ANZ Group's chief economist Richard Yetsenga argues technology's at least as big for the global economy as the epoch of China but the impacts are probably broader

ANZ Group's chief economist Richard Yetsenga argues technology's at least as big for the global economy as the epoch of China but the impacts are probably broader

By Gareth Vaughan

The impacts on the global economy of technology will probably be broader than the development of China over the past couple of decades into a full participant, according to the ANZ Group's chief economist Richard Yetsenga.

Speaking to interest.co.nz in a Double Shot interview Yetsenga said the epoch of China means the world economy with China as a full participant is radically different from the world before this occurred. However, he argues the impact of technological change may be even bigger.

"China now accounts for 25% of global manufacturing production, 25 years ago it was 5%, half of global steel production, it's the largest trading nation, [there are] more Chinese tourists than anyone else. I mean you go on. So China has clearly shifted the plates in a way that was almost unimaginable. I think technology's at least that big but the impacts are probably broader," said Yetsenga.

Technology, he said, is changing the narrative around the political debate, it's changing the way labour markets function and it's changing the efficiency of the allocation of capital across a whole range of sectors. He noted this week's announcement from Amazon about entering the US health sector

"Amazon's not entering the health sector to build hospitals. They're there to improve the provision of that health service between the producer and the consumer like they've done in retail...So I think we're going to be debating a whole lot of issues that we thought were resolved," said Yetsenga.

"If you step back for a minute and think about the parts of any modern economy where you have technology based new entrants, it's very difficult to think of a part of the economy which doesn't have that. In fact health was one of the sectors I would've said doesn't have that."

"What technology is doing is often liberalising capacity which was already there and using it more efficiently. So Uber is a great example, 95% of cars in any advanced economy typically are parked at any one time. That capacity existed but was not being used properly. Uber has mobilised that," Yetsenga said.

"The freeing up of retail space because we increasingly shop online, that retail space enters the economy [and] something else has to happen to it."

Yetsenga sees a "twin puzzle" across almost every economy he looks at. This is weaker than expected wage growth, and business fixed investment not recovering the way it normally would.

"And I think technology links those things in a way which says actually this is becoming quite pervasive for us. Ultimately productivity is the only route to sustainably higher living standards."

Yetsenga also said economic growth levels aren't strong enough to deal with the structural issues that it normally deals with when economies recover out of a cyclical slowdown.

"It [growth] is probably not going to help us out of housing affordability problems in countries where we have them. It's probably not going to help us out of these political situations where electorates are signalling that their life is just not as great as they thought it might be. And it's not going to help generate long-term growth. I think we're going to have to work harder on all of those things," said Yetsenga.

"We've been through this golden age of globalisation over the last couple of decades which has seen the largest global increase in living standards we've ever seen. But within countries often living standards have started to diverge. And if rates of growth are lower structurally, and I think they are...I just don't think we are going back to the rates of growth we had pre-crisis."

"With any distribution around lower rates of growth there are going to be more people whose lives are going backwards in GDP terms. And I think that's what you can see when you look at the way electorates have behaved the last couple of years around voting patterns," Yetsenga said.

"I think governments have to work out how they're going to deliver economic growth because ultimately that's how we get higher living standards delivered in a way where everybody feels like their boat's being lifted rather than other boats being lifted ahead of them."

He notes Finland's "experiment" with a living wage against the backdrop of technological transformation.

"When we start to think about the implications of technology for occupations and skills and labour markets, having that real world experiment I think is going to be very useful. I do think it [universal basic income] is going to be part of the debate," said Yetsenga.

In the video he also talks about where the global economy is at, how the Australian and New Zealand economies will fare this year, and his expectations for global inflation. And here's an article by Yetsenga where he looks at why GDP and welfare are parting company.

*This article was first published in our email for paying subscribers early on Friday morning. See here for more details and how to subscribe.

We welcome your help to improve our coverage of this issue. Any examples or experiences to relate? Any links to other news, data or research to shed more light on this? Any insight or views on what might happen next or what should happen next? Any errors to correct?

We welcome your comments below. If you are not already registered, please register to comment.

Remember we welcome robust, respectful and insightful debate. We don't welcome abusive or defamatory comments and will de-register those repeatedly making such comments. Our current comment policy is here.

32 Comments

Comment Filter

Highlight new comments in the last hr(s).

Quite interesting the claim that a UBI would create a new class of serf although serfs without meaningful work. It would be ironic if the rise of the robots plunges humanity back into feudalism.

There are many forms of UBI in the system now. The moment Reverse banks started participating in the market such as the Reserve bank of japan we see the start of forms of UBI. What they dont want to tell you is that forms of BOND funding REPOS can be extended by reserve banks and treasury departments to cater for funding based on advanced models. Computers are about to get a 200% increase or more in CPU power allowing for very big computer models. Once the research for the models are in place UBI models funded by a combination of on market and reserve bank Bonds can come into existence. As helicopter ben said the fed balance sheet does not need to run off although they would prefer it to slowly run down to 2 trillion. Which of course allows them to run it up again it needed. UBI is only a matter of research and in time will be as common as japan reserve bank buying equities.

Quantitative Easing is driving the world to global neo-feudalism. Continually devaluing currencies (and wages) against asset values (particularly land) will eventually see the land owned by fewer and fewer people / corporations / families. (think late stage Monopoly game)

Automation and robots simply facilitate and speed the process.

Certainly highlights why people like to tax the working plebs while protecting land wealth from any such demand. Luck of timing and the desire to be on the right side of the resurrection of old models of society drives all.

While I agree on the outcome (at least until the people take it all back). I fail to see why "quantitative easing" is the cause, please explain? Far from it actually in my view QE is a symptom of the state of our world's economy due to peak oil, and decades of neo-liberalism resulting in growing in-equity.

One of the reasons why it is important for democracy to survive is to avoid the take back as that tends to be via messy revolutions, Id'd rather not see that.

Yes of course.... a putin troll

In my experience in IT, Health has been a technology target for at least 30 years. They are now doing surgery via remote control over the internet. Amazon+Berkshire+JPMorgan are only disrupting the usurious health-insurance industry in USA. Initially only for their 1 million employees. What is not commonly known here in NZ, is the "average" Americano pays approx $700 per month in health-insurance or $8000 per annum. The lack of health-insurance is the incubation industry for a never-ending continuous supply of new bankrupts

I read that the most commonn cause of bankruptcy in USA is health care costs, found it hard to believe until a friends daughter got sick, she was 30, lost her house and the parents had to go into debt to pay her bills. Lots of my friends were insurance free up till Obama care kicked in, now they vote Trump or for anyone who can fix what they see as a rigged system.

Yet the Obamacare system would even in its semi-broken format be an improvement over no insurance and / or bankruptcy.

The simple answer is to just get Government out of healthcare. Plastic surgery costs have fallen in real terms over the past 20 years in the US while hospital and medical care services have sky rocketed. Give everybody a Kiwi Medical account and if you don't spend it in x years you get to keep the money - similar to the Singapore system. Take responsibility for your own healthcare and don't rely on a "free" system and jobs for the old boys network.

"Because of the price transparency and market competition that characterizes the market for cosmetic procedures, the prices of most cosmetic procedures have fallen in real terms since 1998, and some non-surgical procedures have even fallen in nominal dollars before adjusting for price changes. In all cases, cosmetic procedures have increased in price by far less than the 100.5% increase in the price of medical care services between 1998 and 2016 and the 176.6% increase in hospital services. In summary, the market for cosmetic surgery operates like other competitive markets with the same expected results: falling real prices over time for many cosmetic procedures."

https://www.vox.com/policy-and-politics/2017/4/25/15356118/singapore-hea...

I think you are overlooking the significance of elastic vs non-elastic demand in this case. New boobs too expensive.. Don't buy them and life goes on as before. Cancerous lump needs removing.. Yeah, you can't ignore that for long.

I think you are overlooking personal responsibility - why maintain your health when “free” healthcare paid by the 10% will pick up the tab? 70-80% of cancers are lifestyle related and many are curable with early detection. New boobs are akin to many medical procedures. Nice to have but not essential. Difference is some are “free” and the other is out of pocket so people shop around and doctors compete for business on price, service and reputation.

Who would administer the UBI?
Given that governments of nation states have diminishing power and global corporations have ownership of most of the resources/wealth. Perhaps every company could administer a percentage of UBIs - a bit like the Railways employees or Govt clerks of the 70s.

We should be very afraid of allowing global corporations the ability to run things to this extent, which is why I think we absolutely must start discussing this now. It will come down to ownership of the means of production because it is the production that provides the income to buy what is produced, so I'm sure even giant corporations know they are doomed if no-one can buy, but they must not be allowed to dictate, even though it could be argued they already do, I reckon they pretty much do.

Since its a UBI where everyone gets it, I cant see that the admin overhead is worse, especially as then many ppl wont be taking up WINZ time it would point at NET less admin.

Ownership of wealth is an interesting Q. The ownership is only given to them as long as the majority feel they are getting something ie fairness out of the system. If you look at Brexit and Trumpism these are IMHO early signs of ppl feeling they are not getting their fair share. The Q is then at what stage do enough ppl who voting in a democracy decide to change the ownership of the assets. I am left wondering at times just how far this is off.

Building Hospitals
If Bezos can build or rent massive purpose-built-warehouses and employ lots of fork-hoist operators and box-wrappers and use large conveyor belts then he can soon build or rent massive purpose-built-health-warehouses (disguised as hospitals) and employ lots of 3rd-world doctors. He could even get into the health-tourism-trade and cut out the middle-man. Next he's into health-travel-agencies to facilitate health-tourism to provide the custom for his health-warehouses. It's called vertical integration

A UBI would not come out of taxation. In fact income tax does not run a country. It is a method by which money in circulation is controled, it is a an inequality tax. It does a lot of things but a country is not restricted in what it does by the amount of money it takes in taxation. I recommend everyone reads, or listens on YouTube, to Randall Wray or Stephanie Keaton or Bill Mitchell on Modern Monetary Theory, MMT.

So how would a UBI be funded? Who pays for it? Somone has to

Start reading but better still listening to those people above and it will all make sense. Bill Mitchell is the best and Randal Wray a very close second. The former is Australian and so more comprehensible to us. The latter is American.

how is it funded. Take a look at how everything is funded now and why the financial system can never crash. The only thing which makes you have to earn an income at the moment is supply and demand. You supply the labour to meet the demand. Once you no longer supply the labour your free to idle the system. The funding is easy but right now they cant UBI inject the system while supply of labour meets demand.

Once they labour supply is meet by automation they can start to drip feed the UBI. Which is fact they do already by payments to unemployed and and other credits.

Bulk funding of UBI would involve a law change in which the funding would be supplied by on market bonds and reserve bank repos. This would involved some being sold back to the market at a later date and some being written off.

It would be called something like a Income Equalization stabilization bond...and away you go.. the public would not be informed of how it works behind the stage curtain. Or how much would be written off each year and how much would be drip fed back to the market to maintain price stability...The monetary system is not what the public think it is.

The entire UBI will be administered by a statue law pass by government allowing treasury to raise funds on and off market in co ordination with the reserve bank. It will require a lot of maths to calculate the percentage of supply and demand in the market.

In short the government runs it as part of its taxation system. So many parts of UBI are already in place and automation of taxation will be it easier over time.

Since the reserve banks are already involved in markets it becomes easier to implement the technicals that will allow UBI to exist without increasing government deficits.

MMT is a pile of doo doo IMHO.

You can call it what you want but its money printing really and there is no evidence in history that this works.

The biggest mistake being made by the MMT brigade is they fail to understand that money is an IOU for work/energy.

Steven, read and listen to the MMT lectures on YouTube. Do it at the gym and you don’t waste time. It does take a while to understand it but if you rinse and repeat then you can understand it.. They are very good and explain things so well. Yes it is heterodox but the nonsense that is pedalled theses days in the name of Economics is a more than a pile of doo doo.

David Goldman's view of finance hinges on demographics. The seminal article is 'Demographics and Depresssion'

It is just possible that the ANZ writer's view - that ".I just don't think we are going back to the rates of growth we had pre-crisis" is rooted in world-wide demographics , as well as in globalisation and the application of technology to intermediaries of all stripes.

Goldman's view is succinctly expressed here, and expanded upon in book form in 'How Civilisations Die'.

A particularly concise view of finance, from those sources is that:

There is nothing complicated about finance. It is based on old people lending to young people. Young people invest in homes and businesses; aging people save to acquire assets on which to retire. The new generation supports the old one, and retirement systems simply apportion rights to income between the generations. Never before in human history, though, has a new generation simply failed to appear.

The lack of a new native-born generation is acute throughout most of Europe (which fills the gap by immigration from unsympathetic but nevertheless failing cultures - hardly a recipe for social harmony), Japan, Russia, Iran and China - the latter because of the one-child policy.

Thoughts about UBI need to take into account Sustainability, and its all-too-often-omitted twin 'At What Level of Comfort'. To twist another quip from the VRWC, 'the UBI of the future is funded by those who turn up to do so'.......

Although having a child should be the most deeply considered decision of one's life in practice that is not so and even a small nudge makes a big difference. Bring back a really generous universal child benefit and having children in the prime of your life becomes popular again. Tailor it to reward both parents if they are publically committed to one another (commonly thought of as marriage but call it whatever sounds good) and our society will return to its healthy roots with minimal child poverty and a generation willing to work and be taxed to pay pensions.

You cannot grow for ever on a finite planet, ergo having more than 1 or 2 children per couple should actually be penalised IMHO ie we need to decrease the population and send a clear signal to do so. If we dont do it in our tax system the planet will do it for us.

Waymad....The most telling statement..I have read for some time....and it aint new......in those links from 2008.

This is why Americans continue to drive gas-guzzling SUVs to collect their unemployment benefits from an increasingly indebted US government that in turn borrows the money from Asian governments by giving them IOUs that return less than the domestic inflation rates of all these countries. (Note: if you are a central banker, you are encouraged to read that sentence a few times. Anyone else will have understood it in the first read and can proceed).

Loser, do nothing monkey brains, just need vote for the party that will promise free stuff for doing nothing, and breed like maggots until they are a voting majority, wont take long - should end well.

Do you have a superiority complex? It sounds like you think you're more important than other people? Doesn't everyone get a fair shot in this country? Or is that only for a certain part of society?

The thin veils of decency are falling away aren't they, aided by a fresh breeze.

Skudiv, I think I know what you're trying to say there. But that's a low quality way to try and make your point. Please lift the tone of your comments. Thanks.

Agree, I think the context is there but needs re-writing.