CFI Podcast: The Golden Era of Productivity, Retail, and Supply Chains

This episode of the CFI Podcast takes us on a quick tour through the themes of economics/historian/journalist Marc Levinson‘s books — from An Extraordinary Time, on the end of the postwar boom and the return of the ordinary economy; to The Great A&P, on retail and the struggle for small business in America; all the way through to The Box, on how the shipping container made the world smaller and the world economy bigger.

In this hallway-style conversation, Levinson and we (with Sonal Chokshi and Hanne Tidnam) touch on everything from productivity growth & GDP to the “death of retail” — to finally connecting all the dots through logistics, transportation, infrastructure, and more. How are supply chains changing? How does all this, taken together, affect the way we work? And what can — or can’t — policymakers do about it? Perhaps, Levinson argues, a lot of the improvement to our living standards really comes out of “microeconomic improvements at the private sector level rather than as a matter of great policy”. But that’s a bitter pill to swallow for those seeking solace in easy answers from governments, whether at a national or city level. Maybe it’s just a matter of managing our expectations — or resetting our clock for when the new normal begins… and ends.

Show Notes

Why the post-WWII era was a golden age for economic growth [0:48]

The current state of the retail economy [8:43] and how the history of A&P relates to today [12:43]

Discussion of shipping and supply chain issues [15:50], and issues that will face future generations [27:38]

Transcript

Sonal: Hi, everyone. Welcome to the “CFI Podcast,” I’m Sonal. Today’s episode with me and Hanne is another one of our podcasts from our recent road trip with Voices from the Ground in Washington, D.C., though this one actually takes us all around the world. Our guest is the economist, historian, and journalist who was last at “The Economist,” Marc Levinson, the author of the beloved book, “The Box,” which is about how the shipping container made the world smaller and [the] economy bigger. But this hallway-style conversation is actually a quick tour through all his books, starting from his most recent one, “An Extraordinary Time,” where we touch briefly on the topic of the golden age of productivity and beyond, to the topic of the death of retail in his book, “The Great A&P,” to finally wrapping up on logistics, transportation infrastructure, supply chains, and touching very briefly on the future of work and where government comes in policy-wise in all of this or doesn’t.

The golden age of economic growth

We’re so excited to have you. Welcome, Marc.

Marc: Thank you. Glad to be with you.

Sonal: So, those seem like really different topics. What’s the big idea that drives the thrust of your work — that kind of connects all the dots?

Marc: I’m really interested in the connections between economics and the world we live in. A lot of my work starts out at a microeconomic level, looking at particular companies, looking at particular industries, and tying the developments there to broader trends that really affect how we live, affect our standards of living. More recently, I’ve been focusing on some of the trends in productivity growth, because I believe that a lot of the improvement in our living standards really comes out of these, kind of, micro-improvements at the private sector level, rather than as a matter of great policy. And what that means, and this is a frustration for public officials, is that there are no easy government solutions. We’ve now been through generations in which politicians and the economists who advise them said that they had the cure for productivity growth.

Hanne: Right.

Marc: I argue in “An Extraordinary Time” that, actually, this was what was behind the political swing to the right in the late 1970s, early 1980s, when we got Margaret Thatcher and Ronald Reagan. Because the more social democratic types of governments before that hadn’t been able to restart productivity growth. And so, voters turned to people with other ideas, but the people with the more free-market ideas proved no more successful than the people with the more statist idea.

Hanne: What are we actually comparing to, as we’re thinking about these, like — “Well, this is not good enough?” What are we holding up as, you know, something that we’d prefer it to be?

Marc: The end of the post-war boom and the return of the ordinary economy. The story I’m telling is that the quarter-century after the war was an unusual period of very rapid economic growth. The period from 1948 to 1973 was probably the period of the fastest economic growth in the history of the world. GDP around the world grew at more than 5% a year.

Now, at 5% a year, something doubles in 14 years, quadruples in 28 years. So, even with some population growth, people’s incomes were growing very rapidly. People’s living standards were rising in a way that was visible to them. They were able to buy houses for the first time and cars for the first time, and send their kids to high school, and maybe even college, and we had all kinds of very rapid advances in living standards.

Hanne: What was that due to? What was the big driving force?

Marc: We had an unusual confluence of factors in the post-war period that people have really forgotten about now. One is that there was a great deal of underused capacity — underused resources in the economy. I’d like to remind people that at the end of World War II, we still had 3 million mules on farms in the United States.

Sonal: Wow. It’s such a technical, post-industrial revolution time. You don’t even realize it. It’s that…

Marc: You have millions of people, and not just in the United States — European peasants and Japanese farmers owned half an acre of land — who could be moved from very low-productivity jobs into very high-productivity jobs in the cities. And we had a lot of that in the ’50s and ’60s. So that was one big boost to productivity. We had very rapid increases in education levels, and we know that education is associated with productivity. In the United States, at the end of World War II, going to college was not common. It was — just a few percent of the population of 18-year-olds actually went on to college, and the average education level was around eighth or ninth grade. So, in very few years, governments spent a lot of money building a more educated workforce and it paid off.

Sonal: The government was the one that seeded that, or was that just a shift in the fact that adolescents existed and childhood changed?

Marc: No. This was heavy expenditures, building universities all over the place. Take a look at how many universities in the United States started after World War II, okay? That’s when a lot of government money started — it was no longer an elite thing to go to university.

Hanne: And how about women entering the workplace?

Marc: Well, women entered the workplace. The other thing I think that was really consequential in this quarter-century I’m describing was that we had the growth of motorways — the interstate highway system in the United States.

Hanne: So, public infrastructure, like, the transportation infrastructure?

Marc: Public infrastructure, and think about what that does. If you are a manufacturer or a retailer, that lets you sell over a wider area, lets you operate your facilities more efficiently. You don’t need a warehouse in every town. You can have one that’ll serve a large area. If you’re an employer or a worker, it’s changed the size of your labor market. I mean, in Silicon Valley, San Jose and San Francisco are now part of the same labor market, right? That wasn’t the case after World War II. These were very different cities and they were a considerable drive apart.

And so, that creates a better fit between people and jobs, and then leads to higher productivity. They can’t be repeated. Once you’ve moved those sharecroppers to the cities to take jobs in industry using heavy machinery, they’ve moved — and you don’t have those underused resources again. There were countries around the world that literally went 25 years from 1948 to 1973 without a single year of recession. We had countries that had less than 1% unemployment back then.

Hanne: So, how did this burst of productivity, this golden age, actually come to an end?

Marc: Well, in 1973, we really saw a trend change. That was the year of the great oil crisis that some people may remember. What we have moved into, since 1973, is really an environment in which economic growth has been slower. The improvement in living standards has been slower, the unemployment rate, in most countries, has been permanently higher. We have not been able to recapture the very unique good times that we had in this golden age, and I think that we’re not going to be able to. What we’re experiencing more recently is actually normal. This is the way most economies work most of the time.

Hanne: And how it worked before this golden era?

Marc: The golden age was actually the exceptional time. It’s not normal that economies grow at a rapid pace. It’s not normal that incomes double, or triple, or quadruple in a matter of just a few years, and I don’t think we should expect that to recur.

Sonal: I view this as analogous to child development and how a human body, an adult develops. Because there’s a rapid development that happens in the birth of a child, and then another big rapid shoot that happens in adolescence, and then you continue to grow, but it’s a little slower. And, in fact, thinking about the natural conclusion of your argument — is that that growth has now shifted to other countries like India, China, where they are now experiencing the kind of boom that you were describing that happened pre-1973.

Marc: That’s a great analogy. Take Japan which in the 1960s or early ’70s was growing at 7% or 8% a year, and then it downshifted, and then it downshifted some more. More recently, China went through a period where it was growing at 10% a year.

Sonal: By the way, in China’s case, we do have to take the numbers with a big grain of salt.

Marc: Even so, people were extrapolating and saying, you know, when China grows at 10% a year for the next century, its economy is gonna be twice as large as the rest of the world put together.

Sonal: Right.

Marc: But China’s not going to grow at 10% a year for the next half-century. It’s becoming much more like a normal, mature economy in which the growth rate is a couple of percent a year, and that’s all they’re going to be able to expect.

The current retail economy

Hanne: But it doesn’t mean necessarily that, like, in adolescence or growing as a human being, you only get one burst. These things can come in waves, there can be other, kind of, confluences to these factors. When you were talking about the Japanese farmers with their mules, and the, sort of, move towards the way automation and the move to cities increased productivity, are there any inklings that you’re starting to see of possibilities, like, with the automation we’re starting to see happen today, and maybe even with autonomous cars, new infrastructure might, you know, for city infrastructure — are there things that give you any sense of maybe a new era might be coming at some point?

Sonal: Or just even a way to juice the body on steroids? Like, just inject some more steroids into this economy?

Marc: You’re asking great questions here, and the answer is maybe. I think that these are things we really can’t predict. If you look at past episodes of fast productivity growth, in general, they weren’t predicted very well. For example, we had a spurt of productivity growth which translated into faster income growth in the late ’90s and the first years of the 2000s. This is the famous internet boom, you may remember.

Sonal: Oh, we remember it.

Marc: In 1992, no one predicted this. What happened was that there had been investments in infrastructure, there had been developments in technology decades earlier — and, finally, during this period of time, they all came together.

Hanne: But I think a lot of people would argue that we’re in a moment like that again now.

Marc: Well, I think that’s a question which we can’t answer. So, if you take a look at a technology, will it actually revolutionize the way certain industries work? I don’t exclude the possibility, but you have to keep in mind that there are also a lot of complications. You’re seeing this right now as we go through this rather brutal shakeout in retailing. Yes, everybody knows that you can order goods on the internet. That’s not news these days, okay? But the reality is that for a lot of retailers, there’s a problem here, because they’re maintaining an internet business, they’re also maintaining a retail store business, because some customers want that. So, in some cases, their costs have gone up. They have not become online retailers — they have become bricks-and-mortar/online retailers.

Sonal: Right. And they’re <inaudible> for the online sometimes.

Marc: They’ve got multiple channels that they’re having to service, and that’s actually made their operations less efficient in a certain way.

Sonal: I would actually say there’s a flip side to this, though, again — which I think is really fascinating. Because when you think about the internet economy, birth of Amazon — which is, let’s face it, the behemoth in everything, the everything store, the everything everything. And they recently, as we know, started doing physical brick-and-mortar bookstores. The difference is that they started online and they went into physical, using data to help stock and think differently about how to create their store in an internet-native way in the physical world. So, I also wonder if while the death of retail might be on the horizon, if after that there might be an entire new post-boom — a new boom around retail that’s completely reshaped by new technologies. We don’t know.

Marc: That’s entirely possible. But just to give you something to think about, Amazon’s problem in terms of getting its books into its physical stores is entirely different from its problem getting its books ordered online to you, the customer, okay?

Sonal: Yes.

Marc: So, now it needs a different kind of logistical system. It needs to figure out how to distribute to retail stores like the ones it, apparently, is building. That’s going to have a lot of costs attached. It may have some inefficiencies attached, at least while they’re developing it. So, my point is to say that the path of — you know, sometimes people who are involved in the tech industry, kind of, get very romantic about how quickly these great technologies are getting absorbed. But, in reality, life is messy, and some of these technologies take a while to be used efficiently, and some of them will never be used efficiently.

Sonal: That’s right. There are more failures than there are successes. There’s no question about that.

Hanne: So, does it remind you at all of the, sort of, death of the supermarket that you talked about in your book, “The Great A&P?”

Marc: In “The Great A&P,” I was writing the history of what was, for about 50 years, the largest retailer in the world. People forget this now, but The Great Atlantic & Pacific…

Hanne: Is that what A&P stood for?

Marc: Yeah.

Hanne: I had one in my town. I didn’t even know that.

Marc: Yes, it was The Great Atlantic & Pacific. It was so named in 1869 for the transcontinental railroad.

Hanne: Wow.

Marc: And at one point, it had more than 16,000 stores in the United States, so it was a behemoth. It was the Walmart of its day. But one of the things that kept it so vibrant is that it remade itself continually, because shopping trends change, consumer expectations change.

Hanne: From what to what?

Marc: It started out as a seller of coffee and tea and spices. It made itself into a small grocery chain. And then, in 1912, it developed the idea of having an economy grocery chain, which is to say, it would have a very bare-bones store and sell products much cheaper than the competition. And that’s what drove its growth in a small period of years. It integrated vertically, so it made its own chocolate, its own macaroni, canned its own salmon — and then had a huge network of manufacturing plants, and, again, we’re in the 1920s here. And then it started building supermarkets. It was not the innovator in any of these things. A&P did not develop the idea of supermarkets, but once it saw how supermarkets would work and how they would fit with its business, it started building supermarkets all over the place, and by the end of the 1930s, was the biggest supermarket operator in the country.

Hanne: So, what ended up being its downfall?

Marc: The company stopped innovating. The company stopped remaking itself. It was big, it was fat, it was happy. The two brothers who had controlled it for decades both died in the 1950s, and it was then run by people who had been with the company for decades, and whose idea was to preserve it rather than to keep it changing.

Sonal: You know, the beat that keeps coming up in this is that, basically, the tension between this idea that you can innovate but then you get too good at what you do, too comfortable, too complacent. Okay, so what’s the big, then, lesson or takeaway, you know, from your work on “The Great A&P” to this narrative around the death of retail today?

Marc: Retailing is full of dead bodies. People like to talk about how unfair competition is sometimes, because the big companies have more power than the little ones. But when you are a big retailer, you can’t change so easily. Okay, if you own one store and you think you need to do something else, you go in there with a hammer and some plywood and you can do it. If you own a thousand stores, you’re stuck. Okay, you’ve got your locations, you’ve got your product line, you’ve got your brand name, and you can’t change easily. It’s a really difficult situation, and so a lot of stores end up dead.

Sonal: It’s the innovator’s dilemma, classic case.

Marc: It really is.

Shipping and supply chains

Sonal: So, another theme that’s come up and that connects all the dots with this entire conversation — that this post-boom world was one of the drivers — was this, like, rapid development of infrastructure. Amazon exists because of logistics and infrastructure. Like, innovations and being able to ship things and deliver things fast. You know, we talk about the supermarket and the growth of suburbs around railroads and transportation. Transportation on logistics and infrastructure is, like, the thread that connects and drives all economies. So, let’s talk about “The Box,” which is all about logistics and infrastructure in the form of container shipping.

Hanne: You chose one very specific thing in “The Box” to talk about. It had this massive effect on the global economy. Give us a little bit of sense of what that story was like. I remember Tim describing, when he pitched your book, this incredible scene of just the giant mountains of peanuts in the ships. Like, how quickly did shippers see this possibility and start using it? Was it fast or slow?

Marc: Well, let me give you just a quick history here. The idea that you could save money by shipping goods in containers came along in the 1700s, okay? This was an old idea, and nobody had ever figured out how to make money out of it. Because what would happen was that, well, you would make a container out of wood and nails, and you’d put your goods in it, and then at the other end of the trip, somebody would break the container apart and use it for firewood. That was a pretty inefficient system, and nobody ever found this to be viable. It actually cost more to ship goods and containers.

What made this whole thing work was the arrival of a guy named Malcolm McLean, who was a trucker — so he didn’t come from the shipping industry — and he understood that what was needed was not particularly a container but a new system for moving freight, okay? And the container was just a piece of what…

Sonal: It was just a container.

Marc: It was just a container, and a lot of people back in the ’50s and ’60s who were in the shipping industry were very enamored of their ships, and they thought they were in the shipping business. And McLean’s basic position was, nobody cares about your ship — they just wanna get their goods from here to there, and let’s design an efficient system for doing that. So, shipping containers first came into use in the United States in 1956. They started being used internationally across the Atlantic in 1966, and the industry was pretty substantial by the 1970s. By that time, most of the older vessels had gone out of service. But it was really in the 1980s when modern logistics took off.

There were a couple things that happened. You had, in this country, freight deregulation — which meant that you could actually sign a single contract to import products that would cover delivering the goods to a port and moving them inland by rail to a final destination, or having a truck pick them up and move them to a final destination. So, you could actually integrate all these modes of transportation and have some assurance that the goods would get there. And then you had improvements in communications. This was referred to as electronic data interchange.

So, all of a sudden, it became possible to run an international supply chain in the 1980s. Now, you could send instructions across the ocean quickly about how you wanted something shipped or how you wanted something made. And so, this innovation — the container — that had really come about in the ’50s, started to make a substantial difference in the world economy in the 1980s when we had the birth of modern supply chains.

Sonal: The most fascinating thing to me — the idea that astounded me most about the box was the idea that the containerization of moving goods allowed things to travel multimodally. That because of that — this modularization — you could now bring things across ship, to train, to plane across the world. And that is, like, a really eye-opening idea. And it’s really interesting that you referenced the EDI, because the analogy that I was thinking of was actually packets and moving data across lines, like the ethernet. And that packetization of data also led to this thing where you can move things across phone lines, ethernet lines, other computer lines, broadband, etc., and essentially reassemble them at the other end.

Marc: That’s a good analogy.

Sonal: That’s a really, really mind-blowing idea. So, I guess the question I have is, what’s happening next and now that you think is interesting in the next evolution of supply chains that is along these lines?

Marc: Well, there are a couple of things that are going on in supply chains, and they’re not necessarily good. International trade and manufactured goods actually grow more slowly than the world economy for the past six or seven years. That’s a big reversal from the previous trend. Why is that? One of the reasons is that supply chains have become less reliable. The ship lines went out and purchased very, very large vessels, and I’m sure your listeners have seen these vessels can carry…

Sonal: I’ve actually seen them first-hand, because I went to the Panama Canal, and it’s incredible.

Marc: Okay. The Panama Canal doesn’t handle the biggest one.

Sonal: That’s right. Because they’re actually rate limited by the Panamax ships.

Marc: The biggest container ships now at sea can carry more than 10,000 truck-size containers.

Sonal: Wow.

Hanne: That’s amazing.

Marc: These are enormous vessels. So, what has happened? Well, imagine you’ve got a port, but instead of having a ship carrying 2,000 containers showing up every day, now you’ve got a ship that carries 10,000 containers showing up once a week. You’ve got a mess on your hands, because you’ve got this enormous load of traffic which you need to get all of these containers out of the port.

Hanne: It’s too much.

Sonal: It’s like a bottleneck congestion.

Hanne: Yeah.

Marc: Yeah, that’s right you’ve got a bottleneck. And this has come at a time when growth and trade has been pretty slow, so there’s considerable overcapacity in the industry, and even so, the reliability has fallen. So, what you’ve seen is, actually, manufacturers and retailers contracting their supply chains. They would like to make things closer to where they’re used, because they think there’s less risk.

One of the things that I think happened in the growth of these international supply chains is that companies paid a lot of attention to cost. They said, “You know, our hourly labor cost in China is a lot cheaper than it is in Detroit.” They didn’t really pay much attention to risk. And risk is a cost factor. There were a number of U.S. companies that failed or came very close to failure because of supply chain disruptions. Key merchandise wasn’t available when they needed it for their factories or for their store shelves.

Sonal: I mean, this is the story of hardware startups. The problem isn’t that they can’t plan out, and predict, and build, it’s that they need to lock down that supply chain inventory at the right time. But, yet, they have that issue — that they don’t know how many products their customers are gonna buy, so they don’t know how much to make. So, there’s a sort of chicken-egg problem.

Hanne: It’s the same thing in book publishing.

Sonal: Yeah, yeah.

Marc: So, you’ve got the container ship lines that essentially created their own crisis.

Sonal: It’s like a success disaster of sorts.

Marc: They got bigger and bigger ships, because that was more efficient for their purposes. Their own costs running ships went down per container as the ships got bigger. They didn’t devote too much thought to the problems of the ports, or the railroads, or the truck lines, and all of them have had a lot of difficulty coping with this flood of containers. And so, I think one question facing this industry going forward is whether these long-distance supply chains will continue.

Sonal: Well, I’d like to ask a question, though — is that necessarily a disaster? Because isn’t that also the inevitable sort of cycle of things aggregating, un-aggregating, lengthening, and contracting, etc.? And also, in that same context, one of the arguments I’ve heard for — there’s actually advantages to shorter supply chains. For example, in the case of, like, hardware and software innovation, there’s this rapid iteration and back and forth that happens.

So, if you have a components manufacturer in Mexico, and you’re designing a chip or some piece of hardware, you could rapidly iterate on your designs without the long delay that happens when you have a big time difference and a bunch of other logistical issues with someone, you know, doing the same thing in China. So, there’s some argument that it’s actually not a bad thing, because it actually speedens innovation almost in some cases.

Marc: In some cases, it may speed innovation. In general, I think that manufacturers and retailers are expecting that it’s going to reduce risk. Another trend that you see is that many manufacturers and retailers are now looking to multiple sourcing. Now, in many industries, it’s cheaper to have a single source, right, because you’ve got huge economies of scale. One factory makes a ton of stuff, and that’s great so long as it’s working.

Sonal: It’s cheaper because of the China stuff, right.

Marc: It’s cheaper, but maybe it’s worth paying a little bit more and have an extra warehouse. We’re seeing a lot of that now. We had, for example, a work stoppage out at the port of Los Angeles — actually, the West Coast ports in general — in the early part of the century, a lockout by the port employers. How did that affect companies?

Sonal: With a lockout, you mean, like, it was, like…

Marc: They locked out the union workers as part of a labor dispute.

Sonal: Oh, right, right, right.

Marc: And so, a lot of companies said, “Well, maybe we ought to redirect some of our traffic to ports on the U.S. East Coast.” Okay, so they still send their goods to Los Angeles, or Long Beach, or Oakland, but they also send a portion of them now to Savannah or New York, because they want to have options. They want to not have the risk that their supply chain will be shut down.

Sonal: There’s another fascinating analogy with the digital world here, because it reminds me of the time of the early days of the internet, when as the internet became super popular and more multimedia started coming online, there were tremendous bottlenecks in data traveling through pipes. And so, they had to figure out new methods to essentially reroute and decentralize it from these central choke points. So, it’s kind of a fascinating thing.

And it also now, by the way, explains when I was in Panama, I was a little struck by this thing where every single ship that goes through spends a day being inspected before you can even put it through, and it costs, like, $1 million per ship to put it through or some — I forgot the amount, but it’s some significant amount. And it just blew my mind, like, there’s so much extra work, but now I understand, because if one ship bottlenecks that entire thing, nothing gets through for, like, the entire day, and that’s a huge blockage.

Hanne: Right. You gotta make sure this is gonna get through.

Sonal: Yeah, exactly. It’s kinda fascinating.

Marc: So, what we’re seeing in container shipping now is a lot like what we saw in the United States with the railroads in the 1870s, 1880s, 1890s when many railroads went bankrupt. We went from a country that had hundreds of railroads, each a few miles long, to a relative handful of large railroad networks. We went through something similar when we had airline deregulation, starting in 1978.

You may remember, we used to have lots of regional carriers around the country, had a number of national airlines, and only two international airlines that were heavily protected by the government. Now there’s a lot more potential competition, and, of course, the carriers have dealt with that by merging. So, you’ve actually now got a situation in which you’re supposed to have cutthroat competition, but they’ve tried to find a way around it by merging and reducing the number of airlines.

Hanne: It’s the inevitable cycle.

Marc: We’re headed in the same direction with container shipping now. Many container carriers are in financial distress, a lot of them have merged into the big carriers. There are now, probably, three so-called alliances of container carriers that kind of dominate world trade. So, we may be in an environment in which there are few enough players that they’ll be able to have a better handle on prices on shipping rates, and that will mean less competition. That will be good for their shareholders. It probably won’t be good for shippers.

Future of the world economy

Sonal: Okay, so to wrap up, we started this with your view that connects the dots between all of these books, and you have this perspective of this economist-historian. And, you know the question is — is it good to know that this is an ordinary economy, or are we just talking about cycles of things that are just gonna inevitably decline and grow? How do you know it’s just not a typical waning, and that this actually really is something different?

Marc: I think this actually has a lot of political implications. For decades and decades, we’ve trained people to believe that the government can provide a very steady income, can provide low unemployment, can provide rapid economic growth, and I think the government’s ability to do this is limited. What we’re seeing, I think, and not just in the United States, is somewhat of a crisis of expectations.

Hanne: It’s a reckoning.

Marc: If you take a look at what’s going on now in Europe, or in Korea, or in Taiwan, people expect more of their public officials than their public officials can deliver. People want their incomes to grow quickly. Their public officials promise, “Yeah, we’ll bring back the good old times. We’ll make your incomes grow quickly.” But, in reality, we’re in a normal age in which people’s living standards rise slowly.

Hanne: I feel like while you’re saying this, all I can think is, like, “Well, only really time can teach us that that’s not…” You know, because I’m trying to think, like, “Well, what can we do to reset those expectations,” but we can’t really. It’s just time and not…

Sonal: Understanding, possibly?

Hanne: Well, and not having the same growth, right, getting used to not having the same growth, which is sort of disheartening, when you think about it.

Marc: It is. On one level…

Hanne: Because my question is, like, so how did we move beyond that?

Marc: On one level, it’s disheartening. On another level, I think we have trained people to believe that the government can deliver things it really can’t deliver.

Hanne: So, how do we start to undo that?

Marc: There is a question about how the available income is distributed, which is really quite separate from the question of how fast productivity is growing, how fast the economy is growing. And I think we have to have a real discussion about how income is being distributed and how automation is going to affect our workforce.

Sonal: This is top of mind for everybody, including us, our guests, everybody.

Marc: And I bring this up not really in an economic sense, but almost more in a psychological sense. There’s a lot of concern about where the jobs are going to be for people in the future. I’m not too concerned about that. I’m pretty confident that we’ll have ways in which people can earn livings. But so many people get some degree of satisfaction from their work, and if what we’ve got is a world in which people are doing part-time work, occasional work, unsteady work…

Sonal: I mean, work itself has become containerized.

Marc: That’s right. What are people going to be moored to, in this sense? And we can do anything we want to guarantee your income, but the fact is, if all you do is wake up in the morning and watch television, because you’ve got nothing else to do, you’re not gonna be very happy. So, I think we have an issue here that really goes beyond economics to…

Sonal: To finding meaning.

Marc: Finding meaning in our lives as human beings.

Hanne: To the human condition, yeah.

Sonal: One last thing. You talk about a crisis of expectation, but the reality — and this is actually another thing that connects the dots — is that these problems are multifactorial, multimodal. There’s crisis expectations around the world, and they’re playing out in ripples and waves in different ways across, you know, France, Europe, the U.S. in so many different ways. So, I also wonder if there’s some change in the geographic or governance structures that we have to think about. Do you have any thoughts on, sort of, the geopolitical implications of this? Is there any, like, parting thought on that front?

Marc: We’ve seen, obviously, a big shift away from faith in the nation-state, to people wanting power and control closer to home. I think we’ve seen over the centuries cycles in that — that that sort of comes and goes. Will city governments be able to deliver satisfaction in a way that national governments can’t? I’m not convinced of that, but in some issues, some areas related to people’s quality of life, they can be very important. I think another issue that we face is that there are things we know that will improve productivity over time.

Sonal: Yeah.

Marc: We can’t predict how that’ll work, and we still need to make those expenditures. So, for example, we know that improving education levels is, in general, good for a country’s productivity. So, we need to invest in education, but can we say if we spend an extra billion dollars in education now, that it will improve productivity three years from now? We can’t say that. We’re doing this somewhat on faith.

Sonal: Especially if the skills and jobs of the future change.

Marc: Well, that’s correct. We know that as a general proposition, it’s been important for economic growth that we’ve had scientific research going on. Does that mean that if we put more money into scientific research now that we will be able to benefit from the consequences at any predictable time in the future? The answer to that is no.

Hanne: Right, and these are the reasons exactly why we tend not to make these decisions.

Marc: That’s exactly right. That’s exactly right.

Hanne: Or we can’t.

Marc: These are very tough choices, because you’re asking for our tax money to be spent, and you really can’t promise the return.

Sonal: It’s like investing in the future, difficult to do.

Marc: Exactly. Exactly.

Sonal: Well, Marc, thank you for joining the “CFI Podcast.”

Marc: Thank you so much for having me. It’s been great fun.

Hanne: Thank you.