Ben Bernanke concluded his Wednesday keynote at Schwab Impact with the mildly optimistic statement that “looking ahead to the medium term, the U.S. is still a good place to invest in.”
But addressing the same group of some 5,000 attendees of the annual investment conference on Thursday, international economist Dr. Dambisa Moyo offered a far less sanguine view, saying that the former Fed chairman was dealing with short-term problems for which there were temporary fixes such as quantitative easing.
“I’m talking about the long term,” she said. And while she recognized that the 200,000 jobs the U.S. economy has been adding over each of the past seven months that Bernanke spoke of is a short-term positive, she said that “nobody talks about the fact that they’re not good jobs.”
Indeed, the Zambia-born economist despaired that U.S. and world policymakers tend to focus on what she called “smoke and mirrors,” short-term fixes that may help politicians get re-elected rather than the “compelling long-term policies” that are needed.
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“In the U.S., you have far too many elections,” Moyo said, acknowledging she is not a U.S. citizen and noting that countries such as Mexico, Brazil and Nigeria have in recent years changed their constitutions to broaden the electoral cycle and thus encourage longer-term thinking.
Overall, Moyo’s talk focused on the rapid accumulation of long-term problems that go unaddressed at our peril, and her central conceit was that today’s unprecedented short-termism makes us vulnerable to being blindsided by dangerous world trends.
She approvingly quoted Goldman Sachs CEO Lloyd Blankfein, who in 2004 (when he was the firm’s COO) said:
“Look, fortunes are going to be made. But the biggest risk is what you can’t see today. That’s why life is the ability to step outside yourself, to see that something that you can’t see today, something that one day you’ll hit yourself on the forehead and say, ‘Why didn’t I see it that way?’”
Moyo endeavored to paint that picture that might otherwise go unseen, describing the “disrupting trends” now in motion.
First among them is a global economy in decline. In just the past six weeks, she noted, the International Monetary Fund downgraded global growth, the E.U. slipped into recession, and Japan’s economy took a dire turn.
Meanwhile, major emerging economies with populations of at least 50 million — economies that must grow at 7% to escape poverty — are growing at much slower rates: 1.7% for South Africa, 1.9% for Russia, about 3% for India.
What that augurs is no less a threat than a global depression, saying “for the first time in a long time, arguably since the Great Depression, this time it is really different.”
What’s different are four stormy headwinds — including technological advancement, changing demographics, income inequality and resource scarcity — that policymakers lack the tools, “fiscal or monetary,” to address.
For all the wonders of new technology, a key downside is that it is putting people out of work, she said, citing data that 120 million young people across the world are jobless. Even in the U.S., robots have replaced people at institutions such as the Cleveland Clinic, where they deliver laundry and even play a role at the operating table.
While the robot economy disproportionately affects the unskilled, demographic change exacerbates the problem.
Moyo says the U.S. population is aging, even adjusted for immigration, and while that limits the quantity of workers, international tests that reveal U.S. students perform poorly in math and reading impair the quality of U.S. workers. “It is virtually impossible” to bring those workers up to snuff after having lost the opportunity to learn well at an early age, she says.
The demographic challenge is even more acute outside the U.S. Moyo says 90% of the world population lives in emerging economies, where 60% to 70% of the population on average is under 25. That means there are legions of young men with no prospects, and the problem is expected to grow, given a historically unprecedented population surge that is not expected to plateau until 2100, after the world population reaches 10 billion from its current 7 billion total.
Moyo expressed particular alarm about growing income inequality. As an economist, she recognizes the inevitability of disparate wages. “The problem,” she said, “is that we’re no longer creating social mobility.”