A Plan to Fix a Fractured World

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Book: “Permacrisis: A Plan to Fix a Fractured World” https://www.simonandschuster.co.uk/bo…

Do you feel like we’re in a permacrisis? Chances are you feel some anxiety about the state of the world. Gordon Brown, Mohamed A. El-Erian, and Michael Spence certainly did. Three of the most internationally respected and experienced thinkers of our time, these friends found their pandemic Zooms increasingly focused on a cascade of crises: sputtering growth, surging inflation, poor policy responses, an escalating climate emergency, worsening inequality, increasing nationalism, and a decline in global co-operation.

Transcript

Rob Johnson:

This is Rob Johnson, president of the Institute for New Economic Thinking. I’m here today with Dr. Michael Spence. He’s a professor at Emeritus at Stanford University, a senior fellow at the Hoover Institution, a Nobel laureate from, I believe the year was 2001. He’s won the John Bates Clark Award, he’s the co-chair of the Commission on Global Economic Transformation for iNet. And is, how to say, if I’m trying to shed a light on things, there’s nobody I turn to before Mike Spence. So Mike, thanks for joining me today.

Michael Spence:

Thanks so much, Rob. It’s a pleasure.

Rob Johnson:

We’re here to talk about things in the final stage of the India leadership of the G20 as it pertains to climate, global south, global challenges, and particularly, the challenges that the nation India, a very large nation with tremendous potential and lots of unusual innovation has, how would I say, put in front of the world, and we’re interested in, Mike, your perspective on how to align, illuminate and, what might I call, create an anxiety alleviating and prosperity enhancing strategy in the next phase.

Mike, you were the head of the growth commission at the World Bank years ago, and he has a new book out with Muhammad A. El-Erian and Gordon Brown. Oh, it’s not out yet. It will be coming out called Permacrisis, which I’ve had the good fortune to read and learn from in these last few days. And it’s a very constructive and exciting creation, and I want to pre-congratulate you on that offering.

Michael Spence:

Thank you so much, Rob. We hope it helps people.

Rob Johnson:

So in the big picture, where are we? We’ve got questions of climate, national security, inequality or social sustainability within nations and between nations. And we’ve left, what I will call a phase, that W Arthur Lewis talked about in the transformation, particularly of China, where people move to the urban areas and higher areas and leave the farms. But any rate, I don’t want to go on much further. Where do you think we are, Mike? And then we’ll zoom in on global south, particularly climate issues and India.

Michael Spence:

Well, there’s several parts to it. We lived in a world for 30 years or so, maybe more, in which we had very powerful, what are usually called deflationary forces, which, to me, when translated, means we had extraordinarily large amounts of productive capacity brought into the global economy because of the extraordinary growth in emerging economies. India began this journey in full throttle at the start of the nineties, China only slightly earlier. But anyway, the effect of that was that we just lived in a world in which no matter what happened to the demand side, the supply side kept up, essentially. And so it was a world that where inflation wasn’t a particular concern. There were always exceptions. There were pockets where governments printed money and that led to inflation or hyperinflation, and that’s not good. But in general, we lived in a world, we have a generation of people who have basically never lived in a high inflation environment, or ones where inflation’s a serious concern. I think that world is rapidly disappearing behind us in the rear view mirror, Rob.

So in much of the world now, 75 or more percent of the global economy, we have aging. It’s not true in India, it’s not true in a lot of countries. But if you just look at it for in terms of where the GDP comes from, we have labor shortages in advanced countries, especially in the US. We have geopolitical tensions, we have shocks to the system, we have very powerful new set of incentives with respect to diversification of supply chains, which is an expensive process depending on how you do it, more concerns about economic security as well as national security. It’s just a different world. And when you add it up, it’s a world where inflation will be a threat, the cost of capital may be higher when we level off on interest rates, we don’t know, but they may be higher.

So I think the first thing for people to understand is we can’t assume, even though it’s a natural human tendency, that despite all these shocks, somehow we’re going to manage to get back to where we were in the relatively recent past. I don’t think that’s going to happen. Anyway, it’s a debatable subject. So that’s piece one. Piece two is that, and you and I have talked about this a lot, we’re just extraordinarily powerful scientific and technological developments, which, if we find a way to use them properly, are at least tools that we can use to solve really challenging problems like climate change, like declining productivity, like supply constrained world, et cetera, like financial inclusion.

Rob Johnson:

Global healthcare.

Michael Spence:

And global healthcare, yeah. These things come in the biomedical and life sciences, they come in digital, which everybody’s talks about, especially now that we have generative AI, which it really is a stunning, stunning breakthrough for a number of reasons we may want to talk about later on. And so before cycling into depression, I think that the way I look at it is we’ve got these powerful tools, let’s focus on thinking about how we’re going to use them to solve these big challenges that we face, slow and declining growth, et cetera. And we’ll talk more about what these problems are and how you go about dealing with them. But that’s the general frame of reference that I go into this with, at least on the economic side, setting aside governance and so on.

I think there’s a pretty tough couple of years coming in the global economy because none of these things get done overnight. But when you go beyond that, then I think you have multiple scenarios and some of them look pretty attractive, but it’s going to take the combined effort of an awful lot of people in business and government and civil society and in international cooperation to get there.

Rob Johnson:

And we’ve come from an era which many call the neoliberal era, where we’ve said the best thing government can do is get out of the way and let the market solve it.

Michael Spence:

Yep.

Rob Johnson:

And it feels to me, from the reading I’ve done of your draft and Permacrisis and so forth, the next chapter may call for, what you might call a different kind of chef in the kitchen.

Michael Spence:

Absolutely right.

Rob Johnson:

We’ve got some different challenges now, in climate, obviously with the public goods, both within the community where there are fossil fuels having negative side effects, and the global ramifications in a globalized society where national governments have to function vis-a-vis climate for the benefit of all humankind. It’s a new era for sure.

Michael Spence:

You can easily talk yourself into a state of depression when you look at global carbon dioxide production based emissions, they’re still, at best, they’re still going up and they’re just way, way higher than anything that’s reasonably within the bounds of safety in the longterm. And we’re now experiencing what most people believe are serious climate events. And it does. I think people are right. There’s lots of challenges, but the biggest and most complex one that we have to deal with is that one, because it involves literally everybody on the planet, it involves every country and government, it involves the way we interact with each other internationally, and it has huge distributional issues, which we have a long track record of not being able to handle very well. So I think that one legitimately gets to the top of the list, in terms of magnitude of challenge and complexity.

I don’t think it’s time to give up, but I think it’s probably realistic to think that we are going to live with climate change for a significant period of time. There’s no scenario that’s reasonable that takes the carbon emissions down at a speed that would essentially cause the climate issue to go away. It’s just not possible. Maybe 25 years ago if we were on a different glide path, that would’ve been possible, but not now. I think if that’s true, then, and this is not news, there’s discussions that every one of the cop meetings about these distributional issues, at least on an international basis. And Gordon Brown, if he were here, would say, we’ve made a lot of promises and haven’t delivered on most of them. There was a hundred billion dollars promise with respect to climate mitigation and adaptation with respect to lower income countries, and we haven’t really delivered that, yet.

So we’ve got a lot of work to do, but that’s, at least on the climate front, that’s where we are. I think climate will probably get to be on the agenda legitimately on the agenda of every major international group meeting for the foreseeable future.

Rob Johnson:

Yeah. One thing I wanted to emphasize, also, that is in your book is that we have a very interesting pattern of aging in many countries. So you have a smaller based workforce with supply shocks and higher interest rates, the need to finance climate and, what I’ll call more people needing elder care in the support that, perhaps, they think they earned during their working life. And then we have a very young population in Africa, but it doesn’t have the, what I’ll call systems, whether it’s education coordination and so forth, yet in place. But as you said in your introduction, the digital potential could create a very happy ending for the invigoration of the African continent, and also what might call aviate the fierce of large scale migration, as their population grows.

Michael Spence:

Yeah, no, I think this is right. Now, so the starting point’s pretty tough because the pandemic and all of that produced an enormous shock. All countries face major challenges, as you and I discussed, in generating a growth model at works and so on. But with these external shocks for which nobody was responsible and certainly not the global south destabilized finances and reduced fiscal space because everybody had to respond, the global economy semi shut down and so on.

So I think item one, item one is a concerted effort to stabilize the debt and financial situation of these countries so that they can get on with pursuing their growth and development agenda. Item two, Rob, I think, is I said that in describing what you referred to as the Arthur Lewis model, I described this once, by analogy, as a Lewis turning point in the global economy, but how fast that turn really depends on whether or not the very populous global south finds a way to connect to the global economy and be part of the supply side.

So what I describe as a relatively sharp turning point might be less sharp if we can solve that problem, and I think that’s worth a fair amount of attention. What incentives do we need to create? How do we reduce perceived risks so the cost of capital aren’t as high as they are in these countries? This, by the way, applies to climate change, as well. A lot of climate change investment is going to be very capital intensive, I would say. And so cost of capital becomes a first order important parameter with respect to doing this.

The example I use is solar. So solar looks like an awfully attractive technology for part of the electricity generation system, but it looks less attractive if you have cost of capital or double or triple what you find in the advanced markets, financial markets. So if we did both of those things, that is, we made a serious commitment to stabilizing countries that are shaky because they got hit by the pandemic and other shocks, the climate shocks keep coming and coming and coming, and then say, well, the Asian growth model is not going to get replicated in its exact form in the digital era, but the connectivity to the global economy and finding a role is still an important part of the growth development process, and that, I think, deserves to deserves a lot of attention and to be on the agenda, as well.

Rob Johnson:

One thing that has concerned me, both in following your work and thinking about this, is the nature of governance in the global south, but let’s talk about Africa. You have these climate needs in part because of the pandemic, you have very high sovereign debt ratios. You have some people allocating capital, not thinking of it as a public good, but worried about default risk in these high debt countries. And you have people concerned about the, what might call risk premiums that the capital gets allocated to where it should.

I know my friends and who I greatly admire at the Mo Ibrahim Foundation were cited in your book about, what you might call quality and integrity of governance, and that’s not a criticism of the African people. That’s about an interactive north-south system that may have gotten a little out of balance. But to get this climate work allocated in the direction and at the scale that we need in this equatorial region, there may be these other dimensions that have to be addressed to ensure that capital flows are part of the public good and they go where they’re directed.

Michael Spence:

Yes. So the capital requirements, with respect to the sustainability energy transition agenda, are very large. I mean, I don’t know, there’s a whole bunch of estimates, but let’s pick one. $3.5 trillion a year for an extended multi-decade period of time. Well, that’s not all going to come from government, not with high interest rates and maybe higher for longer, and high and rising sovereign debt ratios that are part of the legacy of the pandemic, but there are huge pools of capital in the private sector. And so I think the way that’s starting to be thought of is it’s a huge challenge to mobilize that private sector.

And in this context, let me mention, a very talented Indian American or Indian by background, now American, Ajay Banga, is the head of the World Bank. I think he’s basically exactly on target. He’s set himself the goal of dealing with sustainability and dealing with the kind of growth challenges, and it’s right in the center of what we’re talking about now. I think what he’s going to try to do, this is just a personal opinion, I haven’t talked to him for several months, is he’s going to try to show that you can use the bank’s balance sheet, the World Bank’s balance sheet, essentially to adjust the incentives and start to mobilize this capital. And I think if he succeeds, then the entire G20 world ought to get behind him and a number of other international institutions, and increase the capitalization a lot.

Okay? And so, I think it’s fair to say prove the model out. I think that’s the direction he’s going. If he proves the model out and with various risk mitigating incentives using its balance sheet, if we mobilize huge pools of sovereign wealth fund capital and pension fund capital and so on, I can see we could make serious inroads into this investment challenge with respect to the.

There’s lots of technological activity that’s really interesting going on in the sustainability world, but the people who are investing in that world have come to realize that there’s also some just huge infrastructure like investments that have to go along with the technological development to fully solve the problem. So I’m going to cautiously optimistic about that because I think people are thinking about it in the right way, in a realistic way, not just we got to invest $3.5 million a year, who’s going to do it, but where’s the money and what do we need to create the incentives to mobilize it?

Rob Johnson:

And I know you and my friends at the Luohan Academy who are currently working with iNet on a multi-part course about how digital technology could help climate mitigation and create some optimism here. I think they have a lot of insights.

Michael Spence:

They do have a lot of insights. That’s really important. We’ve talked about it a lot, but I think, of course, designed for the kind of right people. Look, we won’t wave our hands at this. Let’s look at what the real options are as they emerge and the technology develops, but I think it’s very promising,

Rob Johnson:

But they tend, with their technological expertise, to see where the realistic good fits are. So I find them reason I chose to make the course with them is because I admire their ability to prioritize and illuminate at the same time.

Michael Spence:

Absolutely, yep. And there’s no reason why this can’t go on in a whole variety of places, including India, especially, there’s just a ton of talent and deployed in this area, they could make a major contribution, as well. The young people, the technology oriented people who find it easy to be creative in the way you think about using the technology.

Rob Johnson:

There’s a word that’s used frequently in your book that has come on stream, particularly as the US-China tensions have risen; resilience. And it’s almost as if you have to create a contingent insurance policy for your supply inputs or whether it’s semiconductor chips or what have you. But the notion of resiliency, I think, has become very interesting, and as we look at India, as, might I call, perhaps, one of the cutting edge leaders of the future in development.

I’ve seen a book by a friend of mine, Ajay Shaw, from India, and five other people, there’s six of them, about how does India respond in light of the US-China anxiety? How do you see, what you might call, the priority of resilience emerging and what kind of effect will it have and how does one construct resilience?

Michael Spence:

So it is rising as a priority, and it’s not just in the business world where they, in the past we had sharks, and they talked a lot about tightly wound supply chains and choke points and things like that, but nothing really happened. I remember when the Japanese tsunami hit, there was a particular auto part that virtually every automaker in the world uses that was produced somewhere near, and anyway, it was destroyed in the tsunami and it brought a temporary halt, screeching halt in the automobile industry.

This is different now. Europe is this high speed energy transition because of the war, the Russian Ukraine war, but it’s going way, way beyond that. When I talked to friends who are on boards, every boardroom is having a discussion of diversifying their supply chain so they don’t get caught, and then you have policy backing it up. The policy motivations are multiple, some of it’s just plain resilience or we don’t want to be held hostage if we’re dependent. Some of it is distributional. Some of this home shoring friend shoring stuff is motivated, in part, by relieving some of the negative distributional pressures that go with full throated, unfettered global trade. And then some of it’s just plain flat out either holding China back, some national security agenda or restraining them, and it’s growing.

The president just announced expanded restrictions on private equity and venture capital investments in China, in particular areas that are viewed as sensitive, but one of those areas is AI, and AI is everywhere. So it’s a little bit like the national security law in China. You’re not allowed to pass national security information, but nobody knows exactly what that is. And so the fear factor is causing people to hold back. So there’s just a lot of turmoil around this, and it’s an important part of, it’s not going to go away.

I think that where Gordon and others, Ngozi at the WTO, many people, and by the way, I would say most of the emerging economies in the world, other than China, want to go is a new form of globalization. The kind of thing that Danny Roderick talks about a lot, which isn’t as uncomplicated as the old one. And simple, not driven only by market incentives. We have to acknowledge these other things are real and they’re going to be a factor. But it’s one thing to admit that it’s a more complex world that we have to adapt to, and it’s quite another thing to abandon multilateralism and the institutions that support it.

The last thing I’ll say is it’s transparently clear that the vast majority of countries in the world do not want to go down the road driven mainly by US-China or US and Europe and China tensions, and they’ve made it transparently clear and their voice matters. When you add up India and Indonesia and Brazil and a whole lot of other countries, they have something to say. And India has been particularly skillful at not taking sides. They have productive relationships with Russia. They don’t sign up to the sanctions. They have pretty good relationships with the United States, and maybe not quite there in the case of China. So I think that’s where we are.

Our hope is that the G20, because of its important leadership position, there is no alternative to the G20, will accept the complexity, but try to drive for a workable new version of multilateralism that’s inclusive, that includes the global south, that doesn’t put the emerging economies in the position of having to pick sides or be subject to contradictory restrictions coming from China, the United States, Europe and other places. And the United States, by the way, is losing ground because of our expansive use of economic and financial policies to pursue other ends, right?

There’s a serious, probably not imminent, search for alternatives to the US dollar and its function in the global financial system. There’s talk about central bank digital currencies and the trading of them being in a possible longer term alternative. Again, none of this is imminent, but it’s just a clear signal that people don’t want either one country or two dictating what goes on in the global economy, and that should resonate in India because India’s on a course to become a third or fourth major, major power economically in the global economy, but it’s going to take a few more years before they’re in the China category.

Rob Johnson:

Well, one of the things that, I know you and I have been to the China development forum together at the same time in a number of years, but a lot of meetings that I’ve had with Chinese leaders were all about, well, you’ve got this thing called Silicon Valley. And it’s great these platforms, the digital commerce, but we’re not really very comfortable letting the Americans deploy their platforms because we think the side effect is they can collect data on us for their intelligence community, and they talk about how DARPA and other elements of CIA and others had contributed to the formation of Silicon Valley.

Well, now I have people, I was on a panel with some people from Huawei about 5G and various things around the management of ports and so forth. My own nautical interest inspired me to join the panel. And then they start to talk about how, now, American intelligence community, people who are acquaintances of mine, came to me after I did that panel and said, “Rob, that’s all fine and everything, but now when the Chinese are at the cutting edge digitally, they can collect information for their intelligence committee.” In other words, there’s a side effect to the digital commerce that relates to national security issues. And it’s almost like the same argument China made about their anxiety of working with America is now in reverse. And I see India fascinating in this regard.

The reason I brought it up is not just to wallow in US-China, but the digital advances in India, given the state of, what I’ll call, their manufacturing other types of development, I think is very promising. And you’ve talked about, with me or Montek Singh Ahluwalia and others in the distant past, about the Indian platforms and the Indian financial system and other things is, I want to say it’s ahead of the crowd, now. It’s moving or has been at the cutting edge in some dimensions.

Michael Spence:

Well, that’s true. There’s no question about that. When the earlier round was, well, Rajiv Gandhi got India investing heavily in engineering and computer science and so on, that produced a really significant burst of, what you might call, the outsourcing business, technology driven outsourcing, business process, tech administration and so on. Big business. And now India has made several leaps forward. You have the digital identity system, you have the universal payments interface, which means, basically, other players can compete with each other in the digital finance area. I’ve been really struck by the speed with which the mobile payment system is spread in rural India, for example. All kinds of junk, you have to go and stand in line at the bank. It’s gone away.

And India has also, I think, smartly leveraged global technology but not allow foreigners, either Chinese or American, to dominate the local landscape. And I think you’re going to, successful countries and regions, Europe has not done that. Europe does not have a big cloud concluding system. It does not have a major mega platform resident domestically and so on. It’s a huge disadvantage, and I think India saw that, saw that China, if they sat back, that the Alibabas and 10 cents and others would check in and eventually dominate the market, and they stopped that. And I’m not inclined to be critical of that. This is an aspect of sophisticated industrial policy, in a way, that there’s certain capabilities because of their huge positive external spinoff effects that you want to have, and control issues that you want to have resident in Italy.

And then you have the Geo Revolution. India went from, in the early 2000 and teens, low penetration of mobile phones, high data rates and so on practically overnight and certainly in a five-year period to 400 million or more incremental subscribers, low data rates, and that created the underpinning for a burgeoning digital platform-based system with reliance geo a major player. But the Americans as co-investors are in that, Google Meta, a bunch of elite private investors and so on. It’s just really impressive.

And I think you and I have talked about this, but I think both the progress and the balance, so nobody has all the power and whatnot that India has managed to achieve with a combination of government policy and private sector initiative, really is an impressive example that can be replicated in one form or another in a wide variety of developing countries. It’s not the whole of the development story, but it’s a pretty important part, in terms of financial inclusion and efficient financial system, a payment system. With a payment system, you collect a lot of data, you can just do a whole lot better and more inclusive job in supplying credit to people than you can in any known alternative, including the first microfinance revolution.

I think of this as a sustainable version of microfinance, a sustainable, scalable version of microfinance. And India is not alone in this. Ant financial and others have led a similar movement in China. Again, leveraging the same batches of data, I think everybody knows, it’s worth saying, but when you’re going to go down this road, then you need a parallel process of defining and refining the rules, policies, norms, and ethics that go with the responsible and secure management of data. And I think everybody understands that. And if you don’t do that, then you get all kinds of negative side effects that you don’t want. But I don’t think those negative side effects should deter you from going down that road. You just have to be careful about the parallel process.

Rob Johnson:

Yeah. Well, we’ve seen, in the United States, thinkers like Tim O’Reilly at O’Reilly Media and others talking about how we have commerce and there are ways you use the technology to enhance commerce, but we also have, what you might call, the public good platforms that are digital that have, let’s just call, side effects that we need to be conscious of and manage, and seeing this next phase where India is very sophisticated and involved in vibrant development, one can imagine, what you might call, platforms for the public good much as Luohan talks about in Africa, contain tremendous potential. But I will say along with Permacrisis, my other, say, most exciting book of the summer has been Power and Progress by Daron Acemoglu and Simon Johnson.

Michael Spence:

Simon Johnson, yeah.

Rob Johnson:

Yeah. What they did was they did something slightly different. They said, we can see this technology on the frontier, but let’s look at the historic analogies of how the public good of technological change was managed, because there’ve been horrendous mistakes and tremendous successes. Let’s learn how to use power to create win-win progress.

Michael Spence:

Yeah, it’s incredibly useful.

Rob Johnson:

And they did a very, very nice job in economic history bringing us to the frontier of that challenge, which you and your co-authors are, how do you say, even more deep in illuminating the present challenge.

Michael Spence:

But it brings, it’s an important book, and there are lessons and the notion that technology just goes along on its own path with no influence, that’s just rubbish. And their book makes it clear that we can guide this. And we can. I think the current version of that is these powerful new artificial intelligence tools. Generative AI is amazing. I know there’s hype and there’ll be excess valuations and all kinds of stuff that go along with it. But fundamentally, I’ve been talking with AI people, I mean researchers, as many others have, up until recently, the artificial intelligence, common wisdom was the AI’s work in well-defined domains, and then don’t work so well when the domain is not well-defined. You know what I mean? So this is software, this is, and then along comes ChatGPT and the large language models, and they don’t have any trouble switching to domains at all.

In addition, basically, you can ask them about anything. They’re not the whole story because there’s lots of specific use cases and applications that are going to be built either separately or on top of them, but you don’t have to be an expert to use them. ChatGPT had a hundred million users in the first two months because anybody can ask a question and after a little experience, they learn how to make prompts that yield useful responses, and it’s got applications everywhere. I think there really is a chance.

Let me put it this way. I thought the odds of a productivity surge were pretty high before the LLMs and generative AI came along. I thought those odds jumped up quite a lot with the arrival of this. And so we’re in a period of experimentation now, but it’s just stunning what these things do. There’s this thing called ambient intelligence. So an AI system can listen to doctors and nurses going around, seeing patients in a hospital, watch, fix errors, write up the first draft of reports.

Medical people spend, these reports are important, right? Medical people, including doctors, spend astonishing amounts of time documenting what they’ve just done. There are estimates 30, 40% of their time, three hours at night after a full day’s work. The AIs can do, it’s not going to automate that. I think the powerful digital assistant model is the right way to think about this, at least for the foreseeable future. These are prediction machines. They occasionally say something truly stupid, they make stuff up occasionally and whatnot. Nobody with any sense of caution is going to delegate the whole thing to an AI expert, at least not in the immediate or any time in the near future. But if an AI can produce, for a doctor, a pretty good first draft that the person can edit in 15 to 20% of the time they took writing it. It just every time you turn around, you can find uses of that.

I think, I’m not suggesting this as reading for our audience here, but Erik Brynjolfsson and colleagues did a case study. It was customer service, which would be pretty interesting in India. AI enabled, basically listened to thousands and thousands of hours of audio, customer service, and then was trained on that data combined with performance measures, standard ones like did they solve the problem? Did it take a long time? Did the customer get really angry and frustrated, et cetera. And then they gave it, this was a real case. They were writing about a case that was actually done. They gave the AI to a subset of people, customer service agents, spectrum of experience and performance, and not to others. They got a 14% productivity increase. But the thing that struck me most, Rob, about that paper was you got a benefit from having the AI as a digital assistant.

The benefit at the most experienced stand was noticeable, but at the bottom end, the less experienced people where there’s a lot of turnover, was huge. It’s a learning curve, leveling up effect, which isn’t surprising, and it has attractive distributional characteristics when you look at how it plays out in the marketplace. At least it could, depending on the behavior of employers. But anyway, I think when you cut through all the hype, the potential here is pretty astounding. And I think every major country, including India, needs to make sure that they’re part of the process of, at the forefront, of developing that these tools are accessible. To train a large language model takes an astonishing amount of computing power. Basically, it’s the cloud computing people who have the power to, enough computing power to do this.

And a very significant policy question is this going to be accessible to a very wide range of players in the economy? Small, medium sized businesses? Is there enough competition? Can we just do it hands off? These are all questions that don’t necessarily have answers right now, but they’re important questions that have a direct effect on how fast and how comprehensive the productivity and other performance enhancing characteristics of these potential of these technologies is realized or not.

Rob Johnson:

Well, coming down to home stretch here, I think what you just illuminated is right, cutting edge for India, but I look at India as the head of the G20.

Michael Spence:

Yep.

Rob Johnson:

Out of Indonesia, heading towards Brazil, the focus on the global south in relation to climate is, how would I say? I applaud, tremendously, that they have made that a central emphasis.

Michael Spence:

I agree.

Rob Johnson:

The questions of financing in the next phase, with regard to climate. And now, how would I say? Your final thoughts, perhaps echoing what we’ve just talked about, is that India is at a place where it is large at the cutting edge of development in the digital world. How would you advise the country’s leaders, not as a G20? What’s the, what you might call, the recipe for success in this next chapter?

Michael Spence:

Well, part of it is, it sounds trite, in a way, because it’s always been there, is education. So you need universal education that’s either free or so low cost. You want quality measures, you don’t want teachers not showing up. You want, basically, you want to produce a young population that’s an asset rather than a liability. And so access and all that, and I think that’s well understood in India. And implementing these things isn’t easy, right? So you can’t just snap your fingers and say, this is a huge problem in South Africa. They just have not succeeded in overcoming that huge divide that was the legacy of the apartheid system. And then under the Zuma administration, you lost the thread, basically, and stopped working on it for an extended period of time, and now, they have a huge problem.

But I think I’ve always thought that India has, first of all, it’s not followed the Asian growth model or if it has, it’s a pretty mild version of it. So I think the question that still remains for India is, what are the employment engines? You need very, very powerful employment engines to produce inclusive growth patterns. One of the things that the Asian growth model produced was just mountains and mountains of employment in, what were initially, export sectors. These were labor intensive by design, they weren’t initially supposed to be in the capital intensive side. And so I think that’s a remaining challenge for India. Is there another development model? If India figures this out and solves the problem, then it’s going to be an earth shattering development that ought to be replicated everywhere as the manufacturing sector eventually gravitates over to the digital side, and every economy becomes somehow a service economy.

I think, other than that, there’s relatively few things that I’ve seen going on in India on the economic front that look, to me, to be a problem. On the climate change. I think, when we were working together, Montek Ahluwalia and I on the growth commission, the problem was coal was, by far, the dirtiest and cheapest source of electricity. I think that’s probably less true now. It is less true. In India, presumably, has tremendous capacity to build alternative energy sources. But I suspect that a full-throated domestic agenda on the climate change front that you and Adair and others will talk about, is probably deserves to be on a list of things that are top priorities for the Indian leadership.

Rob Johnson:

Well, as you say in the book Permacrisis, when you move to be at the center of the growth engine for the world today, you have to be careful how you deploy carbon burning in that development strategy. So it’s a consciousness given, how would I say? Given the size and scale of the population, I think it’s an important issue at an important time.

Michael Spence:

Yeah, I think India is at the point where it needs to start thinking carefully about what it means to be one of the economic giants in the global economy.

Rob Johnson:

Yes.

Michael Spence:

It really is. It’s not next year, but it’s not that far away, and it’s by far, India has, I think, the highest growth potential of any major economy in the world.

Rob Johnson:

Yes.

Michael Spence:

And for the most part, it seems to be delivering on that potential, which is really good. It’s good for everybody. It’s certainly good for India’s population.

Rob Johnson:

I was going to say, the rising tide raises all boats, potentially.

Michael Spence:

Exactly.

Rob Johnson:

If done well. Well, Mike, this has been, how they say, very invigorating, I must say, as I expected, in reading your book. When does your book, Permacrisis, to be released?

Michael Spence:

So it’s semi-published in at the end of September. I think it’s the 28th in the UK, and simultaneously distributed in the US.

Rob Johnson:

Okay.

Michael Spence:

And then I hope there’s a reasonably rapid process of moving that out around the world. Of course, many Indians read English well and probably will have access to it. But anyway, that’s the current. Was done on a reasonably compressed schedule, given the way the publishing industry normally operates.

Rob Johnson:

Yeah, that’s great. Well, that, how they say, we’ll get them that, and Eric, you want Nielsen’s paper that you referred to and, how would I say, INET and CGET will be standing by to help in any way we can. But thank you for your help today, and thank you for the tremendous insights that you bring to our profession and to our world.