse, particularly the sort of consistent period of low
• 24:47
  Speaker 1: energy costs, transportation costs, calm geopolitics, and of course low
• 24:52
  Speaker 1: wage peace was a big element of that. Do you
• 24:55
  Speaker 1: think that wages, that that labor is going to be
• 24:59
  Speaker 1: a more more expensive input for businesses in the years
• 25:03
  Speaker 1: to come? And where does that leave workers? Is it
• 25:06
  Speaker 1: a great new time for workers? Coming down the track
• 25:09
  Speaker 1: in terms of the US and Europe, labor shortages will persist,
• 25:14
  Speaker 1: especially here in the US. The expectation is that the
• 25:17
  Speaker 1: next decade of employment growth will be half of the
• 25:21
  Speaker 1: previous decade. And uh, the mirror or the image of
• 25:24
  Speaker 1: that is your So labor shortages will continue. That means
• 25:28
  Speaker 1: wage pressures will still be there, and wages I don't
• 25:32
  Speaker 1: think will fall uh in terms of growth low enough
• 25:36
  Speaker 1: to be consistent with two percent target inflation. So there
• 25:39
  Speaker 1: is going to be a new world of higher inflation
• 25:42
  Speaker 1: and more robust wages. Where does that leave the worker?
• 25:46
  Speaker 1: It's really a race against time. Will inflation moderate enough
• 25:50
  Speaker 1: and wages stay solid enough that they that workers actually
• 25:54
  Speaker 1: benefit from lower inflation. We don't know the yet. Globally
• 25:58
  Speaker 1: they haven't, and are many low income workers they haven't.
• 26:02
  Speaker 1: Their wages haven't kept up with inflation. So the hope
• 26:05
  Speaker 1: for the worker is the same for the hope for
• 26:07
  Speaker 1: the global growth. You need to see inflation moderate. At
• 26:10
  Speaker 1: the same time, we need that productivity, investment in human
• 26:14
  Speaker 1: capital that keeps wages growing for the right reasons. So
• 26:18
  Speaker 1: I had wrote a piece for Business Week looking through
• 26:21
  Speaker 1: the beginning of the year, and I was that was
• 26:24
  Speaker 1: my end point, that you know, if getting if inflation
• 26:26
  Speaker 1: is under control, in the next year and a half,
• 26:28
  Speaker 1: everything gets easier, everything we might have wanted to achieve.
• 26:31
  Speaker 1: Nila Richardson, thank you so much. It was a pleasure.
• 26:34
  Speaker 1: Thank you, I promised you. A last word from Kristina Gorgeva,
• 26:45
  Speaker 1: Managing Director of the IMF. What you heard at the
• 26:48
  Speaker 1: very start of the show with some of her opening
• 26:50
  Speaker 1: comment on a panel I didn't moderate entitled keeping the
• 26:54
  Speaker 1: Lights on amid Geopolitical Fracture. That's a van typical title
• 26:58
  Speaker 1: for a panel around here, and there was some interesting discussion.
• 27:02
  Speaker 1: What really stuck with me was the final word, which
• 27:05
  Speaker 1: the MD insisted on contributing right at the end, a
• 27:08
  Speaker 1: message based on her personal history. It seemed right from
• 27:12
  Speaker 1: the heart. If you look at twenty two, the biggest, single,
• 27:18
  Speaker 1: biggest factor affecting the world economy was this senseless war.
• 27:25
  Speaker 1: What I know about Russia is that one of the
• 27:34
  Speaker 1: pitfalls of the last decades was the fact that there
• 27:39
  Speaker 1: wasn't more concerted effort to integrate the Russian society, the
• 27:45
  Speaker 1: Russian people within the world community. I was country directed
• 27:51
  Speaker 1: for Russia based in Moscow in the best days, when
• 27:55
  Speaker 1: Russia was reforming and there was g a to remember
• 27:58
  Speaker 1: these days, yea. And at that time, when you ask
• 28:03
  Speaker 1: the Russian people who they are, how they define themselves,
• 28:09
  Speaker 1: the majority would say Europeans, even the Russians that live
• 28:13
  Speaker 1: in the Asian part of Russia. When you ask the
• 28:16
  Speaker 1: Russian people today, they say we are different, We are
• 28:21
  Speaker 1: a different civilization, were different from from the rest of
• 28:25
  Speaker 1: the world. So if I draw one lesson is to
• 28:28
  Speaker 1: remember that, yes, policies are defined in the high corridors
• 28:33
  Speaker 1: of power, but when a population of a country subscribes
• 28:39
  Speaker 1: to policies that are the treatmental to their own interests,
• 28:44
  Speaker 1: there is something for the world to reflect on and
• 28:46
  Speaker 1: perhaps think about ways in which we can do more
• 28:50
  Speaker 1: people to people exchange. In this horrible thing Russia has done,
• 28:56
  Speaker 1: there is a bit of kind of vilifying all Russians.
• 28:59
  Speaker 1: We roll the moll in that pot, and we have
• 29:02
  Speaker 1: to be careful about it. There are so many wonderful,
• 29:05
  Speaker 1: smart Russian people that don't agree with these policies. Are
• 29:10
  Speaker 1: these Russian speakers in the audience anybody? There is a
• 29:15
  Speaker 1: very famous Russian song and when the war started it
• 29:19
  Speaker 1: spiked into my my mind. That is about Russia not
• 29:25
  Speaker 1: wanting the Second World War And the song is usk
• 29:29
  Speaker 1: by night? Do the Russians want a war? And the
• 29:33
  Speaker 1: whole notion of the of the song is not they don't.
• 29:37
  Speaker 1: What happened, why did it happen, and how we can
• 29:41
  Speaker 1: put an end to it. I want to leave us
• 29:45
  Speaker 1: with this uh notion that that even the hundred years
• 29:50
  Speaker 1: war and it where at the negotiating table the sooner
• 29:58
  Speaker 1: we defined space, as everybody here said, for this horrible
• 30:04
  Speaker 1: war to end, the better for everyone and of course
• 30:10
  Speaker 1: great news for the world economy. Well, thank you, m right,
• 30:21
  Speaker 1: your roof need what you should not see, you perty
• 30:29
  Speaker 1: buddy you video. That is it for this action packed
• 30:36
  Speaker 1: devils compendion. We'll be back for our final episode of
• 30:39
  Speaker 1: the season next week. Who In the meantime, please rate
• 30:43
  Speaker 1: us wherever you get this podcast and check out the
• 30:45
  Speaker 1: Bloomberg News website for more economic news and views on
• 30:48
  Speaker 1: the global economy. This episode was produced by Yang Yang,
• 30:52
  Speaker 1: Samma Sadi and Magnus Hendrickson, with special thanks to the
• 30:55
  Speaker 1: World Economic Forum. Is a copy as rag Ram Rajan,
• 30:59
  Speaker 1: Paolo gen Aloni, Nan Daniela Khani, Nila Richardson, and Kristina Nagorgieva.
• 31:05
  Speaker 1: Mike Sasso is the executive producer of Stephanomics. Kakat e
• 31:09
  Speaker 1: rufski kakat e rufskie hutcha ruf kiel by me