Per reporter: Liang Hongliang Per intern reporter: Wang Siyu
The year 2020 is destined to go down in history because of its extraordinaryness.
The unprecedented changes in the world in a century and the new crown pneumonia epidemic have touched a profound adjustment of the international political, economic, scientific and technological, cultural and security patterns. At the same time, a new round of scientific and technological revolution and industrial transformation is booming, and the emerging new industries, new formats and new models have brought new opportunities to people.
Looking back on 2020 and facing 2021, we can't help but ask: in the face of change, how should the world unite and cooperate, overcome difficulties together, identify new opportunities in the crisis, and open up new situations in the midst of change.
Today, when science and technology are accelerating iteration and scientific and technological innovation is deeply affecting future development, we can't help but explore: how to further cultivate the spirit of science, enhance the original innovation ability, and strive to achieve more "from 0 to 1" breakthroughs.
At the beginning of 2021, the Daily Economic News launched the "Pinnacle Dialogue: See 2021" series of planning. In the first quarter, the Daily Economic News will have an exclusive dialogue with six Nobel Laureates to conduct in-depth discussions on issues such as world economic prospects and scientific and technological innovation.
On the first day of 2021, we bring an exclusive interview with Professor Edmund S. Phelps, winner of the 2006 Nobel Prize in Economics.
Edmund S. Phelps Image credit: Courtesy of the interviewee
In October 2006, the Nobel Prize Committee of the Royal Swedish Academy of Sciences announced that the 2006 Nobel Prize in Economics would be awarded to Edmund S. Phelps, an economist at Columbia University in recognition of his contribution to deepening people's understanding of the relationship between inflation and unemployment expectations.
The Nobel Prize in Economics jury pointed out that Phelps' research played a decisive role in the development of economic theory and the formulation of national economic policies. Professor Phelps' most important contribution is in the theory of economic growth, he is after Robert Solo, the analysis of the dynamic optimization path of economic growth, put forward the famous "golden law of economic growth", formally established the influence of economic growth theory, is one of the most important figures influencing the process of economics.
In this interview, Professor Phelps analyzes the core issues facing the current global economic recovery and explores the important role that income distribution plays in promoting efficiency and equity.
"I'm more worried about soaring public debt"
In the context of the global epidemic, countries have adopted measures such as lockdowns, work stoppages, and quarantines, basically stopping economic activities other than the production of necessities, and the economy has stagnated. The contraction in international trade and investment has further reduced global economic growth. At a time when global integrated large-scale production has become an important source of global economic growth, the short-term "shock" of some industries has affected the key nodes of the global supply chain and affected the normal operation of global production activities.
In response to this problem, Phelps said that in the United States, home production in U.S. industry has grown significantly as owners and managers want to avoid another shortage of overseas components. "We are now waiting to see if the new U.S. administration will put more pressure on businesses to make more use of locally produced parts than those manufactured overseas." He said.
In Phelps's view, America's attitude toward outsourcing and its overall attitude toward trade will largely depend on workers' satisfaction with their jobs and whether they can be treated fairly by the U.S. government.
"On the former, 'job satisfaction' in the U.S. has been declining from the 1970s to recent years," Phelps said, "and on the latter side, from the 1970s onwards, workers in the country's central region seem to have a growing sense that their wages have been stagnant while the incomes of the more advantaged have managed to continue to grow, as have stock prices." ”
The COVID-19 pandemic combined with global economic uncertainty has opened a new wave of monetary easing around the world. Many countries have joined a new round of "printing money" operations. Judging from the statement issued by the year-end meeting of the major central banks represented by the Federal Reserve, it can be judged that global monetary policy will maintain a super-loose tone in the coming period. Looking at the global market, interest rates in the United States, the United Kingdom, Canada, Europe, and Japan remain at historically low levels.
For the new round of global monetary easing, the market is worried that it will bring potential risks and uncertainties to the recovery of the global economy. But Phelps argues that monetary easing does not pose a risk to the recovery.
"Of course, persistently low interest rates for the next year or so could lead to higher inflation. And, in that case, the stock market price will fall and some investment plans may be put on hold. But my guess is that by then most of the recovery is complete. ”
Phelps added: "What I'm more worried about is actually the rocket-like spike in public debt. ”
At present, the level of public debt in some developed economies has reached new highs, and they are deeply trapped in the dilemma of monetizing fiscal deficits. As the contradictions of high deficits, high debt, and low economic growth rates in developed countries become more prominent, the distorted allocation of market prices and resources has brought about long-term negative impacts.
In the face of many challenges and dilemmas facing the global economic development, the trend of asset prices such as stocks, bonds, and gold has attracted the attention of global investors. Phelps argues that even in the best-case scenario, the price of future assets is shrouded in huge "Knight's uncertainty." "Therefore, it is very inappropriate to take a risk of making a prediction on asset prices."
Knight's uncertainty refers to risks that cannot be measured or calculated. Proposed by economist Frank Knight. In his famous book Risk, Uncertainty and Profit, he defined risk and uncertainty, arguing that risk is uncertainty that can be calculated probabilities and expected values, while risk that cannot be pre-calculated and evaluated is uncertainty.
"But what I want to say is that as long as the West remains at a long-term stagnation of unusually slow growth, stock prices and the like are much higher than in the 1970s to 2000s in the medium term." Phelps said.
Economic change requires overcoming obstacles
Looking to the future, the process of economic recovery is inseparable from the joint cooperation of capital, market, labor, innovation, supply chain, industrial chain and many other factors. Professor Phelps believes that for countries around the world, innovation is undoubtedly an important driving force for rapid economic and social development.
This view is also reflected in Professor Phelps's book "The Great Prosperity: How Mass Innovation Brings National Prosperity" - social institutions, scientific inventions, and maritime discoveries are not the root causes of national prosperity, on the contrary, the spirit of innovation that penetrates into the grassroots of the masses is the lasting driving force for economic take-off.
"I believe that the natural tendency in any country is to explore, create, innovate and develop what it discovers." He also stressed to every reporter that historical experience proves that in some countries around the world, economic change will be hindered by various obstacles and need to be overcome.
"Another problem is that in some countries, people somehow lose the will, curiosity or risk-taking to try to create new approaches or new things." Phelps said, "I hope I am wrong, but it seems to me that some countries in the West are no longer the countries that were once imaginative." ”
Looking forward to the future, we must not only discuss the recovery process of the global economy from the perspective of the overall situation, but also analyze the important role played by income distribution in docking demand and supply side from an individual perspective. As the pandemic reshapes the global economic landscape, can we achieve a relatively fair income distribution through rational resource allocation, so that more people can share in the fruits of economic development?
Much of Professor Phelps' work in economics is devoted to creating and using policy tools to achieve greater equity in a country's economy. "Most of my energy is focused on the tax structure. I am also particularly interested in subsidizing the employment of low-wage workers in each company. ”
Professor Phelps observes that in the United States, people are now beginning to realize the rationality of government measures to raise the lowest wage rate.
"But it's important to avoid using bad tactics to achieve good ends." In terms of means of raising incomes, Professor Phelps also cautioned that it should not be too "simple and crude": "Disappointingly, in the United States, many non-economists envision legislation to force employers to pay higher wages. Without realizing it, this rough approach can cause problems. ”
Note: The interview content in this article only represents the personal views of the interviewees, does not represent the position of the Daily Economic News, and does not constitute investment advice.
Reporter: Liang Hongliang
Intern reporter: Wang Siyu
Edit: Liang Hongliang
Vision: Zou Li
Typesetting: Wang Siyu Ma Yuan
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