 This is Rob Johnson, president of the Institute for New Economic Thinking. I'm here today with Mike Spence, Nobel Laureate from 2001, and the co-chair of the Commission on Global Economic Transformation at INET, a professor at many different places based in Milan, Italy, and a tremendous, tremendous partner and ally in opening the world's eyes to technology, China, and many other things. Mike, thanks for joining me. Thanks, Rob. It's good to be with you. So we've got, as I said to you moments ago, Jerry Lee Lewis, a whole lot of shaking going on. We got pandemics, we got climate change, we got nervous people, we got feelings about how technology affects democracy. I'll always like to start with the whiteboard, where you can paint the picture. What do you see, Mike? What's right now at the top of your concerns? Well, you know, I mean, I always like to start with things that we can be fairly sure of without being overconfident about. So we know we were in a digital transformation, you know, for some time now. We know we experienced an acceleration in terms of its scope and to some extent its pace as a result of breakthroughs in computing power, artificial intelligence, learning algorithms, and so on. And then we got the pandemic. And so now I think, you know, if we're sort of stay on the same track, we can be pretty sure that this transformation that we were involved in is going to proceed at an accelerated pace. Not just because of the forced acceleration in the pandemics, but more looking out slightly longer term, but because the forced acceleration in the pandemic also produced accelerated adoption, which carries with it, you know, experiments that wouldn't have been conducted, discoveries about how to use the technology that it wouldn't have occurred at the same rate. They would have occurred, but they wouldn't have occurred at the same rate. And you can see that happening all over the place. You can see it in health care, you know, including primary care. You can see it what they're calling telehealth, you know, it just would have taken, not ages, but a long time before the medical profession and their patients got around to thinking that you really didn't have to go to the emergency room or the office or the, you know, health care provider every time you needed to have a chat with some of the medical staff. You can see it in education. Educational institutions were forced to adopt. They'll revert to some extent because, you know, frankly, online is awfully useful, especially when offline is prohibited or dangerous, but it's not a substitute for in-person. On the other hand, it is a compliment to in-person learning. And so what we learned by being forced to use the technology and education is another sphere where adoption for a variety of reasons tends to be slow. These two sectors are not unique, by the way. And so I see that coming. Now, so that seems pretty easy. But we know then there's this host of challenges that you and I have talked about and opportunities that we've got to contend with. And the list is so long. I mean, we could use up, you know, the next day and a half talking about it. I think one of them, at least in the developed countries, is dealing with the transitions in work, the skills required, and so on. And I think this is a little idiosyncratic and not totally aligned with the way I think the majority of the writing runs in this dimension. This is usually perceived as either a big problem because we're not going to be able to employ people, but that's not the majority view. The majority view is that we need to facilitate and help people make fairly large changes in the skill set they bring to the marketplace through programs, through engagement companies, through shifts in the educational system, et cetera. And I think that's basically right. And there's a lot of very good people in government, in the nonprofit sector, and in business working on it, frequently in partnership. So I don't think it's going to be pretty. And I think it's going to be harder because of this acceleration we just talked about, but we're moving in the right direction. I think the real crack in the foundation of this is the very, at least in the United States, is the very high level of inequality. So people don't have buffers that help them make these transitions. That inequality and those buffers declined and got, I mean, the inequality increased and the buffers declined in the pandemic economy, even though the government has tried to buffer that shock. And in fairness, that was true even in the previous administration, at least to some extent. But you can't buffer it completely. But the going in initial conditions were very high levels of income and wealth inequality. And that just makes this transition scarier for people and harder to get done. If people, if we had built out institutions that had effectively dealt with managing inclusive growth, and this has been talked about a lot by us, by lots of people, then we could deploy those institutions or adapt them. And when we would have households sitting there with more resources to invest in their future, then we do now. So to me, the big underlying challenge, I don't mean to minimize the transition in work, but the big underlying challenge, I think, is to deal as rapidly and effectively as we can with the income and wealth inequality, using multiple instruments, social services, high quality, free, expanding those to help people in this particular set of challenges, tax system. And even then, reversing the trends in wealth inequality is going to be a Herculean challenge because, as you and I have discussed, I mean, the wealth is held in a highly concentrated fashion. The investment opportunities at the upper end are much larger at the upper end of that spectrum are much larger and much higher returns. Just think about it. People with skinny little balance sheets are investing in stocks where they may or may not do well. They would have done well if they stuck with it in the recent past or bonds where they're not going to do that much of a return at all, unless they're traders. The average person can't trade effectively in these markets and generate return that way. And then you start to get into things where the returns really are quite impressive, but those are the ones that require a lot of liquidity. And that's just not accessible to these people. So I think there's, and then it's turbocharged by the Jim Vasily effect, you know, which is the intangible assets are being created and dominate now the value creation in the public markets. And they're being created by relatively small numbers of people and those assets are owned by small numbers of people. And those are all very powerful trends that are running in a different direction. So I think in addition to the, so we need a multi-dimensional assault, I guess, you know, with government leading the charge, but with engagement from basically the rest of us to kind of deal with this. And I think we're going to have to deal with wealth, investment opportunities, post tax income and public service delivery kind of all at once and to get the job done. And where some people, even progressives are quite cynical about this is that they see the role of money and politics creating a situation where as the wealth concentration increases, governance serves fewer and fewer people. And things like what used to be called tax evasion is now tax avoidance. And people are allowed to keep their money legally offshore and then say we can't afford it back home to build out the infrastructure, the health systems and what have you. And so there's a cynicism that really accelerated during the time of the great financial crisis where people really feel like government is captured. And that, I think you and I could go through a whole menu of sectors where things are being exacerbated or difficult. And through that whole menu, there is a common thread, which is the role of money and politics and large scale money in politics has been allowed to commodify social design. And I think I couldn't agree with that more. I mean, I think, you know, I like to try to simplify things. So I agree with everything you said. I think, you know, we somehow with leadership or, you know, fighting the political battles, we have to get to a point where money isn't the decisive factor in elections in America. There are a variety of ways to do that. But I mean, you know, putting limits on how much you can spend is the way most of the European countries approach the challenge. But we've got to consider and I couldn't agree with you more, by the way, if we don't confront that challenge, then the chances of a what I would call a pragmatic and level headed progressive agenda diminish when you get around to doing it because that because the interests, you know, then are front and center. I mean, you just have to ask you a simple question, you know, could somebody get elected to an important leadership position in the United States now, not without a massive amount of financial backing from somewhere. And I think the answer to that's no. I mean, I may be wrong, but it seems to be no. So then the question is, where's that financial backing come from? And the answer used to be, you know, wealthy people in business, now it's wealthy people in business and, you know, and other aggregated interests. But also, we now have this sort of internet, you know, the small donation channel. And that's a that's an arrival of some importance, probably, because it's become big enough, you know, in a number of campaigns, Obama, I guess, was the pioneer, or the his campaign in kind of raising money this way, not that he didn't have the other kind as well. And so we really, I think we need the political scientists to sit down and say, well, kind of, where are we? Perhaps the Sanderson, Elizabeth Warren campaigns would be worth studying, not because they succeeded, but because they plowed in that pathway that you just were painting the picture of. That's good. Yeah. Yeah. So I mean, well, I'm with you on that. When people become despondent about the functioning of government dominated by concentrated money, that despair fosters a submission to authoritarian or demagoguery, like perhaps we just experienced in the United States over four years. And and that despair is not going to be alleviated. There's a static sense in which you can make a transfer and take a little bit of the sting out of the pandemic. But unless systemically, that dominance of what I'll call plutocracy is curtailed. We'll revisit that despair over and over again. And I think that's that's a very deep long term danger that we have to confront right now for the kind of reasons you've shared. Yeah. That's right. I mean, you know, in the end, though, I think at least in a democracy, ultimately, people, you know, have to look inward when they ask that question. I mean, we have the system we've got because we haven't gotten rid of it and replaced it with something. And so we can be despairing, but we can also realize that, you know, we have some agency if we kind of find young leaders that can take us there and then follow them and and get something done. So I guess I'm really trying to say, Rob, is in addition to being kind of frustrated and then despairing about aspects of the trends that we've been talking about, I think I think, you know, you're also seeing in various parts of the political spectrum, you know, this is our problem, we're going to solve it sort of attitude and activism of that type is ultimately what's required to make significant changes in direction. I think a combination of even those who have the plutocratic advantage, seeing a system is unsustainable, coupled with the activism, which reminds them of that, helps us evolve in a constructive direction. That's a really good point. You know, I mean, the engagement, no, look, I mean, we've got to wait and see how it works out. But the engagement that we can see from the corporate and financial sectors now in taking some of the responsibility for dealing with the big challenges that we face environmentally and in terms of inequality, social cohesion, et cetera. At the very least, it's promising. Well, let's, Mike, you mentioned in passing a couple of times what's happening in the developing countries. And before we talk about the difficulties in governance in the developed countries, we were talking about the role of technology and in the spirit of being constructive. What do you see as potentials related to technology? And what do you see as the dangers related to this technology for the emerging countries? Well, I mean, you know, it's becoming common knowledge, but for a while it was kind of a closely guarded secret. So I think the simplest way to describe it is the most successful development, growth slash development model. I use the word model in that, you know, strategy. Think of it for most people, you'd think of strategy. But it is, but it's embedded in the strategy as a model of how the economy works, you know, when it's working well in a development context. And the most successful and best known one is sometimes called the Asian development model. So we know basically that developing countries can grow at the rates we've seen, six, seven, eight percent a year for long periods of time, essentially because of the global economy. What does that mean? It means they sell something to the global economy in large amounts, and they buy stuff from the global economy because they can't make everything they need, including the things they need to sell, the things they're selling to the global economy. So it's an open economy model that leverages the enormous demand in the global economy. But what does that mean? It means relatively poor countries, even if they have a billion citizens, don't have big enough economies to flood the global economy in any sector, right? So if they specialize in doing something that they're pretty good at, they can sell it, you know, in enormous quantities. So that's item one. And the item two in that development model is you bring in technology that's been developed over, you know, a couple of centuries, but not adopted here yet. And that's a much faster process than inventing the technology. So there's a good reason why we never saw growth rates at seven or eight percent a year before the developing countries arrived in the global economy after World War II. And those two things together, there's a lot of other moving parts in that model, and they're not of great interest to us right now. But the core point is that the area of comparative advantage, at least for countries that are not rich in natural resources, including agriculture, was labor intensive manufacturing. And that's why it's called the Asian model, because that's where it's implemented in its most successful form. And the digital technologies, because of their particular characteristic, basically because of the speed with which they're moving. So the relevant digital technology is automation. There's been an enormous breakthrough in automation, think of robots, because of artificial intelligence, with data they can learn to do things like sea and with sensors. And so robots are basically growing like a weed, getting less and less expensive and can do more and more things. And if you ask the question, where are we now? The answer is we're at a point where robots, it depends on the sector you're talking about, can do things that humans can do at lower cost and higher quality and greater reliability. Almost no matter what the cost of employing those of human beings are. And because the cost structures of digital technologies, as lots of people have noted, are high fixed, very low to negligible variable costs, as they get bigger, so to speak. The scope of the markets they enter gets larger and larger. The average costs keep going down and down and down. And that's not true of labor intensive technologies. I mean, there's a bit of that because there's learning curves, but it's not anywhere near as powerful. So once these digital technologies get to the point that they're scaled up to get the cost down so they're comparable and they're just going to go past. And what that means is that comparative advantage in labor intensive process-oriented manufacturing and assembly, which has been the kind of turbocharger of a lot of country's growth, isn't going to be as powerful. It won't happen overnight. But they're basically, we have a situation in which developing countries, if they're going to successfully grow at relatively rapid rates, they're going to have to engage with the global economy in a different way. And it probably means in services. And that has all kinds of implications for what you do domestically, whether it's in education or infrastructure or whatever, that enables you to search for ways of connecting to the global economy, mean commercially productive ways to connect to the global economy. I don't think that's an insoluble problem, but it's not a problem where that has the same status as the Asian development model, because by now everybody knows what that one is. So that one's going away and another one's coming, probably, or hopefully, and we don't really know what it is. So that's the big challenge. And as an aside, if you don't engage with the global economy and you don't have that ability to sell into a big market and specialize, you can't grow fast. If you're selling to yourself, meaning to your own economy, then domestic demand is small and relatively small in scope. So you don't, you really need the global economy, both dimensions, demand and technology, to get this done. The flip side of that, and I don't want to be long winded, is they're starting to be studies that suggest that another batch of digital technologies, those that support e-commerce platforms and fintech platforms, and especially when those platforms are the center of an ecosystem. The way the Chinese think of them is that the platform is the architect of an ecosystem. An ecosystem means just what it means in Silicon Valley and other places. It's a bunch of complementary resources that are easily available that make it easy to innovate, start businesses, not have to do everything yourself, because you can, you know, it's in the environment accessible and you can acquire it. And those platforms, you know, have probably reasonably powerful growth, promoting characteristics, but they have very powerful inclusion characteristics. You know, so mobile payments, for example, is being used with the pile of data that it generates to do, to extend credit. I mean, these are algorithms, right? So there's machine learning applied to big piles of data, and essentially make people who don't have any collateral, people or businesses that don't have any collateral and are anonymous, essentially, with respect to the traditional banking system. You can extend credit to them on reasonable terms and make a profit and not have big loan losses and a whole lot of other things. And we're just at the start of that journey. So I can foresee a future in which these digital aspects of the digital technologies aren't really just a threat, but a whole bunch of, you know, as yet not completely discovered opportunities. Because I don't think that China experience is unique. I mean, it's true, their infrastructure is better built out than a number of other places. But, you know, I'd be astonished if we don't see this, you know, with real differences because of context, the same things in India and Indonesia. We already see it in Latin America. There's a big rapidly growing e-commerce platform there that's also in mobile payments and so on. So I think, I think, and African countries themselves have innovated in mobile payment systems, given that the technology and the infrastructure they've had available. So I think there's some promise there, whether it's big enough to have another golden age of developing country growth, I think it's just too soon to tell. Well, another dimension of technology relates to what I'll call information management communication with the large economies of scale. These platforms, these networks that we've learned about in movies like The Social Dilemma have what I'll call novel or interesting new characteristics. And the question of who becomes the arbiter of what's distributed. There is a sense in which fomenting critical discourse with multiple channels allows a democracy to make up its mind. But if everything is funneled through one channel, we might call metaphorically the editorial director on that channel has a very powerful concentrated role in society. How do you imagine shaping those systems? And especially with the advertising model that was brought up in The Social Dilemma, where using the filter bubble as Eli Pariser labeled it, to reinforce people's priors to increase their enthusiasm and their duration and their participation and their invitation to others to join the network creates more profit. But what it, in the parlance of The Social Dilemma, it may help foster a civil war by polarizing people in directions that make it almost intractable to compromise. Well, these are deep problems. So, you know, again, I like to try to break them down. You know, I remember data rights and security and all that. That is, you know, let me date, big databases are kind of co-created by the owner of the platform and the users of the platform. Most people, I think, are coming around to the view that it doesn't really make sense to try to decide who owns it. But it does make an awful lot of sense to decide rights. And the reason this is such an important issue is because this data is about people and it can be misused. So, getting the trust mechanisms, legal structures, rights embodied in regulation and or law, and security arrangements so that third parties, you know, who may or may not get access to the data either because it's sold to them or because they just steal it. That's a set of issues. People are on top of it. It's, I think, will come out in a reasonably sensible place at some point. You know, there's data on this now, there's studies. You know, users actually learn over time who to trust, you know, what data they're comfortable sort of, you know, coughing up and so on. They probably learn more about how it's used over time and so on. But that's one big, I mean, if we don't solve that, let me put it in a negative, if we don't solve that problem, then a lot of the benefits that come from having big pools of data that are responsibly used to do productive and socially useful things like extend credit, you know, low income people, like, you know, find good credits and people who are being excluded because, you know, on average, you're in the good risk or something like that. It's, so I think it's important. Ironically, that's the easy one. I mean, it's not easy at all, but it's easier than the other one. And the other one is content. So I don't think anybody has a real solution to this, but so let me tell you what I see. So the Chinese, you know, in fact, any, you know, any, any a government system that, you know, seeks to sort of maintain order at all costs and understands how powerful the sort of communication channels are. I mean, Hannah, a rent wrote a book on fascism, you know, many, many years ago, and she basically said, and I'm not calling China fascist, by the way, it's she said, one of the most powerful tools in the in the fascist toolkit is taking control of the media, right? So that the communication system is under their control. It's very hard to maintain a regime like that, you know, if somebody is out on the corner uncontrolled sort of telling the truth about what's going on. The Chinese approaches that, you know, with, you know, their own version of what is good for society, which includes stability and not having internal wars and stuff, say basically the content of the in these communication channels, let's call it the internet, okay, needs to be subject to, you know, controls. Judgment has to be used. And that means somebody has to do that. And the answer in China is the government, right, or the party, whatever, however you want to describe it. So they don't miss words about it, right? There's not a lot of fussing around about free speech. It's not that they're against free speech, but they're against destructive free speech. And they get to decide what it is. So they don't really have a dilemma. Now, this may not, I mean, this may make a lot of people unhappy. And even relatively autocratic places don't go on forever. If, you know, if they're, you know, social dialogue, you know, that goes along with society is suppressed beyond a certain point, because there's a pretty universal value attached to that. The rest of us really don't know what to do, as far as I can see, because we're caught in a balancing act that we don't want to acknowledge. And that balancing act is the value that we attach to individual rights, especially things like free speech on the one hand, and the, and the value that we probably want to attach to social cohesion or, you know, collective rights, if you like. And when they're in conflict, we don't know what to do. And specifically in the internet, and social media, which is the focus of the, of attention, it doesn't make any sense to delegate, you know, content review to a private company, regardless of what their business model is, right? I mean, I think, you know, there are problems with a business model where you're selling people's data to advertisers. So I agree with that. But I don't think it's this problem. This problem is that, that there's nothing in the Constitution, or anything else, that says that there are the appropriate people to, you know, do this. But since nobody else has stepped up to the plate, I mean, I'm overstating it a bit. They're basically caught in the crossfire and being asked to do it. And they're struggling with it, you know, so they have a panel of, you know, wise people advising them, you know, so that they're not just kind of making it up in the office, you know, every day and so on. I mean, they're experimenting. And I think it's, it's largely well intentioned because they, they have, it took some battering, but I think they now understand how powerful the impacts are on political and social discourse and how, how they can be very negative. But let me skip to the bottom line. At some point, I think the government and, you know, has to step, the government and the courts, the legal system have to step up to this issue and recognize that, you know, the answer isn't, you know, whichever platforms invoke. I mean, what are we going to do? So, suppose tech, tech talk eventually beats Facebook, then do we hand the ball off to tech talk? I mean, it's just nonsense, right? These are big important social decisions that we have to make. And we need the government, the legal system, and kind of everybody involved but they're going to be tough choices because they are going as best I can tell. I don't see any way to sidestep this. They're going to involve restrictions on free speech. And you can see universities battling this through now. I'm so glad I'm not an academic administrator anymore, you know, because, because the same tension occurs, you know, at what point does the university's commitment to open dialogue start to be, have net, you know, net negative benefits in terms of the cohesion of the community that they hope to foster? And once again, I mean, I, I pose that not because anybody did anything silly, but it's a really hard problem. The interesting, I guess, dilemma using the word in another context is that when you looked at a place like Africa or southern Asia and describe the influence that digital technology will have, the question is, how do you teach the population and who are the teachers given the newness of this challenge? And at some level, if you said we got to educate all the teachers to teach the younger generation to be ready for this challenge, I don't know if the teachers have assimilated the things that you're exploring. It's almost like science fiction. So the question is, is there a role for what I will call remote education things like courses that teach the teachers and teach the students and then the teachers augment with the interpersonal exploration that almost everything I see by the way about online education suggests that real human contact massively increases the participation and the duration of participation in online courses. If you have a teacher that you're answering to, if you have a mentor who's willing to discuss your confusions that you might call your emotional stamina for staying with it persevering and getting the fruits of all the learning goes way up. So how do you see bringing this technology to the challenge of education, particularly in the emerging countries? Well, I think of it, Rob, as a voyage of discovery. So we've learned that these technologies complementing in-person education and at times filling in gaps, it can be very useful. But you're right. I mean, we'll learn more about this from a whole variety of experiments, people and studies that psychologists and educators will do. So we'll kind of, not really stumble along, but we'll learn a lot as we go along that answers to questions that are A, important, and B, we don't know how to answer them. That said, I think that the technologies are, especially with the younger generation that kind of, you know, grows up using them somehow, are pretty, are potentially pretty powerful, you know, for the teachers as well as the students. There's unicorns now. I mean, this doesn't prove that point, but there's unicorns, more than unicorns in the education space. So these aren't little, you know, small experiments anymore. They're going like gangbusters. And to some extent, they're filling in quality gaps in places like India. But, you know, so we're kind of finding our way. But I think, you know, when the internet first, when the worldwide became available, you know, I think we correctly thought that it was democratizing because it basically with enough infrastructure that now seems to be being kind of built out globally, you basically have universal access to information. Right? Because it's all digitized and the cost of access, and it doesn't go away. And when A has it, and it gets transferred to B, then they both have it. So it's what economists call non-rival. It's got all these powerful characteristics that Paul Romer and others have described. And that's a wonderful thing. I mean, you know, that is empowering. And I think in the education sphere, as long as we don't slip up and get to the point, and I don't think it's going to happen where we think, gee, the digital technologies are a superior technology because they just aren't. They're in-person learning. Because I don't know how to describe it because it's not my field. But I see it in my own kids and others and my grandchildren, you know, they just, something goes on in the school when they're all there that doesn't go on, you know, when you're sitting in front of a screen. Social, non-cognitive development, this, you know, motivation that comes from a particularly inspiring teacher. So, you know, in the best evolution going forward, you'll have everything. You know, you'll have inspiring teachers, personal contact, motivation, curiosity, all the things that educators talk about that aren't just being able to do math and logic and whatnot. And then you'll have access to these resources. So, you know, Inet's in this business, you know, you have Michael Sandel and Bill Janeway and others. Robert Skedelsky and, yeah, a lot of Arjun Chang, all kinds of courses. Yeah. So, you've got a very rich menu of offerings that are well produced that are resources, so essentially available to the world as educational resources. I mean, I think, you know, I think it's great. I mean, in a sense, we could have done this before, but it's easier now that networks are faster, it isn't as clunky. But we needed a kick in the pants. I mean, I'll give you an example. You know, I've been away from Stanford physically for a long time. But in this spring, Dave Brady, who's there and I are going to conduct the experiment of, you know, having a course, which will be a hybrid. He'll be in the classroom and I'll be online. And at least some of the students will be in the room, we hope, what we don't know. But we wouldn't have even considered that, right? You know, including me, I just assumed that if I was on a different continent, my value as an educator to Stanford, you know, it dropped essentially to zero and would stay that way until I was back in the neighborhood. Well, Mike, I want to say to you that when I have the pleasure of being on screen with you, I always think of my young scholars, because you are such a model of humility and curiosity and unyielding curiosity. When I try to point to them as to who should inspire them to want to be an economist, you're one of the first people I think of. And today's conversation is a beautiful illustration of that. We toured across all kinds of cutting edge domains, dilemmas, corruptions, unknowns, and you engage imaginatively, humbly, and with what you might call a curiosity and imagination that illuminates and inspires hope. And I think there are a whole lot of leaders who can learn a lot from your example and the young people too. So thanks so much for being my guest. Let's really be with you. Thank you, Ron. And thank you for being- I wish we had more answers, so. That's a nice thing to wish for. But I love the fact that you're at the helm, along with Joe Stiglitz of the Commission on Global Economic Transformation, where we're trying to deal with all of the elements of disruption, globalization, migration, climate, technology, and so many of these facets of the challenge, even the historic financialization and the ongoing ramifications. And how would I say, in addition to your imagination, your spirit gives us leadership. Thanks, Steve. It was great to be with you.