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Michael Spence

Michael Spence

Nobel Prize in economics, Economics professor at Stern School of Business NYU, author of The Next Convergence

Articles by Michael Spence

­Regime Change in the Global Economy

8 days ago

After helping to drive decades of development and modernization in emerging economies, the twentieth-century economist W. Arthur Lewis’s Nobel Prize-winning growth model can now be applied to the entire world. Unfortunately, what it shows is that we are heading into a period of deep uncertainty and supply-constrained growth.

MILAN – In 1979, W. Arthur Lewis received the Nobel Prize in economics for his analysis of growth dynamics in developing countries. Deservedly so: His conceptual framework has proved invaluable in understanding and guiding structural change across a range of emerging economies.
­Regime Change in the Global Economy

Ji Haixin/VCG via Getty Images

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Is Strategic Cooperation with China Possible?

24 days ago

From climate change and rising inequality to the pandemic and the digital revolution, there is ample common ground for rival powers to pursue mutually beneficial forms of collaboration. Unfortunately, the opposite has happened, raising doubts about the current recovery and the world’s future health and prosperity.

MILAN – Looking at the economic landscape as 2021 draws to a close, one cannot help but notice the emergence of new obstacles to a robust recovery. The United States, Europe, China, and others face a growing list of remarkably similar short- and longer-term challenges.
What the US Misunderstands About Russia

Peter Klaunzer/Pool/Keystone via Getty Images

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Lessons from Digital India

November 25, 2021

Over the past five years, India’s mobile-internet and digital-services ecosystem has grown rapidly, owing to the pioneering efforts of large private-sector players. Although this industry-led growth is somewhat unusual, it offers a model that could benefit other developing countries.

MILAN – Over the past five years, India has experienced an unusually rapid expansion of digital connectivity and access to services. This has had a positive impact on the inclusiveness of economic growth; on efficiency and productivity in retail, supply chains, and finance; and on entrepreneurial activity.
Whipping Up America’s Inflation Bogeyman

Al Seib Los Angeles Times via Getty Images

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Why Are Supply Chains Blocked?

November 3, 2021

When forecasts are not specific enough to be actionable, the supply response cannot adjust in a timely or efficient manner. And because there is relatively little slack built into global supply chains, large deviations from normal patterns produce delayed responses, shortages, backlogs, and bottlenecks, like those today.

MILAN – Supply-chain disruptions are severely hampering the global economic recovery. It is a strange situation in many ways. The types of products and services affected by delays and shortages – including a wide range of intermediate goods, from commodities to semiconductors, and the final products that depend on them – resemble what one would see in a wartime economy. And the disruptions took us

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Betting on Italy

September 30, 2021

Italy has endured more than two decades of slow economic growth and below-potential performance. But two factors now seem to be changing the game: the creation of a credible and effective government and a newfound willingness on the part of the EU to provide robust fiscal support.

MILAN – On September 18, I had the privilege of participating in the National Meeting of the Cavalieri del Lavoro, Italy’s federation of business elites, where 25 entrepreneurs are recognized each year for their leadership, innovation, and contributions to society. The mood was strikingly upbeat.
China’s Risky Business Crackdown

Qilai Shen/In Pictures via Getty Images

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How Great Powers Should Compete

June 25, 2021

Both China and the West espouse some version of multilateralism. But unfettered strategic competition, together with relentlessly negative rhetoric, precludes effective multilateralism, not least by disrupting trade and technology transfer – a crucial driver of development.

MILAN – At the recent G7 and NATO gatherings, China was singled out as a strategic competitor, a calculating trading partner, a technological and national-security threat, a human-rights violator, and a champion of authoritarianism globally. China denounced these characterizations, which its embassy in the United Kingdom called “lies, rumors, and baseless accusations.” The risks that such rhetoric poses should not be underestimated.

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Vaccine Licensing, Production, and Global Distribution

May 14, 2021

Although much of the current COVID-19 vaccine debate is focused on the question of waivers for intellectual-property rights, the transfer of knowledge and technology is only the first part. Equally important are global manufacturing capacity and pricing, either of which could still pose a problem.

MILAN – At this point in the pandemic, the key question is whether vaccine production can be ramped up quickly enough to allow most people to be vaccinated relatively soon. But implicit in that question is another: whether and under what circumstances it is appropriate to suspend domestic and internationally agreed intellectual-property rights. The matter is being discussed in the World Trade Organization now that US President Joe

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High Growth Sectors in the Post-Recovery Decade

April 29, 2021

The post-pandemic economy could well be defined by the return of robust aggregate productivity growth after 15 years of relative sclerosis. Between the increased availability of powerful new technologies and aggressive fiscal policies, the stars are aligned for a cascading sequence of rapid recovery around the world.

FORT LAUDERDALE – A multispeed economic recovery is underway, reflecting the significant cross-country variations in containing the coronavirus and acquiring and administering vaccines. But notwithstanding these differences in timing, there will soon be a cascading sequence of rapid recoveries around the world.

Build Back the State

Getty/Bettman 

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Avoiding a K-Shaped Global Recovery

March 24, 2021

While the United States and other advanced economies rush to vaccinate their populations and gear up for post-pandemic booms, developing countries and emerging economies continue to struggle. Fortunately, rich countries could help everyone else – and themselves – at little to no cost.

NEW YORK – The United States expects to “celebrate independence” from COVID-19 by Independence Day (July 4), when vaccines will have been made available to all adults. But for many developing countries and emerging markets, the end of the crisis is a long way off. As we show in a report for the Institute for New Economic Thinking’s (INET) Commission on Global Economic Transformation, achieving a rapid global recovery requires that all countries be

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The Shape of Global Recovery

March 17, 2021

The accelerating rollout of COVID-19 vaccines in many advanced economies has set the stage for rapid recovery in the second half of this year and into 2022. Although growth in digital and digitally enabled sectors will level out somewhat, high-employment service industries will ride a wave of pent-up demand.

MILAN – COVID-19 vaccination programs are gaining momentum as production capacity ramps up, and as disorganized and tentative distribution and administration procedures are replaced by more robust systems. A task of this size will surely encounter additional bumps along the road. But it is now reasonable to expect that vaccines will have been made available to most people in North America by this summer, and to most

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Winners and Losers in the Digital Transformation of Work

February 25, 2021

Advances in artificial intelligence and machine learning have again raised fears of large-scale job losses. And while labor-market adaptation is likely to stave off permanent high unemployment, it cannot be counted on to prevent a sharp rise in inequality.

MILAN – Perhaps no single aspect of the digital revolution has received more attention than the effect of automaton on jobs, work, employment, and incomes. There is at least one very good reason for that – but it is probably not the one most people would cite.

No Time to Waste

PS OnPoint

John Keatley 
Free to read

Growth Is Not Enough

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Biden’s Vaccine Challenge

January 25, 2021

In confronting the COVID-19 crisis, US President Joe Biden will avoid many of his predecessor’s mistakes, not least by heeding the advice of scientific experts. But, unless Biden also enlists adequate management, operations, and logistics expertise, even his best-laid plans may go awry.

MILAN – US President Joe Biden’s plan for ending the COVID-19 pandemic and hastening the economic recovery is well designed and comprehensive, with clear objectives and priorities. But implementing it will not be easy, not least because it depends on rapid vaccine deployment.

Liberation

Joe Raedle/Getty Images

History at the Barricades

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An Interview with Michael Spence

January 5, 2021

This week in Say More, PS talks with Michael Spence, a Nobel laureate in economics, senior fellow at the Hoover Institution, Professor of Economics Emeritus, and former dean of the Graduate School of Business at Stanford University.

Project Syndicate: After the US presidential election, you and David W. Brady concluded that the record-breaking voter turnout was “a sign not of a healthy democracy but of an anxious one.” One factor driving that anxiety is steadily rising income and wealth inequality, which a moderate wealth tax, you wrote in 2019, could partly address. Because the Senate could remain in Republican hands – pending today’s runoff elections in Georgia – President-elect Joe Biden’s ability to change the tax code may

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The Pandemic Public-Debt Dilemma

December 8, 2020

Much of the conventional wisdom about how governments should manage the COVID-19 economic fallout is perfectly appropriate for advanced economies, but dangerous elsewhere. Even if developing and emerging economies could simply borrow and spend more to weather the storm, doing so could jeopardize their long-term economic prospects.

MILAN – Increased government spending during the pandemic is essential for managing public health, supporting households that have lost income, and preserving businesses that otherwise may fail and thus cause longer-term damage to output and employment. Kristalina Georgieva, the managing director of the International Monetary Fund, has urged policymakers to “spend but keep the receipts.” Likewise,

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The State of America’s Disunion

November 23, 2020

The 2020 US presidential election followed a pattern very similar to the contest in 2016, with narrow margins in a few key counties determining the outcome in battleground states. And the record-breaking turnout on both sides was a sign not of a healthy democracy but of an anxious one.

MILAN/PALO ALTO – In the US presidential election this year, President-elect Joe Biden received 79.8 million (51%) votes, Donald Trump received 73.8 million (47.2%), and the remaining candidates received 2.5 million (1.7%). Though votes are still being counted in California, New York, and Illinois, this year’s turnout has reached a record high for the post-war period.
Yet, owing to America’s Electoral College system, which allocates

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Who Will Win the US Presidential Election?

October 31, 2020

If the latest polls are any indication, Joe Biden is on track to win the popular vote in the upcoming US presidential election by a substantial margin, and an Electoral College reversal of that outcome, like in 2016, is unlikely. But the polls have been wrong before, including in 2016.

MILAN/STANFORD – In late July, opinion polls clearly indicated that US President Donald Trump had lost ground to Joe Biden, his Democratic challenger in the upcoming presidential election, owing primarily to his administration’s mismanagement of the COVID-19 pandemic. Since then, Trump’s fortunes have not improved; if anything, they have deteriorated further. Now, Trump appears set not only to lose the popular vote on November 3, but

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Minding the Digital Economy’s Narrowing Gaps

September 30, 2020

By collapsing physical distance, the digital economy has overcome one of the largest traditional hurdles to market formation and efficiency. But data-driven digital markets come with their own unique informational challenges, demanding further innovation not just by entrepreneurs but also by policymakers. 

MILAN – Informational asymmetries between buyers and sellers have long been known to impair market performance. But thanks to digital technology and the large, accessible pools of data that it generates, these informational gaps are closing, and the asymmetries are declining.

The Way We Could Live Now

PS OnPoint

Getty Images

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COVID-19 Is Beating Trump

August 3, 2020

US President Donald Trump’s mishandling of the COVID-19 crisis has depleted his support among independents and moderates – the groups that will decide the November election. And with the virus raging out of control, he has no good options.

MILAN/STANFORD – Given the stark differences between US President Donald Trump and Joe Biden, his presumptive Democratic challenger, the outcome of the November presidential election will have far-reaching implications not only for the United States, but also for the rest of the world. So should we brace for four more years of Trump, or is change coming?
In today’s highly polarized environment, committed voters from either party are unlikely to switch sides. But there are too few

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Florida as a Developing Country

July 2, 2020

During the first waves of the COVID-19 pandemic in Asia and Western advanced economies, there was a clear pattern of lockdown, containment, and gradual economic reopening. But now a third pandemic wave has brought a new, more disturbing pattern to both developing countries and major US states.

MILAN/HANGZHOU – The COVID-19 pandemic has arrived in waves, starting in Asia, where it quickly spread from mainland China to South Korea, Hong Kong, and Taiwan. These governments all reacted quickly with aggressive tracking, tracing, and containment programs, and China induced a massive but short-lived economic contraction to stop the virus more or less in its tracks.
Meanwhile, a second wave, now in its middle to late stages,

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Graphing the Pandemic Economy

June 1, 2020

HANGZHOU/MILAN – COVID-19 is an unprecedented challenge for human society and the global economy. The pandemic has already taken more than 360,000 lives worldwide, and inflicted massive negative shocks on incomes, output, and employment. The challenge for policymakers is to strike a proper balance between containing the virus and creating the conditions for economic recovery.That is no easy task. While key measures such as testing, contact tracing, and social distancing happen to align well with both overarching goals, measuring real-time progress in each dimension is difficult. Direct measures like GDP tend to arrive with a significant lag, which makes it harder to determine when to reopen various economic sectors and activities.The Mobility WindowFortunately,

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COVID-19 and the Trust Deficit

April 22, 2020

PALO ALTO/MILAN – With the world in the grip of a deadly, disruptive pandemic, it should be obvious that scientific, medical, economic, political, and other varieties of expertise are crucial to addressing the attendant health, economic, and psychological effects. Unfortunately, what should be obvious is not.
The problem, as we warned back in 2012, is that we are living in an era of policymaking paralysis. “Government, business, financial, and academic elites are not trusted,” we wrote. “Lack of trust in elites is probably healthy at some level, but numerous polls indicate that it is in rapid decline, which surely increases citizens’ reluctance to delegate authority to navigate an uncertain global economic environment.” Change those last words to “navigate a

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The Priority for the Social-Distancing Period

April 1, 2020

With COVID-19 quickly spreading around the world, much of the attention has correctly centered on the need for social distancing to slow transmission of the virus. But limiting human interactions should be regarded as merely the first step in a more comprehensive targeted strategy.

MILAN – The coronavirus has a chokehold on the global economy. Like many friends and colleagues in China, I, too, have been locked down, along with the rest of Italy. Many of my fellow citizens in the United States are now in the same situation; others around the world will follow suit soon enough.
Insuring the Survival of Post-Pandemic Economies

Getty Images

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Can China’s Economy Withstand the Coronavirus?

February 29, 2020

The COVID-19 epidemic’s tail risks are significant and frightening, but as of now, they do not seem particularly likely to materialize. Instead, the outbreak’s economic consequences will probably be substantial but transitory.

MILAN – The new coronavirus, COVID-19, that emerged in Wuhan, China in December has already killed thousands, altered the daily lives of hundreds of millions, and put the entire world on edge. Because epidemiologists have not yet fully discerned the virus’ transmission mechanisms, no one can say for sure when the outbreak might be contained, let alone what its economic fallout will be.
Solidarity Now

PS OnPoint

Spencer Platt/Getty Images

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The Challenging Arithmetic of Climate Action

February 12, 2020

All strategies to mitigate climate change have distributive implications that cannot be overlooked. If left unaddressed, such implications will fuel persistent headwinds to progress on the climate change and sustainability agenda.

MILAN – Climate change was at the forefront of last month’s World Economic Forum meeting in Davos, Switzerland. Younger participants, in particular, underscored the challenge ahead, with the teenage activist Greta Thunberg delivering a powerful speech on the subject. But they were not in the minority: for the first time ever, climate-related issues dominated the top five positions in the WEF’s Global Risks Perception Survey.
Europe Must Recognize China for What It Is

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What My Younger Self Never Expected

January 3, 2020

At the start of a new year and a new decade, it is both humbling and illuminating to reflect on major global developments that no one saw coming just a few decades ago. For those who grew up during the Cold War or in the ensuing period of American primacy, the economic and geopolitical rise of the developing world must rank high on the list.

FORT LAUDERDALE – As one advances in age, one tends to mark each new year by reflecting on the broader developments that have run in parallel with one’s own lifetime. For my part, I usually focus on the surprises (both positive and negative): things I would have been considered unlikely or even unimaginable in my younger years.
The Suleimani Assassination and US

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What My Younger Self Never Expected

January 3, 2020

At the start of a new year and a new decade, it is both humbling and illuminating to reflect on major global developments that no one saw coming just a few decades ago. For those who grew up during the Cold War or in the ensuing period of American primacy, the economic and geopolitical rise of the developing world must rank high on the list.

FORT LAUDERDALE – As one advances in age, one tends to mark each new year by reflecting on the broader developments that have run in parallel with one’s own lifetime. For my part, I usually focus on the surprises (both positive and negative): things I would have been considered unlikely or even unimaginable in my younger years.
The Suleimani Assassination and US

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Which Wealth Tax?

October 28, 2019

Steadily rising income and wealth inequality, along with declining social mobility, is contributing to political polarization. Fortunately, If there is growing demand for some type of tax-policy response to the problem, we have ways to determine which measures would be most effective, depending on the specific objective.

MILAN – Proposals for a broad tax on wealth are not new, but they are receiving renewed attention in the United States. Steadily increasing income and wealth inequality has raised social and ethical concerns, even among a subset of the wealthy. This trend, along with declining social mobility, is contributing to political polarization, which in turn leads to poor and erratic policy choices. And we

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Hong Kong in the Balance

September 30, 2019

After months of large-scale protests in Hong Kong, the city’s future as a bridge between mainland China and the outside world is in serious jeopardy. Fortunately, all sides share an interest in pursuing more inclusive growth within the "one country, two systems" framework that has been critical to Hong Kong’s success.

MILAN – Hong Kong has long played an integral role in Asian and global economic development. But its future as a key nerve center for global business and finance is in serious jeopardy, as is its role as a bridge between mainland China and the outside world. Hong Kong has long been a place where global companies are welcome, and disputes are adjudicated impartially, transparently, and according to the

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The End of Shareholder Primacy?

August 26, 2019

The recent decision by America’s Business Roundtable to abandon its support for shareholder primacy was a long time coming, and reflects a broader shift toward socially conscious investment. Now that the multi-stakeholder model is receiving the attention it deserves, it will be incumbent on governments to create space for it to succeed.

MILAN – This month, the Business Roundtable, a group comprising the CEO’s of America’s largest and most powerful corporations, formally abandoned the view that maximizing shareholder value should be a company’s primary objective. The implication is that shareholders will no longer always take precedence over other stakeholders such as customers, employees, suppliers, and

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The Inequality of Nations

August 1, 2019

Markets are mechanisms of social choice, in which dollars effectively equal votes; those with more purchasing power thus have more influence over market outcomes. Governments are also social choice mechanisms, but voting power is – or is supposed to be – distributed equally, regardless of wealth.

MILAN – The eighteenth-century British economist Adam Smith has long been revered as the founder of modern economics, a thinker who, in his great works The Wealth of Nationsand The Theory of Moral Sentiments, discerned critical aspects of how market economies function. But the insights that earned Smith his exalted reputation are not nearly as unassailable as they once seemed.
What’s Next for

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