>>Eric Schmidt: What I'd like to do is begin
by talking a little bit about 2008.
Maybe the easiest way to ask this question
is: You're sitting there.
There's all of this stuff going on around
you.
In your case, you had literally just -- as
an administration, just gotten there.
What was the low point that you faced?
What was the hardest point?
And how did you deal with it?
>>Lawrence Summers: We met -- it was before
anybody had been appointed to any job.
We met with the president-elect on the Friday
after he had been elected president, and he
asked for a rundown on what the situation
was and what needed to be done.
And we had to tell him that if you looked
at almost any interesting indicator -- the
stock market, industrial production, global
trade, almost anything -- it was falling more
rapidly than it had been in the fall of 1929.
And that the challenge was to avert what had
happened in the four years after 1929.
That the breakdown of basic financial flows,
as even the largest and most successful companies
in the country worried about whether they
could borrow money for one week or one day
because one year was inconceivable, that that
was like a power failure or like a breakdown
of the telephone system.
You know, there would be a kind of economic
analysis that would say telephones are only
2% of GDP, so if all the telephones don't
work, it couldn't cost the economy more than
2% of GDP.
A moment's thought reveals that that's not
very good analysis, and something just like
that had happened with the breakdown in finances.
And I remember what I stressed to the President
was that collective confidence was what was
essential, and that a strong sense of discontinuity
was crucial to the resumption of confidence.
And the President pursued a really ambitious
program between what was done to generate
the recovery, to bail out the automobile companies,
to maintain basic confidence in the financial
system.
There are plenty of questions one can raise
about every aspect of that program with the
benefit of hindsight, but the fundamental
fact is that the path looked nothing like
the post-1929 path.
And that, I think, is a very substantial achievement
of the President's with enormous consequences
for Americans and, I believe, for people around
the world.
Now, to say that we averted the depression
is, I think, to recognize what could have
happened.
It is not to say that everything's okay.
It's not to say that matters are satisfactory.
And I think what's very real is that the power
failure, if you like, that was just stopping
the economy was contained and didn't happen
the way it did in 1933.
But the quiet and sometimes not-so-quiet crisis
represented by the fact that one in six men
in the United States between the age of 25
and 64 -- 54 is not working and that there's
not a prospect that that's going to improve
substantially, that crisis continues.
The crisis that for the first time in American
history, if you look at what college graduates
and recent college graduates are doing, it's
substantially less attractive than what it
had been 10 or 20 years ago.
That crisis is continuing.
And so we have enormous challenges with respect
to realizing the potential of our national
economy.
Never forget that if you want to look for
decades in the 20th century of remarkable
technological progress and creation of opportunity,
the 1920s, with the pervasiveness of electrification,
the automobile, aviation, artificial fabrics,
and much more, stands out.
And that technological progress didn't stop
the 1930s and everything that followed from
happening.
And so the right lesson is that technological
progress is immensely important for the potential
that it creates.
And there's really nothing that's important
over the long term except for it in terms
of human potential.
But no one should suppose that it is somehow
self-fulfilling and that merely the existence
of technological potential and some broad
freedom around assures that things will work
out well for people, because the 1930s and
what happened around the world after remarkable
technical progress stands as evidence for
other things that societies have to do to
manage their economies, to appropriately and
strongly regulate parts of the market that
can become very unstable, particularly those
in finance.
>>Eric Schmidt: You've spent some of your
academic career recently working on the questions
of growth outside the United States.
We have many people here who are not from
the United States or are visiting.
You've taken a look at emerging markets growth
and so forth.
Does your answer change in any particular
way with respect to the emerging markets?
Or is there some new economics on that side
that's different from what we see?
>>Lawrence Summers: Look, I'd say this, Eric.
The reason they called it the Industrial Revolution
was from the time of Pericles to London in
1800, standards of living grew by about 50%.
The reason they called it the Industrial Revolution
is because then, instead of it taking 2300
years for living standards to rise by 50%,
it took one human life span, 40 or 50 years,
for them to rise by 50%.
If you look at emerging markets, it takes
six or seven years.
That's everybody in this room knows the law
of 70.
At 7% a year, something doubles in ten years.
That means if something grows at 7% a year,
it grows by a factor of a hundred in a single
human life span.
That is on a vastly different scale than the
industrial revolution or the Renaissance,
and it speaks to the staggering potential
of what's happening in emerging markets.
But we have been reminded in the last year
or two, last several years, that that potential
is also not self-fulfilling -- is also not
self-fulfilling.
We've seen it in the consequences of corruption,
sclerosis in India that have led to such a
slowdown.
We've seen it in Brazil where growth has substantially
stagnated.
We've seen it in Russia where the economic
challenges are very real.
And China reminds us that the old mutual fund
line about past performance is no guarantee
of future performance remains very valid.
So the particular issues will differ from
country to country, but if I leave you with
one thing here, it is the sense that as vastly
important, empowering, liberating as technology
is, it is not self-fulfilling in its impact.
You're exactly right in everything you said.
The Android device you're carrying and the
iPhone I'm carrying -- sorry about that.
>>Eric Schmidt: Can we discuss this --
>>Lawrence Summers: Yeah, we can discuss that,
perhaps if you compensated your speakers better
I would be able to afford the Android.
>>Eric Schmidt: Android is cheaper.
>>Lawrence Summers: But you have a thing you
all study called lock-in and switching cost.
[ Laughter ]
[ Applause ]
>>Eric Schmidt: That's right.
>>Lawrence Summers: And the like.
You know, it's true that those devices have
more computing power than the Apollo project,
more capacity to access information than you
do standing with the librarian at the Library
of Congress, and more ability to communicate
with people around the planet than the White
House communications system had when John
Kennedy was president.
That's all true, but it's also true that a
hundred thousand people have been killed by
their own government in Syria.
It's also true that the life prospects of
a child born in the United States today, whose
parents are rich and whose parents are poor,
that gap, probably for the first time in our
history, is larger than it used to be.
So what we need to do, the central challenge
for all of us in thinking about this is to
cheer on you scientists and you technologists
as you develop ever more potentials, but also
to think about the systems, the incentives,
the rules, the frameworks, the norms that
establish that all of this comes for maximum
good.
Because without that, we -- as we didn't realize
the -- I mean, if you think about it, electricity,
the automobile, human flight, artificial fabric,
these are staggering things relative to what
had existed before, and then we had the dust
bowl, Hitler, 25% unemployment.
And so we cannot rely on technology alone.
>>Eric Schmidt: Agreed.
There's a -- I'd like to explore the next
five to ten years and its impact on economic
-- the technological impact on economics.
And let me give you sort of the positive and
negative sort of assertions and then get you
to sort of help explain or parse this for
us.
It's clear that technology is improving the
lives of many, as I have stated and as others
have stated, but there's a great deal of concern
about, as you pointed out, economic disparity,
winners and losers, the couple of other demographic
facts.
Because of life expansion, there are fewer
people supporting more people who are not
working.
There's a lot of evidence of a hollowing out
of sort of upper middle class jobs that are
somewhat repetitive that can be competed out
in a globalized economy or replaced by automation
of one kind.
There is a concern that robots over time will
eventually replace more and more of sort of
low-tech, if you will, human activity.
We see already artificial intelligence helping
replace but also augment some jobs.
Take us through what the economics will show
will happen in the next five or ten years.
The technology is coming.
It's accelerating, in my view.
Do we end up, to put a more precise question,
do we end up with a very small number of people
who are doing all the work and a whole bunch
of people who are unemployed?
Do we end up with new opportunities for those
people who are displaced?
And if so, where are they and how do they
play out?
>>Lawrence Summers: There are two kinds of
people with respect to those kinds of prophecies.
Those who know they don't know, and those
who don't know that they don't know.
So all of us are only -- All of us are only
guessing.
When I studied economics, it was -- this was
at MIT in the early '70s, there had just been
the automation debates of the 1960s.
And the way it got taught to me, there were
the smart people who understood that automation
increased productivity and made people richer
and that created demand and there sort of
had to be jobs for everybody, and then there
were the dumb people who didn't understand
that, and that it was just obvious that automation
was going to be completely liberating and
create more opportunity for everybody.
You know, in those days, about one in 15 men
between the ages of 25 and 54 wasn't working.
And just to repeat, that number will be one
in six even after the U.S. economy has recovered
and we're deeming ourselves no longer to be
working through the aftermath of a great recession.
So I think there are serious challenges on
the employment side, and they come from a
place that I don't think is always understood.
They come from a broader transition that is
much like the agriculture transition.
What happened to agriculture in the United
States?
What happened is we got spectacularly better
at it.
People only could absorb so much food, and
so the relative price of food went down, and
we now have one and a half percent of the
population feeding the rest of us and there
are fewer jobs in agriculture, and they went
off and did other things.
Well, here's a fact that's sort of in the
same spirit as the agriculture transition.
And, you know, if this was an economics class,
there would be a lot of things could you quibble
about, but you'll see the point.
All the consumer price indices in the United
States are normalized so they were a hundred
in 1984.
The Consumer -- A hundred in 1984.
The Consumer Price Index for television sets
today is 6.
The Consumer Price Index for a college education
is 600.
The Consumer Price Index for a day in a hospital
room is in the high 500s.
In other words, the relative price of a television
set and, by extension, a large number of activities
whose production can benefit enormously from
this technology, is collapsing relative to
the price of other things.
And that means that more and more of the employment
is going to have to be in those other things,
but where are we going to generate the income
to pay for that?
You will note that health care and education
are a sector in our society that is more involved
with government than the production of television
sets.
So I think there's an immense challenge here.
It goes crucially to how well we educate,
in what ways we educate, how we allow people
to continue to be educated.
It goes to what products we produce and we
enable the consumption of, and what we're
in a position to finance as a country.
I mean, look at it.
How many people here have been through Kennedy
Airport?
I suspect everyone.
Is there anyone who is proud of Kennedy Airport
as the gateway to the greatest city in the
greatest country in the history of the world?
And I would say to you, I would say to you
that if a moment when construction on employment
rates are in double digits, a moment when
the long-term interest rate is below 3% in
a currency that we print, if that is not the
moment to fix Kennedy Airport, when will that
moment come?
[ Applause ]
And that is indicative of what is an immense
challenge of our infrastructure, our mixed
infrastructure like airports, our all-public
infrastructure like 37th Street without potholes,
our private infrastructure which, you know,
when I drive from center of Beijing to the
center of -- to the Beijing airport, I'm able
to continue my phone conversation with my
wife in Boston without interruption.
>>Eric Schmidt: Except by the Chinese authorities.
>>Lawrence Summers: Well, someone may be listening
admittedly.
And perhaps that's why they don't interrupt.
[ Laughter ]
[ Applause ]
>>Lawrence Summers: Because they want to hear
what it is I'm saying.
The same is not true if you drive from the
White House to Dulles Airport.
The same is not true if you drive from the
Empire State Building to Kennedy -- to Kennedy
Airport.
And, you know, this is a -- this is not a
left-right thing.
Yes, there are important elements about government
spending that resonate with some things that
progressives say that are an absolutely crucial
part of it.
But I'm told they just completed some kind
of new on-ramp to the Golden Gate Bridge,
and they took eight years.
It only took 15 months to build the whole
Golden Gate Bridge the first time, and that's
not because technology has regressed.
Harvard has a football stadium that is 110
years old.
When they built it, there was no such thing
as a bulldozer.
It was built in six months.
From the time it was conceived till the time
it was there was less than 18 months.
Can anyone conceive of a stadium in a major
urban area in this country now being built
in any interval like that?
And that goes to lots of issues of absolutely
important regulation where we do need to regulate
right.
And we do need to regulate carefully, God
knows, but maybe we can regulate carefully
faster than we have historically.
And so I think there are a lot of aspects,
both on the worker side and on the patterns
of demand side, Eric, that are absolutely
essentially.
>>Eric Schmidt: Thank you.
I think you all have seen why I believe that
Larry Summers is a genuine American hero.
He didn't have to go into the Clinton Administration
and run everything for a while.
He certainly didn't have to go through the
last so many years of the Obama administration,
but he did this with a strength an American
passion that I truly admire.
Thank you for being such a great public servant,
Larry.
>>Lawrence Summers: Thank you.
>>Eric Schmidt: Thank you.
>>Lawrence Summers: Thank you, Eric.
[ Applause ]
