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00:00I think of what Maury ups felt had to say at the last time if a bank meeting about the prospects for global growth is pegging it at three point one percent. You hear similarly bleak predictions from the OED and other international groups. How do you process that and how long is this going to continue. From your vantage. Well I'm unfortunately you know you mentioned that I wrote about it. I actually think it is going to last for quite a long time unless there is a fairly significant change in the sort of policy regimes. So that would include Europe getting itself organized getting past the Brexit thing. In America it probably is less dependent than fixation on monetary policy and a little broader. No I don't know you're as good as I am guessing whether that will actually happen. And I guess this is a period of maximum uncertainty because we don't know what'll happen the House and Senate and Japan is a you know kind of struggle that it's hard to understand you know and then you have a range of emerging economies that are improving somewhat. I'm cautiously optimistic that China will pull through some of its challenges and continue the middle income transition. But the bottom line is there's lots of downside risk and it's very hard to see at least in the developed countries a likely scenario that that puts us on a different track and right. I was going to ask do you see any place where this might be a beacon D.C. any electorate at all that's about ready to elect a regime that will you know improve that situation. Not really. I mean you know the citizens of the UK decided to leave the euro the European Union and I think that probably that's going to be a fairly costly decision. I hear that major financial institutions are basically planning to leave the city of London which pretty important . It's hard to you know chip Merkel has a challenge. Renzi is being challenged on his constitutional reform. It's very hard to find something that looks like it's really on the fly . Central banks can only combat some of this right and they've done as much as they possibly can. How do you combat what you were talking about. How do you combat income inequality no slack in labour forces all around the world youth unemployment that's ridiculously high . Well you know you can't do it overnight for sure. So the first thing you have to do is get people's expectations in line. If you have a problem that's been neglected for a long time you just can't reverse it. But assuming you could get past the sort of populist and nationalist politics and actually do something I think you'd have some element of redistribution of income and then a whole lot of investment that's designed to accelerate the transition of the economy to a service based economy that makes good use of the technology and so on the things that Michael Bloomberg talked about at your conference yesterday I mean nobody. I think with any humility would say there's a kind of plan and we know it'll work. And what the time horizon is. But you could get a lot of people on both sides of the aisle to agree I think that the first few steps are fairly obvious. I mean let me give one example. OK in Denmark this is comes from my colleagues at the sea and this Council on Foreign Relations in Denmark they spend 2 percent of GDP essentially retraining people for an economy that shifting around we're at about point one percent. So it really is a time when it's not a good idea to invest in anything. You mentioned monetary policy it seems like for so long you've had policymakers legislative policymakers criticizing the Fed Reserve for doing too much overstepping its bounds greatly expanding the use of its toolkit and now you have certainly policymakers from the Federal Reserve other central banks criticizing legislators who are not doing enough on the side of fiscal policy. How does that disconnect get sorted out. Well I mean I guess there's a reasonable chance it won't get sorted out . I mean you know if you've got Draghi is the one who's gotten in trouble in this because he's been absolutely explicit. Well I mean Ben Bernanke was too which is we have a set of tools . It's not a complete tool set. You know everybody has to do their job. It's the way Mario Draghi says it. And it's right when he says that he gets told to mind his own business because he's the head of the central bank right. So as long as we approach it that way I think you know you're basically going to have a reasonable chance of continuing on the same path unless we have a kind of crisis of some kind. I mean things do change in a crisis. And if if it if we have a crisis that's either economic or finance and it interacts with some kind of political upheaval. Then I think we could change. Now it doesn't necessarily always turn out well but it looks an awful lot like things have to get worse before they get better. Professor Janet Yellen has said there is still slack in the labor force. She's not the only one. And we know that it could take in broader measures of unemployment . There is plenty of this. What happens to the U.S. labor force . At what point do companies invest in services. What point does the service economy become a place where you know you could be middle class . Well I think it scares people the most is when is the forward looking version of this because of the sheer power of the digital technology. So it's already taken quite a lot under the economy. You know we don't have many as many bank tellers. It just is a long long list. I mean I can remember when the general ledger of a company was kept by people who wrote things on a page. Hold on. You know a friend of mine says when we were young academics everybody every pair of us junior faculty at a secretary we didn't know how to type. We needed help. Now a department will have one or two administrators and everybody else is doing something else. So there's just a lot of it. And then when you take the forward looking version of that even if you sort of overestimate the speed with which it all happens there's a real challenge in kind of figuring out how we're going to evolve distribute income and employ people and probably have more leisure. I mean I think that's the best guess as to where we're going. What with a legacy be of the recurrence of populism we've seen here in the U.S. during this campaign you mentioned Brexit. You've come from Italy where this referendum is on the near term horizon. How damaging is that that resurgence of populism going to be or how beneficial is it. Well so it's different in Europe in America. OK so in America even though people fuss away about it I think with a very long lag in dealing with basically inequality of the growth patterns we've been experiencing the fact that it's surfaced it has become salient politically doesn't guarantee you a good open but at least a good thing. All right there's a solid core of people who are frustrated angry disappointed et cetera. And it's a lot better than suppressing it. So on balance even though it puts us in slightly uncharted territory at least in the recent past I think it's a good thing in Europe where there's structural reforms of the system required it makes it much much more difficult. And so the rise of populist populism nationalism and other things in that context may actually push in the direction of partially dismantling that system because they haven't made it work right. It's a partial union. It doesn't. Somebody described it as a stool with one and a half legs straight. Mohamed El-Erian have a pretty good analogy. So. So there I think it's much more worrying .

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Nobel Prize Winner Spence on Economy, Slow Growth

NYU Stern School Professor of Economics Michael Spence discusses the economy, slow growth and central banks monetary policies. He speaks on "Bloomberg Markets."(Source: Bloomberg)

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