Hear from one of the world’s most influential economic thinkers, Lawrence H. Summers, on what to expect in 2019. How will the hot button issues of trade, technological innovation and immigration shape the future of economies and businesses around the world?
Lawrence H. Summers – Global Forum 2018: Future of the Global Economy | Fortune
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Thank you. Thank you. So we're going to we're going to do a tour of the world economy a whirlwind tour of the world economy with all its opportunities and all its risks in 30 minutes. You up for that. Up for it. Let's start with the good news and there's a lot of good news. I mean the economy seems to be growing strongly. We're going to have the longest recession. I mean the longest expansion in history. Wages are rising but not inordinately. No sign of inflation should be happy right.
Not very well.
Yeah we're you know you're kind of a nice flight down from the 120 floor to the 30th floor but there's trouble ahead when you're going that go that fast. Yeah look there are a lot of reasonable things happening in the economy you wouldn't have thought we could push employment as hard as we had without having more accelerating inflation.
That's a good thing that's turned out to be a feature of the of the American economy.
Yeah that's the principal the principal positive is that we've learned that there's more labor market capacity in the United States than we thought. Probably the reason there's more labor market capacity than we thought is that workers are more cowed intimidated and lacking in power than we appreciated. And so the fact that we can have low unemployment without having inflation and the fact that we have a society that is enraged with itself are opposite sides of the same coin interest.
And so I don't know that we should regard it as such a fantastic thing because it's precisely the fact that no worker feels they can demand better conditions and get them. That is why there is so much estrangement so much sense of alienation from institutions and such erratic public policy.
But a couple of years ago you were talking about secular stagnation. This doesn't feel like secular stagnation.
No and no I don't agree with that Alan. When I talked about secular stagnation what I said was that the economy would have a very difficult time growing rapidly with sustainable fiscal and financial conditions.
We have moved to unsustainable fiscal and financial conditions and that's been able to generate a period of growth just as we had a period of unsustainable financial conditions from 2005 to 2007 for which we eventually paid a price. Today we are running massively expansionary fiscal policy it's the debt to GDP ratio can't go up forever and we are we have had very substantial asset price inflation and maybe assets will stay where they are but they're not going to keep inflating at the rate they have over the last five to 10 years. So I think it's exactly confirmatory of what I talked about with secular stagnation that if we achieve good growth it would come from an unsustainable Foundation will fall.
And that's exactly what we're saying. OK I want to come back.
I'll come back to the unsustainable policies in a second but I want to keep you with the good news for just a minute. OK. Lot of talk here over the last 30 days about NAFTA should feel good about that. Right. We've got a trade agreement between the U.S. and Canada both sides are in a kind of weird sense.
Here's the truth the new Naft is the same as the old NAFTA. There's no important difference between a new path to.