Nouriel

Roubini is Documented@Davos Transcript Documented@Davos 2012 [MUSIC PLAYING] RANDI ZUCKERBERG: Thanks for tuning into our Documented@Davos coverage from the World Economic Forum. My name is Randi Zuckerberg. And we have such a rare and wonderful treat to be sitting here with Nouriel Roubini, economist and Davos man. He is probably the most requested person to sit down and speak with at this World Economic Forum. We also have a live audience in the house. You can't see, but it's packed in here right now. So thank you so much for being with us here. NOURIEL ROUBINI: It's great being with you today. It's a great initiative. It's such a pleasure. RANDI ZUCKERBERG: Now, I'm thrilled that we can bring everyone, through social media, into the experience of being at Davos. You are very active on Twitter. NOURIEL ROUBINI: Yeah. I'm very active. I tweet regularly. I have about 130,000- plus followers. I have a page on Facebook, also a public page. So I believe a lot in the power of social media. So it's great to be here. RANDI ZUCKERBERG: Now most economists that I follow are-- how should I say this-- a bit dry on social media. But you're full of flavor on social media. So the doom economy doesn't seem to be affecting your personal life that much. NOURIEL ROUBINI: Well, I think that to be effective and successful in social media, you have to have a voice. If you're just saying something boring or dry, you're just repeating some corporate speech or whatever, you're not going to get followers. People are going to follow you when you have something to say. And you have the challenge on Twitter of 140 characters to say something punchy. So that's how you get to be successful. Or even on Facebook, being able to just, say, pointed arguments. So I believe that's one way of expressing yourself. RANDI ZUCKERBERG: Hopefully, more public figures will take your lead that way. Now what does this week at Davos look like for you? NOURIEL ROUBINI: Well, for me, of course, I'm in tons of different sessions in which I'm a featured speaker. I have one-to-one meetings with lots of colleagues and people. I do a significant amount of interviews. And it's a great place where people-- men and women from all over the world, not just in the field of economics and politics, but science, social media, internet-- are coming.

I just had a meeting right now with Sean Parker right before this thing. And he told me about an initiative he wants me to get involved with. So we get to discuss lots of interesting things. And it's a complex world in which lots of things are happening. So it's a great place to come. RANDI ZUCKERBERG: And you just spoke at a luncheon earlier today, you were telling me, "Seeds of Dystopia." NOURIEL ROUBINI: Yeah. I had to actually check in the dictionary what dystopia was, because I was not sure about the term. And dystopia is just the opposite of utopia. And I think that speaking about the seeds of dystopia is fitting of our times, where there all these risks. There are macroeconomic, financial, social sources of risk and uncertainty, but also fiscal, sovereign, regulation, taxation, political, geopolitical policy. So there are lots of things that can go right in the world. There are also lots of things that can go wrong. And unfortunately, recently has been a world less of utopias. And many of the utopias of the past, whether socialism or communism or other "isms," have been collapsing. And we live in a world in which we have to have a reality check. And we have to worry about the things that can go wrong. So maybe we live in dystopic times. Not very cheerful, but these times look a little bit dystopic. RANDI ZUCKERBERG: Eurozone has been a hot topic here. Angela Merkel is speaking today or has already spoken. And you've been quoted saying that it's a slow-motion train wreck. Tell us how you really feel. NOURIEL ROUBINI: Well, I come to Europe every other week. There is a recession in the Eurozone, Greece, Ireland, Portugal, Italy, Spain. Now this recession is spreading to the core of the Eurozone. They have countries that have problems of too much public debt, too much budget deficits, too much private debt, lack of economic growth after the recession, lack and loss of competitiveness, large trade deficits that are not financeable anymore. And their policy response has been more austerity. But more austerity means what? You raise taxes. You cut government spending. So you're reducing disposable income for spending. And you're reducing demand through reduction of government spending. That makes the recession worse. So it's like a vicious cycle. And it's getting the recession worse. And in Europe, you need to talk more about growth and less about austerity. If you don't have economic growth, eventually the social and political backlash against austerity-- strikes, demonstrations-- weak governments are going to collapse. They're going to become overwhelming.

 Two, you're trying to stabilize high debt relative to GDP and income. If GDP, as the denominator, keeps on falling, your debt ratio is becoming higher. And you're bankrupt and insolvent. So we need to restore economic growth. And on the policy agenda in Europe, they talk about everything, but not about economic growth. That's why I'm worried. RANDI ZUCKERBERG: I know you've also spoken and written a lot about China recently. Now if China does, in fact, implode, what does that mean for the global economy? NOURIEL ROUBINI: Well, I don't expect China to have a hard landing this year. But many of their policies, as their own premier said, are unsteady, unsustainable, unbalanced. They can not continue. Right now, China has a growth model that is too much exports, too much investment in fixed capital, too much savings, not enough consumption. Consumption is only a third of GDP. And China is important. They're the second largest economy in the world right now in terms of size. So if something were to happen to China wrong, it would have a negative effect on China, on emerging Asia, on commodity exporters, on the US, on Europe. That's why we have to care about China. So China has to change its policies to have less exports, less fixed investment, less savings, more consumption. So you have to let wages grow more than productivity, so people have higher wages, higher income. Then they can spend more. You need to create a social safety net, social security, public education, health care. There are lots of reasons why the Chinese save too much. If they lose their job, there is not enough public benefits. They have to send their children to good schools. They have to save. If they get sick, they don't have good medical insurance. So the Chinese have to change their growth model. And unless they do it, eventually, not this year, there could be a hard landing, even in China. RANDI ZUCKERBERG: Now your group puts out many reports. Most of them speak about cause and effect and what's to come. When we sit on this stage one year from now, what do you think the global outlook looks like? NOURIEL ROUBINI: Well, we live in a world in which, unfortunately, in most advanced economies, there was too much debt and leverage, debt and leverage of households, mortgage debts, personal loans, too much debt of banks and financial institutions. And now, as a response of this crisis, we have too much debt of the governments, state and local government, central government. So we live in a world that has too much debt.

And unfortunately, economic growth in most advanced economies is going to be weak, anemic, subpar, below trend, more like a U recovery. Because whenever you have too much debt, you have a painful process of deleveraging. You have to spend less to save more to reduce your debts. And that means slow economic growth, high unemployment rate. Unfortunately, I fear that a year from now for the US, for the Eurozone, for the UK, for Europe, for Japan will be another world year of mediocre economic growth. But unfortunately, when you have low growth and high unemployment rate, there is social and political instability. We have seen it not just in the Middle East with the Arab Spring. Occupy Wall Street in the United States, riots in London, the middle class in Israel saying, I can't afford to buy a home. Students in Chile saying, I can not get a good education. Protests in Russia, demonstration and anti-corruption drive in India. Even in China, where people can not go in Tiananmen Square because they'll get arrested it, if you go on their microblogs, the equivalent of Twitter, they're protesting against inequality of income, of wealth, against corruption. So throughout the world, I think, there is a lot of economic insecurity, financial insecurity, poverty, underemployment, unemployment, rising income and wealth inequality. And the manifestations of it are social and political instability that takes different forms in different countries. But we have to worry about income inequality, about making sure that the future is going to be bright for ourselves and our children. Otherwise, we'll have more instability. RANDI ZUCKERBERG: Actually, it's a really interesting point you bring up. Because now, we're partnering both economic instability with every person having a broadcast megaphone via Twitter and Facebook. So the methods of communicating and giving people a voice about their discomfort has just magnified a hundredfold. Is that something that you either predicted or saw over the years, the rise of social media as a real motivator in the economy? NOURIEL ROUBINI: Well, it's a motivator in the economy and also for political change. Some of these Arab revolutions did occur exactly through Twitter, Facebook, the internet. The recent demonstration in Russia after these elections that were stolen led to mass demonstration because people could use social media. As I said, even in China, where people can not go in the streets, and where the government was fearful of Facebook and Twitter and decided not to have them and have their own national version of it, now on the equivalent of Twitter in China, that is their Weibo, there are 300 million Chinese who are tweeting. And on Twitter, it's enough for one person to say, this government is corrupt, that millions of others can re-tweet it. And that kind of thing spreads.

Or even in the United States, there was this SOPA law that was being proposed about piracy and so on. And in a matter of one day-- one day-- a protest by Wikipedia and on Facebook and otherwise, the entire political system was bombarded. I spoke with a few Congressmen who said, I've never received so many emails, so many phone calls on this issue. The thing died in 24 hours. This is the first time, even in the US, in which social media has led the major legislative change, that something that could have been passed is not going to be passed. So it's happening in the US, as well. RANDI ZUCKERBERG: It's amazing. Now I grew up in New York. I've been in Silicon Valley with Facebook until now. And do you think that Silicon Valley and America, in general, will continue to be the center of innovation? Or do you think we're going to see that shifting? NOURIEL ROUBINI: There is a huge amount of innovation in the tech sector, Silicon Valley in California. I live in New York. In New York, we have Silicon Alley. There is so much creative talent in a variety of media. A lot of it is in our new tech companies that are actually based throughout New York or downtown. And I think that among the industries of the future that are going to be sources of economic growth, everything related to IT is going to be key. We don't know how much is going to be social media, Web 2.0 or 3.0, user-generated content, artificial intelligence, cloud computing, integration of traditional media and new media, greater integration of telecoms with what's happening in the internet. But there is an amazing number of things that are happening. They're going to generate lots of economic growth, lots of jobs, but also lots of social and political change, as well. So it's a brave new world. RANDI ZUCKERBERG: It is. So what does success look like for you this week at Davos? When you leave on Sunday, what will make you think it was a great week? NOURIEL ROUBINI: Well, I find that I learn the most when I go to sessions, and I meet people that are not in my field. Of course, I meet economists and people like this in finance throughout the year. But the great thing about Davos is you go to a session about maybe the future of neuroscience or what's happening right now in social media or the internet. And you meet people that are slightly different from your own usual kind of crowd. And you learn so much from them. So for me, success is not to meet economists and finance folks, but to meet people that do stuff with the internet, for example. That's much more exciting and interesting for me. RANDI ZUCKERBERG: That's great. Well, it's been such a privilege to talk to you today. I know that you're very much in demand here at the World Economic Forum.

So I appreciate you taking the time to speak to all of your avid followers and listeners through social media. For those of you who want to see all of our other videos, you can find them at scribd.com/documentedatdavos or follow our #davosdocs. Thank you so much. [MUSIC PLAYING]