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Like it or not, most business leaders, analysts and economists agree that artificial intelligence will play an outsized role in shaping the future of the US economy.
The next few years will be critical in defining the shape of the AI revolution, and economist and former dean of Columbia Business School Glenn Hubbard is worried the United States isn’t ready to accept the disruptions that come along with it.
Before the Bell spoke with Hubbard about what he sees as an increasingly dangerous problem that could stifle growth for years to come.
This interview has been edited for length and clarity.
Why is this the right time to refocus on AI and economic growth?
Growth is always the right answer. Anything we want to do as a society — if we want to fight climate change, if we want to rebuild our military, want to educate and train people — it’s all about economic growth. So how come politicians aren’t talking about this? Imagine I have a coin in my hand. The head side is growth, and we all think that’s great. But the tail side is disruption. Economists believe that you can’t have growth without disruption. And since our political class doesn’t know how to handle disruption, they’ve stopped talking about growth.
A better idea might be to handle disruption — actually help people get trained, get educated, help communities, and yet that’s disappeared off the radar screen. The fact that we are interested in growth is hardly a surprise. The big surprise is why we don’t talk about it. I think the answer is that it’s just hard for politicians.
When you talk about disruption, are you talking about the job losses that will come with greater use of artificial intelligence?
Think of two waves. Over the past three or four decades, technological change and some globalization has caused a slow-mo disruption of the job market and communities around the country. Now look at AI, we’re going to have that same disruption except it’s going to be much faster. We’re talking about five years, not 30. And if we couldn’t even handle the slow-mo, 30-year process, how are we going to do it in five? We really need to rethink how we manage change. Because of course we want the change from AI. The question is, how do you help people cope?
Major CEOs are already talking about how they’re implementing AI in their own businesses. Do we really need government help and intervention?
I think it does require some government help because companies will certainly do what’s in their own interest, which would be to become more efficient or use AI to revolutionize processes, but it’s not up to me as a company to prepare my workers for another kind of job. That’s just not my interest.
So you do need public policy. I do think it’s simple and we kind of know how to do this. It’s arming community colleges, it’s public-private partnerships between businesses and 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 going to be free either, the government would have to spend some money.
A lot of people would argue that the Biden administration’s CHIPS Act and Inflation Reduction Act have done a lot to increase spending and stimulate growth…
I would have gone higher and lower. The real role for government is massive support for basic research that could lead to the next generation of chips. The question is not about today, it’s really about tomorrow. We’re way underspending on R&D, and research is a lot better than writing checks to companies that already have a lot of money.
We also need to target things we think are critical for national defense and protect those things. But we don’t have a checkbook big enough to subsidize everything, that’s not going to be the road to recovery. So we either need to go up and support research or go down and try to find narrow pockets to subsidize. Both the CHIPS Act and the Inflation Reduction Act have good headings and leads, but below that there’s a lot of waste.
Inflation is still above the Federal Reserve’s 2% target. Wouldn’t prioritizing economic growth exacerbate the problem?
Most of what I’m suggesting isn’t going to be a huge demand stimulus. It’s more about supply side productivity, so a little bit less of a concern. But it is still the case that you don’t want to keep expanding the deficit. Policymakers would need to make choices: You could raise some taxes or you cut some other spending.
A massive tax hike isn’t likely to happen during an election year…
Yeah, I’m not expecting any candidate to suggest that right now. But it’s really an arithmetic problem. Payments on the national debt, which were essentially zero a couple of years ago, are now as big as defense spending. And so we really have to think this through and the next president is going to have to deal with it. He may not be campaigning on it, but whoever he is, he’s going to have to do something about it.
How does moving the focus away from growth hurt Americans’ economic prospects?
It will slow down productivity growth. Generative AI will probably be the biggest driver of productivity growth in the next decade or two, not so much because it’s replacing jobs but it’s adding to the productivity of a person. But it also means that we have to be willing to tolerate the fact that some firms will go out of business, some people will lose their jobs and other firms will get very big. Are we willing to do all those things? I would say fine, but I’m not sure our political process is willing to do that.
What will the long-term consequences be if the current trend continues?
Social support for our system is unraveling and it’s been unraveling for a while. There are many communities and many groups of individuals who don’t really feel like contemporary capitalism is serving them well. And the longer we let that go, we’re really running the risk of killing the golden goose.
I don’t even see why this would be unpopular. If I said, “I’m going to have a block grant for communities. I’m going to boost community colleges,” why is that bad? If I’m a governor, I love it. If I’m a mayor, I’m loving it. I can’t quite figure out why we can’t get it done.
