WEBVTT - The Economy May Never Be the Same 0:00:01.440 --> 0:00:06.560 Welcome to Prognosis. I'm Laura Carlson. It's stay one hundred 0:00:06.600 --> 0:00:10.720 and seventy seven since coronavirus was declared a global pandemic. 0:00:11.760 --> 0:00:16.560 Today's main story the pandemic has plunged the world into 0:00:16.560 --> 0:00:22.360 a global recession. But what does a post COVID economy 0:00:22.360 --> 0:00:29.320 look like? But first, here's what happened in virus News today. 0:00:33.000 --> 0:00:37.360 Scientists at the University of Washington forecast that deaths from 0:00:37.440 --> 0:00:41.160 COVID nineteen in the US are likely to more than 0:00:41.320 --> 0:00:45.800 double by the end of the year. The researchers predicted 0:00:45.840 --> 0:00:48.720 that the death toll would reach four hundred and ten 0:00:49.040 --> 0:00:56.040 thousand by January one one, but they said that number 0:00:56.160 --> 0:01:01.840 could be cut dramatically with certain precautions. If almost everyone 0:01:01.920 --> 0:01:05.560 wears masks and governments with high death rates put social 0:01:05.600 --> 0:01:09.600 distancing measures in place, more than one hundred thousand deaths 0:01:09.800 --> 0:01:13.679 could be prevented in the US and seven hundred and 0:01:13.760 --> 0:01:19.640 seventy thousand lives could be saved worldwide. Danish drug maker 0:01:19.840 --> 0:01:23.759 Novo Nordisk is exploring whether a new class of medicines 0:01:23.959 --> 0:01:28.039 that helps people lose weight and control diabetes also has 0:01:28.080 --> 0:01:34.120 potential in fighting COVID nineteen. Research shows people afflicted by 0:01:34.200 --> 0:01:40.040 obesity and diabetes often fare worse with the disease. Now, 0:01:40.319 --> 0:01:44.600 new data shows g LP one, drugs, which help patients 0:01:44.640 --> 0:01:48.120 keep blood sugar levels in check, could be a meaningful 0:01:48.200 --> 0:01:53.600 therapy in helping people with diabetes battle COVID nineteen. According 0:01:53.640 --> 0:01:59.680 to NOVO chief scientific officer Mad's Krogskard Thompson, he pointed 0:01:59.680 --> 0:02:03.480 to it in the virus attacks cells that produced the 0:02:03.560 --> 0:02:10.320 hormone insulin. Finally, the first peer reviewed data on Russia's 0:02:10.400 --> 0:02:17.000 proposed COVID nineteen vaccine show it has promise. In early trials, 0:02:17.200 --> 0:02:21.240 the drug induced an antibody response in all participants and 0:02:21.320 --> 0:02:26.360 found no serious adverse effects. According to the first vetted 0:02:26.440 --> 0:02:32.160 data on the controversial project, preliminary results from phase one 0:02:32.160 --> 0:02:35.959 and two trials that were published Friday in the Lancet 0:02:36.040 --> 0:02:40.080 Medical Journal showed the vaccine also produced a response in 0:02:40.200 --> 0:02:43.519 T cells, a type of white blood cell that helps 0:02:43.560 --> 0:02:49.280 the immune system destroy infection. Russian officials had previously made 0:02:49.440 --> 0:02:52.839 broadly similar statements about the shot, but there had been 0:02:52.880 --> 0:03:02.240 no review by outside experts. And now, for today's main story, 0:03:03.200 --> 0:03:06.960 the global economy could lose up to twenty two trillion 0:03:07.040 --> 0:03:11.600 dollars in twenty twenty alone due to COVID nineteen. That's 0:03:11.600 --> 0:03:17.240 according to Australian economist Warwick McGibbon. He predicts that successive 0:03:17.280 --> 0:03:21.280 waves of coronavirus infections will mean the world will continue 0:03:21.320 --> 0:03:26.040 to count the cost of the pandemic for years. Bloomberg 0:03:26.120 --> 0:03:30.240 Senior editor Jason Gale spoke with Professor McGibbon about his 0:03:30.360 --> 0:03:35.120 dire forecasts. He explains that the pandemic will result in 0:03:35.320 --> 0:03:40.040 lasting changes to the way we work, live and interact. 0:03:44.760 --> 0:03:47.680 Warick McGibbon is a professor of public policy and the 0:03:47.720 --> 0:03:50.840 director of the Center for Applied macro Economic Analysis at 0:03:50.880 --> 0:03:54.080 the Australian National University in Canberra. It was to Warwick 0:03:54.160 --> 0:03:57.240 who the World Health Organization turned to quantify the economic 0:03:57.320 --> 0:04:00.600 cost of Sazzle Severe Acute Respiratory Center and when it 0:04:00.680 --> 0:04:03.760 spread across the globe almost twenty years ago. Back then, 0:04:03.840 --> 0:04:06.280 sickness and death were thought to be the biggest contributors 0:04:06.320 --> 0:04:09.440 to a contagions economic cost because of their effect on 0:04:09.480 --> 0:04:12.800 labor productivity. But Warrick and his colleagues found that the 0:04:12.840 --> 0:04:16.440 behavior of people and businesses in response to pandemics are 0:04:16.560 --> 0:04:20.000 bigger drivers. We found The conventional cost of STARS, which 0:04:20.040 --> 0:04:21.640 was just how many people died and what was their 0:04:21.680 --> 0:04:24.120 fort on income, was really quite small. But when you 0:04:24.160 --> 0:04:26.839 took into account the change in people spending behavior and 0:04:26.880 --> 0:04:30.239 the way capital was relocated around the world, we can't 0:04:30.240 --> 0:04:33.160 be an estimate of about forty billion US dollars, which 0:04:33.200 --> 0:04:37.919 is the official WHO estimate for the Stars outbreak. According 0:04:37.960 --> 0:04:41.360 to Warwick's modeling, the COVID nineteen pandemic may cost more 0:04:41.400 --> 0:04:46.359 than forty billion dollars a day. We estimate this outbreak 0:04:46.480 --> 0:04:48.920 is going to cost tens of trillions to the world economy, 0:04:49.240 --> 0:04:52.680 and it's actually not over even once his pandemic is through. 0:04:53.200 --> 0:04:55.760 Work began looking at the coronavirus outbreak and what it 0:04:55.880 --> 0:04:59.120 might cost back in January when it was just beginning 0:04:59.120 --> 0:05:02.560 to spread into aw We wanted policy makers to understand 0:05:02.600 --> 0:05:05.360 that if they didn't react to very quickly, that this 0:05:05.400 --> 0:05:08.800 was going to be a very very dangerous and expensive disease. Potentially. 0:05:09.080 --> 0:05:12.080 Ricks analysis has been updated to take into consideration the 0:05:12.080 --> 0:05:16.160 actual spread since then. One of his models, the most pessimistic, 0:05:16.520 --> 0:05:20.240 sees the accumulative cost of COVID nineteen topping thirty five 0:05:20.480 --> 0:05:25.320 trillion dollars. I asked him what the biggest costs will 0:05:25.360 --> 0:05:28.599 be with COVID nineteen number one. His international trade has collapsed, 0:05:29.000 --> 0:05:31.960 and the movement of goods around the world has has collapsed. 0:05:32.520 --> 0:05:35.520 The movement of people has collapsed. Very there's a lot 0:05:35.600 --> 0:05:39.440 of human capital that's generated then distributed around the world 0:05:39.520 --> 0:05:42.159 with people moving across different countries for different types of 0:05:42.240 --> 0:05:45.120 jobs and that that's that's a big problem. For example, 0:05:45.120 --> 0:05:47.159 in India, internally, we have a lot of people that 0:05:47.200 --> 0:05:49.680 were working in the city's have lost their jobs, so 0:05:49.720 --> 0:05:52.159 they've had to migrate back to the countryside and take 0:05:52.200 --> 0:05:54.839 the disease with them. So this mobility of people and 0:05:54.920 --> 0:05:58.359 goods is the biggest impact, he says. The second biggest 0:05:58.360 --> 0:06:02.520 factor is the impact on confidence. People argue you shouldn't 0:06:02.560 --> 0:06:04.440 have shutdowns because if you had no shutdowns, there's been 0:06:04.440 --> 0:06:07.240 no economic loss. Well that's just not true. In our 0:06:07.400 --> 0:06:09.080 study that we did, we looked at what happened to 0:06:09.080 --> 0:06:13.400 electricity use in Australia. We had very fine data from 0:06:13.720 --> 0:06:16.320 one of the electricity companies and we knew which which 0:06:16.440 --> 0:06:19.680 groups of companies had been closed by mandate and which 0:06:19.760 --> 0:06:22.440 were still operating, but their demand had shifted because of 0:06:22.480 --> 0:06:26.560 people's own preferences, and overwhelmingly the change in economic outcomes 0:06:26.600 --> 0:06:29.640 is caused by individuals changing their behavior, not because the 0:06:29.920 --> 0:06:33.080 government mandated the shutdown. So the shutdowns are there because 0:06:33.120 --> 0:06:35.680 there are a number of individuals that won't respond appropriately 0:06:36.320 --> 0:06:39.719 to make the choice between do nothing and say the 0:06:39.720 --> 0:06:44.599 economy is a false, false choice. Why it says the 0:06:44.600 --> 0:06:48.560 loss of confidence is having impacts everywhere except in stock markets, 0:06:49.160 --> 0:06:52.400 which in itself is an interesting problem, and that's I 0:06:52.440 --> 0:06:55.080 think largely caused by central banks just flooding the world 0:06:55.080 --> 0:06:59.560 with liquidity, and people are putting that liquidity into buying equities. 0:07:00.200 --> 0:07:02.680 Plus some companies have done very well out of this. 0:07:03.080 --> 0:07:05.440 In the meantime, he sees the current pandemic leading to 0:07:05.520 --> 0:07:08.520 significant change. I think the shift to working from home 0:07:08.640 --> 0:07:11.520 and the uptate of technology is the ever last. There's 0:07:11.520 --> 0:07:12.800 going to be long lasting. There's going to be a 0:07:12.840 --> 0:07:15.240 lot of industries that are going to be restructuring that 0:07:15.560 --> 0:07:18.200 some industries that may cease to exist, especially if we 0:07:18.520 --> 0:07:21.760 never get an effective vaccine. But the other structural shift 0:07:21.800 --> 0:07:25.400 I think is they're just in time technology. They's just 0:07:25.480 --> 0:07:27.720 in time processing that we developed with all of these 0:07:28.000 --> 0:07:31.400 chains for production. That's going to change and I think 0:07:31.400 --> 0:07:33.080 you're going to shift from just in time to just 0:07:33.200 --> 0:07:36.880 in case. Unemployment has surged across the globe as nation 0:07:36.920 --> 0:07:40.200 shutted large parts of their economies. Work estimates the world 0:07:40.200 --> 0:07:44.880 economy has slump. Why tend to this is the biggest 0:07:44.960 --> 0:07:48.720 shock since certainly bigger than the Great Depression for some countries. 0:07:49.160 --> 0:07:51.960 With the structural shifts in the economy remain, a lot 0:07:51.960 --> 0:07:53.520 of people aren't going to be able to use their 0:07:53.560 --> 0:07:56.040 existing skills. You're gonna have to retrain a lot of 0:07:56.040 --> 0:07:58.320 people to take up these new jobs. And we've had 0:07:58.320 --> 0:08:00.320 a lot of automation, so even a lot of jobs 0:08:00.320 --> 0:08:04.760 that were substituted away for either new techniques or machines 0:08:05.360 --> 0:08:07.440 um and so those jobs won't come back. So you 0:08:07.480 --> 0:08:09.480 could have a regular recovery, but it's probably not going 0:08:09.520 --> 0:08:12.880 to have a job recovery. At the same time, says 0:08:12.920 --> 0:08:15.760 that during the global financial crisis, the Group of Twenty 0:08:15.800 --> 0:08:18.720 mobilized a very large fiscal response at the global level, 0:08:18.960 --> 0:08:22.080 saving a lot of economic loss, but the Forum has 0:08:22.120 --> 0:08:25.280 been much less active in responding to the current crisis. 0:08:25.960 --> 0:08:28.480 There is no G twenty response at this point. The 0:08:28.560 --> 0:08:31.720 leadership coming that came from the UK and came from 0:08:31.760 --> 0:08:33.800 the US and came from Australia. It's just not there. 0:08:34.320 --> 0:08:39.160 Suppose you actually coordinated a response so that countries like Brazil, Argentina, 0:08:39.559 --> 0:08:43.000 Indonesia who need fiscal stimulus but can't because the financial 0:08:43.040 --> 0:08:45.320 markets won't allow it. What if you had got them 0:08:45.360 --> 0:08:47.720 the resources to do that and the whole world is 0:08:47.800 --> 0:08:51.200 much better off? Wreck says a vaccine won't turn the 0:08:51.240 --> 0:08:55.680 economic outlook around any time. Seen. I don't think you 0:08:55.679 --> 0:08:59.920 can physically have a vaccine that's going to be adopted 0:09:00.080 --> 0:09:02.960 or by six billion people over the next two years. 0:09:03.000 --> 0:09:05.880 It's just practically impossible. So who's going to get it? 0:09:05.880 --> 0:09:07.880 Where the elites will get it? Who's going to get it? Well, 0:09:07.920 --> 0:09:11.440 the rich countries will get it. Um. So okay, if 0:09:11.440 --> 0:09:13.480 there's a vaccine tomorrow and you can give it to 0:09:13.520 --> 0:09:18.080 the wealthiest people in the country, why does that change 0:09:18.080 --> 0:09:21.080 the economic outcomes? It doesn't. You've got to get it 0:09:21.120 --> 0:09:23.920 into the into the population. You've got to get people 0:09:23.960 --> 0:09:27.160 out there interacting again. You've got to get businesses moving again. 0:09:27.280 --> 0:09:29.920 So you have to get a fair bit of quite 0:09:29.920 --> 0:09:32.600 a lot of the population vaccinated before the economic costs 0:09:32.600 --> 0:09:34.680 start to come down. You'll get you'll get a surge 0:09:34.679 --> 0:09:37.240 in markets because people will say, oh, there's a vaccine, 0:09:37.240 --> 0:09:39.959 and confidence will be restored. But it's hard to imagine 0:09:40.000 --> 0:09:44.079 that the Dow can go much higher once a vaccine. 0:09:44.240 --> 0:09:47.839 If a vaccine is forthcoming, it's already pumped up by 0:09:47.960 --> 0:09:51.320 cheap money. As much as I enjoyed my chat with Warrick, 0:09:51.600 --> 0:09:54.680 it didn't fill me with optimism. As Warrick says, we're 0:09:54.720 --> 0:09:57.760 operating in a great deal of uncertainty, and that's why 0:09:57.760 --> 0:10:01.080 the policy framework is extremely important. And that's why communication 0:10:01.160 --> 0:10:04.760 is extremely important, because you can't predict anything to do 0:10:04.800 --> 0:10:07.480 with this disease except that it's going to be unpredictable, 0:10:07.520 --> 0:10:11.840 which is very helpful. Ah. No, we're all desperate to 0:10:11.880 --> 0:10:15.080 know when we can safely return to our workplaces, when 0:10:15.080 --> 0:10:17.760 our kids can return to the classroom, when we can 0:10:17.800 --> 0:10:21.440 travel again. The reality is, for most of us, nothing 0:10:21.720 --> 0:10:24.720 is certain, and if the pandemic is teaching us anything, 0:10:25.080 --> 0:10:41.600 it's to embrace uncertainty or at least acknowledge it. That 0:10:41.960 --> 0:10:45.199 was Jason Gale, and that's it for our show today. 0:10:45.240 --> 0:10:48.800 For coverage of the outbreak from one bureaus around the world, 0:10:49.240 --> 0:10:54.120 visit Bloomberg dot com. Slash coronavirus and if you like 0:10:54.160 --> 0:10:56.920 the show, please leave us a review and a reading 0:10:57.200 --> 0:11:00.719 on Apple Podcasts or Spotify. It's the best way to 0:11:00.760 --> 0:11:06.000 help more listeners find our global reporting. The Prognosis Daily 0:11:06.120 --> 0:11:11.199 edition is produced by Top for Foreheads Jordan Gaspoure, Magnus Hendrickson, 0:11:11.360 --> 0:11:15.840 and me Laura Carlson. Today's main story was reported by 0:11:15.920 --> 0:11:21.160 Jason Gale. Original music by Leo Sidrin. Our editors are 0:11:21.280 --> 0:11:26.000 Rick Shine and Francesca Levi. Francesca Levi is Bloomberg's head 0:11:26.000 --> 0:11:28.280 of podcasts. Thanks for listening.