#DevTalks: A Conversation with Indermit Gill, Chief Economist of the World Bank

DISCLAIMER: This webinar transcript was loosely edited and there may be inaccuracies.

Ricardo Hausmann Today we are really, really honored to have my good old friend Indermit Gill, who's been a really important thinker for a very long time on issues of growth and development. And he's now the chief economist of the World Bank. I think it's it's a fantastic appointment. And I think he's going to have a huge impact. We'll see it in his next World Development report, which is going to be on the middle-income trap which is a really important topic. He'll be moderated by Dany Bahar, by our own Dany Bahar. Dany is a graduate of the school, he got his Ph.D. at the school and he's also an MPA/ID and he's a Professor at Brown. And so it's it's great. And he's a research fellow, a senior research fellow at the Growth Lab. So Dany and Indermit, it's an honor to have you, and I'm looking forward to your conversation.

Indermit Gill So I'm just going to show you a few slides. No, I'm going to show you many slides. But the basic message is this one over here, the world is in a really bad state and it's worse than last year. And there are even more risks now. So if that's not bad enough, if you look at the longer-term economic prospects, they are actually worse than what they were before. With the ten years before COVID and those although those years were much worse than the years the first the first ten years of this millennium. So essentially what you sort of see is declining potential. So these are all things that you probably already know. I'm just going to prove them rigorously. Right. The other thing, though, is that the one thing that you probably haven't heard is especially from somebody from the World Bank on the IMF, you don't hear who's responsible for this. Right. So I like to tell you who's responsible for it. The third thing, of course, is that there are remedies, but these are very difficult remedies. And essentially, I think that the remedies are similar to what the Oakland A's were trying to do when they when they had lost, you know, big stars like Jason Giambi and others. And they were trying to sort of recreate some of these superstars in the aggregate. Right. So you really need a lot of numbers and so on. And what essentially what we have to do is we have to recreate China in the aggregate. So that's essentially the big solution. Okay. It's not an easy thing to do. All right. So I'm showing you a few slides over here. So first, I'm going to just quickly talk about the next two years are 20, 23 and 2024. So there's not likely to be a global recession because global recessions don't happen unless the US goes into a recession. And we think that the US will not go into a recession. But we will actually probably end up having the year that the five years of 2000 to 2024 are set to record the weakest global growth since the mid-1990s. Okay. And then so and the problem is that the growth is slowing down but is slowing down relatively or slowed down relatively more in the poorer countries. So, in fact, compared with the pre-COVID days, about a third of emerging markets in developing economies, AMD's is emerging markets in developing economies. They'll still be actually at per capita income levels that are lower than what they had before the crisis, right, in 2024. There are some bright spots, right. And the bright spots are the place bottom. Mainly they are mainly the mainly in East Asia and in South Asia, especially India. But other than that, it's really hard to sort of find bright spots. Okay. So here is what we have here. So here are the World Bank's projections for the world, as you can see, is 2021, which was supposed to be a year of recovery, a rebound. We did have that. But that but then by essentially 2022, essentially what you got was growth was back to the pre-COVID, the pre-COVID decade. And since then, it's actually lower. Right. And that's true of advanced economies and that's true of emerging markets and developing economies. And it's true of emerging markets and developing economies, excluding China. But China is somewhere in between this and this, which is why we always have a second category. Okay, then if you look at inflation, as you can sort of see, everybody says that inflation is coming down. It is, but inflation is still much higher than what it was in the four or five years before the COVID average. Right. And then, okay, so who's responsible for this? Right. So this I mean, the other thing that you see over here is that the the world is in a real mess. Okay. So once you get to that, like around 2% growth rate, you're skating very close to the edge in the sense that you get one more hit and you go down below 1% growth and you enter a global recession. Right. So you're not we are essentially in a big hole. Right. Okay. Big holes are not made by small economies. Big holes are made by big economies. So if you sort of see it, you actually sort of see these three big policy mistakes. The first one has to do with misdiagnosing. Inflation is right. The second one has to do with misdiagnosing a virus. And then the third one is misdiagnosing the energy narrative. Okay. And you sort of see over here is I don't want to sort of spell out all of this stuff, but you see you see for each one of these things, you actually sort of see mistakes being made. And what's very what is actually very striking, Ricardo, is that you're not finding that you're you are now finding that the quality of economic policies is actually better in many emerging markets in developing countries as compared to those that we always thought had very good economic policies. The EU, the US and by the way, China too. We always had a lot of trust in China because we always thought that, look, you know, we think that the quality of economic management in China is very good. Chinese data are terrible. But it didn't matter because you don't need the data because you have so much faith in the you you have so much faith in the quality of economic management. Now, that's not true anymore. So now you actually need data and you don't have it. Okay. The third thing I thought I'd say a few things about this one because. So I used to think until last summer, I used to think that. That the EU has done really well in terms of cutting emissions, in terms of moving to cleaner energy and things like that. Right. And I thought that the US had cheated. Right. That basically what the US did was it didn't actually move out of fossil fuels, it just moved from coal to gas. And that's how you can cut emissions by half if you just do that, right. And we were always sort of told what Europe actually has done. It has you know, it's moved out of nuclear. It's moved out of school. It's gone into wind and wind and solar and stuff like that. Right. Well, then you had then you had the invasion of Ukraine. You had all of that. And basically what you saw was that actually you found that the largest economies in Europe had not moved out of had not moved really out of fossil fuels. They just moved instead of shale gas. They had moved to Russian gas and from what, Germany and Austria and others. So they just moved into gas. But it was Russian gas. Right. And then we were also sort of told, no, no, no. Actually, if you look at electricity generation, depending on the day, actually Germany's electricity up to half, you know, between a third and a half of it actually came from renewables, you know, wind and solar and so on. But we are never told that that's not the full energy consumption because electricity is just one-fifth of the total. So if you sort of add it all up, if you actually looked at it before the problem started and so on, the amount that Germany was actually consuming, the share of Germany's energy needs that were coming from renewables was something like 6.3%. Okay. The rest of it was all the usual stuff. So in some sense, I feel that that by sort of, you know, by overestimating the the speed of the shift to renewables. The EU got itself into this right. And when and when you actually had when you had a disruption in gas and oil and so on, you actually had problems. Now things are improving. Right. So things have started to improve over time. One of that is that US CPI inflation has come down and as you can sort of see is essentially what has happened is that US services have proved to be quite resilient. So they have proved to be quite resilient. But as you can sort of see, the trend is not particularly good there. The other thing you would see is because of that misdiagnosis, which I mentioned to you, is if you sort of look at what has happened to expectations of interest rates, they have shifted up over time. Right. They've shifted up between 6th of June and 21st of August in the sense that we were expecting that interest rates would be like this or federal funds rates would be that now they're higher and it's because inflation has proved to be much more resilient than people thought. Oh, much more obstinate and. But you see, I spoke about the bright spots. And if you sort of see over here, I mean, here's the world will grow roughly around 2% this year and the next year. Then if you sort of look at emerging markets in developing economies, roughly twice that amount. But then if you start to sort of look at the Asian countries, you sort of see higher growth rates. You don't see all of the ASEAN countries. It's a little higher at around four and a half, five. And then if you look at China, it's actually coming down from about six to about four and that India is staying up at around six. And Indonesia has staying up at around five. And these economies are doing well. But outside of outside, it's really hard to find such stories outside outside of East and South Asia. Okay, So here's the upshot of it. The upshot of it is that if you sort of look at five year period and look at growth in emerging markets only and you sort of see these were the good years here and you see this, this is what we are projecting these five years to look like. And the only time they were any lower was in the early 1990s. And then if you sort of look over here as a world here, emerging markets and developing economies, they are low-income countries and these are fragile and conflict-affected countries. And you see these these are the shares of countries that will have a lower per capita income in 2024 as compared to before the pandemic. And you sort of see over here is that for the world as a whole, it'll be about a quarter. But for these countries, you'll see it'll be more like two-thirds. And for low-income countries to be more than a third. So this is after five years. So, you know, this is, you know, basically a lost half-decade. All right. All right. All right. So that's what's happening now. A very short-term view of things. So what we also did was we actually sort of we did a major exercise at the World Bank where we looked at what is what are the prognosis for growth, What is potential growth rate? And so you have to sort of calculate this and you're using a whole bunch of assumptions and using a whole bunch of methods and so on. So we did that. We looked at all of the methods that central banks and others used to actually project potential growth. So potential growth is the growth at which an economy can grow without triggering inflation, roughly speaking. Right. And basically what we found was regardless of which way we were measuring all the stuff we found, the potential growth rates in advanced economies were really cutting, were really coming down very, very rapidly. And the reasons are the ones that you could kind of know is actually demographics and other things. Right. Yeah. And but. But this was not just the case only for emerging. It was not just a case for advanced economies. It was also the case for emerging markets and developing economies for a whole bunch of reasons. And for them, that growth potential was also coming down. And those were the main factors, of course. And then the as I said, is that, you know, how do you try to sort of get out of this? You try to get out of this by eking out a little bit of growth, extra growth from a whole bunch of economies. Right. Like one percentage point more, one percentage point from India, from Indonesia, from Mexico, and from Brazil and so on, too. Right. Okay. All right. So that's what we did. I just signed off. So all of this was by the way, all of this is assuming a really optimistic situation in the sense that you should you shouldn't have any more crises. If you had more crises, all bets are off. Okay. And so here's what they look like. So this is a the world you sort of see for this decade, the first decade of the things the second decade is the third decade. Right. And you sort of see everything coming down for advanced economies especially. It goes from about 2 to 1. When you get to 1%, you're sort of skating on the edge of a global recession every year. And then you feel here is that even for emerging markets of developing economies, you also sort of see this cut. It goes from about 6%. It was about 6% growth in the first in the first decade. It went down to five. Now is four. It's going to be four. And this is the average that we had between in the first two decades of the millennium. You sort of see the average over there. And from that you can sort of see across the board. The only the only part of the world where you sort of see any good signs is South Asia. But you don't sort of see a big decline. You also don't see a big decline in sub-Saharan Africa. The problem is that sub-Saharan Africa wasn't very high to start with. And for sub-Saharan Africa, a 3% growth means that per capita incomes are not increasing. Okay. So basically, if it goes down below that, then per capita income start to fall. And as you all know, that the the the conditions of social conditions, economic condition and political conditions in a country where per capita incomes are falling a materially different from those where per capita incomes are increasing. Okay, so then what we did was we actually broke this down and said, okay, how much of this is because of productivity? How much of this is because of how much of this is because of capital and how much of it is because of labor? Right. And so you sort of see over here is that in general, it looks like it's across the board for emerging markets. Right. So for you want to see this decline in the component of labor, and this is, roughly speaking, the demographic. But. Right. And then you see over here, this is the amount that comes from investment. And this is, roughly speaking, the investment climate. Okay. Getting worse. You have debt overhangs, etc., etc., that actually kill investment. And then this has to do with the efficiency of the economy. And as you see, even that the rate of growth of the efficiency of the economy is actually also going down from not so much between last decade and now, but definitely compared to the first thing. Okay. So then what I did was I asked the team to sort of give us the perfect things for China as you sort of see all of the dividends that came to China from essentially a growing labor force. So growing think will be gone. Right. And then if you look at India, India looks stable. Right. And then Indonesia also does. Okay. But in general, East Asian countries are starting to look more and more like this, where one of the drivers is not to actually have that. And then I also asked about Brazil and Mexico and South Africa. And as you see, I was surprised that actually I was pleasantly surprised that actually this is not going down. It's actually looking. Okay. Mexico to you know, I think I mean. So I'm trying to sort of find good news here. Right. These are very, very small differences, almost. And so. Right. So South Africa, I have. So I actually worked on South Africa recently. And South Africa really looks terrible because South Africa has the highest inequality in the world, while the lowest growth rates in the world. They have the highest unemployment rates in the world and now they have the highest electricity shortages. You know, is and before the COVID crisis, the public finances were relatively stable there. Not anymore. So, you know, it's like five strikes down. All right. So then you have remedies. All right. So how do you fix this? So we tried to sort of see, okay, let's say that. Okay. Say that each of the countries did what they did best. Europe take the best decade for each country, for each of these things and say, you know, if you sort of if they just replicated that performance. Right, what would be the overall growth rate, Right. If they just took the best reform years and they replicated those. So you ended or you end up essentially with this. So essentially, you you do would get essentially an investment surge. You would get education and health improvements and give you that much and labor and social benefit reforms that can actually mean a lot, especially in countries like Turkey, in countries like India and so on, where you actually have many women who are not actually in the labor force. So if you have labor reforms that actually bring them in, right, you actually do get this thing. So you can actually you can recover some of the this is what I mean by Moneyball. Okay. So you have to sort of have a lot of countries do this and they have to play really well as a team. That's the last thing. And that's really important too, because what that also means is that you ought to be actually trading with each other, too. Okay. The problem is that trade as a share of GDP is also going down. Right. So all of these things are happening at the same time. So in general, you do get you actually can come up with ways to sort of counter all of this. I'm thinking too long, Danny. No. Okay. Okay. So if you go back to this thing again, right. If you go back to this stuff again and you sort of say, okay, how much? So here. Roughly speaking, you know, you want to sort of exploit the digital divide. Okay. Here. Roughly speaking, what you really want to do is you want to sort of say, can we explore, can these countries exploit the opportunities that come from the shift to cleaner, cleaner technologies, the carbon dividend? Let's call it that. Right. And then this one over here is really I think it's really, you know, for most of these countries, I think it's really about about getting about using the talents of women more. Right. You always end up with a policy implication where the women have to work harder because men because women are coming up with the policy implications of. All right. Okay. So these are the risks. I won't go into too much into this. I can just tell you this, that I'll be making a presentation sort of like this one here. And, you know, I. So I. We have this chart over here. And when I started my job, it just had like four or five, you know. And then every time they give me a new presentation, there's another one and there's another one. So now I started to work out of all of this stuff. Which ones are the ones that are that are that I'm really worried about today, right now. You know, and I would sort of say really worried about financial stress in advanced economies because a lot of these banks and so on had made bets that was booming, that interest rates were going to be low. And those bets are all off now. Right. So that still worries us a lot. And when that happens, you get a big credit crunch, etc., and then everything goes wrong. And this one, this is a huge thing in the sense that because of the trade wars between the US, because of sanctions between the US and China, because of the sanctions on Russia and so on, you have this fragmentation of economic. And by that I mean sort of trade as well as financial networks. And if you sort of look at the period during which the world did really well, it was a period when you actually didn't have this fragmentation, you know, between 1990 and 2015. Right. So you had the fall of the wall and then you get this sort of a unification of global financial systems and everybody prospers. Almost everybody prospers. But then, you know, you essentially now you get this fragmentation again. And generally speaking, when fragmentation happens, it doesn't go into two fragments. It generally goes into three. So you'll get the US fragment, then you get the pro-China one and then you'll get the Indias. And I'll say, I don't want to belong to either one of these. I want to, you know, so you get a third fragment, right? So in the old days, it was called the Third World, the nonaligned movement, etc., etc.. And then but this one, you know, it's super concerned about this one because growth actually solves a lot of things. It solves the jobs problem. It solves the standard of living problem. It solves the climate action problem, too, because you can do a lot more when you have growth than when you don't. Okay, so I'll stop here because otherwise then we won't have any have any kind of income system.

Dany Bahar That was a fantastic presentation. So let me let me bring up a few things and hear your thoughts. And I'm going to ask about the future. I know economists are terrible at predicting, especially the future of the system, and you are the chief economist. So it seems like from seeing your slides, I was thinking, well, the world is going through a long COVID. Right. So these economic impacts from COVID and the mistakes. But I like your framing. It seems like we are now paying for these mistakes to some extent. You also mentioned some secular, you know, determinants that are there are making that the growth issue worth like weak investment, that overhang and demographics. I wonder how much of of of how much or even of these secular ones at least the first two are really part of repaying for the mistakes. How much of this is really structural or how much of these are you optimistic that we're going to be able to get over it with some sound policies?

Indermit Gill I think you've answered your question. I think you're absolutely right. One shouldn't sort of think of all of these as equally secular in that sense. Right. So, for example, the debt part, I mean, there was there was a feeling, you know, we used to say that, you know, that if a low-income country had a public debt to GDP ratio of around 40%, it was skating close to the edge, a middle-income country, if it had it around 60%, it was getting close to the edge. Right. And then a high income country, you know, depending on where the country was, of course, it shouldn't be more than 80%. 60 70% is good, right? Because you sort of keep a buffer somehow along the way. What happened was that we sort of changed that metric. We said, oh, it doesn't matter if this country gets to 60%. So it was for a really simple reason. The world got used to very low interest rates. So the cost of actually financing this debt was relatively low. But we would always want these countries that these things change very quickly, you know, and when they changed, especially since the maturities were relatively small rate for smaller maturities, the interest rates were lower for these countries had an incentive to borrow even lower. Right. So then the question then was that this thing can come up very, very quickly and very soon. What happens is that the best way to sort of see the problems is go back to the time when Paul Volcker raised interest rates in the United States. And look what happened. There were two dozen countries that went bankrupt. Okay. So you needed the Brady Deal and the Baker deal, etc., etc.. Something similar is happening right now. I can actually rattle off 24 countries that are either in debt distress or close to it. And some of them, they're getting bigger and bigger. All right. So it was Zambia and Chad. Who cares? Right. But then it becomes Ethiopia and Ghana. You start up again now, then becomes Egypt, Pakistan, you know, Argentina, etc., Argentina, Argentina's always there. So we all of this, you know, I should. That was a low blow. Sorry, a cheap shot. So, so so you're right. So that part. So I think some of it is this sort of it's the mistake of thinking that low-interest rates will be there forever, you know, And so so and the second thing I think is so I would say the truly secular thing is probably just the demographic that's.

Dany Bahar One thing that I'm that we didn't talk about, you mentioned a little bit about the fact that trade may be weakening a little bit. And there's the sanctions part, but there's also this a few ideas around it, Right. This idea that a also kind of a long copy, the effect of reshoring. Right. So the idea that that, particular rich countries will want to bring back certain industries that were already offshored and that came already from a big backlash against globalization that has been going on for a while. So I wonder how much of that do you buy or how much of that do you see really happening? Kind of going back and globalization. And if that's the case, is this making it worse for developing countries or there could be opportunities.

Indermit Gill So, you know, trade there's one trade that's trade, generally speaking. The other one is trade that involves China. Right. So here, take a look. Yeah. So know, here's China, right? So essentially what has happened is that the shares in the the changes in the share of US imports. Right. So you get this big hit over here that essentially these are because of tariffs and so on. Right. Starting with Trump but continuing after that. Right. And then you sort of see is, okay, well, that's not so bad because you can actually offset a lot of this stuff, at least in the short run. You get a Vietnam that comes up by one that comes of Korea and so on. And then, you know, you start to sort of see even India is responding to this. And we Indians take a little bit of time, but then we are a big country. So once we sort of get into it, it could actually end up being the problem. That is there are other things with this trade that happened with China. So, for example, here is some work that our guys have just finished is that they've looked at what has happened to the patent applications and the EPO, WIPO and USPTO. Right. You know, for Chinese funds as well as for US firms that were involved. And you sort of see as soon as you start to sort of see these tariffs and all coming in, you start to sort of see these patent applications dropping wood sides of the both sides of the Pacific. Okay. So you start to sort of see this. And then if you sort of also look at this and you sort of say if you look at the source of backwards citations, right. So here's the US. Yeah. So here Japan and so on and the others and this is China in back in 1990, between 1996 and 2001. Fast forward to this east, China has become a much more important part of this. So all of this stuff is threatened. That's one thing. The other thing that I don't have slides to show over here is that China is like the Saudi Arabia of renewables now. Right? So if you look at the share of the share of things that you need for solar and for batteries and for wind turbines and so on, a massive amount of that is being is being supplied by China. So when the US sells, the US and others want to say, we want you to speed up the transition to clean energy and we want you to stop trading with China. That's cognitive dissonance. You have what you have. I mean, you really have a problem there. You can do both.

Dany Bahar If I get it right, You're more worried not only about trade per se, but everything the trade brings with it, namely innovation, particularly for developing countries.

Indermit Gill Yeah. So, you know, and the other thing is when we look at trade, for example, at the crudest level, one should actually look at trade in goods and trade in services. So, for example, you know, you actually find that there is perhaps a big upside on trade in services, you know, but then if you sort of start to sort of look at the services, trade policy, restrictiveness and so on, you actually find that that that this needs to come down a lot, you know, and a few countries have made changes. And so but India, for example, is one of the most restrictive. China is relative. Indonesia has restricted, you know. So all of these countries that we think of as like great traders are actually, you know, especially China. So and actually very restrictive on the services side. And this is that this is essentially a difficult thing. Now, even if you want to increase productivity growth in manufacturing, you need to sort of liberalize this.

Dany Bahar Well, let me just one more question and then I'm going to open it up for for everybody. And I'm going to stay standing because this looks like a, looks like a political debate.

Indermit Gill As long as I'm on the right side, haha. 

Dany Bahar I want to ask you about job creation. Job creation. Talking about politics is the one thing that you hear from everybody on the left and the right in developing countries, developed countries. You know, we care about good jobs and there's like a bunch of earthquakes happening right now in the world in terms of the future of work. Right. So there is type of remote work. We're still trying to understand. How is that going? I mean, that was kind of fueled by COVID, but it's going to be here to stay. There's AI tools all over. So I wonder. He's a tough question, but I wonder if you have any thoughts or what would be the right framework to think about whether these are opportunities for developing countries or they're actually going to bring in some good challenges.

Indermit Gill Three quick three quick responses on that one and then we can take other questions on it. So the first one is because the demand for labor is a derived demand. It comes from the demand for goods and services. You have to sort of look at that and it goes takes you back to growth. So, for example, there's this big debate in India about trying to sort of get more women into the labor force and so on. And one of the things that people are saying is that part of the reason is there's just not enough pressure on wages because job growth is not increasing that much. Right. So India needs to probably need to grow not at 6%, but at eight, 9% and so on. And that point then you start to sort of see a pressure on wages because job growth is going up and then put women into the labor force. So first part is that one. The second part on the I guess the other part is that, you know, in general what you sort of say is interventions to sort of, you know, how does one speed up job growth? I always said and it's never been a popular idea that essentially that the policies of government should be much more focused on job destruction or helping people whose jobs are destroyed, not working as much on the job creation side, because governments do that terribly and the private sector does it rather well, You know, so you leave that to the private sector and just make sure that you sort of mitigate the pain of job destruction. Then the third point is the one that you mentioned about new technologies. Right. So I actually sort of did some work some time back about about and we actually wrote this up. And I think so if you look at the general purpose technologies in AI and machine learning and so on, in the general purpose technology, and then there is always a dread that whenever a new GPT comes, there's always a dread that jobs will be destroyed. Right. So for example, the first GPT was the steam engine, right? And people were worried about job destruction. The second GPT was electricity and people again were and actually jobs were destroyed. So for example, if you look at some of these things, they actually led to huge job destruction in agriculture. Right. And then the third GPT was the third GPT was information technology. And then there was also this worry that all this and then the 4th GPT, but now we are talking about is, is AI and machine learning and so on. So again, you know, so you actually look at this and say, well, these fears seem to be overblown because the world has been through these things many times. Right. But then when I sort of actually looked at some of the data done by people and I don't remember the names of the authors, but they've done some really good work that I tried to sort of look to see. How long does it take for a GPT to get mainstreamed in production? Right. If you look at that, you actually find that the steam engine took about 80 years. Okay. If you look at electricity, it took about 40. Okay. If you look at IT took about 20. So if that is a rate of progression and that's the Gill rule, please call it the GIll rule, if you would because I made that up (laughter). Right. But if that happens, that means that this one, when it comes, it'll be ten years. That's too short a time for this. Up to 20 years, you can still adjust. Forty years, of course, you can adjust. There's not so much of our jobs being destroyed is much more about how much time do people have to switch to other things. And I think that's the worry. The worry is that this one won't give us enough time. The other part of it is that, you know, you could sort of look at this thing about why is it that people are really much more concerned about it and so on. Another way to sort of think about it is that the first deputy sort of worked on not you know, we worked on essentially lowering the pressure on your legs in terms of walking long distances and so on. And then if you sort of look at electricity as you sort of keep going up, like that goes two hands after that. And then it is about the brains. And so all these brainy people over here really worried about the outcome. Right. You weren't worried about electricity as But yeah, you're worried about what's going to replace your brains? No. Yeah. And it will. Because you came to the wrong university, you had to go to a place that actually taught you how to analyze this.

Dany Bahar They came to the Duke of the North.

Indermit Gill And why I wasn't talking, but I wasn't talking about Duke. I was told I'm wearing maroon. There's no it's not crimson.

Indermit Gill There you go.

Dany Bahar So let's open now for a question. I think it's best if we take a few at the same time so we have more opportunity. So shall we take three or four? And we have one there. We have one there. We have a microphone. So introduce yourself quickly and make sure you end up with a question mark at the end.

Guest Thank you. I am Pradeep. I teach economics at the Jawaharlal Nehru University in Delhi, India. So I was very pleased about this because not much of econometrics, if anybody know a bit what you are dressed very well. Once in one of the slides you said about the multiple risks. And I'm a little surprised to see that the again, you have highlighted only the older things like we keep starting from I must not see you also financial straits pragmatism we've got long-term growth prospectus what not the pensions are not coming from other things like climate geopolitics because that seems to be very tense and to me, like the way I understand the economy changing is that we are not capturing the data the way we need to capture on those aspects. That is impact on, but public impact on economic growth. What he did something like it's not America like the way I understand the things my readings so it's not actually convincing me the way that that is being told here think I think you're right. I think you're right both in terms of some things being more measurable and so on, because you can see it in you can see it in high frequency indicators and things like that. And then the second one is, you know, is also the ones that we sort of see faster moving. So it takes heart anyway. But you're absolutely right. I had I got the same comment from the from the finance minister of Indonesia two weeks ago. Same comment. This one exactly what you said. So you in good company?

Guest Hi, I'm Sue. I was a recent graduate and I'm a research fellow at the CID. Now, I was a bit more curious when you talked about the bright spots of India and Indonesia. What, in your opinion, are they doing right to maintain the higher levels of growth? Because like you said, how India, for instance, had had declining labor force participation from women? And how does that compare with some of the remedies in women participation and carbon investments that you said? So what are they doing right and how does that compare with what you have suggested?

Dany Bahar Let's let's take a couple more and I'll remind you of the question. So we have one next. Yeah, right next to the gentleman.

Guest Hi, Jason. I'm a fellow at the Belfer Center. I'm just interested if there's anything in particular you want to hear out of the G-20 this weekend or you don't want to hear or whether you think it doesn't really matter.

Guest I thank you very much for the talk today. So I'm Jay. I'm a big fan of economics, but an even bigger fan of baseball. And I was curious about your analogy to the Oakland A's and China. And in particular. So you brought up. Jason Giambi leaving the A's, who's this big player and then has to have a lot of little players fill his void. And I'm curious for China, are you looking at the demand side in that Chinese demand is falling and the resistance use fiscal stimulus, the supply side with, you know, COVID and supply chain shocks both or neither for who the for what the smaller countries have to replicate.

Indermit Gill This is the danger of playing to a gallery of one, because I knew that Ricardo likes analogies like this. I came up with this one, but I didn't think it through. And that's the difference between Ricardo and me, he thinks it through. Okay.

Dany Bahar Yeah, go ahead. Yeah.

Indermit Gill Yeah. So I can start with that one. You know, I was just saying that essentially what we really need to do is we need to get like one or two percentage points, one percentage point more from India, one percentage point more from Indonesia and so on. And if you then if you aggregate all of that stuff that then offsets this decline, this decline in potential growth in China, you have to multiply this by about 20 trillion, but you need to sort of add out all of these. That's what I meant, you know, in the sense that you sort of get, you know, smaller players to step up their game a little bit. Right. But then remember, you also have to get these smaller players to trade with each other the way China because a large part of the China sort of big move was the fact that was trading a lot of inefficiency, lower knowledge flows and so on. That trading part is really hard, you know, in the sense that your team worked on it. Right, which I don't think was quite there in Moneyball because they were just breaking it down. But you know, each person, right? The only team aspect of it was that they were supposed to sort of, you know, it didn't matter whether or not you got on first base because of a walk or a hit. You just got on, right? Yeah. Okay.

Dany Bahar Let me add that I'm going to remind you of the other two. But let me there's a question from Zoom, that I think is a good follow-up, which is what is the US? What changes in US policy are needed, do you think, to support a global re-engagement of China?

Indermit Gill Oh, I. That's a tough one. I thought if you asked me what changes in US policy generally, I think that, you know, pressing both the brake and the accelerator at the same time is a really bad idea. So you should. You're going to take your foot off the accelerator. Right. And I'm talking with the fiscal accelerator and the monetary brake. You know, so I think that's part of the problem here. But in terms of that one, let me think about that. I mean, think about that.

Dany Bahar We had a question about India and Indonesia. What are they doing right now? How about the G20.

Indermit Gill India, you know, India? I think that one of the things that you sort of see from this right away is that if you sort of look at the growth of the Labor Party, you know, that's that's it's steady in India. It's kind of steady also in Indonesia. Right. So that's one of the things I think in a sense, these two economies were actually relatively inefficient. Right. So Indonesia is has just roughly now reached upper middle-income status. India is still halfway through halfway through lower middle income. So they should be growing faster. So it's not as of in fact, I think that India should be growing a little bit higher than this right now, Indonesia. So this is something I don't know if they'd be talking with you, Ricardo, but they have some really bad ideas. So they want they want to create an opaque for for where you are, a nickel and lithium and so on. So I think and Ricardo wants him to talk with them about it. And I guess it seemed like a contested conclusion. Does maybe the Venezuelan idea which is that saying that so you know but they have commodities so they actually even though the you know, they have commodities and they have relatively low labor force participation. Okay. That's one. I think India the other part that India is, is on the digital technologies and so on. So I was told by Nandan Nilekani, who is the I guess he's the father of Indian I.T., and he was saying that what India has been doing is that, you know, India created this unique identity card, universal identity card. Right. And the world sort of thought this was, you know, as the world took some time to catch up to that. Right. By the time they caught up to it, actually, what India had done was it had actually used that as a platform to cut financial transactions a lot. The cost of financial transactions a lot as a result of it. It made sense for these banks to actually to actually reach out and include people in the financial systems who had very small accounts that because the cost of each account went down massively. Right. So the world has caught up to that, too. And what Nandan was saying, well, actually, we moved on to another part of it. Now what we've moved on is that what we are trying to do is we are trying to help poor people or low-wage people use that digital, use the digital use digital footprint as capital. So, for example, they can actually, you know, that you can actually sort of get a lot of banks to bid for your services by giving them temporary access to your digital records so that they know exactly what your income and your expenditures and all have been. And you can even say, for example, you have an autorickshaw driver that autorickshaw driver can actually get a loan which is paid, which is repaid every time the guy actually gets money from somebody because he's getting everything digitally, you know. So they've actually already moved on to that. So that's that's another reason why I feel like India could actually, you know, think that that part has to do with the that that part has to do with this part of the Indian growth. Right. And then, you know, under Modi and this is open to debate, but under Modi, you know, you've had an improvement in the business climate as well. And people are sort of thinking that some of those things are going to be permanent. So as a result of all of those things, Indonesia, I don't know as well think, but Indonesia has a serious problem of infrastructure links between the different islands. So if they invest in that, they're going to get a huge, huge productivity to be out of that. Well, there was one more question.

Dany Bahar About the G20.

Indermit Gill The G20. If they only did one thing, which is that if they only agreed on a way to help countries that are in debt distress quickly. The G20 common framework is neither, okay. It's not a framework and it's not very common. Right. Okay. So you have to sort of have. You have to have something that is actually not country by country and so on, because country by country. The treatments. Screw the screw the weakest countries. No. So it took Zambia two and a half years and they still haven't actually got any debt relief. But it took Zambia two and a half years to actually get to a point where they can now dream of debt relief. Meanwhile, Zambia went from being an upper middle income country to a low income country. No. So this happens all the time. And I feel that with the interest rates rising in the US and so on, we're going to get a very similar thing. It won't all be in Latin America as well as the Philippines. In a few countries it'll be spread out all over the world. But you're going to get this problem. And given the fact that we don't have that kind of a mechanism, that the G20 is not going to do it. Right. Because they can't. Because. Because it's because it's a consensus driven organization. And China won't agree. Right. Because of that. And one China one agreed. The other one is that France will not agree to to actually to like disband the Paris Club and say why don't we ask the World Bank and the IMF to actually intermediate these deals rather than it being done in the Paris Club? You know, the Paris Club, it was a book club. Is is this arrangement that the French led where essentially creditors. Did they all get together and they decide they actually decide the terms of debt relief for countries that are poor, mainly in Africa, but also in other places. But the the problem is that the amount of debt that is owed to these countries that belong to the Paris Club is now a smaller and smaller fraction. It's less than a third. All right. It's actually less than a quarter now, but they still maintain the fact that so they are you know, they are basically playing around with Chinese money and Saudi money and Turkish money and Indian money. Right. And these other countries say we don't like this. So basically, they need to come up with this. And there is this there is there's going to be this impasse both on the French and the Chinese side. So that would be the one thing.

Dany Bahar So let's do another round of questions. Here, here, and one over there.

Guest Hi, my name is Adwoa. Thank you for the presentation. I, I know you're doing important work on the middle-income trap, and I was wondering, I wanted to get your thoughts on this phenomenon of the missing middle, which are the population right above the poverty line who don't get social protection. I was wondering if there is any interventions that you think the government or social sector can do and provide to support this population, this very vulnerable population other than social protection, other than taxes, something that's maybe really driven? Thank you.

Indermit Gill Yeah, well, how much time do you have? Because we are actually. We are doing a whole big report on this issue, and you should talk. We should make you give you a lot of stuff on this one. Absolutely right. But you are spot on.

Dany Bahar To the one in the back. Yes. Yes.

Guest Hi. My name's Melanie and I'm an MPP. So this graph is really interesting and I love the take-up position between labor capital and productivity. And what stands out is that productivity is declining across all these countries. We've recorded a global productivity slowdown, but amidst and all these crises and, you know, COVID, it feels like there really is no solution to boosting that productivity. And I think boosting productivity would help lift China or some of the more advanced countries as well. So wondering if you had any insights on what would be that catalyst. Do you think it's I or do you think it's something else? So what will be that step change in growth for the world?

Indermit Gill Yeah.

Dany Bahar We have one here. Sorry, I'm just bombarded with questions.

Indermit Gill And no worries. No, it's good.

Guest My question is about the industrial transition that's kind of supported by subsidies. So we're sort of seeing not a race to the bottom, but every country is kind of racing to provide a set of subsidies so that the whole green transition takes place in their geographies. So my question is, when these subsidies and what does it mean for the productivity landscape when like the efficiencies, when the subsidies are removed and the efficiencies come back to parity, what does it mean at that point when, like capital stocks have depreciated? Is it going to lead to efficiency problems? Do you see this as a necessary step towards the green transition? Just your thoughts on that.

Indermit Gill This Is a purely hypothetical question, because the subsidies never end. I'm kidding. I'm kidding. When I had a slide that actually sort of said that in fact this is a problem or what you just said. And the worry is the worry is that a lot of this is being done by countries in the guise of the green-green transition, but it's actually just a protectionist measure. And if that is true, then I've coined the phrase, which is that it is simultaneously shameless and shameful. Yeah, but it's. I think it's a real danger because it basically then means that because these things will then take some other form and so on. Right. So, so I think this is something, this is another thing that the G20 could actually use to try to discipline this. But the problem is the that the body that actually would have actually overseen this well and so on is the WTO. And the WTO is pretty toothless right now. Yeah.

Dany Bahar We had one on interventions for variable interval populations other than traditional interventions. If you have any thoughts on that.

Indermit Gill Yeah. Yeah. I don't know.

Dany Bahar Let me add another question to that because the one we have in the chat that I think is related, we had a question from Uganda, from Uganda asking also particular about our policies for labor marketing, push ups of female of women. I mean, two different things, but then you might combine them.

Indermit Gill So, you know, so that there's this old Chinese saying, I think is that Indians never write things down. And then when they're pressed for details, they invariably resort to storytelling. So. So I'm going to tell you a story. The story is from Saudi Arabia. So Saudi Arabia actually, we've been working a lot with Saudi Arabia to increase labor force participation of women. Yeah. And what happened was that they've actually changed quite a few laws and so on. We have something called the Women of Business and the Law Report. Right. And, you know, we actually got a lot of pushback from the Saudis initially, and then they just basically adopted these things. And, you know, they kept changing things like, you know, inheritance rules. The fact that that that essentially we would basically men could drive, etc.. Right. But they that the timing of this was great. The timing of it was that they actually made all of these changes and then COVID came. And when COVID came, a lot of the workers, the migrant workers actually returned to their countries. When COVID restrictions were lifted, a lot of those jobs actually ended up going to Saudi women like sales jobs and so on. So you actually sort of see this massive improvement in female labor force participation in Saudi Arabia. Some of it is luck, but some of it is definitely the hard work of removing some of these. The story from Saudi Arabia essentially illustrates that you can actually do these things, that these things, you know, can happen in places where you wouldn't have thought the odds were very high and then you would have thought that the that the speed would be very fast, you know, And both of those things happened. Right now, in the case of India, there's a lot of analysis on India on this one. You know, and I think there are some really nice there are some really nice analogies between India and Bangladesh and actually between West Bengal and Bangladesh, where you actually sort of find that female labor force participation in Bangladesh is twice as high as that in West Bengal. And normally speaking, we think of Muslims as. Societies are having lower levels of participation. In that case, you actually saw that actually higher. Right. So I think that in the case of India, I was talking about this. One of the problems in India is that northern India is like a very safe suburb when it comes to weather, when it comes to public security for men. And it's like an inner city when it comes to public security for women. Public security is a huge problem in especially especially in northern India. And by the way, in northern India is where 10% of the world's population lives. That's the thing. And there are a whole lot of other things. The one part that I find, Ricardo, is that, you know, so I never sort of really paid a lot of attention to the caste system in India, mainly because of my religion, where we are actually not super robust and so on. But. But, you know, probably because of ignorance. Right. But the more I went to India, the more I realized the system has a lot to do with all of this stuff. And we can sort of. So this is 5000 years old, you know. So it's really going to be hard, but I think it's very related to the labor force participation and so on, because labor force participation of women is relatively high in the lower costs. It's it's lower in the higher cost. No. So how does one sort of fix that? It's a it's a tricky problem. Yeah, it.

Dany Bahar That was another very easy question with you here. I want to note that I was also the presence of Somik Lall who is visiting for the day, who's leading the World Development Report for next year. So I know Somik has thought a lot of, a lot of this issue.

Indermit Gill Somik is looking at exactly the problem that you mentioned you have, that when countries become middle-income, they end up having these three pathologies. The first one is that they end up having not enough mid-sized firms. The second one is not a large enough middle income, but a not a large enough middle class. And then the third one that we sort of see is that they actually end up using energy sources that are on either end of the spectrum, either very clean energy like hydro and stuff like that, or very dirty energy like coal. And compared to higher-income countries, they end up using mid-carbon fuels a lot more like gas. That's. And I'm really thankful to you for not saying that my story was what was wrong. It's true, right?

Guest Yeah. Yeah.

Dany Bahar There was an easy question for you about what do you think is the next is in the next boost for productivity. What is going to cause an explosion of productivity if I rephrase it a little bit.

Indermit Gill I'm...  so in six months Somik will give you a really good answer to this. But I think one of the things is that you know, it goes back to this thing about how we think about how we think about productivity growth, right? So we might think about it as within we could think about it as new firms coming in or and so on. Sometimes we also sort of say, Oh, you know, large firms tend to have low productivity growth and smaller firms have higher productivity growth, I think. Somik's report is questioning all of this stuff in a very, very nicely in a very compelling way, because better and better into the data, you know, So in fact, for example, it has to do with, you know, how do you make sure that you discipline the incumbents, whether those incumbents are large firms, whether those incumbents are the elites or whether those incumbents are state owned enterprises that actually prevent a large part of the energy transition. Okay. But you have to work with them. It's not it's not a question of somehow trying to sort of say that we're going to get rid of these guys. You know, you'll always have the elites and so on. So how do you sort of make sure that you actually have that that you use? You have a group of elites or you have a group of incumbents that brought innovation rather than. So that's part of the answer to your question.

Guest So sorry, just to recap, so you largely think it relates to competition policy then and how to improve dynamism between the businesses?

Indermit Gill Definitely that except that one of the things that Somik has taught me is that there is no place where you're going to get perfect competition, right? So you have to sort of figure out a good way to make imperfect competition work. So competition policy better bid, you know, So it has to be premised on that point that you're going to have that that there is going to be that there's going to be that there's not going to be any place where you have perfect competition. And then how do you how do you design competition policy that is alert to all of these dangers about about elite capture? Yeah, all of these things. Right. But he's he's the man. He's the man. You should ask this question.

Dany Bahar I'm told that we have time for one more question. I'm hours invested in me. I decided I'm going to ask. But I think it's going to be useful for everybody. So I think we have here a lot of people who are going to be looking to start very meaningful careers on development, on development in general. But beyond that. So we want to pick your brain on what's your best piece of advice in terms of like what are the you know, what are the most exciting things to be thinking of in terms of development work and jobs in development in the World Bank and outside the World Bank?

Indermit Gill So the first thing is the best place to work if you want to work in development. Okay. The two best places. One is you work in a developing country. If you decide you don't want to work in a developing country, then you work at the World Bank. That's the best place to be. It's a really good place to work. So you should sort of make sure that you know what the World Bank is doing. And so it's not the only place, but I think is the industry leader in international development for no other reason. The World Bank has this, I guess a niche of the World Bank is that it has no niche. It has to cover the full spectrum of development problems all the way from monetary down to religious. I don't know. So it has to sort of cover it all. So in that sense, you know, it, you know, pretty much anything that you're going to be working on. The World Bank is interesting, you know. Now, the one thing that I do know is that is that, you know, if you if you all want to sort of work on the sustainable energy part and so on, you should know it's a crowded field. Okay. A lot of people want to work on those things. If you want to work on those things, then make sure that you have a skill that other people don't have. And that usually means a technical skill. It usually means an unpleasant thing, you know, something that other pleasant things everybody wants to do. Right. So it has to be something unpleasant is usually some technical stuff is trying to figure out what are the Israelis saying? I mean, that's not easy, right? But if you figure that out, then you have a skill that people want. That technical skill gets you that first job. Okay. And then the World Bank proceeds to destroy that technical skill until you have nothing left.

Dany Bahar All right. Well, let me thank you on behalf of all of us for this excellent talk. Thank you for your time.