DRAFT: Review of Nouriel Roubini: Megathreats: Ten Dangerous Trends Þt Imperil Our Future, & How to Survive Þem
DRAFT: Review of Nouriel Roubini: Megathreats: Ten Dangerous Trends Þt Imperil Our Future, & How to Survive Þem
2022-10-26 We
DRAFT: Review of Nouriel Roubini’s Megathreats:
The book—Nouriel Roubini’s Megathreats: Ten Dangerous Trends That Imperil Our Future, & How to Survive Them <https://www.amazon.com/dp/031628405X/> is written in Nouriel's “Dr. Doom” persona—that does sell, and sell very well:
Debt spirals and crises,
their amplification by our very limited societal private-sector and public-sector ability to deal smoothly with large-scale bankruptcy situations,
the increased costs of caring for an aging population,
overreliance on an easy-money cure for “secular stagnation”,
threatening stagflation,
our continued failure to design a stable international financial system,
the threatened loss of many of the benefits of the division of labor via a retreat from globalization,
out-of-control AI hacking our brains to our detriment,
the New Cold War between China and the U.S.A.,
and global warming.
These are indeed megathreats.
And Nouriel doesn’t even mention:
democracy-in-decline,
rising klepto-plutocracy, or
the increasing mismatch between our system of property with the incentives it generates and the requirements for mobilizing humanity’s anthology intelligence for our collective benefit.
But while the “Dr. Doom” persona makes the book arresting and indeed essential reading for people who want a guide to point them to what our problems are, the same characteristics that make it arresting also make it a not very good guide to any realistic assessment of what we do indeed face.
So, in my rereading, I turned back to the final chapter, which is Nouriel at the most optimistic he allows himself to be—chapter 12: “A More ‘Utopian’ Future. I did so looking for some cheer. But I did not find any. The problem is that Nouriel finds that he can only become optimistic by ceasing to be realistic.
Nouriel writes:
High-powered economic growth… say, between 5 and 6 percent GDP sustained over time in advanced economies… pay[s] down the debts that threaten us… generates resources that can help us tackle expensive public projects to forestall climate change, aging… tech unemployment… future pandemics. It reduces political tensions and strife. Higher growth is driven to a great extent by technological innovations…. Innovations might create cheap energy in large quantities without emitting greenhouse gases…. I marvel at an accelerating pace of biomedical discoveries…. DeepMind’s AlphaFold… augurs well for accelerating progress against… diseases…. Technology that accelerates growth at a rapid pace is a key ally…
These will not solve all of our problems:
Replacing humans with robots will still tend to increase inequality, culminating in widespread structural tech unemployment. Many people whose jobs vanish will end up earning smaller paychecks for less satisfying work. That has happened to factory workers in the United States and Europe, and their pain is real…
But they will solve many of them. Indeed:
Sluggish growth and inequality spur populism, and populism stirs economic nationalism. Strong, inclusive, and sustainable growth keeps both trends in check…
And such growth would recenter the world and restore to it a unified commitment to extending peace, prosperity, and democracy:
Advanced industrial states and successful emerging markets. Their prosperity will beckon to countries wobbling…. Western values would likely prevail…. A rejuvenated Western system would counteract calls for deglobalization and protectionism…
I think Nouriel is right. This would indeed solve our big problems or reduce them to little problems. This would give us the resources to compensate losers from change, and to deal with all those of our problems that can be solved via resource mobilization. Moreover, the better technology we would gain in the process would make most of our other big problems. solvable as well. 5% per year real national income growth in the global north would indeed be a panacea.
But the prospects for 5% per year real national income growth—through some combination of immigration and productivity growth acceleration—are very dim indeed. In the global north, even moderate rates of immigration trigger forces that lead to perceive immigrants as threats rather than helpers. Global-frontier productivity increase at a rate of more than 2% per year requires institutions that we do not know how to build.
It is strange. We know that 40 years from now frontier level of global technology will support an economy between 50% and 100% more productive than we are today. So why not set a goal: Do everything we will do over the next 40 years to boost productivity, but do it all in 20 years. Start next January. In January, do whatever you would normally do to boost productivity in January and February, and do so by bringing productivity-boosting activities forward from February into January and pushing activities that do not boost productivity off from January into February. Then repeat.
Yet nobody believes that anything like this is possible. There are diminishing returns to investment—diminishing returns of all kinds. There are limited capacities for absorption and reconfiguration. There is Fred Brooks’s Mythical Man Month: if you double the number of programmers devoted to a project, you do not halve the time needed to finish, but rather you find that the time needed to finish is significantly greater than if you had just left the situation alone. There needs to be time: time to experiment, observe, reformulate, rejigger, and deploy. And then to experiment again, and restart the cycle.
But should such diminishing returns be an insurmountable obstacles? Perhaps, when global-frontier productivity growth was 2% per year, democracies were stable, and there were no civilization-shaking, urgent problems like global warming far closer than horizon, we could be satisfied with 2%/year global-frontier technology growth. But now we do not een have that—my forecast is 1% per year. We have global warming that we have not dealt with and need to. And our democracies appear very unstable.
Some Super-Sputnik-Moment effort seems to be called for—that is the message I get from Nouriel’s book. But what effort? By whom? And how?
I spent a good deal of my career in large corporation land. I saw very little investment in productivity. I saw much investment in mergers and acquisitions, defense of IP, reduction of tax liability, and creation of "moats" to defend markets. Much "productivity investment" was defined as shifting production to cheaper countries which had even less capital assets per unit. Investment in research and development atrophied. Productivity investments were "too slow" to matter. "Too slow" because they would not increase executive compensation quickly enough. Perhaps this is part of the problem.
" is written in Nouriel's “Dr. Doom” persona—that does sell, and sell very well:"
OH NOES! We're all going to die! Basically Nouriel is the guy who has predicted 11 of the last zero world-ending apocalypses, is he not?
"Debt spirals and crises,"
People! If all else fails, you can monetise the debt! Rich people hate it, but if the choice is between starving people and a radical change in the designated arbitrary unit of pricing, who cares? (Rich people care, that's who cares.) South America never dials in their inflation, but they do know how to monetise the debt, which is why Argentina hasn't grown like we would want, but they are also not Zimbabwe - or the Congo.
"... the ten-dollar hamburger - we may be headed for the 100-dollar hamburger, but that's merely a nuisance as long as there is plenty of hamburger to go around." (<--- I haven't got the quote exactly correct.)
a) "their amplification by our very limited societal private-sector and public-sector ability to deal smoothly with large-scale bankruptcy situations," b) "our continued failure to design a stable international financial system," c) "threatening stagflation,"
a) We have a very limited ability to deal smoothly with large-scale bankruptcy situations because the people who own the large institutions have lots of money and work hard to make sure their particular national government cannot deal with the situation if their institution goes bankrupt so that their national government will be leery of controlling/regulating the large institution and will also move heaven and earth to pay off the large institution's bad debts when it all goes wrong, preferably with a small profit for the people who control the wrecked institution. There's a simple solution for this though: telling the large institution to go fuck themselves and regulating them anyway, or liquidate ownership thoroughly when the giant institution goes toes up. The Obama administration, following in the footsteps of the Bush administration achieved a total face plant & complete clusterfuck on this score.
b) The historical record says there's never been a 'stable international financial system', merely more stable situations when the world is in a growth spurt. The 1880-1890's did not involve stable financial situations - neither did the 1920's. The closest you get is the 1950's and 1960's when taxes on rich people were very high and banking was stiffly regulated. I do not think Nouriel means super-strict regulation of banking, I think he means 'Argentina, Weimar, Zimbabwe....GOLLLLLL - {cough} CRRRRYYYYYPPPPPPTTTTOOOO'. Which doesn't accomplish anything in terms of financial stability but does drives sales to people who mine things, like gold and bitcoin.
c) I've been listening to Boomers BS'ing about the Boogieman of stagflation for ... it seems like my entire life. I have to say: a couple of rotten quarters in 1975 is not and should not be the basis of an entire economic policy. If the economy is contraction, but the previous quarters wages are still rising and/or the central bank slams on the brakes (to create the contraction to force a demand collapse to 'match supply' so economists don't have to pay an extra quarter or two for a pack of bubblegum) then that's a stagflation condition. If you remember the last quarter of 2008 and the first quarter of 2009 the economy was in severe contraction (economic contraction) and businesses started sacking people as fast as they could (rising unemployment) and they started repackaging all their products to sell a given shrunken unit (SKU #) for the same price (rising inflation, or in this case shrinkflation), which is stagflation. No one mentions that particular episode of stagflation, because they are not making serious statements when they drag the stagflation boogieman out of the closet for economic Halloween. If they making serious statements, they'd just come out and say that stagflation is an inherent transitory phenomena (DUH) of harsh contractions that are caused by negative supply shocks or negative monetary shocks.
Nouriel is just spewing the usual apocalyptic crap here.
"the increased costs of caring for an aging population,"
How much of an increased cost? 2% of GDP? I have to say it's very weird that on the right you have these old guys going on about how terrible that people (like these old guys) are aging (improved medical technology leading to longer lives is going to result in more old people - that is what you're trying to do) and how terrible it is that there are all these old people hanging around (like these old guys who are complaining). The solution always seems to be that we should inflict harsh financial pain on older people (the ones over there, not the ones complaining) rather than raise taxes on *gasp* the older dudes complaining about too many old people. After enough of this, I have begun to suspect this is an indirect way to go all Jordan Peterson and whine that there aren't enough young hot chicks around to mack on. It's either that or a way to complain that the heavy urbanisation forced by the economic policies the old guys push for have result in drastic population declines in rural areas that they old dudes do not, in fact, live in. At any rate, I don't see any particular reason to think an aging population is going to result in massive disaster, absent a Children of Men scenario ('magic').
"out-of-control AI hacking our brains to our detriment,"
Feel free to advocate for privacy regulation, anytime here would be good.
"the threatened loss of many of the benefits of the division of labour via a retreat from globalisation,"
Given that the previous complaints that there were not enough employed people (or actually employed men), a re-division of labour from slightly reduced globalisation is perhaps a minor positive, at least in rich countries, or in poor countries that were not previously benefiting from globalisation. On the other hand, if one were to be merely complaining about a reduction in benefits (profit margins) from less Chinese money... too bad. For you.
"the New Cold War between China and the U.S.A."
How is this any different from the New Cold War between the US and the RF, which I hear is a thing right now? If I look up Nouriel's twitter is it going to turn that he's very concerned about Putin's prospects and he can't believe a comedian who wore a dress in a skit on a comedy show is kicking Putin's ass and that such an event heralds the fall of civilisation? (It does not herald the fall of civilisation, anymore than a woman in pants and a suit jacket heralded the fall of civilisation in the period 1890-1960.
"and global warming."
He finally found a serious problem to be concerned about! Yay! I know, maybe we could tax rich people to help fund solutions and then the problem would be reduced and then we could go back to worrying about how unstable the international financial system is.
"overreliance on an easy-money cure for “secular stagnation”"
'Secular stagnation is terrible, and we must keep it in place using any means to hand, so that Howard Schultze isn't upset that his coffee shop chain doesn't suffer the terror of unionisation. Or the terror of video games.'
"and there were no civilization-shaking, urgent problems like global warming far closer than horizon, we could be satisfied with 2%/year global-frontier technology growth. But now we do not even have that—my forecast is 1% per year. We have global warming that we have not dealt with and need to."
Generally - we can spend lots of money on government R&D and we can engage in passing some legislation and re-allocating our money toward better designed education system to educate people (as Catherine Rampbell says, correctly) to work on the R&D (read: reduce the money wasted paying ridiculous salaries to people who work in the exciting field of collegiate administration and loan servicing) and we can do it anytime we feel like it. We did it in 1916-1917 (and actually, we also did it starting in 1862), and also 1939 and 1959. No reason we can't start tomorrow.
Unfortunately, we spend all our time catering to the cranky complaints of old dudes who say that there are too many old people (and the chicks, they are apparently not hot enough), too many people playing video games and also we're not supplicating the Chinese Communist party enough.
elm
nouriel can reduce the 'excessive' population of old people by exactly one any time he feels that he might be a burden on society