Jennifer Blanke: Times have changed, errant nations have no room for error

There has been a consistent message at the 46th World Economic Forum: those countries who wasted the good times are going to struggle most now the tough times have arrived. And as WEF chief economist Jennifer Blanke explains in this forthright interview, their number includes Sunny South Africa which missed out on applying the bonus of a commodity boom and is now facing a bare cupboard as winter approaches. She urges quick and well communicated reforms to reduce the inevitable pain. Hopefully, someone in Pretoria is listening.- Alec Hogg

Alec Hogg is with Jennifer Blanke the Chief Economist of the World Economic Forum. Jennifer, I guess if there were lots of people engaging, you’d regard this as a success.

I think it is a success and this year, I find that we really have a forward-looking perspective. People are concerned about the situation still, but there’s a very constructive attitude, probably because 2015 was very much about coming to conclusions (we have the COP21 and we have the SGG’s), and so we’ve agreed on some of what we want to do. We feel very much that we starting 2016 thinking about what we have to do now to implement some of these good ideas.

Somebody explained it to me in the context that the WEF often looks at immediate challenges, but this year it’s looking at long-term challenges. Do you think that’s a fair description?

I actually don’t. I think we always look at a mix of things. I think we can’t get around looking at some of the big issues of the day because they’re at the forefront of our participants’ minds. At the same time, I think that we do as the World Economic Forum, have the ability to step back and think longer-term. I certainly know that I’ve been doing interviews over the past few days and I’ve been talking to a lot of people and saying, “We really need to think longer-term.” I know that the markets have been very volatile. We knew that we were in for a correction though, and so to think longer-term about things like inequality and a lot of the other slow-burning issues that we know that we have to deal with.

Gender equality as well. We had a lovely chat yesterday with Phumzile, our former Deputy President who said she’s now got a target: 2030, gender equality, 50/50 across the board. Do you think that’s realistic?

I don’t know if it’s realistic and I also think it depends on what she means by gender equality because there are so many different aspects of this issue. I do know that given that we’ve had real problems in terms of productivity that’s not growing, stagnant growth, inequality risking, and you have the ageing populations. I don’t think you have a choice. Obviously, I’m a woman and I’m in favour of gender equality but I think this is a societal issue that does need to get sorted out. 2030: I don’t know, but it’s going to have to happen relatively soon.

Read also: WEF 2016: 4th Industrial Revolution. 5mn jobs, women in the firing line.

One of the high-powered women who is here – Christine Lagarde of the IMF – gave us all a little bit of a jolt to start off this week’s proceedings, by saying that the IMF is now downgrading global economic growth. Was that unexpected?

I don’t think so because frankly, if you look at what the estimates have been over the last few years, they’ve pretty much been downgrading them every time. Remember, the growth rate is still a bit higher than it was last year. At least that’s still expected, even after the downgrade it’s about 3.4 percent or something like that, and they’re still expecting higher growth next year. Hopefully, that’s the case but of course, we’re going have to roll up our sleeves to make that happen. There are still big, long-term issues on the agenda that are burning, which we need to deal with in order to shore up our markets and really make the financial markets start to function again and get companies investing again, which is a big question for the future. Again, it’s the beginning of the year. There’s been a lot of talk here and I’m just hoping (and somewhat confident) that some of these efforts will actually bear fruit.

From a global perspective as well, the easy money tide has now gone out and those countries that hadn’t adjusted and have not been addressing their structural issues, are being shown in that way. Are you expecting that there’s going to be a call to action in those countries or is there enough of a reverse in the global situation to actually wake people up?

Well, I think that they have no choice but to wake up now. If you look at (especially) some of the large emerging markets like South Africa, Brazil, and many others; unfortunately, they didn’t take advantage of the good times – the high commodity price times. They did have floods of revenue to make changes that they need to their educational systems and the functioning of their markets, and now we do have difficult times. On top of that, if you look at some of the large economies like Nigeria, they no longer have those oil revenues that they had before, which is really pretty big for countries that are so dependent on one commodity. I think that they have no choice right now because the Government doesn’t have the capacity to stimulate the way that it did before and so at this point, we really need to get to the hard work of being productive and diversifying economies.

Which means a lot of change in certain instances.

Definitely, a lot of change and it’s going to be a painful transition and that’s unfortunate. It would have been a bit difficult if that had been undertaken five years ago. Now it will be more difficult but what it comes down to is that I think policymakers have to explain to the public why this is important and why it’s important not just for them but for their children and the following generations. I’m hopeful that with that concerted effort, that we’ll be able to make those sorts of changes.

I guess policymakers also have to embrace what is the way forward and not everyone agrees on that yet.

Yes. You can always go back to the idea that policymakers know what to do and yet they don’t know how to get reelected once they’ve done it. I think that we, as a society, need to move beyond that. We’re all responsible for our collective future and I think we all have a role to play, i.e. business, Government, and civil society.

We’ve got some interesting music as a backdrop here perhaps to the final question, which is the theme of the Forum this week – the Fourth Industrial Revolution. It was interesting to hear the various opinions. It could be great for mankind. It could be really awful for mankind. Employment is one of the obvious things if robots are going to take over from humans.

I think that’s true. We’re already facing high unemployment and often very high youth unemployment in particular. This is true in South Africa. It’s true in Europe. It’s true in many places. This is starting to exacerbate that problem because a lot of the jobs that we thought were [sort of] untouchable such as accountants, etcetera… Artificial intelligence is actually moving up the value chain so to speak, and these jobs are at risk now. It will be very important to take this seriously. We know that as we say in economic terms, there’ll be a difficult disclocation. There’s going to be a very difficult moment of transition but we’ve been really discussing a lot here in Davos about the importance of updating educational systems to be able to prepare people over time. One of the important things there is getting away from the idea of ‘school, work, retirement’ to have lifelong learning.

There’s no way that people get into one kind of job and do that for the rest of their lives. I think it’s very much a change in mindset. At the same time, the Fourth Industrial Revolution is going to offer a plethora of excellent things. A lot of the mind-numbing jobs that people do will no longer be necessary and my hope is that we humans who are really quite ingenious in general at finding things to do, will find much better things to do. They’ll be [inaudible 07:07] jobs today and the question is what we do in the interim.

Read also: UBS: 4th Industrial Revolution – Rich to get richer

Two years ago, we had Erick Brynjolfsson and Andy McAfee here in Davos launching a book, which is a watershed ‘The Second Industrial Age’. You knew (and when I say ‘you’, I mean the WEF) and got on to this two years ago. Now of course, it’s coming front and centre and there’s no doubt – because the WEF has given it so much attention – that the rest of the world will follow suit. How do you find these trends? What happens within the organisation that you can actually spot them?

Well, I think that (in particular, Professor Schwab because it’s a book that he just wrote) is talking to policymakers and business leaders every day on an ongoing basis and really testing the pulse of what’s happening in the world. The rest of us are as well. That’s our job – to really kind of scan the globe and understand what’s going on and make sure that it’s a real trend by the time we start discussing it. I think that’s what’s happening. We really do have a network of really top thinkers and doers and those are the people who are really helping us to understand what’s happening in the world.

If I summarise from all of that intelligence, this is going to be a tough year but if you as a human being, watch out for the robots and educate yourself better because no-one else is going to look after you…

I don’t know if that’s true. I’d say we’re all in it together and I think that Government has a role to play. Business also has a role to play because they’re the main employers in the world in most places and we as individuals also have a role to play in taking responsibility. I do hope that coming together (and this is not a one-year thing. This is going to take a number of years to get right) and if we really have that long-term approach, that we will be able to do so.

Jennifer Blanke is the Chief Economist at the World Economic Forum.