@ 2018 Annunziata + Desai Advisors, LLC

  • Marco Annunziata

Year-End Reflections



This is not a robust analysis, rather some quick considerations shared at a virtual festive dinner table—take them as such.


From an economist’s perspective, 2019 has been remarkable mostly for what did not happen. The world economy slowed, but it did not stall or crash—the much talked about “trade wars” did not cause a global recession. The US economic expansion did not end—it became the longest on record, with employment levels reaching new highs. Speaking of which: the robots have not yet taken all the jobs. China did not implode—it slowed, as its government tries to very gradually reduce excessive leverage; meanwhile it is making impressive progress on a range of key technologies, and the number of world-class Chinese companies keeps increasing.


The fact that all these negative developments failed to materialize is notable because we’ve spent 2019 being constantly warned that they most likely would happen. In fact, we have spent the entire decade under the menacing shadow of a tireless doom-and-gloom campaign by the media and by many experts and analysts. Even when they reluctantly acknowledged the global economy was still growing, they insisted that we are in Secular Stagnation, with unredeemably mediocre growth condemning us to constantly tread on the edge of recession and deflation.


And here we are: the US has enjoyed its first recession-free decade, with record-high employment and household finances in a very healthy state. Low inflation has boosted purchasing power. Global poverty has continued to decline, the emerging markets middle class continues to grow.


I am not suggesting that all is well in the world. Income and wealth inequality, financial excesses and imbalances, structural rigidities that undermine productivity all abound and we should address them.


Most worryingly for me, the democratic process has deteriorated in a wide range of countries. Polarization has increased and the quality of social and political dialogue has collapsed, undermining decision-making and policies.


But excessive and close-minded pessimism is counterproductive. It diverts attention from the most important problems and counsels the wrong solutions. By all means let us worry—but let’s worry about the right things. And let’s not underestimate what we are doing right.


Looking closely at the new technologies implemented across industry, I am more and more convinced that they will boost productivity. They are transformational. But because they are transformational, implementing them is hard; it requires a massive change in operations, skills and thinking. It will take longer than we’d like—but it’s already happening. (If you are curious about the tech and productivity debate, in this special feature by The International Economy you will find more of my thoughts as well as a range of views from Jason Furman, Jim O'Neill, Mohamed El-Erian, Mark Sobel and others).


Similarly, I think we tend to underestimate the extent to which technological progress has improved living standards. We keep hearing that the median real income in the US has not budged in over twenty years—but I have yet to meet anyone who would happily go back to a 1995 lifestyle (and not just in the US).


When it comes to technology we are again worrying about the wrong things. We worry about what to do when the robots take all the jobs—and conclude we need Universal Basic Income now. The truth is, the robots are running late. So for the time being, let’s focus on improving education and training to build the right combination of skills: scientific, manufacturing, digital. And let’s worry a bit more about how smartphones and social media are eroding our cognition, our ability to think deeply and independently.


My wish for 2020: let’s be a bit more optimistic, and a bit smarter in how we choose and address our worries.


Merry Christmas & Happy 2020!

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