60 Minutes with Professor Joseph Stiglitz
A discussion with economist Joseph Stiglitz, winner of the Nobel Prize for Economics and public policy analyst and professor at Columbia University and Christophe Donay, Chief Strategist, Head of Asset Allocation & Macro Research, Pictet Wealth Management.
We live in an increasingly complex world, in the midst of a fantastic innovation wave that has many consequences across multiple dimensions. These impacts go beyond technology, reverberating through the economy via disinflation and magnifying society’s inequalities that have ultimately paved the way for the rise of populism around the world.
Watch the conference highlights:
PART I: DEFINING AND CHARACTERISING THE CURRENT ECONOMIC REGIME
“The pandemic and climate change remind us that we have to cooperate on a range of global issues.”
CD: Innovation is one of the most appropriate lenses to use in discussing increased inequality and the potential for future inflation. In this context, how would you define the current economic environment and what role do you think innovation plays in it?
JS: Innovation is very much alive and the current pandemic underscores this in a hugely tangible way. If covid had arrived 20 or 40 years ago, we would not have been able to so swiftly identify and develop a means of testing, nor develop a vaccine – let alone multiple vaccines – at such a rapid speed. In this way, we have been protected by innovation. Global GDP would have plummeted far worse and for longer without these biology innovations.
Climate change is another major issue we face today. But I feel confident that innovation will provide us with the means of combating climate change and allow us to achieve net carbon neutrality by 2050. The cost of renewables has plummeted to a degree that no one anticipated, and this will allow us to leave the fossil-fuel-based economy behind, all because of innovation. By its very nature, we cannot anticipate what direction innovation will take or where it will show up and how it will help us in one way or another. But we can envisage a brighter future – from health to climate change.
PART II: THE INTERNATIONAL LANDSCAPE: THE RISE OF ASIA AND GLOBAL RISKS
“Climate change is an existential issue for all of us and we must use every tool at our disposal in addressing it – including both monetary and fiscal.”
CD: Broadening our scope , let us look at China; we cannot discuss innovation without China. The US has been the global tech leader since WW2, but now China is presenting itself as a serious challenger, especially in AI and robotics. How do you see the trade war and innovation confrontation between the US and China?
JS: Most economists see the world as positive sum, rather than a zero-sum game. If another country grows more, it can buy more of our goods, and we can all expand and grow together. But there are areas of concern. Obviously one wants a level playing field. Difficult issues arise because differences in economic systems imply greater difficulty in agreeing.
PART III: THE UBIQUITY OF CONCENTRATION AND ITS AFTERMATH
CD: Today there is a ubiquity of concentration, from profit growth and margin contribution to technology and inequalities. Does innovation play a key role in the rise of inequality?
JS: Yes; it is not the only driving factor but it plays a key role. We have witnessed the growth of wealth at the very top, among the tech giants. It relates to why we have seen the rise of enormous fortunes without very large increases in GDP. Innovation hasn’t provided the impetus for GDP that one would have hoped, nor has
it helped the tax base to the same degree, due to big tech’s aptitude for tax avoidance. Throughout our discussion, I have made reference to the positive and negative types of innovation and one of the latter includes that around avoiding taxes. The big tech players have also been extremely innovative at extending their market power and exploitation, which is of course a real concern. This comes back to the matter of rules and the enforcement of rules. Europe has historically done this better than the US, but there are many antitrust actions now underway in the US.