The World Economy at a Turning Point

In this episode of Data Talks, Wolfgang Fengler sits down with Indermit Gill, Chief Economist of the World Bank, for a wide-ranging conversation on the forces reshaping the global economy.

From the middle-income trap and India’s growth potential to Europe’s economic model, oil shocks, trade barriers, and the promise of AI, Indermit brings sharp insight to one of the biggest questions of our time: what will define the next era of global development?

Together, they explore why some countries rise while others stall, what today’s global crises mean for growth and inflation, and how better data and new technologies could transform the future of public services in developing economies.

At a moment of deep uncertainty, this episode offers a timely and thought-provoking look at the world economy at a turning point.

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Data Talks is produced by World Data Lab, bringing global data to life through insights, conversations, and stories that matter.

Transcript

SPEAKER_00 0:00

Dear viewers, welcome again to another episode of Data Talks. This one is even more special than the previous ones. We have Professor Indamit Gill with us. Indamid is not just a good friend and mentor of mine, but among a handful and growing number of Indians in the US who have been extremely successful. You know, you know, the chief, you know, the chief economist, actually the CEO of Google is also of Indian origin. The World Bank president is Indamid Gill, the chief economist of the World Bank as well. Indamid, welcome to the show.

SPEAKER_01 0:32

It's a pleasure to be with you, Wolfgang.

SPEAKER_00 0:34

It's always a pleasure to be with you. Well, that's uh and we'll have now, I think, a pretty engaging 30 minutes that our viewers will will benefit from. And um I was one of talking at the beginning about the person behind the data, the person behind the numbers. And as I indicated, you grew up in India and you studied in India, and then you went to Chicago and then to the World Bank, and the rest is history. Just mark some of those big transitions of your career.

SPEAKER_01 1:03

Yeah, so you know, I left India in 1983. Around that time, India started to do very well. So I believe I have something to do with India doing well. Um, and and then I actually um joined the World Bank after I spent some time in academics. After I finished my PhD at Chicago, I spent some time in academics and then I joined the World Bank. And then uh about um about 10 years back, I actually left the World Bank again and I went to taught at Duke University for five years. And I know that you and I worked a lot at that time, Wolfgang. And then about five years back, I was asked to come back again. Um and I took this job over about three years ago. Um and it's been it's been it's been a wonderful time to be an economist because because things in the world are so uncertain. Uh and when things are uncertain, people actually listen to economists.

SPEAKER_00 2:02

Well, that's a wonderful summary. And there is, I think, um two things which are um which you have a bit in common, right? We have been a very long time with the World Bank, and then we left, and you came back. Um, so tell us a bit about that move. Why did you leave the World Bank and then what made you come back? Because the classic World Bank person never leaves. Um and then give some advice to younger people. Why would it still be worth to study economics and move, go to development?

SPEAKER_01 2:28

I got it. So, you know, I left um, so I joined the World Bank in 1993, and I had spent uh almost 22, 23 years. And I have to say, Wolfgang, I had been very, very lucky. I mean, some of the people that you and I work with, Homi Karas and others, you know, they really shaped our lives, they shaped our attitudes to thinking and so on. I was super lucky. Um, and uh so in 2000 and uh 2016, uh I was just looking at some ads in The Economist, you know, and it was a Saturday morning, and I saw this I saw this ad from Duke University, and I said, Oh, it would be good to go and head up a Center for International Development, you know. Um, and so I applied cold, by the way. I didn't know anybody there and so on, and then soon I was interviewing and so on, and soon they offered me the job, and I said, Hey, what the heck? This is not a bad thing to try out. Uh so uh so at the World Bank, I had been a regional chief economist for Europe and Central Asia during a very busy time for the World Bank in the region and so on, at a very defining time. So I felt quite satisfied with my World Bank career, you know. So I went to Duke, and the main realization that I had uh was that World Bank uh I felt that um if you want to do development, you should either do it in a developing country or you should do it at the World Bank. Okay? And so, you know, a Center for Development, I have I have no disrespect for them. I think they do wonderful work and so on, but the best places to do to actually do development are either at the World Bank or in a developing country. And I know that you followed that rule better than anybody else because you work both at the World Bank and in a developing country at the same time. You haven't been at headquarters for a very, very long time. So I think if I had to stay so if I had to ask, so if I had to give advice to people about how they should be thinking about their careers and so on, I would tell them call Wolfgang.

SPEAKER_00 4:37

Well, I'm happy to take these calls. But just uh to by the way, for the viewers, um, I think Inamed, you may be the only person on this planet who got featured uh with an essay in The Economist twice. And the Economist is very nice because you just mentioned The Economist, they also do this very nice picture and caricature of you. So I think people should read this. I think yours last one was like three, four weeks ago, just before the war.

SPEAKER_01 5:02

The last one was uh the last one was before the war, yes, yes.

SPEAKER_00 5:05

On the containers, right?

SPEAKER_01 5:07

Maybe just the last one was about the importance of non-tariff barriers in trade. Uh, you know, I mean, everybody talks about tariffs all the time and so on, but tariffs are, I would say, about a third of the story. Two-thirds of the story are actually non-tariff barriers. And they often come masquerading as standards. So, you know, standards are actually a very good thing because they actually help countries grow up that innovation ladder so on quickly, but they can also be a way to keep countries down. And I think that that was what I think, and and so uh uh we had actually written a world development report on standards last year, and this was essentially a summary of that. And uh for those of you who haven't looked at that World Development Report, I think it's the only book that looks at the importance of standards in development, okay? And it's a superb, uh superb report, if I may say so myself. Yeah.

SPEAKER_00 6:05

Yeah. So congrats on that. And we are already on and going on to the main part of the discussion because you have also this talent to make call a topic, a boring topic very interesting. And then to give it a different angle. Um, right, everybody talks about tariffs, there's non-tariff barriers. Um, the same went actually when we worked quite a bit together on economic geography, when everybody said the problem is in rural areas, is there's no the opportunities in urban areas, you need to think dynamically. So maybe pick up this as well as the the other big piece they did with HOMI on the middle income trap, that was the other world development report two years ago. How you put those elements together, and then we'll talk about the state of the world today.

SPEAKER_01 6:48

So, you know, uh two things happened. One was like um, so I worked in Latin America for a while. I actually worked in Brazil with HOMI. Uh, and then and then um back, I think back almost 20 years ago now, I moved to East Asia to actually work with Homi as his deputy. And that's when I got to know you too, because you were a young person who just joined the World Bank at that time. Um, now at that time, I think that essentially what happened was that people were asking us questions. There had been this wave of developers, the Japans, the Hong Kong, and Singapore and Taiwan and South Korea. They had done very well, and they had done very well both in terms of growth and in terms of equity. They had actually done this in a very inclusive manner and so on. And they had done it very rapidly as well. Uh, and uh I think then there was a second group of countries. These were the Indonesia and the Philippines, the Thailands, Malaysias, and so on. And they were concerned that their future wasn't looking like his early developers in East Asia, that their futures had started to look, that their features actually has started to look more and more like Latin America. And so Homi and I ended up sort of trying to sort of look to see what is it that what are these features that mark stagnated, uh actually mark stagnation in growth. Uh so uh we actually looked at the experience of Brazil and Argentina and Mexico and Colombia and so on, and then we contrasted it with what was happening in East Asia. And that was that was a genesis of the middle income trap. Because it was, you know, if you don't make certain changes at a time when your per capita incomes reach about$2,000 to$5,000 per capita, you end up getting stuck at those levels. And that was the pathology of Latin America. And so what we were saying was that these countries like Indonesia and others, who they were justified in worrying about these things because they had started to look a little bit more like Latin America than like the early developers in East Asia. So that was that was what led to that was what led to the middle income trap. And that and that term, by the way, was coined by Homie, not by me, because uh so homie actually wanted to call a book the middle income trap. And I said, no, no, no. I said that would mean I would have to rewrite the introduction. So just through sheer laziness, we called it something else. But anyway, I should listen to Homie more. Um but the thing was that uh then what happened was that the chief economist of the World Bank uh, so he called and he said, Look, um I like to do a report on uh uh uh what he called spatial disparities, and uh Francois Bourguignon, it was, and he said that you know, I'd like you to lead that report because he liked East Asian Renaissance, he uh saw the importance of place, about the fact that there was one group of countries, all geographically located in Latin America, that had not done well, and there was a group of countries all located in East Asia that had done well, you see. So he wanted to sort of bring that and think. And that's what led to the world, uh the World Development Report on Economic Geography. Once we started to look at that more closely, we found that, yeah, place was very important. It was important at a local level, and that was the importance of cities. It was important at a region, so it was important at a national level, and that's what led to the importance of lagging versus leading regions. And then, of course, it was important at the international level too. That's what led to lagging countries or lagging economies and leading economies. And our main principle was don't focus too much on one or the other, focus on the linkages between them. And the innovation there simply was uh that we said that these linkages, the most invisible linkages, are actually the most important. These are the institutions. Uh, then of course you have the more visible linkages, which are the that we call infrastructure. And then the ones that we felt uh were the most visible, these are interventions like slum clearing programs or regional development programs or financial aid to poor countries and so on, these tended to be, these tended to get the most attention, but they they actually should be the ones that should, in a sense, get the least attention. The first two should get a lot more attention. So that's what led to that. I have to say, though, that when we were talking about the problem of growth, uh, if I had to revisit that world development report, no, if I had to revisit uh uh uh the problem of growth, not that world development report, but the problem of growth generally, I would not anchor it in economic geography. That's what we did for East Asian, that's what we did for the East Asian Renaissance, I would actually anchor it in the theories of creative destruction. So that's the reason why when we revisited that issue of the middle income trap, that that whole report is actually anchored in Champiterian theories of creative destruction. So, in a sense, you know, we actually felt that the grounding for East Asian Renaissance should not have been economic geography, it should have been creative destruction. I don't know if I've given you too long.

SPEAKER_00 12:15

Oh well, that's fair enough in a bit. I want to pick up on one part of um of this um middle income trap in ASEAN countries, especially Indonesia, Philippines. Um, and my team is doing a lot of work on ASEAN also with MasterCard. Um, and um, and that's actually the first time we met actually physically, was in Jakarta. So it's a good connection here. Um, when you look at those countries, they're obviously doing better than the other countries that you know well, or you lived in Latin America and Africa, but they haven't reached the fast growers and the high performers and high innovators. At the same time, you will see now in the numbers and some of our middle class numbers that we put out that Philippines and Indonesia are actually the next the next ones who will reach what we call middle class dominance. What's your view on those in-between countries that were part of the middle income trap but seem to be doing, be on a path that is more promising?

SPEAKER_01 13:10

So actually, the most promising countries or the um the part the part that is the most uh I guess the most um uplifting experience was was uh was actually among the members, the uh new member states of the European Union. Because they were all middle-income countries when they were transitioning from communism or socialism, and they've and they've almost all of them, actually all of them have become high-income economies. So we actually wrote a book on that one. It was called Golden Growth, it was essentially saying there's no middle income trap in the European neighborhood. And then we try to sort of look at that more closely and say, why is this the case? And I think it just goes back to the same point, which is that essentially these countries signaled what their institutions, what their infrastructure and other things were going to look like in 20 years. And they made a commitment to that, and that commitment led to the flows of money, not short-term flows, short-term flows of course came, but longer-term foreign direct investment from Germany, from Italy, from Sweden, from France, and so on. All of that money came. So, in that sense, and this was really what I would call high-powered money because it came with knowledge of new technologies and new markets and so on. And so that actually helped these countries become high-income economies in a hurry, you know. And we actually even said that just like just like the US is very good at taking poor people and making them into and uh helping uh to uh uh so helping to make them into high-income families, the European Union was uh a great arrangement uh to take middle-income countries and make them into high-income economies. And it did this, it did this with an uncanny um I I mean I start to lose words uh on this one, but it was perhaps the most important arrangement made to help poorer countries become high-income economies. And still still the best one. The problem, of course, is it's not easily replicable in other parts of the world. So every other part of the world needs to find its own arrangement, you know, in that subject.

SPEAKER_00 15:33

I want to come to Europe and the state of the world in uh in a minute. Um, and just maybe um another way for the viewers, the Intermittent has this very nice way to capture things as you just saw, right? It was the phrase that you know, America is very good to make poor people rich, and the European Union was very good to make poor countries rich. That would be more the the even more um you know summarized version. Um will your home country, Intermittent, India, will it escape the middle income trap or um not?

SPEAKER_01 16:03

So, you know, uh we've been looking at um, so you know, um so part of the problem with my career so far has been more of that I haven't uh worked in uh so I did not work much in Africa or in South Asia. Because remember at the time that I was working, I was working mostly on middle-income countries. And these middle-income countries were those in Latin America, those in Central Europe, and those in East Asia, you know. So for that reason, I don't know as much about South Asia and Africa. Now, India we've been working a lot on, because India is a very important economy now, not just for India itself, but for everybody. And uh the thing that I find is that India has the best conditions in some sense over the next two decades to get past the middle income track, the best conditions in terms of demography, in terms of its debt, in the sense that it has relatively low private sector debt and relatively managing and relatively manageable public sector debt. And then it has a structure that is very good in the sense that it has its weight is in the domestic economy, in the sense that if you look, for example, at the share of consumption to GDP, I know that you know the numbers better than I do on this one, but these numbers are very normal in the case of India as opposed to China, for example, where they were very abnormal. So domestic consumption as a share of GDP in India is above 60%. And domestic consumption as a share of GDP in China has not come up above 40%, you know? So there's that 20 percentage point gap, which is that so, in the sense, India's growth will not tax the rest of the world nearly as much as China has ended up doing, you know? So for those three reasons, India has this very, very good thing. But over the next two decades, it's gonna be at its what I would call its peak development potential. So then the question is: given these nice favorable fundamentals, will India convert that into growth? In the sense that can India grow at around 7, 8% in this decade and then 6, 7% in the next decade? If it does that, Wolfgang, it would be an economy transformed, it would be as important in global terms as China is today, you know. Um, and then and then it would be a very, very different game for both for India and for the rest of the world. I think that India needs to do certain things on this one. And India uh has this one weakness, I guess. Everybody has this one weakness, which is there's a tendency to start to focus. Should we work on services or should we work on manufacturing? And when you look at India's experience more, you find that actually when India does not look vertically at these sectors but looks horizontally at the underlying foundations that will lead to growth in all of these sectors, including agriculture, it actually does very well on those. So, for example, if you look at India's digital infrastructure, it's done very well on that. But that is something that all these sectors use. If you look at India's public infrastructure, it has been doing very well over the last 10, 15 years on that one. That's something that all of these sectors use. So I would actually say that India should be thinking about what's the next thing that it should tackle on mission mode in some sense. And I would look for a horizontal initiative, not a vertical one. And my favorite horizontal initiative would actually be secondary education.

SPEAKER_00 19:33

Yeah. Interesting. I thought you would mention AI now, but I guess that India is already probably work, it should be, right?

SPEAKER_01 19:43

On AI, yeah. I think on AI, India's India is right where it should be. I think India's still at this point where it should be just taking technologies from abroad and diffusing them across uh the entire economy. And India's done that very well in the case of digital uh things. If if it does the same thing with AI through big AI, small AI, all of these things, uh, I think that India would actually end up putting itself in a very, very good position to have six, seven, eight percent growth. And you know, if you have seven percent growth, you double your per capita income. Right now it's around 4,000. It gets doubled to eight, then it's getting doubled again to 16. Now you're a now you're a powerhouse, you know?

unknown 20:27

Yeah.

SPEAKER_00 20:28

Well put, Intermit. Um, so um you mentioned um Europe. Um, and um, by the way, for those who want to follow Intermittent's life, life at work, there is a lot of flagship reports, and we interacted with some of them. And the one on golden growth that you mentioned is the one, some call it the love letter to Europe. Um, which was when Europe was in crisis, you said something very nice about it, but for good reason. Um, but uh I wonder if your view of Europe has changed now since you wrote the report, and if yes, in what ways?

SPEAKER_01 21:02

So my view of Europe in many ways has not changed in the sense that I feel that Europe becomes very uh I think that at that time, by the way, Wolfgang, I felt that um so uh so I became chief economist for Europe and Central Asia in um in 2008. And what happened was, of course, we we would uh speak with the Poles, the Romanians, the Bulgarians, and others where where we had operations, right? And so they were asking questions. They were saying, you know, is the European model a good one? You know, should we be integrating more quickly or less quickly? Should we be integrating more or less and so on? And what are the conditions that we should have that actually allow for good integration into the EU, good integration into the euro area, and so on. So that was what Golden Growth was supposed to do. It was supposed to sort of look at what were the uh things is this a good model. For middle income countries. And I already gave you the answer to that. Not only is it a good model for middle-income countries, it's the best model ever invented for middle-income countries, right? So then the next question is okay, but is it a good model once middle-income countries become high-income economies? Now that's where the question started. Even back then we had questions about those kind of things, you know? And that's where we compared, uh that's where we compared the economies of Western Europe with the US. If I had to do it all over again, I would also compare it with China as well. And I remember that you and I, when we worked on Europe 4.0, that's basically what we did, you know, and we found Europe was lacking because now we were focusing much more on the higher income countries or the countries that were actually losing pace with respect to the US and with respect to. So I think in some sense, my view hasn't changed. I do feel like that moment that we had back then, which was the Euro crisis and so on, in some sense, I think it has it has uh so I think it's a similar period now. Europe is going through a similar period of lack of confidence in its own model. And I think that it would be good for us to think about something similar as golden growth, uh, to actually, I think, uh, to see what is it that Europe has done well and what is it that it can do better now. It would not be the same kind of report, I think. But it would be, it would, I think it would be well-timed too, in the sense that you can easily throw the baby out with the bathwater when you start to lose confidence, you know? And I think that was what we were worried about at that time.

SPEAKER_00 23:39

In a minute, uh, we're doing this podcast at the time where Europe and the world is very much affected by a number of global events and crises. Um, this is now this um two weeks after the Iran war. Do you have for the viewers any perspective on oil prices and the oil price shock that they haven't heard yet uh from the news?

SPEAKER_01 24:02

Ah, okay. So, you know, um so this oil price shock, if I had to summarize it, it would be about two and a half times the size of the shock that we got when uh in 2022, when the Ukraine crisis erupted. It's about two and a half times. If you just sort of look at the shortfall in oil and gas as a result of the Strait of Hormuz closing down, you know. Um, so you should expect a big uh so you you you should expect huge effects on this one. Now, if you start to sort of look at these more closely, you find that countries that have gone through a similar shock, especially Europe went through that shock in 2022, you find that they've actually found ways of how one should deal with these kinds of shocks. I suspect, I don't know for sure, but I suspect they'll do relatively better than countries in Asia, which didn't go through that problem at that time. Uh not to the same extent anyway. So this time I think that this shock is going to hurt Asian economies like India and uh China and Indonesia and others. So India, South Korea, Japan, and others much more than Europe, you know, simply because Europe has actually been through a shock like this, a smaller shock, but it was a fairly acute one at that time. So I think my own sense of it is that um there is there is no substitute for peace. I mean, that this has to sort of end quickly. If it doesn't, I would actually say that it could it it could end up actually, it could end up cutting uh global growth, it could end up creating inflationary pressures, uh, which means that interest rates would not come down, they might even go up, in which case you start to see all the other problems. So for a country, for essentially developing countries that don't have a good fiscal stance, which means that they have high levels of debt, that'll start to strain them right away. The second one, of course, is that to the extent that they have current account, to the extent that they have current account deficits, the prices of energies, especially for energy importers, that's going to sort of put a strain on their currencies as well. And then the third thing, I think, that I think that the I think that the I think that the I think that the societies are going to get stressed a lot because one of the things that people don't talk about enough is the fact that a sizable fraction, about 25% of nitrate fertilizers actually come from come from the countries whose shipping is affected by the closing of the Strait of Foreign Moons. And when that happens, you're going to get food production and so on in the next cycle also going down. So you're going to get food crises too. So you'll have a fuel crisis, a food crisis, a currency crisis, you know, and a fiscal crisis all at the same time. It's going to be it's going to be very bad for these countries. So if this thing lasts more than um you know three months or so, uh they are going to there uh there are gonna be huge effects for developing economies.

SPEAKER_00 27:12

If it didn't last for uh for three months, uh and we're assuming Iran would be a full participant again in global oil markets, and together with innovations that are out there, you know, solar is now two, three cents kilowatt hour in Morocco and Mexico, isn't there a scenario that energy prices could actually come down dramatically?

SPEAKER_01 27:35

100%. Because actually, if you looked at energy prices before this conflict, and if you looked at um not just energy prices today on the spot market, but also energy futures, oil prices were like around 60 into the into the foreseeable future. They're gonna be$60, you know, which is I mean absolutely reasonable and so on. That has changed a lot now. That has gone up to about$100 for the uh uh uh for uh futures that mature three or four uh three or four months down the road to about 80 uh three or four years down the road. So that's changed a lot, you know. But but you're right about the fact that in general um the world had uh uh the world had ample energy sources in that sense. And so if one sort of has a quick end to this conflict, you go back to those fundamentals in a sense. Yeah.

SPEAKER_00 28:34

Great Intermit. Then uh if you come to the final substantive part of our discussion, I want to talk about data and AI. So, first, about obviously one, was it the World Bank is known for its knowledge and data. It's known and kind of famous for the definition of poverty. That time it was$1. I think you had to move it up just to$3. Um, and everything that's known about the World Bank that's not the bank side is actually more or less the home of Indermit Gilles department and the most powerful probably group of development economists in the world. Um, tell us a bit about the latest developments on the poverty measurement, but also the prosperity measurement, which um is one that is an innovation of this current administration of the World Bank.

SPEAKER_01 29:19

So the thing, uh the first thing I want to tell you is that when I left the World Bank, um so I was at Duke for five years, and the thing that I realized during that time, Wolfgang, was that I would use World Bank data every day. Okay, I would use World Bank country reports uh you know every week or so. I would use World Bank research every other month, you know. So to me, I realized that the part of the World Bank that I left, because my last job was with development economics as the deputy to the chief economist, in that time I said, oh, if I had that job again, I would actually change my priorities. I would put a lot of emphasis on data. I would put much more emphasis on things like business readiness, these indicators, and so on. Again, basically data that have to do with the quality of policies rather than the quality of outcomes. And then on this research side and so on, fine. I mean, I think that one uh should do these things, but one should do research on things that academics don't want to do research on, because these are not things that have yet become very popular in academics, but these are things that we see are becoming very important in developing economies. So that was what that was the focus that I brought back. And when I got this job, one of the first things that we did was to appoint a data statistician. Uh uh we actually appointed a chief statistician. And then along with that, there's a whole office, and one of the things that that office does is that it actually makes sure that data quality is mainstreamed across the entire World Bank group. Uh, then data statisticians and others now have a family, uh, and so they have professional standards and so on. And then the third part was that data used to be, or development data largely used to be an enterprise of this one group in development economics. Okay, and what we really wanted it to be was an enterprise of the entire World Bank group. So we created uh or we essentially upgraded the platforms to something that we call data 360. So that in a sense, what you know, basically what we've done is that we've actually improved the infrastructure for data, the human as well as the um the non-human infrastructure, we've improved that a lot. Now, where's the agenda still to be done? One of them, of course, is you now have to improve the data that actually is uh the data we use to populate the various infrastructure. That has to, and that has two elements. One is, of course, comprehensiveness and quality, but the other one is timing. And on the timing part, the World Bank is slow, Wolfgang, as you found, you know. You guys are really fast at this, okay? We are slower. But I think that I think that through partnerships like the ones that we have, you know, if through these partnerships we can actually do a little bit of both things, you know, uh bring the uh bring the advantage of the World Bank in the sense of actually having data or having access to people who are supposed to collect these data for poorer countries and so on and for middle-income economies, but then also but actually start to sort of bring in these new technologies to actually make sure that these data are much more timely. Because if you ask me for if you ask me for poverty data, and I tell you, okay, yeah, I'm gonna give you data, but it's you know it's only current until 2021, that's useless to you. This lead and that's useless to the World Bank too. So, what is it that I do when somebody asks me, so what is the poverty rate in this country? Guess what? I go to your data. I go to the poverty club, okay? Uh, and so then I sort of say, okay, you know, I'm now there is a there is a legitimate concern on the part of our data people saying, look, we need to ground these data back into household surveys, et cetera, et cetera. And I think that's fine. But we haven't yet found that happy medium. And I think that's that's something that we still need to do. Now on AI. On AI, one of the things that uh we are trying to do is to make sure that you know that at the end that the data that actually feeds into these AI models and so on is much more contextualized. So if you don't have the data from those countries, AI is going to give you solutions that are not particularly customized to the circumstances of those countries. This was something that people from Google and others actually told me that this is something that they're very concerned about. The other part of it is, you know, the AI debates, and this doesn't have to do with the data nearly as much, Wolfgang, as the debates that we are having about AI. The debates on AI are very dominated by the problems that people are, or problems or promise that people sort of see from AI for developed countries. And to sort of oversimplify things a little bit, they are largely focused on the labor market effects, the employment effects of AI. But there's this other side. The other side are the public service quality, the public service reach. I'm talking about education, health, public administration, and so on. The upside of that, of AI for those things is massive. I mean, you worked in these countries like Kenya and so on. If we continue to rely on the previous thing, even if we put a huge effort, we'll be able to sort of get decent quality education and health and so on in rural areas in these countries where more than half the people live, only in maybe in one century, you know? And now we have a chance to do it in a decade, you know? So that's the potential of AI. So our next World Development Report is actually on AI, as you know, and and we are trying to sort of make sure that it just doesn't only address these problems about, you know, uh the the share of a country in world trade or what the share of labor in GDP, but also to see whether or not what's the potential for AI to do in a decade what otherwise would have taken a century when it comes to uh when it comes to education quality and health quality and so on. And if you even if you care only about a problem of inequality and about the fact that AI might exacerbate the digital divide, imagine how much how much uh how uh how you could actually address that problem if you just extended higher quality education and health and so on. But again, if one has to do that, you have to make sure that these countries have a minimum data package, that these countries are helped through new technologies and so on, saying you don't have to do, you don't have to sort of, you know, you don't have to collect the data the same way as the richer countries did or are still doing. You can collect it differently through mobile telephony, etc. etc. So those are the problems that we are dealing with.

unknown 36:28

Yeah.

SPEAKER_00 36:28

Well, doing a decade, what could be done in a century, what would be otherwise take a century. That's already, I think, a tagline that people can read in the forthcoming World Development Report that also you've been overseeing together with other powerful pieces of work. Intermit, congratulations to all of this. Uh, intimate the show always ends with um the guest's favorite number. Tell us your favorite number and the story behind the number.

SPEAKER_01 36:55

My favorite number is three, Wolfgang. Uh three is a very special number because it I think it is simple enough uh that people can understand, uh, and it's complex enough that you can actually take very, very complex and difficult problems and boil it down to three dimensions, you know. Um so for example, when we were doing the World Development Report, uh, we thought that we could actually bring everything down to three dimensions, and and those, and those dimensions were density, distance, and division, you know. Um and then similarly, for example, when we're talking about uh when we were talking about the middle income trap, and we recently finished the World Development Report 2024, we tried to sort of say what were the phases, you know, and the and the phases was one which is largely investment, the other one which is infusion of new technologies from abroad, and then the third one was innovation, where you're sort of getting to the frontier. I find that it's very easy for me to remember uh, you know, uh things in threes. So even when, for example, when we were doing Golden Growth, we ended up looking at six activities, you know, that ranged all the way from trade to government. But I found that nobody would remember the six, even I would have a tough time remembering them. So what I ended up doing was I grouped them into three, you know, and then it was easier to remember, you know. Uh anyway.

SPEAKER_00 38:21

The rule of three, the 3D, and people so often forget economies, one has to communicate clearly and make it memorable. So you're a master of this in a mid. Thank you for being on the show and all the best for your time at the World Bank. Thank you, Wolfgang.

SPEAKER_01 38:36

Thank you so much. And the only advice I would give people, young people, is have three kids.

SPEAKER_00 38:45

Which also unites us, actually. For those also unites us. We'll both have that.