thank you so much to our panelists our next segment will dive into job creation the economy inflation and recession this is a conversation with the honorable Wilbur Ross former U.S Secretary of Commerce and current chairman of the board of the Ross acquisition Corp and leading the conversation today is James Fontanella Khan reporter with the financial times thank you hi everyone secretary it's a pleasure to have you with us I'd like to start with a broad questions like kind of what are the challenges and opportunities that you see for the U.S economy going ahead well I think both are huge and in some ways without parallel the AI is going to be transformative to most economies but especially to the more advanced and more highly industrialized ones because to me the real benefit from AI will come to the people who use it as opposed to the people who just provided so I think that's one big set of opportunities that also brings some challenge because it clearly will change the nature of work just as computers did in the old days just as textile Machinery did in England in the 19th century so it'll require some retraining and that's one of the areas I worry some about during our Administration Ivanka Trump and I co-chaired the Workforce Development initiatives and we learned a lot of things that were Troublesome one U.S has the least vocational training of any oecd country wow the least um second out of more High skill level they pretty much don't teach math high school math they don't teach physics they don't teach chemistry in high schools anymore they say the students find them too difficult well that was always true my point we found it too difficult and the answer was you worked a little harder now instead they're editing it out of the curriculum so whether our educational system will meet the challenges which create the opportunity that to me is the biggest single question absolutely so you mentioned AI as a the perfect example of a threat and an opportunity um I guess the question is like kind of how does this also affect the labor market we're in a situation where actually despite inflation being very high the labor market is still pretty strong right um but there's threats about you know how jobs will be impacted so I guess the first question is what can be done maybe to kind of increase the labor Supply um and yeah let's start with that well the biggest problem with the Labor Statistics is the labor participation rate it's been pretty well stuck at about 62 for quite some time that means that 38 of people who were in the right age bracket for Workforce neither have a job nor want one that's a very high percentage and that's a huge number of people in some cases it's a mismatch of skill set in another case the substance abuse there are a variety of reasons for it but we need to get that participation right how do we do that well I think training is an important thing a guy who's been used to being a dishwasher is not very much helped by the need for a computer programmer or for a code writer so training is the thing and what we did a lot on in the Trump Administration was working with community colleges the community colleges by and large don't have the teacher Union restrictions that the secondary and primary schools have so they were very open to doing joint programs with manufacturers where the manufacturer would commit certain amount of resources to the school and would commit that if the student passed enough testing they would get a guaranteed job but at an average of around sixty thousand so fairly decent jobs so that those are some initiatives but at the end of the day it's really the federal government that's responsible for Education the funding and all that they have to be willing to fix it and they don't seem to be at this stage fair enough um sticking on the theme of inflation the FED has been increasing rates very steadily part of that is trying to kind of suppress kind of wage increases is that strategy working or um do you think something better could be done well I think the big test case there will be the current labor negotiations between the UAW and the big three car companies those are huge employers and because that Union is so prominent it will have a big impact on all subsequent negotiations no the union demands are quite extreme they won a sixteen thousand dollar co-worker signing bonus signing back up for the same old job we want to think of 40 percent total increase over the life of the contract and then worst of all they like many other unions are now trying to insist on cost of living increase Cola things anytime you start putting colas onto things you are going to generate inflation because it's self-propelling and self-fulfilling so I think that set of contracts is going to be a big Bellwether as to whether the wage part of inflation is under control the other two big Parts energy is a big part of it and we've been in a little bit of an illogical situation in that our government seems surprised that if you make a product more scarce it becomes more expensive but that's kind of a truism and so I think between our government's activities however well considered they may be from a climate control point of view I think to the degree that they're restricting hydrocarbons that's going to have an inflationary problem and to the degree that their relationships with the gulf countries don't get better they're going to be having upward pressure on price from Saudi and other parties so that part I think is a little dangerous third big component is housing and shelter is a large component of the CPI the way we measure it is a pretty bizarre way very judgmental way rather than taking the actual cost of occupancy of a resident what they do is they make a survey of homeowners and they say well what do you think you would have to pay to live in this kind of residence if you didn't own it well I don't think the average person has a clue what would be the right price of doing it so it's a very subjective measure and it has tended to lag reality minerality is there's a lot of upward pressure on true shelter costs so I think those are problematic factors in inflation and then the last one is budget deficits we're running five six percent budget deficit as a percent of GDP hard to imagine if you're having that kind of deficit hard to imagine that there won't be inflationary pressures so I think the FED also in my view should be considering to bestiture of some of its long-term bonds they got up to 8 trillion or so too big a number and all they're doing is letting the runoff not be reinvested they're not actually selling bonds but I think if they were there would be a change in the yield curve and right now you have this inverse curve where the short rates are higher than the long rates that's not it's a normal thing it's not stable and I think it's largely due to the FED policy of just pushing up the price of money rather than the availability fair enough another issue kind of that you mentioned is like Saudi Arabia and kind of do you think a deal can be reached there or some kind of like negotiation given your uh well we have made we had made very good progress in the region with the Abraham Accords and with direct dealings of with the Saudis we in fact when we had the big trip over there early in the administration agreed to sell them a lot of their defense systems and a lot of F-35 Fighters President Biden's first week in office he canceled that over the humanitarian issues the slaying of the journalists well obviously that was a horrible thing that happened but I don't think it Justified canceling military aid to Saudi because all that does is help Iran and sure enough a week after Biden canceled those orders the houthis who are surrogates for Iran started shelling aramco so we would hurt our relationships with Saudis by doing that so you see that as a way to kind of try to mend it up yeah fair enough um I have a follow-up on on China but before we go to that stick with on the FED do you think they'll increase rates again or well I think a lot will depend on this GM's uh Ford and Solaris uh contract because that's going to have a lot to do with wage inflation um I don't think the FED as they say is handled it the best I would have done more at the long end than they've been doing I would be selling some of those bonds rather than just letting the Fairly short-term runoff yeah because when you just don't reinvest the maturity you're not addressing the long end because something that matures in six months is obviously very short sure fair enough um on China you it's a region that you know very well you've worked a lot on the trade negotiations the sense of like things are not necessarily getting better how's that Weighing on inflation do you think there's a way of like normalizing um the relationship with China well our trade deficit with China's in the three four hundred billion a year range so when you compare that to the size of the economy even if that portion went up five or so percent it it's not determinative for the whole economy plus there are other sources alternate sources to China Mexico is a big beneficiary of the current problems with China Vietnam's a beneficiary those two are not as big a country by a long shot as China but you are having the relocation away from China both to the U.S and to low-wage countries of manufacturing and I think that trend is going to continue but do you think it can make up for what might be a change in in ties with China well we in China are battling it out for who's going to be the world's leading power so there's always going to be some degree of love hate in that relationship and it'll swing one way or the other um the the whole Taiwan situation obviously very tied with that absolutely um you mentioned some other countries like the relationship with India is that a potential kind of new important relationship for the U.S it's already obviously very important but like an expansion of it sure and India is a logical counterweight to China for one thing they have a big land border between the two countries and two people don't realize but they've been armed troops on both sides of that border for quite a while then their occasional little outbursts so India logically should be looking to more relations with us problem India has is a couple of things one it has a zillion political parties and it's always a kind of coalition government it's very hard for a coalition governments to take decisive action by the very nature of it um so I think it'll be slower than it could be with India but India is definitely going to come way up the technological scale they're already doing some very good things in outer space they're making a big push into semiconductors they're trying in a lot of high-tech areas and they may very well succeed absolutely we've seen a lot of U.S companies investing in India as a way of kind of diversifying from from China um talking about Apple and Tech um how can Tech generally help on on the side of again Lower inflation creating new opportunities for the labor market well the mainly is going to be changing the nature of work but you can argue how how do you make a nation grow it's a question of increased size of the labor force eligible people times the percentage of those people who are in the labor force times productivity increases those are the three factors the productivity increases where I think the AI will come in the change in labor force participation you know each percentage points a couple million people it's a big big number so just moving that 62 percent to 65.66 would help very much to close the gap between unemployed people and open jobs so it's not a earth-shattering number that you need to do but you need to change the psychology how do you do that well I think we have to do it in a number of ways one is some of it is a skill set mismatch I think the other thing is we have to get out of the habit of paying people more not to work than they ever earned when they were working I think a lot of the labor descent we have now comes from that a guy who is making fifteen dollars or eighteen dollars an hour when he was working suddenly with all the covet help was making often 25 dollars an hour well what message does this send to the person first of all it sends him a message my former employer must have been exploiting me charm because now I'm worth two-thirds more for doing nothing than I was when I was working not a good labor attitude and it makes people too feeling entitled fair enough um you you mentioned before kind of how you I was trying to kind of build links between industry and community colleges more broadly like how can can a public private Partnerships kind of help boost growth well in effect that's what they are most of the community colleges are state-owned or that's what I mean locally owned and the corporate sponsors who work with them are obviously private sector so it's already evolving but uh what would be a big help would be if the federal government would start pushing the high schools to change their curriculum it's ridiculous that there's no uh vocational training to speak of in high schools there should be not everybody should go to college not everybody needs to go to college but then for those who are they really have to get back teaching high school math High School science high school chemistry it's not that hard it's just the only one I can see in a position to do it is the federal government and so far I don't see any signs of it but how can I mean what what are kind of examples of ways that like business and government can work together Beyond kind of colleges well we we had this Workforce Development we got American businesses to commit to over 6 million jobs over the next five years to come out of these worker development programs and that's still going on the Administration has not done away with that they haven't particularly pushed it but at least they're letting it flourish but the companies don't get anything special by way of the tax break for doing that the very modest tax break would encourage even more to do it and so the the mechanics are there the mechanism is there a little more incentive would help particularly the smaller companies if I'm Caterpillar tractor in some big factory town I couldn't afford to introduce a curriculum aspect into the Community College but if a guy needs one employee how do I do the program yeah um so helping the small businesses that have some specialized needs work with the community colleges I think would be very useful fantastic I have a lot more questions for you but we've run out of time thank you very much for your time well thank you three seconds