A Conversation with Glenn Hubbard, Dean Emeritus of the Columbia Business School on Building More Prosperous Economies.

A Conversation with Glenn Hubbard, Dean Emeritus of the Columbia Business School on Building More Prosperous Economies.

Two of today’s greatest economic changes, and challenges, are technological advance and globalization. Historically, when the majority of people—in particular political leaders—have been confronted with change, they have met it with opposition and walls—both physically and metaphorically.

Glenn Hubbard is the Dean Emeritus of Columbia Business School and former Chairman of the US Council of Economic Advisers. In The Wall and the Bridge, Hubbard proves that walls never lead to prosperity and almost always portend collapse. While change can be extremely difficult, it is inevitable. Ultimately, the only way to propel ourselves towards tremendous technological, cultural, and economic progress is to build bridges—accessible to and created by all. Bridges level the playing field by preparing those needing the skills for the new economy while providing the infrastructure for them to reconnect with today’s workplace. It is because walls delay needed adaptations to the ever-changing world, they are essentially backward-looking and ultimately destined to fail.

In this interview, I speak to Glenn Hubbard about our economic model, why we need to build bridges instead of walls, and how we can create an inclusive economy that allows everyone to flourish and grow.

Q: How would you characterise our current economic model?

[Glenn Hubbard]: Whether it’s in economics, politics, or wider society, there’s a debate about capitalism versus socialism; but I don’t really think that’s what’s happening. If you look at the populist undercurrents around the world- it’s really about walls & bridges.

When there are big changes in the economy – like globalisation or technological change, the simple thing to tell voters is, ‘we’ll build a wall to protect you against those changes…’ what you really need however, is bridges.

I always think back to Monty Python’s Life of Brian movie where they ask, ‘What did the Romans ever do for us?’ – they then list all the amazing accomplishments… you could say the same about capitalism, right? It’s brought us amazing living standards on average, but not everyone wins from this type of technological change and globalisation.  That’s the political problem. Business and political leaders often take social support for a system as given, it’s not. You must build bridges to people – we’ve done this before with land-grant colleges in the US, the GI bill… we’ve done this before, we just haven’t done it in the last few decades of the neoliberal era.

Q: What are the economic and policy walls?

[Glenn Hubbard]: Walls are an old idea, think back to Queen Elizabeth I trying to smash machines so they wouldn’t put people out of work, the various luddite movements over the years and more recently anti-trade and anti-immigration. A lot of this is from political leaders thinking, ‘well, if change creates losers as well as winners, why don’t we just stop change?’ – the problem is that if you eliminate dynamism, you don’t have growth for anybody, everyone loses. Rather than just having some people who are disadvantaged, everyone becomes disadvantaged.

Walls are seductive though… what politician hasn’t said, ‘I can make it like the old-days again…’ From Youngstown, Ohio to the heartlands of the UK or – indeed – any industrial country, politicians propose walls. Bridges sound harder – how do you buidl them? What will they cost? Who will pay?

In truth, build walls almost always yields a negative result. I can think of a few counterexamples of course such as protecting early-stage industries in the emerging economies (even the emerging United States used such policies!) but in general, walls serve to protect entrenched interests – and not the very people they’re trying to protect. Walls undermine the social support for business and the economic system.

Ironically, our world economy grew because walls came down. We also had the death of distance with advanced communication – the world became everyone’s oyster. It made some people much better off but left many behind.

If you are taking care of individuals and communities with bridges, it would be clear that the arguments for walls were just pure protection for special interests, for smaller groups. The wall can hide behind the notion of being there for you, behind the notion of wanting to protect everyone with a wall around the country, across a border, or around a technology. You would cut the arms and legs off the argument if you had bridges instead.

Q: Why don’t we have more bridges?

[Glenn Hubbard]: We’ve had a collective gap of imagination around economic bridges. If you look at the Lincoln era, people think about the civil war (which was obviously a big deal!) but there were also Land-Grant colleges, the Homestead Act and the Transcontinental Railroad. Lincoln used the government as a battering ram to bring opportunity to those left behind. The country was modernising, industrialising, and Lincoln wanted to empower people. We did that. Franklin Roosevelt did it with the GI Bill – he ensured that those serving in the armed forces had jobs when they came back. We did that.

We know how to build bridges; we just don’t build them.

There is a problem with business leaders and the economics profession where we have celebrated the gains from neoliberal policies whilst only paying lip-service to compensating those left-behind.

There are some mechanisms we do have. Here in the US, we have community colleges, they are the foot soldier in our mission to train people. Rather than talking about free tuition, a modern Lincoln would speak about a block-grant for community colleges that really gives them the resource to train people. Why can’t businesses work with universities to do that? Why can’t we have a national network of applied research centres? Why can’t we give aid to communities left behind, to help them adjust to the new world, rather than just leaving them out in the cold.

Q: How should we think of the difference (if any) between economics and politics?

[Glenn Hubbard]: The genius of the classical economists was to think of economics and politics as the same. Remember, in Smiths’ Day, there was no economics faculty, it was political economy. We may need to go back to that.

Think back to the 07/08 financial crisis. The Queen of England asked the London School of Economics a deceptively simple question, ‘why did nobody see this crisis coming?’ – what she was really saying is, ‘You are all so smart… and this was so bad… how could your discipline have not seen it coming?’ Implicit in the Queen’s question was the assertion that economists don’t get out enough and talk to people in the wider economy. Talking to politicians and business leaders misses communities and those left behind. This is where politics and economics need to come together.

Economics has certainly lost some sway in politics because we haven’t had a political message. When George Bush was President, I was his adviser at the White House. I advised him not to do steel tariffs, gave him all my econ-101 arguments, and he went the other way. It was later that evening, at dinner, where my wife told me, ‘you know what… there are two sets of people… economists, and real people… you’re an economist, the President is a real person, and real people don’t think the way you do…’ – I strongly suspect that it wasn’t that Bush failed to understand the economics – but rather, he was picking up on the political reality that I didn’t have a ‘thing’ to offer, he did.

Q: How can bridges help us solve today’s grand challenges?

[Glenn Hubbard]: Let’s talk about climate change. In the United States, there’s a debate over what’s called a ‘just transition’ – this is very, very important. Let’s suppose we would like to get rid of coal (which is a very important part of our advance towards zero carbon). We know US coal tends to be very concentrated in politically potent places (West Virginia, for example) – and so rather than saying, ‘let’s get rid of coal!’ or ‘let’s have a carbon tax!’ or ‘let’s cap & trade!’ – what if we talked about programmes for individuals and communities that create bridges to new opportunities?

The land-grant colleges taught manufacturing to people in agricultural areas during industrialisation – they were giving people a bridge to something new. We should be doing practical things like that.

Q: Do we have the fiscal regimes we need to build bridges?

[Glenn Hubbard]: If you look at how most big industrial democracies spend their money, you will see smaller-and-smaller parts of spending are directed to public goods like defence, basic research, and education. More money is being spent on social-insurance and support, particularly for our ageing population. The idea of bridges is anchored in the notion of opportunity. It’s about community. It’s about training. If we want to spend more on bridges, we’re going to have to either raise taxes, or spend less elsewhere, and either of those things poses difficult political choices – but there’s no such thing as a free lunch.

[Vikas: So, does this point to greater wealth taxes as being a solution?]

[Glenn Hubbard]: The problem with the ‘top one percent’ argument is this. To deliver what we need, we need bigger government, and the top one percent aren’t’ going to pay for that. You may, for fairness, wish to tax the most-wealthy at a higher rate, but the argument simply doesn’t hold that they ought to ‘carry’ the government. If we want a bigger government everyone will have to pay, but contemporary politicians aren’t really advancing this choice to the public. The public are sold the idea of small government, low tax, limited opportunity spending, high social spending.

Q: How can we therefore find the voter imperative to build bridges?

[Glenn Hubbard]: We’re not trying hard enough to persuade people that bridges matter. If I think about our left and right wings in politics here in America. The left speaks more in terms social programmes and less in terms of opportunities for work. My colleague at Columbia, Ned Phelps, Nobel Laureate, has talked for years about the power and dignity of rewarding work and participation in society. That’s just not on offer from the left, and the right essentially have nothing to offer.

The view seems to be that rising tides will lift all boats, and that growth will take care of things.

If Smith were alive today, he’d say that in addition to the openness and competition and all the wealth we are creating, we need a sense of mutual sympathy and empathy. We need to give people the ability to compete.

Q: Are we therefore measuring our economy badly?

[Glenn Hubbard]: our economic measures aren’t wrong, they’re incomplete. Smith noted that a successful economic system is one where everyone who participates can flourish. That’s not about equality of outcome, but about the fact that everyone has the ability to flourish, equality of opportunity. That’s what we’re missing in the economy – if GDP is rising on average, but is concentrated, that’s not mass flourishing.

Q:  What should be the relationship between government and business?

[Glenn Hubbard]: Businesses need to care about the people and places they interact with; not just the idea of a global marketplace. Businesses need to band-together in a community to support training. Business leaders often say to this, ‘well, I can’t spend a lot on training because my competitors would just hire my people,’ but what if all large employers work together to support training in general. Also, competition is really important – we cannot forget that.

Tax is also important – we need to tax rents more than competition, and ought to be moving towards a cash-flow tax falling on high-rent firms rather than smaller, more competitive firms.

Q: What do you hope your legacy will be?

[Glenn Hubbard]: A successful economic system should put everybody as a participant in that system. I’ve always believed, as an economist, that you write for the file. I never know when a politician is going to come along who believes, or doesn’t believe, what I’m saying, but if I write for the file, he or she will be there one day. That’s what I think of the ideas I put forward – that perhaps somebody, some-day, will pick them up.

Thought Economics

About the Author

Vikas Shah MBE DL is an entrepreneur, investor & philanthropist. He is CEO of Swiscot Group alongside being a venture-investor in a number of businesses internationally. He is a Non-Executive Board Member of the UK Government’s Department for Business, Energy & Industrial Strategy and a Non-Executive Director of the Solicitors Regulation Authority. Vikas was awarded an MBE for Services to Business and the Economy in Her Majesty the Queen’s 2018 New Year’s Honours List and in 2021 became a Deputy Lieutenant of the Greater Manchester Lieutenancy. He is an Honorary Professor of Business at The Alliance Business School, University of Manchester and Visiting Professors at the MIT Sloan Lisbon MBA.

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