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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

Avoiding a K-Shaped Global Recovery

18 days ago

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

25 days ago

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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The “Digital Revolution” of Wellbeing

June 28, 2019

The rise of digital platforms, cutting-edge forms of automation, and Big Data promises to transform labor markets and upend longstanding business models. It will also broaden our thinking about human wellbeing, much of which hinges on social and experiential factors that have little to do with standard measures of material welfare.

MILAN – Western attitudes toward digital technology have soured in recent years, as once-celebrated innovations have begun to reveal their downsides. But, like all technological revolutions, the digital one is a double-edged sword, offering substantial benefits alongside daunting challenges – and certainly not only in the West.
The Roots of Our

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Beyond Unemployment

May 28, 2019

In modern economies, people may have jobs, but they still harbor major concerns in a wide range of areas, including security, health and work-life balance, income and distribution, training, mobility, and opportunity. By focusing solely on the unemployment rate, policymakers are ignoring the many dimensions of employment that affect welfare.

MILAN – For much of the post-World War II period, economic policy has focused on unemployment. The massive job losses of the Great Depression – reversed only when World War II, and the massive debt accumulated to finance it, kick-started economic growth – had a lasting impact on at least two generations. But employment is just one facet of welfare, and in

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The World’s Next Big Growth Challenge

May 1, 2019

The economic performance of lower-income developing countries will be crucial to reducing poverty further. Although these economies face significant headwinds, they could also seize important new growth opportunities – especially with the help of digital platforms.

MILAN – The global economy is undergoing very large structural shifts, driven by three megatrends. One is the digital transformation of the foundations on which economies are built and run. Another is the growing purchasing power and economic strength of emerging economies, and China in particular. Lastly, there are broad-based political-economy trends, which include rising nationalism, various forms of populism, political and social polarization, and a

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The Economic Consequences of Global Uncertainty

March 25, 2019

With new sources of uncertainty seemingly proliferating by the day, a broad economic slowdown should come as no surprise. And as long as the rules and institutions governing the global economy remain in doubt, continued underperformance is to be expected.

BEIJING – The global economy is weakening, in no small measure because of a deep, widespread sense of uncertainty. And a major source of that uncertainty is the ongoing Sino-American “trade war.”

Jose Luis Pelaez Inc/Getty Images

Wojtek Radwanski/AFP/Getty Images

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As Lawrence J. Lau of Stanford University has shown, the problem is not that tit-for-tat tariffs have had

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Stock Buybacks Are the Wrong Target

February 26, 2019

Legislation banning companies from purchasing their own shares, or conditioning buybacks on investment in workers, would not significantly alter the distribution of wealth. What it would do is undermine the broad cooperation needed to tackle income inequality and a fast-changing labor environment.

MILAN – The surge in stock buybacks in the United States has sparked a high-stakes debate about what corporations can and should do with surpluses they have generated. It is a topic that raises fundamental questions about the role of the public and private sectors in securing inclusive growth patterns.

Jose Luis Pelaez Inc/Getty Images

Wojtek Radwanski/AFP/Getty Images

Photographer is my

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What Next for China’s Development Model?

January 21, 2019

Even if China maintains its market-oriented reform momentum, tensions with the West are unlikely to be resolved quickly. While steps can be taken to reduce these tensions, they cannot be easily eliminated, which means that they will probably be a key factor shaping the future of China’s development model.

MILAN – China’s strategy for economic growth has been a work in progress since Deng Xiaoping launched the country’s “reform and opening up” in 1978. While the last 40 years of reform have been far from error-free, the government has displayed a willingness to adapt, as well as a capacity for navigating complex transitions, supported by a healthy internal policy debate. But how is China’s development model likely to evolve in

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How Inequality Undermines Economic Performance

December 26, 2018

France’s Yellow Vest protests are rooted in frustration with the government’s indifference to the plight of struggling households outside France’s urban centers. With job and income polarization having increased across all developed economies in recent decades, developments in France should serve as a wake-up call to others.

MILAN – About a decade ago, the Commission on Growth and Development (which I chaired) published a report that attempted to distill 20 years of research and experience in a wide range of countries into lessons for developing economies. Perhaps the most important lesson was that growth patterns that lack inclusiveness and fuel inequality generally fail.

Win McNamee/Getty Images

Spencer

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The Long Sino-American Trade War

October 25, 2018

If governments are going to engage in trade wars, they should have a clear and pragmatic vision of where they want to end up. Yet the trade war initiated by the Trump administration seems less like a tough negotiating tactic, and more like a guessing game.

MILAN – Some observers interpret the trade war that US President Donald Trump has initiated with China as a tough negotiating tactic, aimed at forcing the Chinese to comply with World Trade Organization rules and Western norms of doing business. Once China meets at least some of Trump’s demands, this view holds, mutually beneficial economic engagement will be restored. But there are many reasons to doubt such a benign scenario. The long China-US trade war is really a manifestation of a

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