Commentary: We talked to Giuseppe De Arcangelis about the general economic outlook of our world today , focusing mainly on emerging countries and the importance of the U.S.A. and the European Union. Focusing furthermore on Artificial Intelligence its importance and its influence in modern day society. Additionally expanding briefly on the economic faculty at Sapienza and LUISS.

1. Can you explain what an economist does in simple words?

The job of an economist is basically to analyze the different economic phenomena. And then it depends which economist you are referring to. Because there are academic economists, like myself. I’m a teacher, I teach economics, I do some research. Research, basic research. But otherwise, there are other economies that are working for government. So in that case, those are economies that are making economic analysis, but with a certain purpose. And the purpose is to but just different reforms or measures that governments must consider in order to intervene into the economy. So it depends. In general, an economist is someone who does X-rays about the economy, and knowing basically, prepare the therapy for the economy. And then it’s a matter of the politicians to see whether they have to consider one therapy or another in order to cure the economy from the different diseases that the economy can take.

2. What is the role of an economist in shaping the way people live?

As I said, an economist is like a therapist for the general of the economy. However, an economist is not responsible for what politicians or governments actually prepare. They are indirectly responsible because they can suggest solutions to situations that are not always correct, sometimes, or they may be wrong. Think about what happened before the great financial crisis at the beginning of the year 2000, when the economies didn’t forecast that such a big crisis was approaching the economy. They couldn’t realize that. And this was not certainly an important performance by the economy. They’ve been accused of not being very responsible in some ways regarding what was going on in the economy. It’s an analyst. It’s someone who wants to understand the economic reality of the world and try to suggest, in the best cases possible to look at what happens after an economic shock occurs or when there are other shocks that are affecting the normal course of an economy.

3. Can you explain the new world order in economic terms?

up to 50 years ago, Europe and the US were the most important countries. Then, after the Berlin Wall tumbled down at the end of the 80s, many new countries got into the world economy. They were partly on its side. At the same time, China in 1979 started big reforms that basically gave a big push to the economy to develop. So, a big turning point was certainly the end of the 90s and the beginning of the 2000s. In 2001, China got into the World Trade Organization, and Russia, after a big, important crisis in 1998, started recovering and really got in much better shape, especially further on. You may have heard of the term BRICS, which stands for Brazil, Russia, India, China, and the S is for South Africa. This was a term that was initiated by one of the main CEOs of JPMorgan in the year 2000. Basically, he said these are going to be the countries on which the world will count upon, considering that they are developing at a very large pace. Well, this is what happened. Among those countries, certainly China has been the much more successful country. Russia got into the stage, but didn’t develop that much. I mean, the weight of Russia is no more than the weight of Spain in the world economy. But they have important resources that they have to share, they can’t share with the rest of the world. India is still a developing country, but it’s gaining more of an important role in the stage. And then South Africa and Brazil are in a different situation. Brazil is certainly a very, very large country, an important country. However, Brazil went into a very deep crisis in 1998, just like Russia. But then recovered, and it’s on a good path. But probably with respect to what was expected in the year 2000, they are not really performing on the path so far. South Africa is a different story. They are similar to Brazil. Basically, they develop, there are a lot of potentials, but it is not in the center of the page right now. Now, probably a big important turning point in the world economy was 2016. In 2016, we had two important shocks that reshaped the world, basically. First one was Brexit. When the UK decided to get out of the European Union. And at the same time, Donald Trump won the first election. And then he started ruling in 2017. These are pivotal turning points because these were two shocks to globalization in some way. Because those were the first two episodes in which globalization was seen as a problematic phenomenon in the world. Through Brexit, the UK basically decided they wanted to be on their own. Not counting on the European Union anymore. So, breaking this long-lasting link. And at the same time, Donald Trump won the election on an agenda that was certainly not for opening up the economy or confirming what was going on, what has been going on for the previous decade. And indeed it was a turning around for the US foreign policy. And at the same time, international policy in general, even from the economic side. So, he started immediately with a very muscular trade policy. Especially with respect to the rest of the world. So, up to now, now that Trump has been elected for the second time in the previous months, this kind of policy has been confirmed and actually deepened even more now in this outlook.

4. How do you think that countries will be affected by Trump’s tariff? Is this an opportunity or a risk, both for the United States and for other countries?

History tells us that when a country started an aggressive tariff policy, an aggressive trade policy, under different reasons. This idea of reciprocal tariff by the Trump administration has been considered as a sort of retribution. Basically, they think that the US has been treated badly by the other countries, and so they feel like they can react. Now, they are doing this just on their own. They are not following international rules that were set up by the World Trade Organization. And when something like that happens, this means to start a trade war. Because, of course, countries cannot stay there and accept what one country does. They feel they have been hit unfairly. And so what they do is just to react, and probably impose new tariffs. And this is how a tariff war can start, or may start. But in a trade war much less dramatically than regular wars, nobody wins. Actually, there are a lot of situations in which all countries are going to lose. Because if the United States wants to punish other countries, then other countries will react more likely to give a tariff back. April 2nd, Donald Trump basically decided for a certain number of tariffs. Then he withdrew from this decision nine days later, imposing simply a 10 percent tariff on everybody, except for China. For China, instead, there was a large escalation in this trade war. And now according to what has been declared, the tariff on Chinese imported goods in the U.S. is up to 145 percent. But at the same time China didn’t stay put. What they did, they reacted, and they imposed tariffs back on the U.S. goods up to 125 percent. And they also completely forbid exports of rare earths to the U.S. So, really, we are in a situation in which this is really a turning point in the world economy, where the two giants in the world economy are not getting along, just to say a simple word.

5. Will China emerge as a more active world power? How do you see the division of power in the world if the USA continues to ignore Europe and treat allies?

I mean, what is the role of China in all of this? And how can China play a different role from what was before? And Europe is in the middle in some way, or some people say maybe in the middle. In my opinion, it’s not in the middle. Europe is not in the middle. It’s on the western side. But Europe is really now representing the only truly democratic society. Because the way the U.S. is changing, and the way Donald Trump is trying to act or trying to use his power, is not very different from many other autocracies. So, at least, this is an attempt at least. This is going to be an important test for the U.S. democracy here. But it’s still a democracy. So, I really think that Donald Trump will be stopped in many of his executive orders, I would say. But, I mean, if he succeeds, then this is going to be a big problem. China, for a long period of time actually didn’t abide by all the rules internationally, now it claims that the international rules should be applied. But, I mean, we have to remember how China is covert. China is still an autocracy. It’s not a fully free country. Freedom is not the best thing that you can think about China, if you think about China. You think about efficiency, you think about production, but freedom is certainly not one of the words that comes to your mind when you think about China. The death penalty is used heavily, and has been used heavily in the previous years. So, certainly, it’s something very distant from European societies and European attitudes. But, at a certain point, I mean, at the international level, Europe can, in some ways, put pressure on the U.S. to change its attitude. Especially because the U.S. started treating it badly. First, it’s a lie, which is not very smart, in some ways. So, we have to think about what’s going to happen. There are a lot of words that are flying around. But, in terms of act, we have to think. It’s really a very difficult moment.

6. Do you believe that this could be the end of the American supremacy?

I think that the U.S. has already lost its economic supremacy. I mean, the role of the U.S. in the international economy is not as important as not even 20 years ago. China has a GDP that is larger than the U.S. GDP. Also, GDP per capita is much, much lower, of course. But, China is the biggest exporter in the world. So, I wouldn’t say it lost its supremacy, because I think the U.S. lost its supremacy back in the 1970s, probably the early 80s. The question would be, can the U.S. lose the lead of the Western world, or the lead of the democratic society? There is a big danger, especially the way things are going on inside the U.S. Certainly, a lot of people won’t look at the U.S. as the most democratic society, or the society in which you have the best freedom that you can have. What we have seen in the previous months is exactly the opposite of what people can think. Really, the U.S. is not a place where people are dreaming to migrate anymore. Especially, some of the liberties, some of the freedoms that have characterized this society are not going to be confirmed.

7. What role will AI play in the new economic world?

Artificial intelligence is developing so quickly. We had the internet at the beginning of the 90s, but it took about 5-6 years to become extremely important for the economy, for societies in general. For artificial intelligence, we are seeing a pain at which AI is affecting the economy that is extraordinary.
There are many different paths that AI can take. It’s a tool. It’s a very important tool, and tools can be used in many different ways.
If you have a knife, you can use a knife to cut meat, to cut food, to prepare the best dishes, and use a knife for this kind of thing. But a knife can be used also to hurt people. And so, for artificial intelligence, it’s not that different.
I mean, in human history, we have always had situations like this, where technological advancement can have either positive or negative effects. Up to now, it’s very difficult to say. I mean, we had a lot of discussions regarding how AI has positive effects.
It certainly can make some jobs very, very productive, much more than before, because you can have the help of an extraordinary tool. But at the same time, you cannot rely on AI completely. It would be very, very dangerous to release important answers to AI.
I mean, ask AI to answer questions that instead should be asked by humans. In terms of economics, differently from the invention of robots, when robots have been invented and used, certainly blue-collar workers suffered the most. There’s been a lot of unemployment among the blue-collar workers.
AI is now affecting white-collar workers, certain dimensions of blue-collar workers. It can affect even some categories in the art industry. We see how it’s possible to create very simple artistic objects using AI, especially in the digital world.
This is something we have to guard. We have to be extremely careful on this side. So, there are positive and negative effects, in my opinion, on the role of governments.
It would be very important on this, setting up rules that should be very effective, not simply written on a piece of paper.

8. Could a career in economics be threatened by AI and how exactly would it be threatened by it?

I don’t think that the career of an economist, just like the career of any other intellectual job, can be challenged by AI. Actually, high professionals can actually gain a lot from artificial intelligence.
For example: I had to work on a big set of data a couple of days ago, and I needed to do certain cut-and-paste actions on that data. I noticed that some of these actions were very repetitive.
So I decided to see whether, instead of repeating probably 150 times this kind of action, AI could help me. What I did was to ask AI whether in Excel there is a certain function that can be used and can really make it really important to do exactly the task that I wanted to obtain. Well, in a matter of five minutes, AI told me exactly which function in Excel I should apply, and in less than five minutes, I was able to do exactly the same amount.
I could reach exactly the same result that doing cut-and-paste would have taken me probably the whole day and probably making mistakes. So, this is just an idea of how AI can help, but the idea of treating the data in that particular way was mine. So, I had to give directions on what is the type of investigation I want to do.
In conclusion, AI can be a very good assistant. Probably, I won’t need an assistant anymore. I would need much less help from other people, and I can perform numerous tasks by myself. But, just like 50 years ago, much secretarial work vanished because university professors started typing by themselves.

9. What’s it like studying economics at Sapienza or LUISS?

We have different programs in economics here at Sapienza.
I’ve been the director of one of the undergraduate studies for a long time. But there are many different programs. There is a program at the School of Political Science but there are other programs also in the Faculty of Economics, what they call.
So there are, these are the two major programs that are offered by Sapienza. At Lewis, they have different programs, but none of them is concentrated on economics. It’s more business administration in that case.

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