The future is risky, but we’re going to be fine: Former Bank of Canada Governor Stephen Poloz on how to adapt to the age of uncertainty
This episode of Hub Dialogues features Sean Speer in conversation with 2022 Donner Book Prize nominee and former Governor of the Bank of Canada Stephen Poloz about his nominated book , The Next Age of Uncertainty: How the World Can Adapt to a Riskier Future . They discuss how the world is entering a new uncertain age filled with risks, from AI to climate change, how Canada can prepare itself for what’s to come, the dangers of reshoring, and the benefits of trade liberalization. You can listen to this episode of Hub Dialogues on Acast , Amazon , Apple , Google , Spotify , or YouTube . The episodes are generously supported by The Ira Gluskin And Maxine Granovsky Gluskin Charitable Foundation and The Linda Frum & Howard Sokolowski Charitable Foundation. SEAN SPEER: Welcome to Hub Dialogues. I’m your host, Sean Speer, editor-at-large at The Hub . I’m honoured to be joined today by Stephen Poloz, the former governor of the Bank of Canada and author of the important 2022 book, The Next Age of Uncertainty: How the World Can Adapt to a Riskier Future . The Next Age of Uncertainty has been shortlisted for the prestigious donor prize, the best public policy book by a Canadian. The prize will be awarded on May 18th. Stephen, thanks for joining us at Hub Dialogues, and congratulations on the book and its success. STEPHEN POLOZ: Well, thanks very much, Sean. It’s a real honour. I’ve been a policymaker all my life, so when I recognize something that’s in policy, that’s special. SEAN SPEER: Let’s start with the book’s fundamental thesis. After several tumultuous years, those listeners looking forward to a return to normalcy are going to be disappointed. Why? STEPHEN POLOZ: Well, what I draw attention to is there are forces acting beneath the surface that economists pretty well never mention to us. Economists are usually making forecasts one or two years ahead, and the sorts of long-term things that might be influencing these don’t enter the picture. But what I’m saying in the book is that there are actually several forces that have operated in the past that are really active now and can produce unmeasurable uncertainty going forward as they interact with each other and magnify each other’s effects. As they’ve done on major events in the past, such as depressions or the great inflation of the ’70s. These are the kinds of inferences that emerge. SEAN SPEER: As you say, you identify five major tectonic forces that are going to reshape our political economy. What are they? And Stephen, what is their interrelationship? How do they work effectively together to create such tremendous uncertainty into the future? STEPHEN POLOZ: Sure. Well, the forces themselves are quite recognizable. The population is aging, so there’s a demographic wave going on. People like me who entered the workforce in the ’70s are now exiting. So the population got young for 50 years, and now it’s going to get old and at a very rapid rate. Technology, people see that every day. But historically, there’ve only been three big waves of technology. Industrial revolutions, we call those. The steam engine, electricity, the computer chip, and now we’re entering the fourth, which is the digitization of everything. AI, and all those implications. The third one is rising income inequality. You can see it all around us, but the divergence in incomes—70 percent of the world has seen a deterioration in this over the past decade. The fourth one is rising debt, and I don’t have to go into detail there. Everybody knows that one. Everybody, including governments, households, and firms, are more indebted than they’ve ever been. And the last one is climate change, or more specifically, the forced transition to net zero. That’s not necessarily Mother Nature at work, but implicitly it is; it’s a natural force, and we’re responding to it. So those five together, how do they interact? I’ll give you an example. When we have an industrial revolution, usually that leads to a period of extremely low or often deflation as you deploy new tech and it lowers costs throughout the economy. When that happens, people with a lot of debt would discover that their revenues are slowing down because of the deflation, and yet the debt at the bank is the same number as before. This leads to waves of bankruptcies, including among banks, and that’s where depressions come from. So this is the kind of force that […]
