The Roman philosopher Cicero once wondered how two soothsayers could pass each other in the street without laughing. Today, given the turbulence of markets and governments, the idea that one can predict the future of the global economy seems like pure folly. But at a recent economic forum sponsored by the Jerome A. Chazen Institute of International Business, Glenn Hubbard, the Russell L. Carson Professor of Finance and Economics and dean of Columbia Business School, attempted to do just that. Here are his top-line thoughts.
On the purpose of economics: I would remind all of you that George W. Bush once said about me that Glenn can’t even predict the past. My belief is that he meant data get revised, so some humility is in order. I definitely think I can tell you which questions to ask. I’m not sure I can necessarily answer them.
Understanding growth: First, on the question of growth and how we might understand it in major regions of the world: I’ll look through a couple of lenses — one the lens of finance and the financial system and the other the lens of public policy. For the United States I am far more optimistic about the potential for long-term growth than I think many are. I say that for two reasons. First, even with demographic pressures on labor force participation rates, work is in no small sense a matter of choice. It depends on policies that support work. Second, our financial system has healed greatly since the crisis. Putting these together, I cannot imagine a place where I’m more excited about the prospect for innovation and productivity growth than the United States.
Europe’s prospects: Looking through the same lenses, I just cannot get so excited about Europe’s long-term growth prospects. The financial system there has not adjusted as fast as the United States. There is not the same capacity to finance the new, the emerging, the innovative. I worry that Europe is in a series of very slow growth episodes — not just lurching between a recession and very slow growth, but a period of prolonged slow growth that threatens European living standards. Again, part of that too is policy.
The effect of an aging population: I would mention three long-term sea-change factors that I look at in the economy. The first is demography. People think of demography as simply being about an aging society. Rather, I think of it as being an opportunity. So in an aging society, are we going to think of ways to provide financial services for that? If you look around the world, aging is not always correlated with the penetration of financial services that would support it — retirement, insurance. There are many opportunities for healthcare, for dealing with older people, for helping older people work. We are scratching the surface of a huge opportunity and a policy question wrapped inside of it, which is, what does it mean to grow old before you grow rich?
The effect of worldwide urbanization: We are now seeing different parts of the world growing more urban and more rich. That leads again to a huge demand for services, for brands. And my question for this sea change is who will win that race for hearts and minds? Is it American brands and products? Is it local brands and products? Is it multinational brands and products from around the world? That will be one of the great business questions of the next fifty years.