We have to tie education much more closely to jobs: Penny Pritzker

We have to tie education much more closely to jobs: Penny Pritzker

Penny Pritzker has three identities. The first is as a member of the Chicago-based Pritzker family, which owns the Hyatt brand globally. The second is as former US commerce secretary in the Barack Obama administration, a role in which she spent almost four years. This period was also marked by her unrelenting drive and success in negotiating and completing the Trans-Pacific Partnership (TPP) agreement between 12 nations. In her third role over the past two years, Pritzker has been leading Chicago-based investment firm PSP Partners as founder and chairman. She recently co-chaired an independent task force, sponsored by the Council on Foreign Relations, on the future of technology and work. The report—The Work Ahead: Machines, Skills, and US Leadership In The Twenty First Century—talks about some uncomfortable facts relating to employment and its future. Edited excerpts from an interview taken during her recent visit to Mumbai:

We have to tie education much more closely to jobs: Penny Pritzker

The document—‘The Work Ahead’—raises some relevant issues but they don’t square up as national security concerns. Would you like to comment?

I think the real question is why would the Council on Foreign Relations take up this issue, and why do they see it as an issue of national security. I think you have to connect the dots between the anxiety that people feel and the absence of confidence that there is about work and opportunity. This leads to an attitude about the world and it is leading to a sense of retrenchment and therefore concerns about whether the US becomes less expansive in its engagement or becomes more isolated, more retrenched. I think that is an issue of national security and it is one that removes us from a global conversation, and the politics that can come from that kind of anxiety is what motivated the Council on Foreign Relations to say that this is an issue that needs to be looked at not just as an economic issue but one of national security.

Still, the future of technology or work is a domestic issue. How does that interface with your relationship with other nations, in terms of commercial and economic diplomacy?

This isn’t just an issue for the US. It is also an issue facing every major country; even in India, the front pages of newspapers talk about this issue. If you can’t help your populations figure out where opportunity is coming from, then their sense of confidence and engagement retires; it’s not a big leap to become an issue of national security. You see the social tension in the US. It is blamed on trade but it is much more about technology and digitization and not preparing people for 21st century work.

The document seems to ignore the likely sociological or psychological impact it can have on the society. Isn’t that also a matter of national security?

The way we decided to frame the report was to produce a menu of options for various players. The document says what you could do whether you’re in the federal government, state governments, cities, as business leaders or as NGOs. The other thing we tried to do was survey and see what were some of the best practices or most interesting things happening. It wasn’t meant to say “here’s the solution”. It is really meant to be a menu because I ultimately think solutions to this challenge are local; which means in the US you need to work with your K-12 (school system), community college and university systems, with your business community, with your local government, with your social safety net, to say we’ve got to rethink how we are approaching workforce and education training and we have to tie education much more closely to jobs because jobs have specific requirements. That doesn’t mean you give up all basic education and just have workforce training but it does mean you need a lot more flexibility. Many might even want a solution that is flexible and say, “I need this set of skills, which I will get in an eight-week course”, or whether they need expertise in Artificial Intelligence (AI) or machine learning, where expertise, or even the notion of a career, didn’t exist a decade ago. Now, we are going to need a lot more people engaging in, say, cyber security, machine learning, etc.

The report advocates a liberal policy on immigration, to the extent that it helps the start-up industry, innovation, and investment in research and development…

We make the argument that immigration reform is important because we have an enormous demand that’s not being met by our current population and we should use these opportunities in other parts of the world and welcome them into our country. At the same time, we should be training up our own population but that’s a generational process versus the acute needs we have today. For example, I’m on the board of Microsoft; because of our immigration policy in US, Microsoft is forced to put more of its facilities and operations in Canada so that it’s close by. Canada’s immigration policy makes it easier for folks with specific talent to be able to enter that country. That’s nuts, we should be doing that in USA. There’s a multiplier effect that would be beneficial for the economy. That’s also a loss of opportunity.

But how does that spirit of openness align with US’ FDI policy? The US government across regimes has been wary about technology investments from China.

I think that the national security issues for sensitive technology is one issue; immigration writ largely is a totally separate issue…There’s a sense of, “Are we going to share our most sensitive tech with our allies or with the folks with whom we are in tough and competitive situation with?” I think both can be true; you want to encourage FDI, you want immigration but you got concerns with who will protect or respect your intellectual property (IP).

How do you view the current global trade environment? Do you see a breakdown in multilateralism and rules-based trading regime? How do you fix it?

I think, first, you have to take it apart. You can’t just say it’s uniformly broken, but rather what are the challenges being faced. Unfortunately, the US is currently pursuing a policy of bilateral trade agreements and not multilateral. Personally, I don’t agree with that. But that’s where the US’ current administration is going. We have benefitted from multilateral trade agreements. NAFTA (North American Free Trade Agreement) has been a huge boon to US, Canada and Mexico, and I think it’s made the North American platform really competitive globally. I mean if you think about trade with India, we do about $118 billion a year. India’s on its way to becoming a five-trillion-dollar economy, bigger than the UK and Japan. Whereas with Mexico, we do $600 billion of trade and Mexico is only a 1-trillion-dollar economy. So, I think we benefitted from having intertwined supply chains. I also think it’s good for national security, to have the strength of two more countries on our border where people on both sides are doing well. It is good for all three countries. I’m just using NAFTA as an example. I think it’s very important that we pursue NAFTA again in its newest incarnation as a trilateral agreement.

I was a huge proponent of TPP. I saw TPP negotiated as an upgrade to NAFTA because Canada and Mexico were in the agreement and it’s to our detriment to not have pursued TPP and let it go without the US. I think it not only created a unifying force for 40% of the global GDP but also it was a good counter to China in the Asia-Pacific region. And what I loved about TPP was the open architecture; the idea that here is a set of standards, if you can meet it, you can join. I think that would have been a good outcome. Obviously, US is pursuing a very different approach right now.

TPP is often blamed, perhaps unfairly, for the break-down in the global trade regime, with concerns about issues on IP, labour, and environment that were viewed as a challenge to sovereignty. India was not a TPP member but still felt impinged by it…

Well, I don’t think it was a challenge to the sovereignty of the countries that chose to be part of TPP. The countries that were making labour or environment agreements wanted to be a part of TPP, felt that it was an opportunity for them to raise their standards and the agreement gave them the internal political will of saying: we are going to be part of this larger globalized market place; it could create the opportunity to push back against some domestic forces. First of all, no one joins an agreement that they don’t want to join. So I didn’t see it as impinging on sovereignty because otherwise they need not do it. Which is what the US chose to do.

Ironically, they’ve signed TPP with China as an observer. Have all attempts to exclude China failed?

But, in a funny way, it wasn’t about keeping China out. It was about saying if you want to be in, you have to live up to these standards and you have to participate in global trade in a rules-based order that is more consistent with how the rest of world is participating. It’s going to be interesting to see how it works out because the world trade regime is being shaken up but let’s see where it lands. I can’t predict but there is a need to say it has to work for all participants.

It hasn’t been a level playing field for many nations. India has had problems in agriculture, IPR, Mode-4. India hasn’t given up on WTO yet, but there is a sense of angst…

Well, that’s why TPP was so powerful. We were able to negotiate agricultural provisions with Japan, which has a very protected agricultural environment. Or take the Canadian dairy sector. Everybody has got their pet sector that is very powerful politically, domestically. That was the beauty of the situation. Let’s see how it all plays out. My hope is we get a revised NAFTA done. I mean no country will sign up for a new NAFTA if it doesn’t work for them, so it’s got to work on a trilateral basis. Everyone’s got their own legislatures that they got to get these things passed through. By their very nature, these agreements are compromises.

The common criticism against TPP is that negotiations were secretive and not transparent and foisted on the public only after finalization. Any comments?

I take issue with that. In TPP, we were negotiating across 25 sectors, including automobiles and technology; these are groups of representatives from those sectors, sitting there advising the negotiating teams. So it wasn’t like it was a big shock what the priorities were. It’s easy to say you are not sitting in the room with the precision of the negotiation, except that actually we were being advised by all of those groups; the compromises weren’t big surprises. We got a labour group for the first time to make sure that they didn’t feel left out of the negotiations. There were international labour standards which were new to that kind of an agreement. The hope was that you have a multilateral trade agreement that was a race to the top and not to the bottom. You’re trying to raise the standards how countries engage with another. So, there was a lot of negotiation on customs, border processes to make it easier to do trade. Not just in sectors, but also the process of engaging in trade. I am a believer in multilateral agreements but they are tough to do. And in order to get that through our House or Senate, it’s necessary to live by a certain set of standards that doesn’t degrade the situation for America or for any other country participating. What was interesting was that countries, for whom it would be hard to adapt, wanted to be a part of this impetus to raise labour or environmental standards.

Funnily enough, though, soon after US chose to move out of TPP, the remaining 10 members plus China started discussions on how to dilute the provisions. In some sense, it’s as if there wasn’t a consensus earlier…

I don’t know what’s the dynamic when there are 11 members instead of 12. You don’t know what the forces at play are either.