Speaker 1: Hello, and welcome to Stephanomics, the podcast that brings the
Speaker 1: global economy to you, and we really are doing that
Speaker 1: this week because we have a special tour of the world,
Speaker 1: a discussion on the outlook for the global economy, which
Speaker 1: I took part in a few days ago, hosted by
Speaker 1: the Council on Foreign Relations. My fellow speakers were the
Speaker 1: eminent economist and former head of the New York Federal Reserve,
Speaker 1: Bill Dudley, and the equally eminent President of the Peterson
Speaker 1: Institute for International Economics, Adam Posen. And for once I
Speaker 1: didn't have to ask all the questions because the Council
Speaker 1: on Foreign Relations Senior Fellow for International Economics, Sebastian Mallaby
Speaker 1: was in the chair. He started by asking Bill Dudley
Speaker 1: about the state of the US economy and especially the
Speaker 1: surprisingly weak employment growth that we saw in April. You
Speaker 1: might remember, instead of adding a million more jobs that month,
Speaker 1: which everybody was expecting, the number was fewer than two
Speaker 1: hundred and seventy thousand, meaning there are still eight million
Speaker 1: fewer people in work in the US than they were
Speaker 1: before COVID. You were one of the first sound a
Speaker 1: warning about inflation resurgeons. You write a piece in Bloomberg
Speaker 1: back in December, Um, how worried about inflation are you? Now? Well,
Speaker 1: I think the you know, the bubble of inflation that
Speaker 1: we thought was going to happen has arrived. And it's
Speaker 1: basically arriving for a couple of reasons. One, base effects
Speaker 1: were throwing out the very low rings from a year ago. Now,
Speaker 1: so the year of your numbers are spiking up because
Speaker 1: of that. But the most important reason why we're seeing
Speaker 1: more inflation is there's a lot of friction uh in
Speaker 1: the economy as you try to reallocate resources back to
Speaker 1: rapidly increasing demand. Look at the big increase we saw
Speaker 1: in use card prices, for example, do we really think
Speaker 1: that's sustainable over time? I think eventually auto production will
Speaker 1: will pick up as some of these chip shortage disease,
Speaker 1: and so inflation will will come back down again. That said,
Speaker 1: it's certainly more than what we were expecting. I mean,
Speaker 1: I don't think anybody was expecting to think that the
Speaker 1: core inflation would already be at three percent. And and
Speaker 1: it may be we may become more difficult for the
Speaker 1: Fed to keep talking about this being transitory, as it
Speaker 1: maybe might last, you know, six or twelve months before
Speaker 1: we start to see the other side of this. Yeah,
Speaker 1: and you you haven't mentioned m the sort of dry
Speaker 1: powder argument that households, in addition to the fiscal sim
Speaker 1: houseleves are sitting on a lot of money because the
Speaker 1: savings rate high. It demands me very strong. I think,
Speaker 1: you know, there's eight million people that are still unemployed
Speaker 1: because of the pandemic, and those people have suffered greatly.
Speaker 1: But for the rest of people in the US, they're
Speaker 1: coming out of this out of this recession in great
Speaker 1: financial shape. I mean, the household savings rates, you know,
Speaker 1: been running over. A lot of people have used the
Speaker 1: steamulus money to pay down debt, and monetary fiscal policy
Speaker 1: are very expansive. So it's really hard not to see
Speaker 1: a very wrong economic recovery in your ahead, unless something
Speaker 1: happens with the virus and effectiveness of the vaccines to
Speaker 1: throw that all out the window. So I think that
Speaker 1: you know what's gonna happen is we're gonna we're gonna
Speaker 1: get back to full employment, I think faster than what
Speaker 1: people anticipate. And the FEN is going to try to
Speaker 1: be patient, but their their patients may ultimately be overrun
Speaker 1: by an economy that does better than what they're currently anticipating.
Speaker 1: So at searching to fiscal I guess, um, the question
Speaker 1: I'm curious about it is you've got this. You know,
Speaker 1: these these two bills proposed which expensive but at the
Speaker 1: same time will generate revenues in the sense that lifelong
Speaker 1: learning and income tax credits, infrastructure, child care provision, all
Speaker 1: of these things incy increase the productivity of the workforce. UM.
Speaker 1: How far do you think in the long term these
Speaker 1: things can be viewed as, you know, not just increasing
Speaker 1: the share of government and GDP, but the time I
Speaker 1: think a lot of it can be segastition. I think
Speaker 1: the problem is we've heard so many claims through the
Speaker 1: years about tax cuts paying for themselves that we which
Speaker 1: they never do are almost never do unless you're marginal.
Speaker 1: Tax rates are extremely high, that people are skeptical about
Speaker 1: claims things will pay for themselves. I think many of
Speaker 1: these aspects you mentioned, particularly things that improve the quality
Speaker 1: and the quantity of the workforce. So the pre K education,
Speaker 1: the community college, the child care helped through taxes and
Speaker 1: provision to enable women to better balance home and work. Um.
Speaker 1: More portability on things of insurance and pensions. All of
Speaker 1: these things are improvements in not just productivity, but even
Speaker 1: more so their improvements in labor supply. But the thing is,
Speaker 1: they pay for themselves elves over five, ten, twenty years.
Speaker 1: They don't pay for themselves over two years, and they
Speaker 1: have to be sustained. I don't get caught up in
Speaker 1: this infrastructure lexicon debate of what you label infrastructure or not.
Speaker 1: And there are going to be wasteful things. But on balance,
Speaker 1: if this can be sustained, and if there can be
Speaker 1: an agreement that this, you know, a few percent of
Speaker 1: GDP spread over a few years, that will be helpful
Speaker 1: to this country, in addition to whatever you do to
Speaker 1: repair bit bridges, trains, power grid which also obviously is necessary,
Speaker 1: and switching tech a bit to um UH the exchange
Speaker 1: for an exchange markets. So there is a view that says, um,
Speaker 1: you know, we may have an inflation problem coming, but
Speaker 1: we also have a data problem in the sense that
Speaker 1: foreign save as being asked to finance this US fiscal
Speaker 1: expansion at a time when interest rates a negative. Um
Speaker 1: do you see uh that as being a problem in
Speaker 1: terms of daughter inflowers and therefore darter weakness and don't
Speaker 1: in the short term at all. Um, I think and sevesting.
Speaker 1: You and Stephanie Bill have all been around the block
Speaker 1: on this with me as well. What would drive down
Speaker 1: demand for the dollar is also what would mess up
Speaker 1: the fiscal policy, which is if we have political division
Speaker 1: in the society and in the particularly in the governance,
Speaker 1: such that we cannot raise taxes if we need to,
Speaker 1: such that we cannot sustain useful investments, they get reversed
Speaker 1: and changed every election. Then people start saying, as they
Speaker 1: used to do for Italy or Argentina or Greece, Okay,
Speaker 1: there's there's a lack of fiscal credibility there, and that's
Speaker 1: when the dollar starts to fade. And so for me,
Speaker 1: it's at least ugly contest, and so the US is
Speaker 1: increasing its ugliness on this fundamental basis, not because of
Speaker 1: the debt level, but because of the governance, and so
Speaker 1: that makes things like frankly, the euro look relatively more
Speaker 1: attractive in my opinion. So it's definitely. Um, a few
Speaker 1: years ago we might have stopped the presses for that
Speaker 1: sort of positive comment about Europe. Do you agree broadly
Speaker 1: that the U Zone and the EU are emerging from
Speaker 1: the pandemic looking credible despite the slow vaccine roll. Yeah,
Speaker 1: I'm not I'm not even sure that Adam was saying
Speaker 1: that much, but he was certainly being more positive than
Speaker 1: we might have been even even a few months ago.
Speaker 1: I think if you, I mean, if you step back
Speaker 1: a bit, we could probably say that Europe did a
Speaker 1: slightly better job of predicting, protecting citizens and even cushioning
Speaker 1: the effect on the economy and the sort of Act
Speaker 1: one of the pandemic last year. But if you think
Speaker 1: a bit seriously botched up at two this sort of
Speaker 1: crucial period of obtaining and then rolling out the vaccines
Speaker 1: and that's led to this palpable delay in the recovery
Speaker 1: is certainly relative to the UK. It's catching up. We're
Speaker 1: getting nice. It's a confidence, I would say, and spending
Speaker 1: is actually probably getting ahead of where countries are in
Speaker 1: terms of vaccinations, infections um even and quite strict restrictions
Speaker 1: in many cases still, so you're looking at maybe two
Speaker 1: thirds of the population being vaccinated by August or September.
Speaker 1: But I mean, I say that because that's a pretty
Speaker 1: the difference between that and what you're you're seeing in
Speaker 1: the UK and the U S which is the beginning
Speaker 1: of the summer. Being at that stage, it's pretty crucial
Speaker 1: if you're particularly one of the southern European countries utterly
Speaker 1: dependent on tourism. So this this few months delay, if
Speaker 1: it's if it means losing a summer or or losing
Speaker 1: a big chunk of your summer trade, that is quite significant,
Speaker 1: and I think further sort of worsens the credibility of
Speaker 1: the of the whole EU effort this year. Even though
Speaker 1: as you say, people are optimistic, you've listening to the
Speaker 1: ECB Crest conferences, Christine Legard's upbeat, Um, it could have
Speaker 1: been a lot better. And if you're in Spain or
Speaker 1: Portugal or you are really going to be affected by that.
Speaker 1: And of course it also worse than some of these
Speaker 1: North South divides that we know have been exacerbated by
Speaker 1: the crisis. The key thing, which I'm sure you'll get onto,
Speaker 1: is whether there's been an institutional shift that's been sort
Speaker 1: of kick started by COVID last year, and I think
Speaker 1: there there is some there's optimism in that you now
Speaker 1: have this next generation to you funding going out. It
Speaker 1: could help the sort of seal the deal on the recovery.
Speaker 1: But I worry a bit that though it has this
Speaker 1: sort of potential and it clearly was enormously significant to
Speaker 1: have now some sort of serious collective financing for fiscal
Speaker 1: policy of some degree in Europe. Um. You know, we're
Speaker 1: kind of in the opposite situation we were in the Eurozone.
Speaker 1: I mean, we've all talked. You know, during the Eurozone crisis,
Speaker 1: we would a key moments you had leadership, whether it
Speaker 1: was from Mario drug or Chancellor Merkel jumping in and
Speaker 1: sort of papering over the cracks where there were no
Speaker 1: institutions to hold the to help the Eurozone response. We
Speaker 1: now have potentially this institution that could really help it
Speaker 1: move forward, and the leadership isn't there. You know, you
Speaker 1: have the European Commission undermined by the way the rollout
Speaker 1: was handled. You have Chancellor Merkel on the way out,
Speaker 1: and and President Macrow, who has probably been the greatest
Speaker 1: sort of talking most about what Europe could do if
Speaker 1: it was more unified, what a European identity could be.
Speaker 1: You know, he's very much distracted with that election coming
Speaker 1: up in a year. I see the story that on
Speaker 1: the one hand, you've got this institutional shift in that
Speaker 1: there is now this joint joint liability the euro the
Speaker 1: Eurozone as this union's own Donald the European Union is
Speaker 1: this uniers own barnd. The question is you're saying a
Speaker 1: leadership deficit on that the prospect that the Greens might
Speaker 1: do well in the next general election might portend a
Speaker 1: greater willingness to do fiscal burden sharing and make the
Speaker 1: most of that opening created by the joint bond. Those
Speaker 1: of us sitting outside Germany always think everything is an
Speaker 1: opportunity to have a different German fiscal stance. Then it
Speaker 1: suffers when you actually contact with German politicians involved, and
Speaker 1: you tend to always find that they're not really very
Speaker 1: different from the ones before. And I'm probably not the
Speaker 1: person to talk about all the permutations of potential coalitions
Speaker 1: coming out of the next German election, but I think
Speaker 1: as long as if if the the chances are that
Speaker 1: the Christian Democrats will be there in some form, and
Speaker 1: then then it won't actually make necessarily a huge difference
Speaker 1: if the Greens have the chancellor itself. Um. But I
Speaker 1: think you're right to say that green issues and the
Speaker 1: Green transition economic transition is an area where Europe has
Speaker 1: clearly got, has made some strides and could show real
Speaker 1: leadership in the world. Um. I think it's also shown
Speaker 1: itself um better responding to the competitive and other challenges
Speaker 1: of big tech and taxing big beginning to do that.
Speaker 1: So I think that, I mean, there is a potential there,
Speaker 1: but we're always saying that, but then the actual innovations
Speaker 1: are lacking. The innovations are all coming from the US.
Speaker 1: I am larger with Stephanie. I think the fiscal changes
Speaker 1: that have been made our precedent setting and exercise the
Speaker 1: institutions and legitimize future mutual efforts on the fiscal front,
Speaker 1: but the actual use of the Common Fiscal Policy is
Speaker 1: going to be very limited. And the German deficits still
Speaker 1: ended up being much smaller than they had originally. They're
Speaker 1: the only country in the world that announces they're going
Speaker 1: to have much bigger, bigger deficits than actually turns out,
Speaker 1: which takes a lot of work. Okay, So we we
Speaker 1: have we have person you know, guardedly more positive on
Speaker 1: the prospects of the Euro but we also have the Tish,
Speaker 1: the British voices still the skeptical of Germany as ever,
Speaker 1: maybe so I'm sorry, I just want to say, I mean,
Speaker 1: my point is not that the euro and Europe are
Speaker 1: doing great. My point is that they have slightly improved
Speaker 1: in a world where the US is worsening and property
Speaker 1: rights are no good in China. So in the relative
Speaker 1: ugliness contest, Europe comes out, I mean, no longer hitting
Speaker 1: themselves in the head with a giant hammer is definitely
Speaker 1: a big, big step forward. Okay, so let's bring another
Speaker 1: region into this debate, which is the emerging Well, I
Speaker 1: guess the analogy I have at the back of my
Speaker 1: mind is that India had a first wave of COVID
Speaker 1: and people say, wow, that was remarkably mild because well,
Speaker 1: maybe the Indian population is young, whatever, whatever reason, we
Speaker 1: don't understand, but the country was hit less badly than
Speaker 1: we feared. And then second wave comes and it's truly appalling,
Speaker 1: and in the same way slightly on economic policy tools.
Speaker 1: I remember discussing with people at the beginning of the
Speaker 1: pandemic the sort of inequity that the strong economies that
Speaker 1: developed economies had policy space, but emerging economies might not. Now,
Speaker 1: the FED and the other leading central banks loosing so
Speaker 1: much that there was really policy space for everybody. But
Speaker 1: maybe a second wave could be different. So Bill, perhaps,
Speaker 1: like I could put this to you, do you think
Speaker 1: that this world in which the US recovers a good
Speaker 1: deal faster than a lot of emerging markets, it's going
Speaker 1: to create complications through the exchange rate channel. I mean
Speaker 1: it could, but you know, it will be all set
Speaker 1: by the fact that a strong US recovery that's accompanied
Speaker 1: by a strong recovery other advanced It probably means commodity
Speaker 1: prices go go up quite a bit and that so
Speaker 1: the terms of trade will be you know, will be
Speaker 1: beneficial to the emerging markets. And the second thing I
Speaker 1: think it's really important is the FED is going to
Speaker 1: be slow regard relative to whatever economic recovery that we get,
Speaker 1: because they basically told us that they're not gonna tighten
Speaker 1: Monterrey policy until they're at full employment, they're at two
Speaker 1: percent inflation, and they're confident inflation is going to go
Speaker 1: above two percent for some time to come. That's a
Speaker 1: big change in the Monterrey policy framework. So the FED
Speaker 1: is basically communicated that we're going to be late. So
Speaker 1: that gives time for the emerging markets to sort of
Speaker 1: catch up in terms of vaccination, in terms of the
Speaker 1: COVID based recovery. I think, um so, I think that
Speaker 1: you know, the risk from from the FED is really
Speaker 1: more that it's not like immediate. I think it's really
Speaker 1: like two or three years down the road, when all
Speaker 1: of a sudden the FED has to go from very
Speaker 1: easy too tight, and that has to happen in you know,
Speaker 1: twelve months now. That would be a shock for markets.
Speaker 1: But I don't think that risk is going to materialize
Speaker 1: in the near term, Adam. Historians sometimes talk about, you know,
Speaker 1: how pandemics have changed political economy in various ways. Either
Speaker 1: the omnipresence of risk can boost entrepreneurial risk appetite, and
Speaker 1: you do see more new business formation in the urest
Speaker 1: and I think also the UK in the last year
Speaker 1: than the normally or businesses response to health has this
Speaker 1: by mechanizing production because the labor force has to be
Speaker 1: distanced or that's sick or whatever, so you get an
Speaker 1: acceleration of mechanization. UM you've written a great essay and
Speaker 1: foreign affairs, perhaps you could talk about how you see,
Speaker 1: like what is the big political economy effect UM coming
Speaker 1: out of COVID well Sebastian has many people have been
Speaker 1: noticing industrial policy of various forms is now back into
Speaker 1: chic UM. And this has an anti globalization taint to it,
Speaker 1: including in the Biden administration and some other places. UM.
Speaker 1: And it sometimes gets tied to the national security side,
Speaker 1: to China's doing it, and we can't let China have
Speaker 1: the technology. And so if we move to an environment
Speaker 1: where people are more concerned about trust because of health reasons,
Speaker 1: because of local governance reasons, and because of perhaps overdone
Speaker 1: national security fears, then I think there's a cascade of effects. UM.
Speaker 1: I think we're going to see too much emphasis on
Speaker 1: manufacturing and too much emphasis on autarchy, which isn't going
Speaker 1: to go very well either politically or economically. I think
Speaker 1: we're going to see too much emphasis on local loyalties. UM.
Speaker 1: I mean we see this in the leveling up debate
Speaker 1: in Britain, we see this in the discussion of the
Speaker 1: places falling behind in the US. UM. We see this
Speaker 1: throughout the world. But we also see that there are
Speaker 1: very few policies that level up regions rather than people. UM.
Speaker 1: So you look at even China, which has the world's
Speaker 1: largest set of subsidies in the world's best ability to
Speaker 1: order people to move someplace or to put businesses someplace.
Speaker 1: And we still see these huge in their latest senses,
Speaker 1: these huge changes in population of the southeast versus the
Speaker 1: North and west and little income convergence between them. We
Speaker 1: see in West Virginia two senators again ex storting the
Speaker 1: whole government because this Bobby Bird used to do to
Speaker 1: bring goodies to West Virginia, and yet West Virginia remains
Speaker 1: in zero income convergence versus the rest of that country.
Speaker 1: So there's a lot of frustration and anger where we're
Speaker 1: already giving the people, the the prototypical angry white male,
Speaker 1: the rural white voter, or their equivalent in other countries
Speaker 1: what they want, which is a retreat from globalization, subsidies,
Speaker 1: local local boosts, and it doesn't work politically or economically.
Speaker 1: So this is why the center left and others are
Speaker 1: flailing about now trying to find something else to do.
Speaker 1: And it's hard to convince people if if you have
Speaker 1: presidents and populists on both sides saying you can have
Speaker 1: a pony, that convinced them that no, you can't have
Speaker 1: a pony. You have to get on again on the
Speaker 1: train and go someplace else. Um. So the final point,
Speaker 1: sorry I'm rambling. The key point is A I think
Speaker 1: the political divisions in the democracy's continued to rise for
Speaker 1: the time being. And B that the world does turn
Speaker 1: more into blocks. I mean, again, we've all heard people
Speaker 1: writing bestsellers every few years about the world turning into
Speaker 1: economic blocks. I think finally that time is hitting, now
Speaker 1: that it's going to start happening. It's definitely the same
Speaker 1: debate plays out a bit in the UK about regional equity. Um,
Speaker 1: listening to Adam, what's your reaction? Well, I was just
Speaker 1: smiling because I thought how much that Adam would hate
Speaker 1: Boris Johnson's new slogan, which is lived, local and prosper,
Speaker 1: which you might consider a contradiction in terms. I mean,
Speaker 1: I think it is a debate that we're seeing in
Speaker 1: the UK, and it's there is a sort of fundamental
Speaker 1: um philosophical shift. I don't know if it's going to
Speaker 1: be matched with a financial shift or let alone an
Speaker 1: economic shift, but you've certainly you've now got the the
Speaker 1: government in that sort of lived local and prosper mantra
Speaker 1: actually saying to small towns you don't you can aspire
Speaker 1: to more than being the dormitory for some big city
Speaker 1: that we put lots of money into. And that of
Speaker 1: course has been the model of even regional regional development
Speaker 1: across America and certainly across Britain for for decades. Is
Speaker 1: you get you maybe don't want it all in London,
Speaker 1: but you try and get more London's. You try and
Speaker 1: have cities that can then have the agglomeration effects, and
Speaker 1: there are towns around that are supporting the economic activity
Speaker 1: in the city that the city is the central bit
Speaker 1: that's delivering the jobs. The Boris Johnson is now saying
Speaker 1: in terms to people, no, you know, we were not
Speaker 1: going to force you to go, We're going to take
Speaker 1: the jobs to you. You don't have to go in
Speaker 1: the city. You don't even have to get on a
Speaker 1: train to get them. And I share some of Adam's
Speaker 1: skepticism about that. I don't think there is any sort
Speaker 1: of real economic thinking behind that particular thing, but I
Speaker 1: would push back a bit. I think even before this,
Speaker 1: many of us were thinking that there had to be
Speaker 1: more emphasis on people and places and livability in the
Speaker 1: vision of globalization that we have, and I think there
Speaker 1: is I'm not sure I see a fundamental threat to
Speaker 1: globalization coming out of this. You know, well, at the
Speaker 1: beginning of the crisis, we sort of thought all supply
Speaker 1: chains were going to regionalize, everyone was going to pull
Speaker 1: out of China. It's not what we see on the ground.
Speaker 1: We don't see people pulling out of China, and we
Speaker 1: don't we only see limited regionalization. We have seen massive digitization,
Speaker 1: and I think that automation has obviously gone done in
Speaker 1: a few weeks, certainly months, what we might have expected
Speaker 1: to have happened over five years. And that holds. You know,
Speaker 1: there's opportunities there in terms of bringing not necessarily bringing
Speaker 1: jobs right to where people are are, but changing the
Speaker 1: pattern of jobs. Um, if we if we help prepare
Speaker 1: people for it. And again as the big hole, the
Speaker 1: big the special boris Johnson sized hole, and this is
Speaker 1: that they're not going to spend any money on any
Speaker 1: of this, compared to you know, Adams worried that Biden's
Speaker 1: actually putting some financial weight behind this policy. You don't
Speaker 1: have to worry about that in the UK because all
Speaker 1: the sort of extra spending that's gone into the economy
Speaker 1: is all is all going to dry up next year?
Speaker 1: Can I just quickly sinned as usual? Stephanie and I
Speaker 1: agree about but disagree violently on about or um. The
Speaker 1: first point is my my concern is not so much
Speaker 1: the band is going to spend money on this. My
Speaker 1: concern is more that if we focus on the rural local,
Speaker 1: and we focus on manufacturing, and we basically ignore of
Speaker 1: the non college educated people who work in frontline services
Speaker 1: and who mostly live in cities, and so it's it's
Speaker 1: partly adjust this argument as well as an efficiency argument.
Speaker 1: It's not about the waste of money, it's about the
Speaker 1: diversion of attention. But secondly, and the thing I wanted
Speaker 1: to pick up on is Stephanie's absolutely right about supply chains,
Speaker 1: and her and or Bloomberg colleagues have done a great
Speaker 1: job of reporting and tracking on this, But I think
Speaker 1: trade is a very actually small part of the story. Um. Look,
Speaker 1: it's the corrosion of globalization that we're seeing is much
Speaker 1: more about flows of people, flows of technology, flows of ideas,
Speaker 1: and even in the digital realm. While I agree there
Speaker 1: is this potential for allowing small businesses individual workers to
Speaker 1: sort of get more flexible from where there there happen
Speaker 1: to be located. I think there's also divisions going up
Speaker 1: in the world around the Internet, around platforms, around standards.
Speaker 1: There are fewer students going back and forth across borders.
Speaker 1: There are fewer people. The immigration is being cut back
Speaker 1: in a lot of places now. The US is doing
Speaker 1: more of this cutback than most places. And that's one
Speaker 1: of the things I tried to put out my article,
Speaker 1: and we have charts at pia dot com about this,
Speaker 1: that he got much worse under Trump. But it really
Speaker 1: all started twenty years ago, and it wasn't just trade.
Speaker 1: It was investment, it was immigration, it was making trade
Speaker 1: deals or not making trade deals while others make them.
Speaker 1: So I just want to say that I'm not sanguine
Speaker 1: about globalization in general, and particularly from the US, even
Speaker 1: though I agree with Stephanie's characterization of trade and supplych
Speaker 1: We were trading messages before we went knife here. And
Speaker 1: I think Bill, you said to me that your choice
Speaker 1: for the political economy shift coming out of the pandemic
Speaker 1: would have to do with inequality. I think that the
Speaker 1: thing that strikes me about the pandemic is how unfair
Speaker 1: it has been through a small section of the population
Speaker 1: you know, the people who worked in leisure and hospitality,
Speaker 1: the people that had the list incomes, so that burden
Speaker 1: had fallen very disproportionately on a small segment of the population,
Speaker 1: you know, the eight point two million people that are
Speaker 1: still without jobs. And I think that really colors ethnoic
Speaker 1: policy going forward is like because it really underscores to
Speaker 1: the Adams point, how unfair and unequal A lot of
Speaker 1: aspects of the US regime are in terms of the
Speaker 1: taxation regime, the inheritance taxes, I mean, things that allow
Speaker 1: generations to pass on money to to the to their
Speaker 1: to their children, their grandchilda. And I think that's really
Speaker 1: going to be the lasting impact of COVID. I think
Speaker 1: in the United States it's really gonna it's the illustrated
Speaker 1: so clearly the inequities in the society, and I'm sort
Speaker 1: of hoping that that as a consequence of that will
Speaker 1: actually see lasting um set of policies to address them.
Speaker 1: Do you want to comment on this stuff? And it well,
Speaker 1: I think it's when it clearly is something that we've
Speaker 1: has been most evident in the in what's happened in
Speaker 1: the response to the to the crisis. But I think
Speaker 1: of it as being I think Robert McFarland talks about
Speaker 1: unburial in a book he's written, the British author and
Speaker 1: that he's talking about things that get unburied close to
Speaker 1: the Arctic Circle, things that were buried undreds were expected
Speaker 1: to stay under the surface, but because of global warming,
Speaker 1: a sort of just coming out of the earth. And
Speaker 1: it feels a bit like that inequalities that we knew
Speaker 1: were there have just become much more evident and have
Speaker 1: been been unburied. I guess I'm just a little bit
Speaker 1: skeptics of I mean, there has been quite a deep
Speaker 1: understanding of inequality for some time, and a lack of
Speaker 1: in most countries, a lack of practical political will, particularly
Speaker 1: when it comes to capital taxation. You know, people way
Speaker 1: down the income scale want to pass on wealth even
Speaker 1: when they don't have any. They really care about the
Speaker 1: ability to pass on wealth. It's just been a been
Speaker 1: a persistent issue trying to even begin to address that,
Speaker 1: and you end up with these very inefficient property taxes.
Speaker 1: As a result of taxes, particular in the UK, you
Speaker 1: tax the transaction, you don't really tax anything to do
Speaker 1: with the value of the house itself. On an annual basis.
Speaker 1: So I would like to think of all the things
Speaker 1: that Bill is talking about, but actually this long overdue
Speaker 1: shift to thinking more in terms of capital taxation and
Speaker 1: not only in terms of income tax when you're thinking
Speaker 1: about any kind of redistribution um will start to happen
Speaker 1: in the US and other places as a result of
Speaker 1: the crisis. But I'm just given how much the crisis
Speaker 1: has itself exacerbated inequality, I guess I sort of feel
Speaker 1: like you have to have quite a lot of political
Speaker 1: will just to offset what's happened in the last two years,
Speaker 1: let alone start to turn some tide. The one thing
Speaker 1: I wanted to add, which is no place where I
Speaker 1: want to give credit to the by administration, is they're
Speaker 1: very clear openness stated by Secretary Allen that they're going
Speaker 1: to engage in the international discussions over a minimum corporate
Speaker 1: tax globally and against profit shifting by large companies and
Speaker 1: particularly dig job companies. And that's not going to solve
Speaker 1: every problem. But unless you make sure that countries are
Speaker 1: getting revenue and that that revenue is seen as fairly gotten.
Speaker 1: That's it for this special episode of Stephonomics. I'll be
Speaker 1: back next week. With a lot more from around the world,
Speaker 1: but if you need to, you can always get more
Speaker 1: news and analysis from Bloomberg Economics by following at Economics
Speaker 1: on Twitter. This episode was produced by Magnus Hendrickson, with
Speaker 1: special thanks to Sebastian Mallaby, Bill Dudley, Adam Pose and
Speaker 1: all at the Council on Foreign Relations in New York.
Speaker 1: The new executive producer of Stephonomics is Mike Sasso, and
Speaker 1: the head of Bloomberg Podcast is Francesca Levy.