Nobel Prize winner Shiller on Trump: "Give him his wall"

SPIEGEL ONLINE: Mr. Shiller, you are dealing with the influence of narratives, meaningful narratives, on the economy. Here in Davos a lot is talked about the next possible downturn this year. Are we talking about the crisis?

Robert Shiller: Yes, some people get that impression, me too. Towards the end of last year, people suddenly seemed to speak in more pessimistic tones, before the situation calmed down a bit. I tend to see it as an epidemic: negative thoughts are contagious. But I see the causes as a puzzle - as well as the different strengths of flu outbreaks difficult to explain.

SPIEGEL ONLINE: So Davos would be an incubator for viruses?

Shiller: (laughs) Yeah, I hope you do not catch anything.

SPIEGEL ONLINE: But there are also real risks. For example, at present, growth in China is slowing, with European and US companies seeing declining sales. Is that not dangerous?

Shiller: Yes. But I think that narratives play a similar role there. Our reaction in the West also depends on the stories we hear from China.

SPIEGEL ONLINE: A big topic here is Industry 4.0 and the feared job loss.

Shiller: That reminds me of the late twenties. At that time, the narrative started from technological unemployment. When it actually rose for possibly other reasons, people blamed it for technology, which led to declining consumption. I think that is also a potential risk today: that rising unemployment is automatically explained by machines that replace people.

SPIEGEL ONLINE: Certain jobs are actually replaced today by machines. Is that nothing more than a narrative?

Shiller: Yes. But at the beginning of the 1930's there was a lot of talk about robots taking over jobs. Even then it was believed that the development was completely out of control and automation was now reaching its peak. So we've had this discussion for about 100 years.

SPIEGEL ONLINE: Another real danger is the trade war between the US and China. Do you think Donald Trump could give in?

Shiller: He could at least just change the subject. Trump would never admit that he changes his mind, but he does it anyway.

SPIEGEL ONLINE: Trump threatens but also the Europeans, especially German automakers. You think it's possible he'll drop all this?

Shiller: Or he'll be removed from office.

SPIEGEL ONLINE: Do you think that's likely?

Shiller: It's tricky because the polarization in the US is so high. As a leader of the Democrats, I might even have accepted Trump's offer of compromise, claiming that he will receive money for the border wall with Mexico, and that migrants will be protected from deportation for three years. Give him his wall! Will it let him try. I think the wall will not change the illegal immigration - and there will be all sorts of offensive graffiti on it.

SPIEGEL ONLINE: Foreign Minister Mike Pompeo has pointed out in Davos that the US economy is growing significantly faster than in other industrialized countries. Something seems to make Trump right.

Shiller: It seems plausible to me that he is actually responsible for growth - but not necessarily for good reasons. Trump has lowered corporate taxes. This drives the stock markets and could boost demand. And he lives a pompous lifestyle: He says in his books, one should state that this is the way to success. Maybe people spend more to imitate Trump.

AFP

SPIEGEL ONLINE: One topic that is currently haunting Europe is Brexit. So far, the financial markets have responded only in certain areas: the exchange rate of the pound has fallen, as well as the housing prices in London. Are these reactions rational?

Shiller: I usually always say that something is irrational. But who owns a flat in London may not be able to work there in the future. So it's rational that housing prices are going down.

SPIEGEL ONLINE: And the so far moderate reaction of the stock markets, which is also rational?

Shiller: I think the stock market in a country is never rational. And the UK stock market has been cheap for a long time, even before Brexit. I could maybe invest (laughs) .

SPIEGEL ONLINE: What happens if there is no agreement and there is a hard, unregulated Brexit?

Shiller: That makes it hard for companies to do business. So it sounds bad. Also in the sense of the narrative: There will then be stories about people who can no longer do European business as usual - and that could be strengthened.

SPIEGEL ONLINE: Would it be bad for the European narrative, for the EU as a whole?

Shiller: Yes, some people are talking about the European dream or the European project. These are motivating factors. In my book, I deal with the American dream, which is about mutual respect and the fact that everyone has the same chance of success. The Brexit does not seem to suit me.

AFP

Angela Merkel

SPIEGEL ONLINE: Some years ago you told us in an interview that Angela Merkel received a lot of respect in the USA because she is considered compassionate. Now her chancellorship is nearing its end, this year's appearance in Davos may have been her last. Do you think the Americans will miss Merkel?

Shiller: Some already, but not all.

SPIEGEL ONLINE: Who will miss her?

Shiller: I can not say that exactly. But there is this simple narrative that left millions of Muslim immigrants to Germany. Trump supporters see them as negative - and there are still many unflinching Trump supporters. So it could be with Merkel as with Barack Obama: There is a very strong split opinion about both.

SPIEGEL ONLINE: Will you personally miss Merkel?

Shiller: Yes, I think so. She stood for an enlightened person in a new Germany.

SPIEGEL ONLINE: Is there any other person who could take on her leadership role on the world stage in the future? Maybe French President Emmanuel Macron?

Shiller: Yeah, but Macron looks like he's about to slip. And British opposition leader Jeremy Corbyn is also not so appealing. I dont know.

SPIEGEL ONLINE: But would not that be a problem for Europe if there is no leader?

Shiller: Yes, that's right. Who will be Merkel's successor in Germany?

SPIEGEL ONLINE: As party leader, Annegret Kramp-Karrenbauer has recently taken over Merkel's post. She is also here in Davos.

Shiller: Ah, yes, another woman, I remember. I tried to learn her name.