CIC 2019: Lawrence H. Summers on the US economy and China-US trade discussions

Dr. Larry Summers, is there light at the end of the tunnel for the China-US trade discussions? What outcome do you see as more likely, a new era of cross-country disputes or a trade agreement, and why? I think it’s going be some of both. I’d be surprised if there weren’t some agreements reached, and I’d be even more surprised if they were the agreement to end all agreements. I think there are going to be continuing frictions. New issues are going to arise, not all issues are going to be covered. People are going to try to change their minds. So I think we’ll see some ongoing negotiation with some moments of agreement, but the overarching picture will be one of negotiation and uncertainty with some elements of friction for a long time to come. Is the US heading towards a recession, why or why not? I think the odds are against a US recession over the next year, to the end of 2020, but not by a wide margin. Probability’s perhaps 35 percent. I think if you look over the long term, people don’t live forever and recoveries don’t continue forever. So the odds that the next President of the United States will be dealing with a recession and/or its aftermath, I think are far better than even really very likely. Disillusionment with US-style capitalism is rising. Does this herald a long-term shift in how economies are managed, why or why not? I think you’re going to see some pretty fundamental changes around what I’ve called secular stagnation, the issues of excess savings relative to investment, the issues of rising inequality. So I think you’re likely to see a period of more ferment in economic policy than we’ve had historically. I rather doubt that we’re going to see a fundamental change towards socialism of the kind some people talk about, or a fundamental change towards deglobalization and separation of the kind that some people talk about. But I think you’re likely to see more change in the way economies function over the next decade than you have over the last several. Thank you, Dr. Larry Summers.

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