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Like it or not, most business leaders, analysts, and economists agree that artificial intelligence will play a major role in shaping the future of the U.S. economy.
The next few years will be critical in defining the shape of the AI revolution, and economist and former Columbia Business School dean Glenn Hubbard believes the U.S. is ready for the disruption that will come with it. I'm worried that there won't be any.
Before Bell spoke to Mr. Hubbard, he discussed what Mr. Hubbard thought was an increasingly dangerous issue that could derail growth for years to come.
This interview has been edited for length and clarity.
Why is now the right time to refocus on AI and economic growth?
Growth is always the right answer. Whatever we want to do as a society, whether we want to fight climate change, whether we want to rebuild our military, whether we want to educate and train people, it's all about economic growth. So why aren't politicians talking about this? Imagine you have a coin in your hand. The brain part is about growth, and we all think that's a great thing. But the tail side is disruption. Economists believe that there can be no growth without destruction. And our political class has stopped talking about growth because it doesn't know how to deal with chaos.
A better idea might be to deal with the confusion. It actually helps people get trained and educated and help their communities, but it's off the radar screen. The fact that we care about growth is not surprising. The big surprise is why we don't talk about it. I think the answer is that it's difficult for politicians.
When we talk about disruption, are we talking about job losses due to the increased use of artificial intelligence?
Consider two waves. Over the past 30 to 40 years, changes in technology and some aspects of globalization have slowly disrupted job markets and communities across the country. Next, look at AI. You'll end up with the same mess, except it'll be much faster. We're not talking 30 years, we're talking 5 years. And if he couldn't even handle a slow 30-year process, how could he achieve it in 5 years? We really need to rethink how we manage change. Of course, we want to see changes brought about by AI. The question is, how can we help people cope?
Leading CEOs are already talking about how they are implementing AI into their businesses. Do we really need government assistance or intervention?
I think government support is certainly necessary. Because companies will definitely do things that are in their interest: increasing efficiency and using AI to transform processes. But it's not up to me as a company to prepare our employees for a different kind of worker. work. That's not my interest.
That's why we need public policy. I think it's easy and we kind of know how to do this. It's a public-private partnership between businesses and community colleges that arms community colleges. It's not that we don't know what to do, but we need to do it. And of course, it's not free either, the government has to spend some money.
Many will argue that the Biden administration's CHIPS Act and the Suppression of Inflation Act have done a great deal to increase spending and stimulate growth…
I could have gone higher or lower. The real role of government is to provide massive support for basic research that could lead to the next generation of chips. The problem is not about today, it's actually about tomorrow. We are severely underspending on research and development, and research is much more effective than writing checks to companies that already have a lot of money.
We also need to target and protect things that we believe are important to our national defense. But no checkbook is big enough to subsidize everything. That is not the path to recovery. So we need to either stand up and support research or stand back and find narrow pockets where we can provide grants. Both the CHIPS Act and the Suppression of Inflation Act have great headlines and headings, but underneath there is a lot of waste.
Inflation remains above the US Federal Reserve's target of 2%. Wouldn't prioritizing economic growth make the problem worse?
Most of what I'm proposing will not be a significant demand stimulus. This is a supply-side productivity issue, so there is nothing to worry about. However, it remains undesirable to continue expanding the deficit. Policymakers will have to make a choice. Either raise taxes or cut other spending.
Major tax increases are unlikely in an election year…
Well, I don't think any candidate would propose that at this point. But it's really an arithmetic problem. The country's debt payments, which were virtually zero a few years ago, are now as high as the country's defense spending. So we have to think through this issue thoroughly, and the next president will have to address it. He may not be campaigning about it, but whoever he is is going to have to do something about it.
How will shifting focus away from growth negatively impact Americans' economic outlook?
If this happens, productivity growth will slow down. Generative AI will likely be the biggest driver of productivity growth over the next 10-20 years. Because it increases personal productivity rather than replacing jobs. But it also means we have to be willing to accept the fact that some companies will go out of business, some people will lose their jobs, and others will become very large. Are we going to do all these things? I think that's fine, but I don't know if our political process is going to do that.
If current trends continue, what will be the long-term impact?
Social support for our system is crumbling and has been for some time. There are many communities and groups of individuals who don't really feel that modern capitalism is serving them well. And the longer we leave it, the more we're in danger of actually killing the golden goose.
I don't even know why this is unpopular. If I say, “I'm going to give block grants to the community. I'm going to promote community colleges,” why is that bad? If I were the governor, I would love it. If I were mayor, I would love it. I have no idea why it can't be done.
