Is the world's economy heading towards a decade of depression? | The Bottom Line

hi i'm steve clemons and i have a

question well the corona virus pandemic

be the tipping point that takes us into

years of joblessness and poverty let's

get to the bottom line well we look

around we see a lot of people who can't

find work and a lot of businesses that

have gone bust but there are some

winners out there it seems like the

financial markets are always winning at

least from my vantage point economists

usually say that they saw what was

coming after the fact there are always

rationalizations for the ups and downs

of markets or of jobless rates of

consumer and business confidence but

let's take a look at the big picture my

guest today is not afraid to go where

many economists won't and to look at the

key factors out there that predict a

really serious financial and to some

degree even social and environmental

meltdown affecting each and every one of

us all over the world he's not known as

Doctor Doom for nothing Nouriel Roubini

predicted the u.s. real estate market

crashed three years before everything

came tumbling down in 2008

professor Roubini teaches economics and

International Business at New York

University and he joins us from New York


Nouriel thanks so much for joining us I

was very very taken with Main Street

manifesto it seemed to sort of break

through the noise that there is a

stacked deck against people on a lot of

fronts well before the pandemic hit and

the pandemic is in a sense sped up

history and you continue to find people

that are not going to be winners in this

and the system slowly coming undone even

if there are flirtations with what looks

like you know growth etc tell us what

the the real message behind Main Street

manifesto was well the reality is that

globalization trade migration technology

and many factors have led to an increase

in the income and wealth inequality

after the global financial crisis firms

slash jobs and when they started to rerp

'pl they were not full-time jobs with

formal employment and full benefits

there were mostly contractors

freelancers gig workers hourly workers

artim workers so we had the huge amount

of a job and income uncertainty for

labour the share of profit has gone up

the share of labor income has fallen and

this time around I think is going to be

even worse because the conditions of the

corporate sector today are much worse

than they were after the global

financial crisis so we have shared in

three months and us more jobs than we

create in the previous ten years and I

think you'll be a repeat of the same if

and when firms are gonna start to hire

again it's gonna be in ways that

essentially are precarious jobs to that

part time that are hourly to their gig

work and so on and so on so we've

created a vast underclass of what an

economist guy standing called the

precariat instead of the proletariat the

young people and they're not just

necessarily minorities like

african-americans or Latinos there is a

vast underclass of white America that is

a jobless income less skilled less

hopeless helpless with that no asset and

these are actually struggling as much as

anybody else where they appear the

epidemic in the United States with

80,000 young people dying every year of

opioid overdose and a majority of them

are actually this part of these white

underclass so when I saw these protest

and demonstration even riots after the

killing of George Floyd yes it was about

black lives matter it was also about

racial justice but was also about

economic justice live enabled in New

York where every day were demonstration

with thousands of young kids going and

protesting and actually almost 80% of

them were white were not black and

Latino only because there is this vast

underclass of young people that are

alienated are frustrated they don't have

jobs at precarious jobs and they feel

there is no future for them so it's a

revolution of the precariat rather than

marginal proletariat well you and Thomas

Piketty and there are a number of other

writers as you just mentioned who would

that the writer who mentioned precariat

have seen these tensions

economic tensions but the means that the

mainstream of economics those are out

there every day investing in the markets

talking about you know 4 million new

jobs being created even though 44

million people are unemployed officially

from this what does it take the

economics profession to get beyond these

blind spots so that that they see what

you see well you know many people

looking only at the stock market but

Wall Street and Main Street have

different interests

Wall Street represents a big firms big

tech a big banks one Main Street is

households his workers and his as small

businesses and what's good for Wall

Street unfortunately is made for Main

Street because the way most firms are

gonna survive and thrive and achieve the

earnings target of Wall Street or the

city is by slashing a cost and what are

the cost are slashing the initially

labor costs but your labor cost is my

labor income in my consumption and you

know an S&P 500 is going to newer highs

because the big firms are going to

become bigger while millions of small

businesses retail shops small

enterprises are gonna go bust in the

market share of big track and big knees

less is gonna rise so people usually

think that what's in the means they'd

have the same interest

well whoever really a social cost

conflict right now what's good for Wall

Street is beta bad for Main Street and

unfortunately if we don't have changes

in economic policy in a more direction

that is progressive and inclusive then

the success of Wall Street is going to

come at the expense of Main Street and

what's happening right now is that those

who are suffering our workers our

consumers our households are small

businesses one big business is becoming

even more powerful even more an

oligopolistic even more concentration of

economic financial and other types of

political power now you have written the

globalization is coming apart that

nationalism is rising walls are back

it's gonna be harder to move people and

ideas and money and institutions across

lines like used to be the case

is this not a possible fix for the Main

Street problem doesn't this move an

economy to begin looking at what you

need in your own economy as opposed to

buying it cheaply somewhere else or in a

place that has low environmental

regulations well it can if it's done in

a progressive and intelligent way in

many ways that protection is first of

all hurts workers as consumers because

it increases the price of imported goods

cheaply from China and Asia so as a

consumer you're gonna be worse off so is

a very regressive tax a tool even if we

are gonna have a reshoring of economic

activity from China to the United States

big business is gonna decide to our

factories that are fully automated with

robots so we may create more production

more profits I'm not sure we're gonna

create jobs unless we have seen

incentives to create a labor and jobs in

this kind of things and a migration in

many ways is good for America has

brought intrapreneurship abroad people

that that initiative is pro people like

myself any others were contributed to

society so putting a wall of terrace and

a wall of block immigration doesn't

resolve the fundamental problem that

people need education need skills need

the human capital and need to survive

and thrive in a digital and globalized

economy and by the way even if tomorrow

we were to have a wall so nobody can get

in the United States even if we're the

under percent tariff on foreign goods

technology in the future is going to

disrupt many jobs more than migration or

globalization on trade and give you an

example even when we have out on most

vehicles you'll have millions of uber or

lyft drivers they're gonna be without

jobs you'll have millions of truck

drivers are not gonna have jobs so the

next ten years technology rather than

trade on globalization migrations gotta

be the big disruptor of income and jobs

and working incomes so we have to think

about how we make sure that people can

survive and thrive in this digital

economy otherwise we're fighting the

wars of the past rather than the words

of the future look you worked in the

Clinton White House if I

I think I first met you when you worked

in the National Economic Council in the

Clinton White House I was in the Senate

at the time so you know how this town

works you know about policy and politics

and I've been fascinated by you know the

bravado of Donald Trump on one hand

being the populist president ostensibly

responding to these workers you just

talked about who fear for their jobs he

fear for their families but yet you've

said he's not that at all well you know

Iran is a populist but once in power is

govern as a plutocrat so it's not a

populist is a clue to populist

essentially a plutocrat is pretending it

to be a populist if you look at the

economic policies they've been all

against the economic interests of his a

blue-collar phase that voted for him his

policies on taxation reducing corporate

taxes and taxes for the wealthy his

policies of trying to repeal Obamacare

his policies of loosening up a

regulation that the fan labor in unions

his policies about the environment

everything he has done has been against

the working class and the income and

jobs of the working class and he has

pretended that if we have a little of a

fight on trade with China or if we

restrict migration were going to resolve

the American carnage that we created but

to resolve that we need inclusive growth

we need progressive taxation we need to

invest into infrastructure roads ports

bridges that are crumbling we have to

invest into our green future but to do

things that provide the workers with the

skills and education they're going to be

able to survive and thrive in this

globalizing digital world he has done

nothing of that he has been talking

about the infrastructure plan not the

time has been spent

so is it true the populace is really a

plutocrat wearing the ships cloth of a

populace but it's not the populist

well he's been blasting China as you

pointed out he's been blasting Huawei

and and saying we can't have their 5g

embedded into American communications

infrastructure or in the cities and

there's got to be other choices but

there are no other options that we make

these we don't make these

systems in the United States Europe

makes them but but I'd be interested in

in in where we go with that when you

look at these this next wave of just a

certain degree opportunity you know that

Internet of Things vast movement of data

that America has no players in it while

it's shutting down one of the key

providers it's embedded in that business

no you're right you know we need to

build the 5g network but there's either

the Chinese one day one way and we worry

about the back door to the Chinese

government but the alternative is only

Nokia and Ericsson that are European and

by the way the Chinese one is 30%

cheaper and 20% more efficient so to

build the 5g network without Y way by

having a tech divided in US and China is

gonna cost us 50% more and we lost the

technological lead that we had of course

we have many private sector tech company

are doing well but I think that

whoever's gonna be president for the

next decade we have to think about an

industrial policy for the United States

you know Germany as industrial policy

4.04 a world is going to be based on

robotics automation AI machine learning

Big Data internet of thing so this the

revolution is gonna occur regardless off

but web provide people with the skills

to be able to be successful we don't

have work that have the right types of

skills and therefore they're in

marginalized jobs like hamburger

flipping or low low wages services so

you have to invest into your people you

have to invest into your physical

infrastructure you have to invest in

your digital infrastructure we have a

plan we need a plan to make sure that

people can succeed otherwise work is

gonna be left behind even more than the

past I would advise my viewers to go

look at your Twitter stream I do it most

every day and you get snapshots of other

subterranean things that could come and

and dislodgement you know most recently

you wrote you referenced Antarctica and

so it's not just an economic fragility

that you're dealing with we're looking

at environmental fragility even social


and you're predicting that we're gonna

have a very very hard decade that we're

going to enter in a period which is you

know catastrophic ly worse in some ways

than the Great Depression tell us what

you see coming well I do worry that

where the very severe recession that

maybe for a quarter since we start from

a very low base it's gonna look like a

rapid recovery something like Fe but by

next year is gonna be like a you because

there is this burden of private and

public debts that are affecting economic

uncertainty risk aversion and people not

wanted to spend very much and we can

have a first wave and a second wave and

so on and therefore the V is gonna be

coming you and the you can eventually

become a W a double-dip recession

especially if you have a severe second

wave and that W canned up into an L into

a greater depression and I've discussed

in some of my recent writing there are

ten deadly drivers of disruption and of

potentially a depression we have what I

call ten deadly DS one is diet and

deficits the revenge are going to lead

to the fault the second one is

demographic in aging that is increasing

lots of implicit liability of

governments including those from having

to take care of covet and other

pandemics then we have the basement of

currencies as we monetize large fiscal

deficits to avoid the deflation initial

is deflation but eventually is going to

be speculation where this digital

disruption is going to radically disrupt

ops and income an entire industry is

coming from technology where these the

mall a democracy backlash as we have a

return to populist the empower and

inward oriented policies we have also

digital warfare the words of the future

are going to be based on cyber warfare

not on conventional war and then we have

these deadly man-made disasters and I

call them mind me rather than natural

disaster because there is nothing

natural about the global climate change

there is in nothing natural even about

the pandemics and this fandom is gonna

become more virulent in the future in

the last thirty years we've had first

HIV then

the Czar's than wet mares swine flu

Ebola Zika now covet and were destroying

because of global climate change they

are batard of many animals and then

animals are encroaching on other animals

and then they're getting closer to human

beings and the AFD sonic transfer of

diseases from the animals to human this

is not not wrong it is a game having to

do with the destruction of our natural

environment so the combination of all

these deadly forces may imply that

unless we change radically our policies

we could end up into not just a greater

recession like the one we read this year

greater than the global financial crisis

but we have the risk of a greater

depression a depression worse than the

one with in the nineteen thirties well I

think one of the questions I have

because you know I remember the 1990s I

remember working in the Senate and we

had the benefits of a fast-growing IT

economy but you saw people losing

benefits you saw people and being asked

to live in a turbocharged economy

without turbocharged protections and so

this has been going on for quite a while

and so I guess the unfair question is as

you're going very quickly over the cliff

what can stop going over the cliff when

so many forces have come together to do

that but I'm going to ask you that if

you were to be in charge and begin

looking at how you undo some of the

trends that are taking us into this

terrible place what are some of those

things we could seriously consider well

I think the first thing as I said that

we have to invest into human capital

where there is globalization or

technology that be disruption to entire

jobs skills industries and firms so you

have to provide the skills to people so

they can be able to deal with

globalization and with these

technological disruption everybody

should be starting some variant of stem

science technology engineering math

computing coding you name it it was just

start teaching coding to kids as soon as

we teach them English or whatever

language they're learning is the

language of the future we've had

crumbling infrastructure

United States and rebuilding this

infrastructure is going to be important

to increase the private sector

productivity we know that doable climate

change is going to lead to massive cost

and losses and actually many of the

technologies that can change global

climate change can be labor-intensive if

we have solar panels on every building

in every home around data those are kind

of labor intensive jobs like many other

types of green jobs by them adjust up

made a commitment to spend two trillion

dollars on infrastructure and on the

green economy so way to invest into our

people in a human capital into the

physical infrastructure into the green

infrastructure into the digital

infrastructure and also in our

institutional infrastructure because the

social capital in the United States is

spraying as we have a social division

deriving from rising income and wealth

inequality by so many people being left

behind becoming angry alienated

frustrated and even violence in in some

cases so unless we rebuild our own

social fabric will be even more divided

so there is a huge amount of investment

we have to do to avoid the depression

that would occur if we don't do that I

mean you and I have both been around for

a long time I'm sad to say but we've

been around we've seen a lot we've seen

protests and I guess and and you know

history and and I guess one of the

questions when I read your material and

say well you know inequality has been

building for a while we've seen

revolutions in the past we've seen

plutocrats and and you know oligarchy

established in the past what do you

think is making this particular time

different than these other moments where

we've had protests but not change well

it makes it different is that I think

that the amount of income and wealth

inequality expression United States a

rich level that are really politically

and socially unsustainable and you have

both on the right side people who were

maybe socially and religiously

conservative they are left behind

we're very high school degree they used

to vote for Trump because they thought

it was a true populist but they've been

disappointed and of course even on the

left side the people that vote

for Bernie Sanders for Elizabeth Warren

for AOC on Democratic Party are and

looking for change so I think that

progressive policies are necessary

because the number of people that are

left behind our losers were feeling

frustrated alia nated when they worry

about their own income about their own

jobs about their own children but the

future is rising the share of profit is

rising the share of labor income is

falling economic and social

uncertainties are increasing there is

not really economic opportunity and

social mobility in the United States

those who have skills and their capital

are doing well everybody else is being

left behind and it's not just in United

States for the last year within

demonstration and protests and riots all

over Latin America in the Middle East in

parts of Asia in advanced economies like

in France and Italy in emerging markets

so I think that we have globally a

phenomenon in which there is massive

disruption coming from both technology

from trade from globalization and there

are some winners and some losers and now

the losers are becoming a majority and

they are either voting for populist

parties or they're disrupting

traditional establishment parties and

they want change the ones a a world in

which capital is not the one who's

winning but labour as a hook and unless

we do it eventually social unrest we

could have civil wars we could have

evolutions that's what happened in the

past so we have to do something to avoid

social and political instability

Nouriel I want to ask you to be a

futurist about your future ISM to look

past the 2020s and the really gloomy

prognosis that you've given this time to

the 2030s is there someone out there

some nation that impresses you that's

beginning to get these show social

cohesion questions right

to merge in technology the trends that

you think will emerge out of that gloom

and come in stronger and I'm really

asking will the US have had its Suez

moment will another nation or region

demonstrate a very different model than

we're seeing today well there are some

countries that doing the right things I


that some of the Nordic country the

Scandinavian ones are adopting radically

new technologies like in Sweden caches

disappeared payment system are all

digital there's adoption of all these

technologies but they have also very

very wide social welfare system so that

if you are losing your job you're negate

Education Skills retraining your pension

your healthcare your free education and

therefore if just by bad luck you're

falling down you're not a chance to

rebound so some of the Nordic country

are doing the right thing some countries

in emerging age also have policies like

Singapore and others that are investing

in the future of their people while

adopting technology Japan has declining

population but is investing a lot in

robotic and automation and the decline

in populations can be compensated by

using more machines so you have to be

creative but provide people the skills

that allow them to be able to use

technology as opposed to having a

greater digital divide between the ABS

and that's not so there are models you

can work on

well Nouriel Roubini thank you so much

for sharing your insights with us today

on the bottom line and I look forward to

seeing where all this goes hopefully

better than you predict but you know III

by your prognosis and I want to

encourage people to check out Main

Street manifesto it was real eye-opener

for me thank you so much pleasure being

with you today it's Steve so what's the

bottom line there were already bad

trends piling up against folks trying to

hold their lives together before the

global pandemic hit and destabilize them

even more some things are never gonna

change the middle class they're always

going to be squeezed the rich they'll

get richer and the poor even when they

do everything they're supposed to be to

get ahead they just can't catch a break

inequality is gonna remain with us

pugnacious nationalism is going to keep

rising our quality of life is gonna fall

as isolationism takes over and oh yeah

Antarctica is melting my guest is right

that it would take a massive systemic

correction to turn around this ship and

the chances of that happening right now

are highly on

likely we're going to have rough waters

buckle up and that's sadly the bottom