Perhaps it was the fault of the wine and the toasts. Or maybe it was those mushrooms in the rice. The fact is that the asset manager K. returned home with a spinning head and the feeling of being shrouded in fog. The evening had been festive. The end of a quiet and positive year was celebrated for shares, bonds, euros, paintings, real estate, collectibles, cryptocurrencies and everything that could come to mind as an investment asset. The atmosphere had been the most relaxed that K. could remember not only because the world was growing without inflation but also because this situation of calm perfection was seen by everyone as now natural and not exceptional.
So natural that it cannot but continue not only in the next year, but also in the following ones, perhaps further improved and enriched by the American tax reform, by greater European integration through the Macron-Merkel axis which couldn't wait to get action and a booming Asian economy. Sprezzatura, K. called it to himself. Sprezzatura was that art so appreciated in the Renaissance of doing very difficult things with grace and levity which had actually required a long and tiring apprenticeship. The economy and the financial markets ran on a smooth surface without rattles, clangs or creaks, but behind this perfect harmony was the hard work of the central bank engineers, who proceeded with aged nautical charts and worn measuring instruments such as the Phillips and in the midst of a thousand doubts.
They were good, nothing to say, thought K. They were also lucky and what's more they covered their backs by keeping their liquidity abundant and keeping all the gears well lubricated. And yet, sooner or later, some mistakes will be made. The Fed, for example, will fail to not raise rates beyond the neutral level. In fact, if the economy continues to do well, as we all tell each other from morning to night, the central bank will perhaps try to stall and skip a quarter every now and then, but in the end it will not be able to do violence to its nature and stand by passively. And then it will be like Russian roulette. One, two, three hikes in 2018 will fail and the economy will hold up, but the fourth, fifth or sixth hike will seriously risk ending the expansion and starting a recession.
It's always been like this, sooner or later the calculations get wrong, one rises too much and the economy, which was doing very well up to that moment, suddenly collapses. We'll see, K. thought, dissolving an antacid in the glass, but the bad thoughts didn't leave him. Maybe they don't make that mistake, but the opposite one of letting growth run without curbing it in time before it turns into inflation. Growth is beautiful and it is even more beautiful to feel the authors of it as is happening to central bankers in this period, who go around with that smug and almost euphoric air. It's nice to make politicians happy, who in turn make themselves happy with any positive data, and not be pressured by them. And it is almost inevitable to try to appease public anger after 2008 by trying to grow as much as possible.
The problem is that seldom in history have we stopped in time. In the XNUMXs it was thought that we could grow without inflation forever and that we could finance the war in Vietnam and the war on poverty without negative consequences. They were so convinced that they were invulnerable that when inflation really started to rise quickly the bond markets didn't want to believe it and went long of distant maturities thinking that inflation would quickly subside. That was not the case, and the poor XNUMXs Fed governors, bombed by late-night phone calls from the White House warning them not to dream of raising rateswatched helplessly as inflation mounted and suffered fits of anxiety and nervous breakdowns as government bond prices were in free fall.
He always pulls too much, thought K. The weight in his stomach had become unbearable, but luckily sleep was finally coming. The last thing K. saw while awake, as his eyelids drooped, was McKinsey's study on the coffee table in front of the sofa from which he could no longer get up. And it was from that studio that his dream started. K. thus found himself in the near future, in that 2030 in which, according to McKinsey, the unemployed caused by automation in the world in the previous twelve years would have been between 400 and 800 million. It must be said that in the dream everyone was calm anyway, because the citizen's salary covered all the basic needs and even something more.
While K. was strolling on a road crossed by self-driving cars, the philosopher Massimo Cacciari appeared on a giant screen, whom K. had seen on television a few weeks earlier, who theorized as positive, on the basis of the young Marx, the liberation from work thanks to the wealth produced by machines. Now finally, said the philosopher, anyone who wants can devote himself to listening to Mozart or composing poems. After all, Keynes too had foreseen and welcomed a future of this type. Looking around, however, the few people he came across were playing rather silly video games or were obviously under the influence of psychotropic substances or were in or out of massage parlors.
The only human beings who appeared to be present to themselves were those who went to work in the futuristic skyscrapers of the big companies that produced the artificial intelligence, which was actually beginning to produce and reproduce itself. In short, there was a caste of high priests of technology, very intelligent, rich and sincerely dedicated to the well-being of humanity, and then there were what Toni Negri had defined years earlier as the undifferentiated multitudes, the plebs who in imperial Rome were supported by public donations and who were then entertained by sumptuous circus shows.
As a history buff, K. knew that the boundary between utopia and dystopia is uncertain and porous, but he had the clear sensation of being in a dystopian situation, also because his job as an asset manager had become easy in the meantime, but also very anxious. The 400-800 million new unemployed (only partially offset by new tech hires) they had in fact brought about the definitive end of wage inflation. Every day those who had a job saw some colleague escorted to the exit with the box of his poor belongings and the last thing that crossed his mind was to ask for a salary increase. The fired colleague was trying to come up with some business in the services, but the competition was so great that the final income was almost in line with the basic salary.
The high priests of technology, for their part, were paid in shares and the shares continued to rise, because the bonds had for two decades been nailed to yields close to zero and the stock multiples continued to inflate. Asset managers, and their clients, therefore found themselves in the difficult position of having to choose between bonds with no yield and ever more expensive and risky stocks. When K. woke up breathless, a pale light was already filtering through the window. With the help of a strong coffee he thought back to the dream, still vivid in his memory. McKinsey (Jobs Lost, Jobs Gained, December 2017) exaggerated, he told himself. Artificial intelligence and automation really were about to change the world, but this change would not have resulted in the immediate loss of so many jobs.
There would have been a long in-between phase where the AI would still be supervised or flanked by a human. Politicians looking for space, as was already happening in San Francisco, would propose laws and referendums against the use of robots in one profession after another. The numerical drop in the workforce, due to the global demographic decline, would have partly compensated for the lower demand for labor by businesses. Public administration would have been used to create jobs that were certainly unproductive, but useful for social peace. Everything would have been slow and complicated, but the effect on the cost of traditional labor would still have been depressive. K.'s work would also soon be accessible to an AI program, but clients would still appreciate human oversight.
Every day has its cross, thought K. There's no point in worrying too much about a future that we will gradually learn to face. In the short term, then, the picture of the markets appears calm. Certain, in 2019 we will start to take some risks (global rate hike, decrease in the monetary base, loss of momentum in the economic cycle) but for 2018 what is looming is a modest deterioration in the tradeoff between inflation and growth. That is, there could be a little less growth, especially in China, and a little more inflation, but only possibly in America. The night, in any case, will not have been useless. A periodic verification of the structural conditions and the problems that they bring with them will in any case be useful to historicize this relatively happy period and not make us think incautiously that it will be eternal.
