1 00:00:02,400 --> 00:00:05,160 Speaker 1: Hello, and welcome to Stephanomics, the podcast that brings the 2 00:00:05,160 --> 00:00:11,400 Speaker 1: global economy to you. When we were last on air 3 00:00:11,480 --> 00:00:15,680 Speaker 1: two months ago, the coronavirus was a China problem, one 4 00:00:15,720 --> 00:00:18,360 Speaker 1: story of many that we might have talked about on 5 00:00:18,400 --> 00:00:22,239 Speaker 1: this podcast. Now it's the only story, and most of 6 00:00:22,320 --> 00:00:25,720 Speaker 1: us are living very differently, thinking very differently than we 7 00:00:25,720 --> 00:00:30,640 Speaker 1: were even a few weeks ago. Inevitably, Stephanomics is going 8 00:00:30,680 --> 00:00:33,440 Speaker 1: to feel a bit different too, But our basic mission 9 00:00:33,640 --> 00:00:35,720 Speaker 1: to bring you what's happening in the global economy and 10 00:00:35,720 --> 00:00:38,839 Speaker 1: why it matters hasn't changed. In fact, it seems more 11 00:00:38,880 --> 00:00:41,760 Speaker 1: important than ever. So later on I'm going to talk 12 00:00:41,760 --> 00:00:45,080 Speaker 1: to the American economist Adam Posen about how governments and 13 00:00:45,120 --> 00:00:48,280 Speaker 1: economists have measured up to the challenge of this pandemic. 14 00:00:49,080 --> 00:00:53,120 Speaker 1: But first, I am very grateful to James Mega, Julian 15 00:00:53,360 --> 00:00:56,880 Speaker 1: and Jeff Black from Bloomberg's economy team in China for 16 00:00:56,960 --> 00:00:59,600 Speaker 1: managing to produce this piece from the front lines of 17 00:00:59,640 --> 00:01:18,000 Speaker 1: the bat to keep the global supply chain intact. I 18 00:01:18,120 --> 00:01:20,759 Speaker 1: think for a minute about how you get your household goods, 19 00:01:21,560 --> 00:01:23,679 Speaker 1: or at least how you got them two months ago. 20 00:01:24,560 --> 00:01:26,679 Speaker 1: You might have gone to a local store or you 21 00:01:26,800 --> 00:01:30,520 Speaker 1: ordered them online and waited for delivery. That's all become 22 00:01:30,560 --> 00:01:33,759 Speaker 1: a lot more difficult since COVID nineteen spread around the world, 23 00:01:34,240 --> 00:01:36,959 Speaker 1: with billions of people now in various forms of lockdown. 24 00:01:38,040 --> 00:01:40,640 Speaker 1: But what about the people who make these items and 25 00:01:40,680 --> 00:01:45,360 Speaker 1: how do these things travel across the world. Here in China, 26 00:01:45,800 --> 00:01:48,480 Speaker 1: there's a thirty million strong army of truckers who linked 27 00:01:48,480 --> 00:01:52,680 Speaker 1: the factories, markets, container terminals and warehouses of this country together. 28 00:01:53,400 --> 00:01:55,440 Speaker 1: Now they're on the front line of that struggled against 29 00:01:55,440 --> 00:02:03,080 Speaker 1: the coronavirus and its associated economic impacts. This is the 30 00:02:03,160 --> 00:02:07,280 Speaker 1: Shinfai agricultural wholesale market in Beijing, the size of sixteen 31 00:02:07,320 --> 00:02:10,120 Speaker 1: soccer fields, and there were trucks everywhere early in the 32 00:02:10,160 --> 00:02:13,960 Speaker 1: morning on March nineteen. Every truck acts as a standalone 33 00:02:14,040 --> 00:02:17,480 Speaker 1: sales booth. Tai Lily is a thirty six year old 34 00:02:17,560 --> 00:02:21,000 Speaker 1: driver from nearby Herbe Province with a faux hawk haircut. 35 00:02:22,000 --> 00:02:24,040 Speaker 1: He was playing with his phone in the driver's seat 36 00:02:24,080 --> 00:02:26,640 Speaker 1: and we talked to him. Behind him was half a 37 00:02:26,639 --> 00:02:30,120 Speaker 1: truck of oranges and boxes waiting to be sold. He 38 00:02:30,240 --> 00:02:33,600 Speaker 1: told us about what he would be doing normally. No, 39 00:02:35,280 --> 00:02:38,880 Speaker 1: because of the epidemic, lots of factories haven't returned to work. 40 00:02:39,400 --> 00:02:43,000 Speaker 1: We have no other choices but to transport fruit. Fruit 41 00:02:43,080 --> 00:02:45,440 Speaker 1: is all fresh and once picked, it needs to be 42 00:02:45,440 --> 00:02:49,480 Speaker 1: shipped out right away, while factory goods can wait. Besides, 43 00:02:49,560 --> 00:02:53,200 Speaker 1: there aren't many factory goods that need to be transported now. Anyway, 44 00:02:53,680 --> 00:02:55,960 Speaker 1: the market was a lot quieter than it would normally be, 45 00:02:56,120 --> 00:02:59,600 Speaker 1: according to Chai. That's partly because movement in public in 46 00:02:59,639 --> 00:03:02,520 Speaker 1: Beijing is still difficult due to the fear of infection, 47 00:03:02,840 --> 00:03:06,400 Speaker 1: and market demand remains suppressed. But there's an emerging problem 48 00:03:06,400 --> 00:03:09,200 Speaker 1: now that will further crush demand for China's goods abroad, 49 00:03:09,720 --> 00:03:12,799 Speaker 1: just as restrictions begin to be lifted and drivers returned 50 00:03:12,800 --> 00:03:15,480 Speaker 1: to the roads at home. The spread of the disease 51 00:03:15,520 --> 00:03:18,560 Speaker 1: around the world and the lockdowns and economies ranging from 52 00:03:18,560 --> 00:03:23,040 Speaker 1: the US to Europe. In a choice, senior vice president 53 00:03:23,040 --> 00:03:25,720 Speaker 1: at Moody's said, the shock from outside of China is 54 00:03:25,720 --> 00:03:29,720 Speaker 1: a bigger concern now. We are in a very unprecedented 55 00:03:29,840 --> 00:03:34,520 Speaker 1: situation when global supply chain is being disrupted UM and 56 00:03:34,600 --> 00:03:39,760 Speaker 1: I think UM. So far we have been the supply 57 00:03:39,880 --> 00:03:44,040 Speaker 1: chain and various in industry in China recovering to a 58 00:03:44,080 --> 00:03:49,560 Speaker 1: different extent or resuming productivity to a various extent. But 59 00:03:49,720 --> 00:03:52,600 Speaker 1: going out, it's a little bit difficult to predict. Um 60 00:03:52,680 --> 00:03:56,840 Speaker 1: as the virus breaks out you know around the world, um, 61 00:03:56,920 --> 00:04:01,680 Speaker 1: what kind of ramifications and um pulling impact that would 62 00:04:01,680 --> 00:04:04,640 Speaker 1: have to bring back to China. I think now you know, 63 00:04:04,760 --> 00:04:09,440 Speaker 1: without with very little visibility on how long and how 64 00:04:09,480 --> 00:04:12,840 Speaker 1: how how fast evolving situation is. I think it's a 65 00:04:12,840 --> 00:04:16,120 Speaker 1: bit difficult, but I think it's um it's it's It's 66 00:04:16,120 --> 00:04:20,200 Speaker 1: probably fair to say that some supply chain disruptions it 67 00:04:20,279 --> 00:04:24,880 Speaker 1: should should be expected. The situation in China's transport industry 68 00:04:24,920 --> 00:04:28,400 Speaker 1: has come full circle in just a few weeks in February. 69 00:04:28,720 --> 00:04:32,080 Speaker 1: During the immediate aftermath and the coronavirus shutdowns in Wolhan 70 00:04:32,200 --> 00:04:34,960 Speaker 1: and other cities, even if you had goods to ship, 71 00:04:35,320 --> 00:04:39,400 Speaker 1: it was next to impossible to find someone to drive them. 72 00:04:39,400 --> 00:04:42,839 Speaker 1: Shoot Japan is head of logistics that Longy solar panel 73 00:04:42,880 --> 00:04:47,440 Speaker 1: factory in Shanxi in northwestern China. Shoes says the industry 74 00:04:47,480 --> 00:04:54,440 Speaker 1: is experiencing its biggest crisis in history. There were all 75 00:04:54,560 --> 00:04:58,440 Speaker 1: kinds of unexpected and very serious abnormality. The normal order 76 00:04:58,440 --> 00:05:04,440 Speaker 1: of transportation was completely the trupted. Mr Shu who we 77 00:05:04,520 --> 00:05:07,600 Speaker 1: interviewed on March nine, is talking about the difficulties he 78 00:05:07,680 --> 00:05:11,359 Speaker 1: encountered exactly one month before that, when trucks and drivers 79 00:05:11,360 --> 00:05:15,000 Speaker 1: were in extreme shortage. At the time, he was urgently 80 00:05:15,040 --> 00:05:18,800 Speaker 1: needing to ship raw materials to the company's factory in Vietnam. 81 00:05:18,839 --> 00:05:21,560 Speaker 1: It relies solely on supplies from China, and it was 82 00:05:21,600 --> 00:05:24,320 Speaker 1: about to run out of materials from production. If that 83 00:05:24,320 --> 00:05:27,000 Speaker 1: would happened, more than two thousand workers will be sent 84 00:05:27,080 --> 00:05:30,920 Speaker 1: home and the company would suffer great losses. Shoe managed 85 00:05:30,960 --> 00:05:33,760 Speaker 1: to arrange a dozen trucks to deliver raw materials to 86 00:05:33,800 --> 00:05:36,640 Speaker 1: Apport in chin Jaw, a city in southern China near 87 00:05:36,680 --> 00:05:40,160 Speaker 1: the Vietnamese border, where a ship bound for Vietnam was waiting. 88 00:05:41,560 --> 00:05:44,400 Speaker 1: There was one hitch. The trucks weren't able to leave 89 00:05:44,440 --> 00:05:47,120 Speaker 1: the highway and chin Jaw because all exits were closed 90 00:05:47,160 --> 00:05:51,320 Speaker 1: due to virus containment roadblocks. Shoe spent about ten hours 91 00:05:51,360 --> 00:05:55,039 Speaker 1: pulling strings with the local commerce department and customs authorities 92 00:05:55,240 --> 00:05:57,440 Speaker 1: before his fleet of trucks were allowed to exit the 93 00:05:57,440 --> 00:06:02,200 Speaker 1: toll gate and clear customs. China's struggles to get back 94 00:06:02,240 --> 00:06:05,200 Speaker 1: to work after its own virus shutdowns are likely to 95 00:06:05,200 --> 00:06:08,159 Speaker 1: be repeated in other countries in coming months. The truck 96 00:06:08,160 --> 00:06:10,160 Speaker 1: as we talked to said, it's been a hard road 97 00:06:10,480 --> 00:06:15,440 Speaker 1: filled with risk and personal sacrifice. Fung, who's forty three 98 00:06:15,520 --> 00:06:18,239 Speaker 1: years old, is a native of Unaway Problems in the East, 99 00:06:18,680 --> 00:06:20,680 Speaker 1: but he works far from his family in the south 100 00:06:21,040 --> 00:06:25,640 Speaker 1: in Guandong. We spoke with him on February. He talked 101 00:06:25,640 --> 00:06:27,880 Speaker 1: about the fear he felt while driving through the peak 102 00:06:27,960 --> 00:06:32,440 Speaker 1: of the epidemic ceremony worried. I wear my mask very 103 00:06:32,480 --> 00:06:36,760 Speaker 1: tightly every day and replace it daily. For my family's living, 104 00:06:36,960 --> 00:06:39,760 Speaker 1: I have to work. I don't have any other options. 105 00:06:40,160 --> 00:06:42,800 Speaker 1: I have two sons at home. I'm the only breadwinner 106 00:06:42,839 --> 00:06:45,800 Speaker 1: of my family. I have no other choice but to work. 107 00:06:46,560 --> 00:06:49,040 Speaker 1: Frequent temperature checks on highways during the peak of the 108 00:06:49,080 --> 00:06:52,839 Speaker 1: outbreak in China slowed him down and shuttered roadside restaurants 109 00:06:52,880 --> 00:06:56,480 Speaker 1: made it hard to eat while on the move. All 110 00:06:56,520 --> 00:06:58,839 Speaker 1: I hope is for the epidemic to be over soon. 111 00:06:59,360 --> 00:07:05,400 Speaker 1: This way, I feel worried about infections when driving. Whose 112 00:07:05,480 --> 00:07:07,960 Speaker 1: anxiety is the price for keeping even a fraction of 113 00:07:07,960 --> 00:07:11,160 Speaker 1: a global economy operating, and it's in stark contrast to 114 00:07:11,200 --> 00:07:14,160 Speaker 1: other professions which can work from the relative comfort of 115 00:07:14,200 --> 00:07:17,880 Speaker 1: their own homes. Without people like Woo, supply chains would 116 00:07:17,880 --> 00:07:21,800 Speaker 1: have come to a complete halt. Darante Country Risk analyst 117 00:07:21,840 --> 00:07:24,920 Speaker 1: at Fitch Solutions in Asia says, the important role the 118 00:07:24,960 --> 00:07:29,600 Speaker 1: logistics industry plays in the economy goes without saying. You 119 00:07:29,640 --> 00:07:32,440 Speaker 1: can have your factories, um, you know, produced the goods 120 00:07:32,440 --> 00:07:38,440 Speaker 1: manufacturer exports Indian and you still require the logistics industry 121 00:07:38,800 --> 00:07:42,440 Speaker 1: to move those goods around the world. Uh So I 122 00:07:42,480 --> 00:07:46,480 Speaker 1: would say, UM, definitely a very important industry to have 123 00:07:46,880 --> 00:07:50,720 Speaker 1: us trying to try to recover from the economic disruption. 124 00:07:55,320 --> 00:07:58,080 Speaker 1: The hardships that Chinese households have suffered seemed to be 125 00:07:58,160 --> 00:08:01,360 Speaker 1: just the beginning. All indications are that the impact of 126 00:08:01,400 --> 00:08:04,480 Speaker 1: COVID nineteen is far from over. The worst for the 127 00:08:04,480 --> 00:08:07,400 Speaker 1: global economy is probably yet to come, and for China, 128 00:08:07,880 --> 00:08:10,960 Speaker 1: if the virus returns, or even if it doesn't, the 129 00:08:11,040 --> 00:08:16,480 Speaker 1: global downturn or prolong the pain. For Bloomberg News, I'm 130 00:08:16,600 --> 00:08:23,200 Speaker 1: James Meager in Beijing. So that was the road level 131 00:08:23,400 --> 00:08:26,160 Speaker 1: view in China. A bit of a gear shift now 132 00:08:26,200 --> 00:08:28,640 Speaker 1: because in this first episode of the new series, I 133 00:08:28,720 --> 00:08:32,000 Speaker 1: thought we might step back to think about the economics 134 00:08:32,040 --> 00:08:36,040 Speaker 1: of the coronavirus how economists have responded to this very 135 00:08:36,120 --> 00:08:38,880 Speaker 1: different kind of shock to the global economy, and whether 136 00:08:38,920 --> 00:08:41,439 Speaker 1: the right advice has been getting to governments as they 137 00:08:41,440 --> 00:08:44,160 Speaker 1: try to cushion the blow. One of the best people 138 00:08:44,160 --> 00:08:45,679 Speaker 1: I could think of for talking about all that was 139 00:08:45,720 --> 00:08:48,240 Speaker 1: my old friend Adam Posen, who has been president of 140 00:08:48,280 --> 00:08:52,920 Speaker 1: the Peterson Institute for International Economics since and also served 141 00:08:52,920 --> 00:08:55,400 Speaker 1: for a while on the Bank of England's Interest rate 142 00:08:55,520 --> 00:08:59,120 Speaker 1: setting Committee. Adam, thanks very much for being with us 143 00:08:59,480 --> 00:09:03,319 Speaker 1: from your booklined office. Thank you for having me, Stephanie. 144 00:09:04,000 --> 00:09:07,840 Speaker 1: We're all living in a very different world from a 145 00:09:07,880 --> 00:09:09,920 Speaker 1: couple of months ago, or even a few weeks ago. 146 00:09:10,520 --> 00:09:16,240 Speaker 1: How do you think economists have done in first assessing 147 00:09:16,440 --> 00:09:19,800 Speaker 1: this shock and then thinking about how we respond to it. 148 00:09:19,960 --> 00:09:23,520 Speaker 1: I think economists have displayed both the strengths and the 149 00:09:23,559 --> 00:09:28,320 Speaker 1: weaknesses of the profession, the strength of being relatively empirical, 150 00:09:28,559 --> 00:09:32,599 Speaker 1: and perhaps the people's surprise having agreement on some basic principles. 151 00:09:32,960 --> 00:09:36,440 Speaker 1: You know, policy context is very evident, so on the 152 00:09:36,440 --> 00:09:39,680 Speaker 1: fiscal side, they it's fascinating to watch not just the 153 00:09:39,760 --> 00:09:43,160 Speaker 1: Larry Summers or Jason Furman or Peter bell Fingers or 154 00:09:43,400 --> 00:09:45,920 Speaker 1: people on John sunny Ferry on the left calling for 155 00:09:46,080 --> 00:09:49,600 Speaker 1: massive fiscal stimulus. It's also people on the right like 156 00:09:49,720 --> 00:09:52,880 Speaker 1: Ken Rogoff and Glenn Hubbard and us context you served 157 00:09:52,880 --> 00:09:58,640 Speaker 1: in Republican administrations, there is agreement that government had to 158 00:09:58,640 --> 00:10:01,320 Speaker 1: be involved and couldn't be just the central banks, and 159 00:10:01,679 --> 00:10:03,920 Speaker 1: we had to think in terms of essentially said bridge 160 00:10:03,920 --> 00:10:07,839 Speaker 1: loans and job preserving programs on an incredible scale. And 161 00:10:07,880 --> 00:10:10,280 Speaker 1: I think that people should take some part from that. 162 00:10:10,280 --> 00:10:13,120 Speaker 1: That for all to talk about economists never agreeing on anything, 163 00:10:13,440 --> 00:10:16,040 Speaker 1: in this case, the response was clear, and that certainly 164 00:10:16,160 --> 00:10:18,280 Speaker 1: was true with the central banks as well. They're all 165 00:10:18,360 --> 00:10:21,240 Speaker 1: pretty much on the same page. But of course, as 166 00:10:21,400 --> 00:10:24,960 Speaker 1: you well recognized, and I vi you to my shame cringing, 167 00:10:25,360 --> 00:10:27,560 Speaker 1: if you look back to what economists were talking about, 168 00:10:27,600 --> 00:10:31,600 Speaker 1: including myself in early February mid February, you know, we 169 00:10:31,600 --> 00:10:35,040 Speaker 1: were not seeing this coming. Our ability to forecast and 170 00:10:35,080 --> 00:10:38,199 Speaker 1: our ability to think about what kinds of shocks are 171 00:10:38,200 --> 00:10:41,600 Speaker 1: happening when remains very limited. That was true before the 172 00:10:41,600 --> 00:10:44,040 Speaker 1: two thousand and eight crisis, although a few people saw 173 00:10:44,080 --> 00:10:47,040 Speaker 1: things coming, and that's true again here. So it's this 174 00:10:47,200 --> 00:10:51,439 Speaker 1: combination of conditional on what happens. I think the economists 175 00:10:51,440 --> 00:10:54,120 Speaker 1: are behaving well and getting the right advice out. But 176 00:10:54,440 --> 00:10:58,440 Speaker 1: in terms of early warning and foresight and optic well, yeah, 177 00:10:58,440 --> 00:11:00,160 Speaker 1: and I think it is. And of course we been 178 00:11:00,160 --> 00:11:02,760 Speaker 1: going through the same exercise at Bloomberg. We had we 179 00:11:02,800 --> 00:11:06,240 Speaker 1: have a group of economists who were actually very close, 180 00:11:06,320 --> 00:11:09,600 Speaker 1: We have great expertise in China. They were looking at 181 00:11:09,640 --> 00:11:12,000 Speaker 1: the data. We had a sort of China back to 182 00:11:12,040 --> 00:11:14,840 Speaker 1: the work back to work tracker when we were looking 183 00:11:14,880 --> 00:11:17,520 Speaker 1: in January and February, and we were able to see 184 00:11:17,679 --> 00:11:20,800 Speaker 1: quite early that the shot to the Chinese economy was 185 00:11:20,800 --> 00:11:23,679 Speaker 1: bigger than people thought. And then we therefore we were 186 00:11:23,720 --> 00:11:25,880 Speaker 1: then thinking in terms of oh, that's going to mean 187 00:11:25,920 --> 00:11:28,360 Speaker 1: ex or why for the rest of the world. But 188 00:11:28,480 --> 00:11:30,560 Speaker 1: it took a remarkably long time for us or I 189 00:11:30,559 --> 00:11:33,439 Speaker 1: think anyone else to move from that to thinking, hang 190 00:11:33,480 --> 00:11:35,600 Speaker 1: on a minute, it's not just going to be dealing 191 00:11:35,640 --> 00:11:38,480 Speaker 1: with a shot from China. What if the whole world 192 00:11:38,640 --> 00:11:40,800 Speaker 1: has to go through what China is going through now? 193 00:11:40,880 --> 00:11:43,520 Speaker 1: And it does seem to me extraordinary that more people 194 00:11:43,559 --> 00:11:48,480 Speaker 1: didn't make that leap until really quite quite late, including us. 195 00:11:48,520 --> 00:11:50,560 Speaker 1: I mean, is that something about people just not being 196 00:11:50,559 --> 00:11:53,760 Speaker 1: able to compute a total change of regime or what 197 00:11:53,840 --> 00:11:56,120 Speaker 1: do you think is driving that I think you thinks 198 00:11:56,120 --> 00:11:58,839 Speaker 1: for driving that certainly one is as you say, it 199 00:11:59,000 --> 00:12:03,760 Speaker 1: just require a willingness to think of things really deviating 200 00:12:03,800 --> 00:12:07,320 Speaker 1: from normal. Economists talk about, you know, small with the 201 00:12:07,360 --> 00:12:11,000 Speaker 1: technical word perturbations or movements around an equilibrium, and this 202 00:12:11,120 --> 00:12:13,040 Speaker 1: is moving from one state of the world to another. 203 00:12:13,440 --> 00:12:16,680 Speaker 1: And economists are just as bad on that as everybody else. 204 00:12:17,120 --> 00:12:21,600 Speaker 1: But I think another piece of it is ultimately fundamental, 205 00:12:21,720 --> 00:12:26,240 Speaker 1: which is the talk between people who would do public 206 00:12:26,280 --> 00:12:29,760 Speaker 1: health and do pandemics and not just economists, with foreign 207 00:12:29,800 --> 00:12:32,720 Speaker 1: policy people, market people has been quite limited. I was 208 00:12:32,760 --> 00:12:36,360 Speaker 1: talking to somebody from one world's largest most successful investment funds, 209 00:12:36,520 --> 00:12:38,960 Speaker 1: and they're one of those funds that sucks up every 210 00:12:39,000 --> 00:12:41,840 Speaker 1: piece of big information that you know, big data that 211 00:12:41,880 --> 00:12:44,880 Speaker 1: you know of. And even they didn't see this coming, 212 00:12:45,080 --> 00:12:48,600 Speaker 1: They didn't make that mental transition, despite the fact that 213 00:12:48,760 --> 00:12:52,240 Speaker 1: the person who owns this fund contributes to public health research. 214 00:12:52,720 --> 00:12:55,240 Speaker 1: So I think it's just a human failing. It's a 215 00:12:55,320 --> 00:12:57,920 Speaker 1: very sad human failing, but it is one that we've 216 00:12:57,960 --> 00:13:02,480 Speaker 1: just had a failure of collective imagination. What's interesting is 217 00:13:02,520 --> 00:13:04,720 Speaker 1: we have got to actually just in the last couple 218 00:13:04,720 --> 00:13:07,240 Speaker 1: of weeks, some of these conversations that had previously been 219 00:13:07,280 --> 00:13:10,560 Speaker 1: on the sidelines now getting a bit more mainstream. I 220 00:13:10,600 --> 00:13:13,480 Speaker 1: suspect as people get frustrated were being stuck at home 221 00:13:14,440 --> 00:13:18,760 Speaker 1: about the trade offs between the public health emergency and 222 00:13:18,800 --> 00:13:22,480 Speaker 1: the economic emergency. And I wonder what you think, because 223 00:13:22,480 --> 00:13:27,320 Speaker 1: there's there was Intuitively people said, well, we're we're sort 224 00:13:27,360 --> 00:13:31,480 Speaker 1: of putting the public health first in and the result 225 00:13:31,600 --> 00:13:33,880 Speaker 1: is we're really killing the economy and we know that, 226 00:13:33,920 --> 00:13:35,280 Speaker 1: and we're going to try and do all we can, 227 00:13:35,360 --> 00:13:40,360 Speaker 1: but we're prioritizing the health. But increasingly people have said 228 00:13:40,400 --> 00:13:43,400 Speaker 1: that actually it's better for the economy as well not 229 00:13:43,559 --> 00:13:45,280 Speaker 1: to have the pandemic. So do you think we had 230 00:13:45,320 --> 00:13:48,160 Speaker 1: too long where there was a sort of false trade 231 00:13:48,160 --> 00:13:53,000 Speaker 1: off there between the economy and the public health emergency. Yeah, 232 00:13:53,000 --> 00:13:57,200 Speaker 1: it was a very human thing, was very responsible of 233 00:13:57,240 --> 00:14:00,719 Speaker 1: our political leaders in countries including the US, the UK, 234 00:14:00,920 --> 00:14:04,600 Speaker 1: Brazil and elsewhere can talk that way. The historical evidence 235 00:14:04,800 --> 00:14:07,360 Speaker 1: has always been pretty dark, clear going back to this 236 00:14:08,200 --> 00:14:13,240 Speaker 1: flu pandemic nineteen, going back to the nineteen fifties, flu 237 00:14:13,360 --> 00:14:17,720 Speaker 1: academic going to natural disasters of this sort that you 238 00:14:18,320 --> 00:14:22,119 Speaker 1: do better over not even that longer run, a relatively 239 00:14:22,200 --> 00:14:26,200 Speaker 1: short run, by doing what you need to control the damage. 240 00:14:26,280 --> 00:14:28,920 Speaker 1: The damage is the real shock, the the loss of 241 00:14:29,040 --> 00:14:32,400 Speaker 1: human lives, the loss of feman work hours, the capacity 242 00:14:32,440 --> 00:14:36,320 Speaker 1: constraints on the hospitals and the medical system, the fear 243 00:14:36,360 --> 00:14:39,440 Speaker 1: of people that is legitimate, and the withdrawal of purchasing 244 00:14:39,640 --> 00:14:43,120 Speaker 1: in from certain sectors and certain activities. Those are all real. 245 00:14:43,240 --> 00:14:45,680 Speaker 1: Those are gonna happen no matter what. And I think 246 00:14:45,720 --> 00:14:49,120 Speaker 1: that's what people were reluctant to really recognize and admit. 247 00:14:49,480 --> 00:14:51,440 Speaker 1: Once you admit that, and once you admit that, the 248 00:14:51,480 --> 00:14:54,480 Speaker 1: real binding constraint for us all in even in the 249 00:14:54,600 --> 00:14:56,760 Speaker 1: rich world, as we've seen in Italy and Spain now 250 00:14:56,840 --> 00:15:01,000 Speaker 1: New York, is hospital capacity medical systems, because you can't 251 00:15:01,160 --> 00:15:03,080 Speaker 1: It's like for a thousand of your flood, you can't 252 00:15:03,080 --> 00:15:06,040 Speaker 1: always have enough medical capacity for this kind of pandemic. 253 00:15:06,080 --> 00:15:09,360 Speaker 1: On the hand, once you recognized that is the binding 254 00:15:09,440 --> 00:15:13,160 Speaker 1: constraint for everything, then it just falls largically. This is 255 00:15:13,240 --> 00:15:15,120 Speaker 1: no place where I will see you kind of got 256 00:15:15,120 --> 00:15:21,120 Speaker 1: it right. The overwhelming majority immediately said we're better off 257 00:15:21,200 --> 00:15:24,160 Speaker 1: doing the medically induced called offer these sectors and it 258 00:15:24,240 --> 00:15:26,880 Speaker 1: will pay off. And it's not because it's gonna be wonderful, 259 00:15:26,920 --> 00:15:30,560 Speaker 1: but it's because it's better than the t and the 260 00:15:30,720 --> 00:15:33,600 Speaker 1: one of the big bits of advice, I guess that's 261 00:15:33,720 --> 00:15:37,640 Speaker 1: particularly you can see it, particularly in the European government's efforts, 262 00:15:38,280 --> 00:15:41,600 Speaker 1: is this effort to if you like, hold the economy 263 00:15:41,600 --> 00:15:44,200 Speaker 1: and suspended animation. You know everything that that the sort 264 00:15:44,240 --> 00:15:48,360 Speaker 1: of bottom has fallen out of demand um and obviously 265 00:15:48,400 --> 00:15:50,720 Speaker 1: a lot of businesses feeling that they will go under 266 00:15:50,920 --> 00:15:54,320 Speaker 1: very quickly seeing the kind of fallen been the kind 267 00:15:54,320 --> 00:15:56,400 Speaker 1: of falling revenues that you don't get even in a 268 00:15:56,440 --> 00:15:59,560 Speaker 1: really deep procession, if you're talking about nine or a 269 00:15:59,640 --> 00:16:01,960 Speaker 1: hundred said in some cases rather than even the worst 270 00:16:02,000 --> 00:16:04,600 Speaker 1: kind of recession, which might see twenty or thirty fall 271 00:16:04,640 --> 00:16:07,600 Speaker 1: and in demand. But the economists have basically said, now 272 00:16:07,640 --> 00:16:10,440 Speaker 1: what you have to do is is do what you 273 00:16:10,480 --> 00:16:12,720 Speaker 1: can to fill that hole that's been blown into the 274 00:16:12,760 --> 00:16:15,480 Speaker 1: economy so that the economy is then intact when you 275 00:16:15,520 --> 00:16:17,880 Speaker 1: come out the other side. We know what we should 276 00:16:17,880 --> 00:16:19,560 Speaker 1: be trying to do in principle. Do you think in 277 00:16:19,680 --> 00:16:21,600 Speaker 1: practice we're going to be able to do that or 278 00:16:21,640 --> 00:16:23,320 Speaker 1: do you think that there will be there will be 279 00:16:23,400 --> 00:16:26,240 Speaker 1: permanent cost of this even though we know there was 280 00:16:26,280 --> 00:16:28,800 Speaker 1: nothing fundamentally wrong with the economy and we went into it. 281 00:16:29,040 --> 00:16:31,840 Speaker 1: I think you've hit the profound insights, which is that 282 00:16:32,000 --> 00:16:35,320 Speaker 1: even more than the usual recession, this is something where 283 00:16:35,360 --> 00:16:39,120 Speaker 1: there's abroad sudden stop and who falls apart in terms 284 00:16:39,120 --> 00:16:41,920 Speaker 1: of businesses and jobs depends entirely on cash flow at 285 00:16:41,960 --> 00:16:45,520 Speaker 1: that moment. It's not about sort of merit did you 286 00:16:45,560 --> 00:16:48,280 Speaker 1: have a good product, did you invest, did you save enough? 287 00:16:48,440 --> 00:16:52,720 Speaker 1: It's really just the side of economic death is do 288 00:16:52,760 --> 00:16:54,720 Speaker 1: you have the cash right now or do you happen 289 00:16:54,760 --> 00:16:56,680 Speaker 1: to be in the wrong industry at the wrong place. 290 00:16:57,160 --> 00:17:00,640 Speaker 1: And so the response that we've put together other and 291 00:17:00,680 --> 00:17:03,000 Speaker 1: I should say, well, I mean the cultum unity is 292 00:17:03,040 --> 00:17:06,919 Speaker 1: put together is really one about providing essentially a bridge 293 00:17:06,920 --> 00:17:10,120 Speaker 1: loan for everybody. It's the goal to say, don't foreclose 294 00:17:10,160 --> 00:17:14,600 Speaker 1: the mortgages, don't foreclose on loans, don't put people off 295 00:17:14,720 --> 00:17:17,359 Speaker 1: of jobs if you can hold onto them. If we 296 00:17:17,640 --> 00:17:20,399 Speaker 1: the government leave the public funds, you to keep those jobs. 297 00:17:20,560 --> 00:17:23,760 Speaker 1: Because there is this reality that once something goes under, 298 00:17:23,800 --> 00:17:26,639 Speaker 1: it's a company, if it's a job place, and people 299 00:17:26,800 --> 00:17:31,040 Speaker 1: leave that it's very hard to rebuild. I mean, small 300 00:17:31,080 --> 00:17:34,240 Speaker 1: businesses may be easier to rebuild and back than than 301 00:17:34,280 --> 00:17:38,160 Speaker 1: big businesses because there's less capital involved, there's less reputation, 302 00:17:38,200 --> 00:17:43,400 Speaker 1: there's less network, but nonetheless you do have this permanent scarring. 303 00:17:43,760 --> 00:17:45,640 Speaker 1: I think that we also have to think about in 304 00:17:45,760 --> 00:17:49,760 Speaker 1: terms of behavioral changes that persists. So we saw that 305 00:17:49,880 --> 00:17:52,160 Speaker 1: after two thousand and eight to two ten or two 306 00:17:52,160 --> 00:17:56,480 Speaker 1: thousand twelve in Europe, where you had extended increases in 307 00:17:56,520 --> 00:18:01,480 Speaker 1: female labor force participation, extended rises in households savings. People 308 00:18:01,520 --> 00:18:04,320 Speaker 1: were being holding off and moving out of the house 309 00:18:04,359 --> 00:18:09,360 Speaker 1: and building family surprising houses. These were all sensible, understandable 310 00:18:09,359 --> 00:18:11,640 Speaker 1: precautionary measures. I think we're going to see a lot 311 00:18:11,680 --> 00:18:15,040 Speaker 1: of the same, but it's going to be biased towards 312 00:18:15,119 --> 00:18:18,439 Speaker 1: or against, frankly, certain ministries. We can talk about cruise ships, 313 00:18:18,520 --> 00:18:21,160 Speaker 1: we can talk about nails a lots, we can talk 314 00:18:21,200 --> 00:18:25,960 Speaker 1: about tourism, and that part is going to be a 315 00:18:26,000 --> 00:18:30,160 Speaker 1: permanent scar well, if we're thinking about potential long term changes. 316 00:18:30,280 --> 00:18:33,399 Speaker 1: You mentioned at the start that economists on the left 317 00:18:33,440 --> 00:18:36,400 Speaker 1: and right actually had ended up having a similar advice 318 00:18:37,040 --> 00:18:41,239 Speaker 1: for governments in response to this crisis, and that was 319 00:18:41,280 --> 00:18:43,639 Speaker 1: about spending a lot of money and doing a lot 320 00:18:43,680 --> 00:18:46,399 Speaker 1: of things that they're not used to doing. Um, do 321 00:18:46,440 --> 00:18:48,680 Speaker 1: you think that could also be a change that the 322 00:18:49,160 --> 00:18:51,640 Speaker 1: attitude to government could change, and we could see even 323 00:18:51,680 --> 00:18:54,639 Speaker 1: in the US, a desire for government to take a 324 00:18:54,640 --> 00:18:58,160 Speaker 1: bigger role and maybe also have better long term safety 325 00:18:58,200 --> 00:19:02,159 Speaker 1: net for gig workers and the like. I think it will. 326 00:19:02,200 --> 00:19:04,000 Speaker 1: I think there will be pressure in that direction, and 327 00:19:04,040 --> 00:19:06,280 Speaker 1: I'm hopeful, But I also think this is going to 328 00:19:06,359 --> 00:19:08,879 Speaker 1: be much more contentious. I think that there will be. 329 00:19:08,920 --> 00:19:11,919 Speaker 1: I'm already talking to people who say, and again not 330 00:19:12,040 --> 00:19:14,760 Speaker 1: completely and reasonably, well, we don't want to communize the system. 331 00:19:14,840 --> 00:19:17,960 Speaker 1: We don't want to have permanent ownership of government of 332 00:19:18,000 --> 00:19:21,280 Speaker 1: all the main industries. But I certainly believe the US 333 00:19:21,400 --> 00:19:24,639 Speaker 1: has a real opportunity and a real reason now to 334 00:19:24,800 --> 00:19:28,640 Speaker 1: move towards more safety net, as you say, for its workers, 335 00:19:28,640 --> 00:19:31,520 Speaker 1: for its people. And I think also what's become very 336 00:19:31,520 --> 00:19:34,919 Speaker 1: clear but it changes in the unemployment regime in the US, 337 00:19:35,080 --> 00:19:36,800 Speaker 1: is that we do have a lot to learn from 338 00:19:36,840 --> 00:19:40,080 Speaker 1: Europe that you need to make it so the jobs 339 00:19:40,080 --> 00:19:43,359 Speaker 1: are not as fragile as low connection as you mentioned, 340 00:19:43,400 --> 00:19:47,040 Speaker 1: gig workers informal sector, part time people, but also eating 341 00:19:47,080 --> 00:19:50,280 Speaker 1: full time people in the US tend to have much 342 00:19:50,520 --> 00:19:54,919 Speaker 1: more tenuous support and connection to do their jobs at 343 00:19:54,920 --> 00:19:57,639 Speaker 1: the lower end of the income scale. That should change. 344 00:19:58,600 --> 00:20:01,200 Speaker 1: I use the term I think it's not very sexy term, 345 00:20:01,240 --> 00:20:02,960 Speaker 1: I guess, but I think we need to start taking 346 00:20:03,119 --> 00:20:10,040 Speaker 1: terms offer stocking, that businesses, people and especial government create 347 00:20:10,240 --> 00:20:15,360 Speaker 1: a reserve, and that reserve can be stockpiles of masks 348 00:20:15,440 --> 00:20:19,399 Speaker 1: and medical equipment. That reserve could be money for people 349 00:20:19,480 --> 00:20:23,040 Speaker 1: who temporarily lose their job in this kind of crisis, 350 00:20:23,080 --> 00:20:26,760 Speaker 1: as opposed to quitting or something else. Well, we could 351 00:20:26,760 --> 00:20:29,520 Speaker 1: definitely see that also in the in the health care sector. 352 00:20:29,600 --> 00:20:32,359 Speaker 1: I guess My final question is, and it is true, 353 00:20:32,480 --> 00:20:35,639 Speaker 1: having conversations like this about the proper role of government 354 00:20:35,720 --> 00:20:38,439 Speaker 1: and what governments are currently doing in Europe to respond 355 00:20:38,480 --> 00:20:41,000 Speaker 1: to the crisis has led a number of people to 356 00:20:41,040 --> 00:20:44,360 Speaker 1: say that Europe might come out rather better from this 357 00:20:44,400 --> 00:20:47,800 Speaker 1: pandemic than the US. Do you think that's right? Or 358 00:20:48,040 --> 00:20:50,600 Speaker 1: it feels very odd to be saying that Europe might 359 00:20:50,640 --> 00:20:53,000 Speaker 1: come out ahead on anything, really, because we're so used 360 00:20:53,040 --> 00:20:56,320 Speaker 1: to saying it's a very sclerosic, inflexible economy with two 361 00:20:56,440 --> 00:20:59,399 Speaker 1: larger role for the state and all these things. But 362 00:20:59,520 --> 00:21:01,399 Speaker 1: is it possib well that those things are actually going 363 00:21:01,440 --> 00:21:05,320 Speaker 1: to be a competitive strength at least in responding to 364 00:21:05,359 --> 00:21:08,040 Speaker 1: this virus. I think it will. I think it should. 365 00:21:08,280 --> 00:21:11,639 Speaker 1: I think it will. Even before this virus crisis, the 366 00:21:11,680 --> 00:21:15,719 Speaker 1: productivity gaps and especially the per capita income growth gaps 367 00:21:15,800 --> 00:21:21,200 Speaker 1: between Europe and US and UK say, we're much smaller 368 00:21:21,760 --> 00:21:24,720 Speaker 1: as productivity is declined throughout the Western world in the 369 00:21:24,800 --> 00:21:28,119 Speaker 1: last decade. And so then you have to keep asking yourself, well, 370 00:21:28,240 --> 00:21:30,880 Speaker 1: if you're just having a much nastier economy and much 371 00:21:30,920 --> 00:21:34,960 Speaker 1: scarier economy, a much less equal economy, and now economy 372 00:21:35,040 --> 00:21:38,199 Speaker 1: much more vulnerable to disaster and illness. And when I 373 00:21:38,200 --> 00:21:40,760 Speaker 1: say economy, I really mean the people, what are you 374 00:21:40,800 --> 00:21:44,360 Speaker 1: getting for it? And it is not clear at all 375 00:21:44,600 --> 00:21:46,960 Speaker 1: that the US is getting awhere near as much for 376 00:21:47,080 --> 00:21:50,119 Speaker 1: that as they would like, as we would like. And 377 00:21:50,200 --> 00:21:54,160 Speaker 1: so I think that discussion has to take place now. Uh. 378 00:21:54,400 --> 00:21:57,080 Speaker 1: That said, Europe is messing itself up in a different 379 00:21:57,119 --> 00:22:02,560 Speaker 1: way by its unwillingness to share and neutralized risk cross borders. 380 00:22:02,920 --> 00:22:05,280 Speaker 1: You know, it's it's like New York and Louisiana have 381 00:22:05,480 --> 00:22:08,760 Speaker 1: to come together. There is still very strong objection to 382 00:22:09,080 --> 00:22:13,640 Speaker 1: sharing of risk within Europe and so yes, European system. 383 00:22:13,720 --> 00:22:17,879 Speaker 1: The European values what they get for their greater government 384 00:22:17,880 --> 00:22:22,240 Speaker 1: intervention versus what they give up looks increasingly attractive. But 385 00:22:22,560 --> 00:22:26,239 Speaker 1: Europe and the euro Area in particular is starting to 386 00:22:26,240 --> 00:22:29,840 Speaker 1: fail on a different basis. Adam posing, thank you very much, 387 00:22:30,359 --> 00:22:36,840 Speaker 1: Thanks for having me, Thanks for listening to Stephanomics. Like everybody, 388 00:22:36,920 --> 00:22:40,600 Speaker 1: we're working in unusual circumstances right now. The program might 389 00:22:40,680 --> 00:22:42,960 Speaker 1: sound a bit different week to week, but we're certainly 390 00:22:42,960 --> 00:22:45,280 Speaker 1: going to have plenty to talk about, and Bloomberg reporters 391 00:22:45,280 --> 00:22:48,320 Speaker 1: and economists are still hard at work. You can catch 392 00:22:48,359 --> 00:22:51,439 Speaker 1: all the latest news and analysis from Bloomberg Economics on 393 00:22:51,480 --> 00:22:55,560 Speaker 1: the Bloomberg News website or by following at Economics on Twitter. 394 00:22:56,760 --> 00:22:59,360 Speaker 1: The story in this episode was written and reported by 395 00:22:59,440 --> 00:23:03,000 Speaker 1: James May and Julian It was produced by Magmas Hendrickson 396 00:23:03,040 --> 00:23:05,879 Speaker 1: and edited by Jeff Black and Scott Lamman, who is 397 00:23:05,920 --> 00:23:10,440 Speaker 1: also the executive producer of Stephanomics Special Thanks to Adam Posen. 398 00:23:11,160 --> 00:23:14,119 Speaker 1: The head of Bloomberg Podcast is Francesca Levie.