America seems immune to global economic problems

In his latest appearance on the New York-based edition of Bloomberg Surveillance, London Business School's Professor Richard Portes, gave his views on the state of the US economy before the elections on November 5th.

Co-hosts Paul Sweeney and Tom Keene asked Professor Portes what he thought was the particular nature of the "new productivity" in the context of today's US economy, meaning, variously, the introduction of new technologies, and the decentralisation of the workplace.

Describing the new productivity as a "short-run blip", Portes said that if one looks forward to seeing reasons for sustained productivity growth "it's going to take the form of Artificial Intelligence".

"But," he added, "there is so much controversy about whether that will boost productivity growth that I think it is very difficult to conjecture. Otherwise, the underlying sources of productivity growth in the US and elsewhere haven’t changed very much."

Bloomberg's Keene observed that the fear in the upcoming election, "particularly led by the Republican Party candidate", is that "[the Republican candidate] is simply not participating in a detailed discourse on the economy.

Referring to the book, Power and Progress, Our 1000-Year Struggle Over Technology and Prosperity, by Nobel Laureates Simon Johnson and Daron Acemoglu (who received an Honorary Doctorate from LBS in 2018), Keene notes a principal theme of the book, that technology essentially benefits the elites.

How do we reshape the path of innovation to create truly shared prosperity and heal the rift in the US and other economies between the haves and have-nots?

Noting the comments from an earlier commentator on the programme, Chief Economist with Wolfe Research, Stephanie Roth, Portes said he fundamentally agreed that the US economy is in "pretty good shape". "I think though that [Roth] is perhaps too sanguine about the consequences of a Trump election. I think that Trump would be a disaster. That said, to answer your question, bringing the two halves of the country together is just a huge challenge – and certainly not feasible under a Trump Administration. Whether Kamala Harris could do it is an open question. The divisions are so great that it is not good and these divisions have only been stoked further by the Make America Great Again (MAGA) narrative. It's hard to see this aspect of the US economy turning around."

Commenting on the recent closure and job loss announcements made by car manufacturer, VW, Bloomberg's Paul Sweeney asked Professor Portes about the health of the German economy.

"Looking at the German economy just now, it's a disaster area and France is not doing so well either. Germany is clearly going into recession and they desperately need fiscal stimulus, but they have this so-called 'debt brake', which effectively says that they can’t run a budget deficit. This is absolutely crazy because they have a comparatively low debt-to-GDP ratio and there’s plenty of room for fiscal stimulus, but the Federal Minister of Finance Christian Lindner remains firmly opposed. It is hard to see what might happen next given the German coalition's disunity and declining consensus."

Turning to France's economic situation, Portes remains bleak in his assessment. "France is also in trouble because of its poor fiscal position which is not helped by the messy political environment that has been created by the elections earlier in the year."

Overall, from an eurozone perspective, Portes said that the "two motors of the European economy are misfiring".

For the full interview with Professor Richard Portes, click here