Speaker 1: Hello, and welcome to another episode of the Odd Lots Podcast.
Speaker 1: I'm Joe wisn't Thal and I'm Chasey Alloway. You know,
Speaker 1: we're kind of like at the point, Tracy, where I mean,
Speaker 1: obviously we recently sort of hit the one year anniversary
Speaker 1: of the markets bottoming, but we talked to a lot
Speaker 1: of people around this time last year, and you know,
Speaker 1: the world was just everything seemed an absolute chaos and
Speaker 1: markets were, you know, still incredibly volatile. We had no
Speaker 1: idea where things are going. So I feel like it's
Speaker 1: kind of time to uh revisit, revisit some of those
Speaker 1: discussions a year later, like what have we learned? Yeah,
Speaker 1: I think it's been pretty much exactly a year since
Speaker 1: we had the first All Thoughts episodes on what was
Speaker 1: going on at that time, and I think the consensus
Speaker 1: back in March or April of was that this was
Speaker 1: an unprecedented crisis that was going to lead to these big,
Speaker 1: permanent changes, and I think some of that still holds true. Um,
Speaker 1: it's an unusual crisis, that's for sure, But I think
Speaker 1: the thing that no one was expecting was that we
Speaker 1: would basically see a recovery this quickly and that we
Speaker 1: would have a business cycle that was compressed basically in
Speaker 1: less than a year. Yeah, there's no question the recovery, uh,
Speaker 1: especially for the US, but also I would say the world,
Speaker 1: even in areas that are still struggling with the vaccination rollout,
Speaker 1: has been much faster than people expected. And then of course,
Speaker 1: like the other thing that was really going on at
Speaker 1: this time behad besides just like you know, the pure
Speaker 1: health and economic shock, was just this idea that like
Speaker 1: all of the world's big institutions were like really being
Speaker 1: stress tested at once, whether it's the U S. Congress,
Speaker 1: whether it was the sort of institutional passively of the
Speaker 1: US to roll out testing which was pretty abysible for
Speaker 1: the for several months, whether it was the ability of
Speaker 1: politicians to deliver fiscal support and find a way to
Speaker 1: essentially um keep businesses on ice or create a bridge
Speaker 1: to the other side through economic policy. Like there was
Speaker 1: this feeling everything was being tested at the seams all
Speaker 1: at once. Yeah, tested with really really tight deadlines as well,
Speaker 1: and everyone's sort of working under pressure. I remember talking
Speaker 1: a lot about the FED response back in March and April,
Speaker 1: and looking back on it now, it's sort of amazing
Speaker 1: how much they actually got done within a few weeks. Yeah, no,
Speaker 1: it's incredible, And you know, uh, the US fiscal performance
Speaker 1: in retrospect turned out to be massive and probably a
Speaker 1: big contributor to the strong US recovery. So anyway, it's
Speaker 1: been a year lessons learned. I'm sure in ten years
Speaker 1: from now will also be even learning more lessons as
Speaker 1: people study this period. Uh ear there, but I wanted, uh,
Speaker 1: I wanted to revisit one of our guests at the time,
Speaker 1: who is probably one of the best thinkers and sort
Speaker 1: of synthesizing big things in the world. So we are
Speaker 1: going to be speaking with Adam Two's who teaches history
Speaker 1: at Columbia University, also the director of the European Institute there.
Speaker 1: He wrote a sort of magisterial book about the financial
Speaker 1: crisis called Crashed, which everyone was reading back in He
Speaker 1: has another book coming out later this year on COVID,
Speaker 1: specifically called shut Down, How COVID Shook the World's Economy.
Speaker 1: We'll have him back on later this year to talk
Speaker 1: about it. But in terms of understanding lessons learned from
Speaker 1: this year, wanted we had Adam on I think exactly
Speaker 1: this time a year ago, so it's a good time
Speaker 1: to catch up with him. Adam, thank you so much
Speaker 1: for joining us. I supposure to be back. Well, let's
Speaker 1: just start with like your big headline, like what has
Speaker 1: let's start here, what has surprised and most the single
Speaker 1: most surprising thing to you over the past year. Well,
Speaker 1: it's it's kind of banal, but it's it's simply that
Speaker 1: it happened, right, that all of those Cassandras, all of
Speaker 1: those folks that had for a long time, we now know,
Speaker 1: perhaps we weren't paying attention before who had been saying
Speaker 1: that a pandemic of this type could cause mayhem. We're right,
Speaker 1: and it seems to me that that has to shift
Speaker 1: our assessment of probabilities going forward quite fundamentally. That has
Speaker 1: really had been since the nine eighties and then with
Speaker 1: increasing force from the nineties onwards, like global preoccupation in
Speaker 1: the global public health domain. Some economists were involved with this.
Speaker 1: Larry Summers wrote the paper about the potential economic costs
Speaker 1: of the World Economy of of a pandemic. That all
Speaker 1: of those warnings were there, and you know it happened,
Speaker 1: and in fact, I mean, Joe, I've seen your stuff
Speaker 1: on Twitter and I've been been following the same graphs.
Speaker 1: I mean that the fact of the matter is, from
Speaker 1: the US point of view, we almost begin to think
Speaker 1: of this in the past tense, especially if we think
Speaker 1: of it as a business cycle. But if you actually
Speaker 1: look at global infection rates, last week was the worst
Speaker 1: one of this pandemic, and the mortality rate now is
Speaker 1: much higher than it was in what we think of,
Speaker 1: as it were, the North Atlantic crisis of of COVID
Speaker 1: in March April when we first spoke a year ago.
Speaker 1: The you know, the the pandemic is now being driven
Speaker 1: in India and Brazil, but also still by very elevated
Speaker 1: mortality in Europe. So this is not a done deal yet.
Speaker 1: The really terrifying possibility is that out of those cauldrons
Speaker 1: of infection that we begin to get really dangerous mutations.
Speaker 1: We've not seen those yet, right the so far, the
Speaker 1: mutations increased the risk to young people, increase the risk
Speaker 1: of infection, but they haven't fundamentally breached the firewall that
Speaker 1: the vaccines are putting up for us. But that's I
Speaker 1: think for me, the single you know, the single biggest
Speaker 1: takeaway is sure, there's a fascinating story about the economic
Speaker 1: policy response and everything else. But I think we have
Speaker 1: to treat this is a wake up call for the
Speaker 1: sort of risks we might be facing in future. So
Speaker 1: one thing I wanted to ask just on that note is, Um,
Speaker 1: you know, the crisis is still sort of ongoing, but
Speaker 1: you have the book coming out later this year, your
Speaker 1: first book, which you know, Joe rightly has characterized as
Speaker 1: a magisterial work on the two thousand eight financial crisis.
Speaker 1: But that took I think ten years to actually come out,
Speaker 1: and you sort of waited and digested, um, everything that
Speaker 1: had happened in the years since then. Why have you
Speaker 1: been able I'm trying to think how to phrase this correctly,
Speaker 1: but like, why publish this book now? Why not wait
Speaker 1: and see how everything plays out? Like what's different here
Speaker 1: compared to the two thousand eight crisis? Well, I think,
Speaker 1: I mean, you're absolutely right, it's it's it's a risky
Speaker 1: a book to write from that point of view. You know,
Speaker 1: you vote them in the financial markets. You're interested in
Speaker 1: this kind of thing, and you know, I'm kind of
Speaker 1: building a portfolio of different types of intellectual projects, some
Speaker 1: of which have you know, risky profiles and others and
Speaker 1: this is death that lear riskier one, and I don't
Speaker 1: mean that glibly. It's quite a deliberate exercise and risk
Speaker 1: taking in a sense. It's driven by a sense of
Speaker 1: urgency that I think a lot of us feel. That's
Speaker 1: why I'm on this podcast with you folks this morning,
Speaker 1: like we have to try and make sense of this.
Speaker 1: And frankly, in two thousand and eight nine, I wasn't
Speaker 1: part of the conversation. I was. I was a Ivory
Speaker 1: tire academic but working at the time largely on fifteen
Speaker 1: sixteen World War One, and this time around, like it
Speaker 1: or not, I mean, you know, and being Advitage on
Speaker 1: your podcast a year ago was indicative of this, Like
Speaker 1: I didn't have any time to do anything else, Like
Speaker 1: all I was doing along with you folks and you know,
Speaker 1: everyone else in our broader intellectual community. And that's how
Speaker 1: I think about it now, all we were doing, everyone
Speaker 1: was laser focused on on the current event. So I
Speaker 1: literally had to shelve another book project, and so this
Speaker 1: is kind of, you know, this crowded out other other
Speaker 1: activities I was engaged in at the time. And I
Speaker 1: think another thing that's happened is I think maybe we've
Speaker 1: learned something. I mean, part of the lesson you know,
Speaker 1: for me of the twenties after all that some of
Speaker 1: the learning that we did out of two thousand and
Speaker 1: eight nine has come back to benefit us, right, I mean,
Speaker 1: some of the things were actually a bit more transparent
Speaker 1: this time than they were the last time around. We
Speaker 1: we perhaps didn't quite foresee the tremors in the treasury
Speaker 1: market in March, but you know, once they began to happen,
Speaker 1: folks really did have some of the analytical tools necessary
Speaker 1: to grasp that immediately. More or less, and as you
Speaker 1: were saying in your intro, you know, the FED snapped interaction,
Speaker 1: and that's in part because we in fact did have
Speaker 1: a bit of a playbook. So in a sense, part
Speaker 1: of the wager of writing this book is to say, well,
Speaker 1: how does the playbook of OA O nine extent and
Speaker 1: to that extent, as it were, the intellectual overhead is
Speaker 1: less because we've done some of that analytical work. It
Speaker 1: may turn out five ten years from now that new
Speaker 1: perspectives open up. They would be surprising if they didn't.
Speaker 1: It's definitely a wager, but that that's that's what it
Speaker 1: consists of. For me, Like you know, I didn't really
Speaker 1: have much choice because this is what I've been doing,
Speaker 1: and and be it seems to me that we actually
Speaker 1: have kind of collectively moved the ball on how we
Speaker 1: understand macro financial risk. And this is basically a macro
Speaker 1: financial book again, all macro finance plus g policy plus politics,
Speaker 1: which is a train we've really a lot of folks
Speaker 1: have been mapping. Right. Well, you know, this actually brings
Speaker 1: me to a sort of broader question about your particular
Speaker 1: approach to combining the study of history with the study
Speaker 1: of economics with also real time. People are like kind
Speaker 1: of amazed by your output. I mean, you had this
Speaker 1: huge book in but previously you had been studying history
Speaker 1: for the early nine hundreds. Meanwhile, you have this book
Speaker 1: that's gonna come out in a few months. You have
Speaker 1: a sub stack newsletter where you're like take on current events,
Speaker 1: and you have all kinds of charts. It's much more
Speaker 1: writing than most people can do in a week. You
Speaker 1: wrote a recent London review of book Story, essentially cataloging
Speaker 1: the intellectual arc of Paul Krugman's career. Like it's really impressive,
Speaker 1: Like how much work you're you managed to get done
Speaker 1: on quite a range of things. How do you sort
Speaker 1: of generally like approach like what I guess the autom
Speaker 1: two project, what do you see as your sort of
Speaker 1: lend that then sort of refracts into all of these
Speaker 1: the spectrum of output. Well, thank you. I think I'm
Speaker 1: producing at the pace more like that of a journalist currently.
Speaker 1: I have huge admiration for you know, folks in the
Speaker 1: media who you know, have to have to crunch you
Speaker 1: know the what we all know, the names you too
Speaker 1: in particular, but you know, all the all the people
Speaker 1: that we read on a daily basis, we're all involved
Speaker 1: in this real time effort to to try and make
Speaker 1: sense of things. What I guess I bring to the
Speaker 1: party in the sense is, you know, in a sense
Speaker 1: of a drama. I think that's something that I've consistently
Speaker 1: tried to do, is to inject not in the sense
Speaker 1: that we simply take lessons from history in that naive
Speaker 1: way of looking back to previous periods to say, how
Speaker 1: is the presence similar. It's more in a sense the
Speaker 1: approach that says, look, let's take the current realities as
Speaker 1: seriously as we do nineteen fourteen, the record World War
Speaker 1: one or nine, or the dramas of World War Two.
Speaker 1: Let's try and figure say the global lockdown or the
Speaker 1: global shotdown as I prefer to call it, in March April,
Speaker 1: as an epic event, like the outbreak of a war.
Speaker 1: It was something that, after all, affected literally practically everyone
Speaker 1: on the entire planet. And that's a novel experience. And
Speaker 1: if you as a historian, it seems to me, don't
Speaker 1: if that doesn't get your juices going, it's hard to
Speaker 1: see what would, right, I mean, And it's there in
Speaker 1: front of us, and I happen to have ended up
Speaker 1: networked in with some of the smart folks who are
Speaker 1: kind of doing immediate, real time at the cold face
Speaker 1: type analysis. I mean, I'm in that kind of meta space, right,
Speaker 1: because I'm not and not somebody in either a government
Speaker 1: department or a you know, a data hub like Bloomberg
Speaker 1: or EXAMTI where people are actually crunching the data in
Speaker 1: real time. So I guess the role is that of
Speaker 1: a of a kind of framing analysis. And their history
Speaker 1: really does help. I mean, I don't think it's very
Speaker 1: helpful to go back deep into history to look for analogies,
Speaker 1: but I think if you want to understand, say Krugman's trajectory,
Speaker 1: or more generally the trajectory of macro economics. It really
Speaker 1: helps to go back to n seventies m I t
Speaker 1: to understand the kind of context that macro economics came
Speaker 1: out of, and then, as it were, the story since
Speaker 1: you know, I've been lecturing on global economic history for
Speaker 1: decades now, then the pieces fall into place quite smoothly
Speaker 1: in a way, because you know, if you if you're
Speaker 1: steeped in the works of Barry Iching Green or somebody
Speaker 1: like that, then you have take a pre shaped, a
Speaker 1: preformed It's like a model. You know. I like Krugman
Speaker 1: in part because he's a to me. You know, he's
Speaker 1: the sort of macro economist I get. I had a
Speaker 1: lot of macro as an undergraduate, and his I s
Speaker 1: LM simple building block kind of models. You know, I
Speaker 1: can wrap my head around, and in a sense, what
Speaker 1: I'm trying to build as almost the historical analogy to that.
Speaker 1: It's not going to be a perfect and totally subtle description,
Speaker 1: but in a sense, what you're trying to do is
Speaker 1: get those two basic curves on the on the map right,
Speaker 1: and the basic parameters which determine those and move your
Speaker 1: way around them. The try Lemma models that people use
Speaker 1: in international political economy are super helpful for that kind
Speaker 1: of thing too. So that's the that's the kind of
Speaker 1: m O. So shall we talk about the past twelve
Speaker 1: months then? I remember when you came on in April.
Speaker 1: I think you characterize this as a sudden stop in
Speaker 1: the biggest part of the economy, at least in the US,
Speaker 1: and that services. Given that big stop, how were you
Speaker 1: thinking this would actually play out like in April? What
Speaker 1: was your blueprint for how this would play out in
Speaker 1: the wider economy, and how did that contrast with the
Speaker 1: actual events? I don't think, I mean, I can't honestly
Speaker 1: say that I had a very clear idea. I mean
Speaker 1: I had visions, I guess, of downward multipliers spiraling out
Speaker 1: from the service sector. Living on Broadway the way that
Speaker 1: we do, we could see that, you know, just the
Speaker 1: slaughter of small businesses going on all around us. My
Speaker 1: my wife is in the travel business, and we felt
Speaker 1: the shock directly through, you know, her global network of
Speaker 1: people who are suddenly penniless. And I could see the
Speaker 1: way that kind of multiplier effect would work its way out,
Speaker 1: and what we didn't reckon with I guess, and this
Speaker 1: is you know, one of the shocks of twenty is
Speaker 1: the capaciousness of fiscal policy support that it might be
Speaker 1: possible to roll out. Now that doesn't you know, that
Speaker 1: doesn't deal with the more sexual problems which are still
Speaker 1: affecting large slices of the U. S economy. It's important
Speaker 1: to recognize that right that we're you know, maybe somewhere
Speaker 1: between eight and ten million jobs down and where we
Speaker 1: ought to be um but we didn't anticipate I think
Speaker 1: the scale of that of that support and its effects,
Speaker 1: because again it's complicated. It's not a classic Canesian, you know,
Speaker 1: stimulus story, because we know that folks haven't gone out
Speaker 1: and spent the money because in part his main function
Speaker 1: really was to provide a form of security to households
Speaker 1: in the sense that they had some savings with out
Speaker 1: of which they knew they were going to be able
Speaker 1: to meet essential bills. So I think that's one of
Speaker 1: the elements that we that I didn't anticipate, nor did
Speaker 1: I anticipate on the other side of the equation, just
Speaker 1: the gigantic wealth affect story that we would get through
Speaker 1: the impact of the Central Bank federal reserve measures in
Speaker 1: financial markets and inequity markets in particular, UM, so that
Speaker 1: you know, we come out of the year with those
Speaker 1: American households fortunate enough to have large portfolios of financial assets,
Speaker 1: what twelve trillion dollars up on the year, not just
Speaker 1: relative to the March trough. So those weren't developments which
Speaker 1: I anticipated. I'm not saying that you couldn't have done
Speaker 1: the kind of basic calculus which would have given you know,
Speaker 1: which have led you to that kind of a scenario,
Speaker 1: but it seemed improbable um in March. And after all,
Speaker 1: we did live through a kind of nerve biting period
Speaker 1: in US. And I'm not even talking about the politics,
Speaker 1: but just around the stimulus after that huge fiscal obviously
Speaker 1: pushed in March, which you highlighted in the intro, which
Speaker 1: was a surprise in its own right. We did then,
Speaker 1: after all, go into full on gridlock. And it's worth remembering.
Speaker 1: I think how nervous folks felt in the last couple
Speaker 1: of weeks of December, and you know how nervous in
Speaker 1: particular low income Americans, precarious families that were desperately waiting
Speaker 1: to see whether you know, the protection of tenants would
Speaker 1: be extended and so on. You know, as recently as that,
Speaker 1: there was still a huge sense of uncertainty about the
Speaker 1: possibility of the amount and political system reacting to the
Speaker 1: social crisis in this country. I will be the first
Speaker 1: to admit that nothing I anticipated about this cress came
Speaker 1: right and I got everything wrong. But one thing that
Speaker 1: I remember in particular that I was wrong about thinking
Speaker 1: about to the spring of last year was that kind
Speaker 1: of like, you know, the US was still doing a
Speaker 1: horrendous job seemingly on the testing front by this point,
Speaker 1: didn't seem like there was much consensus on you know,
Speaker 1: sort of lockdowns or mitigation strategies. Meanwhile, the Europeans, uh,
Speaker 1: you know, Germany, but most of Europe seemed to be
Speaker 1: doing very well with suppression, very well with mitigation. And
Speaker 1: so my thought at the time I was like, Okay,
Speaker 1: US as a mess, and Europe is going to suppress this,
Speaker 1: and not only that, they're going to finally like turn
Speaker 1: on the fiscal levers in a way that um we
Speaker 1: haven't seen and Europe is really going to come out
Speaker 1: of this out performing. And I don't even know if
Speaker 1: like comparing different entities like this is useful, but it
Speaker 1: hasn't been like this sort of like clear, Oh, Europe
Speaker 1: shows the way that I kind of might have expected
Speaker 1: around this time last year. Yeah, I mean, I think
Speaker 1: you're completely right. I mean I did. I have the
Speaker 1: benefit of having spent a last part of my life
Speaker 1: in Germany, so on that basis, I have to say
Speaker 1: I was always skeptical about that, that first Way success story,
Speaker 1: because I've seen it off of local government administration in Germany.
Speaker 1: Not to buy that, not to have bought it at
Speaker 1: the time. So I'm not surprised. And it's a grim
Speaker 1: reality that the mortality in Europe is now. It is
Speaker 1: now higher than it was at its peak in March April,
Speaker 1: and it's a disaster, and it's really a kind of
Speaker 1: alternate reality story. If you're if you're in regular contact
Speaker 1: with colleagues and friends in Europe, they are living they're
Speaker 1: still living the lockdown, you know, chaos that we were
Speaker 1: in the US in the spring. I agree that there's
Speaker 1: been a real, real reversal of fortunes there. And if
Speaker 1: you speak to folks around the euro Group right now,
Speaker 1: they are acutely away of the way that the narrative
Speaker 1: has shifted, right they they thought, you know, first of all,
Speaker 1: it looked as though Europe was going to fail on
Speaker 1: the fiscal and monetary side. We had that you know,
Speaker 1: March twelfth gaff by Christine Regard parenting the old German
Speaker 1: line about spreads, and then all of a sudden lurching
Speaker 1: into action. Then did Duly Deal. Then you know, Nerve
Speaker 1: acting months when it wasn't obvious that they could get
Speaker 1: it done. And then this extraordinary package deal they did
Speaker 1: in December with the East Europeans in Poland and Hungary
Speaker 1: and getting rule of law provisions in there. I mean,
Speaker 1: it really looked like the sort of quintessential it's how
Speaker 1: you know, kind of European deal. It's a bit like
Speaker 1: a you know, a marvelous piece of Italian sports car
Speaker 1: engineering or something. And then it just turned out to
Speaker 1: be undersized. It's not big enough, it's too slow, it's
Speaker 1: too complicated, and you get whooked by you know, a
Speaker 1: muscle car from the US piloted by Joe Biden. I mean,
Speaker 1: it's it's it's pretty it's pretty confusing for the Europeans
Speaker 1: right now. Um, and then the vaccine story on top
Speaker 1: of that, which which which they've managed to turn into
Speaker 1: a disaster. Um. So yeah, in terms of the transatlantic balance,
Speaker 1: it's been a real roller coaster whiplash, and I think
Speaker 1: the awareness of that in Europe is quite intense. If
Speaker 1: you speak to the decision makers over there, there is
Speaker 1: a real sense that they don't understand quite how they
Speaker 1: lost the plot and how they've ended up looking like,
Speaker 1: you know, it looks like a revender two thousand to
Speaker 1: day after all, in the sense that the US pulled
Speaker 1: out of that. As you know, as many complaints as
Speaker 1: we may have about the slow recover from two thousands
Speaker 1: and eight nine in the US, at least it was
Speaker 1: all going one way at least through the fifteen sixteen
Speaker 1: and that wasn't true in Europe, of course, and I
Speaker 1: think they fear that they're go and going to end
Speaker 1: up there again. So just on that note, Adam, what
Speaker 1: do you think accounts for the US's ability to get
Speaker 1: its act together when it comes to fiscal stimulus? And
Speaker 1: I mean we've already talked about how it wasn't necessarily
Speaker 1: a perfect execution and there was a lot of uncertainty
Speaker 1: over whether they would get it done or not, but
Speaker 1: in the end they did. So why in your opinion
Speaker 1: was that able to come together. I think it's a
Speaker 1: story of several different phases that the continuous through line
Speaker 1: is that America has to act right. A lot of
Speaker 1: this is forced action, and this is the comeback you'll
Speaker 1: get from any European you talked to, Like they've got
Speaker 1: automatic stabilizers, they have sophisticated labor market institutions, so they
Speaker 1: didn't see the surgeon unemployment. The United States did, and
Speaker 1: that was clearly critical in March and driving it. I
Speaker 1: mean those terrifying Thursday mornings when we would get that
Speaker 1: hit of data at eight thirty with you know, six
Speaker 1: million Americans losing their jobs in a week. I mean,
Speaker 1: it was staggering stuff, and that clearly was crucial to
Speaker 1: pushing I think that very surprising consensus in Congress. Then
Speaker 1: we had the coincidence of it being an election year
Speaker 1: and the Republicans having their guy in the White House,
Speaker 1: which which was which was crucial, not crucial enough, it
Speaker 1: turns out to actually drive a stimulus through over the summer,
Speaker 1: which which may have cost Trump the presidency. Then I
Speaker 1: think in the fall, again it was the fact that
Speaker 1: the social crisis in the United States that was looming
Speaker 1: was just so severe that the Republicans felt that in
Speaker 1: light of the upcoming you know, Senate elections in January,
Speaker 1: they had to do something. The really surprising moment, I
Speaker 1: think most of us agree is what's happened under the
Speaker 1: Biden administration, right because we we could have seen a
Speaker 1: rerun of of Obama two thousand and nine UM and
Speaker 1: instead what we've almost seen as a kind of escalatory logic,
Speaker 1: at least in so far as we're talking about the
Speaker 1: immediate response to to to the COVID crisis. I think
Speaker 1: the American Job's plan is a much is a different
Speaker 1: beast altogether. It's much more modestly proportioned, but to deliver
Speaker 1: another huge hit of essentially you know, reliefs. It's almost
Speaker 1: like a fiscal security blanket for families which are still struggling,
Speaker 1: and there are millions of them. And j Power has
Speaker 1: done and I think it remarkable job as FED chair
Speaker 1: and consistently pushing the fact that the labor market is
Speaker 1: much weaker than it looks in some of the numbers.
Speaker 1: That that I think is really the surprising thing, and
Speaker 1: it has to do with a shift in logic inside
Speaker 1: the Democratic Party. I think they've they've abandoned the search
Speaker 1: for bipartisanship. That means that they need every single vote
Speaker 1: from within their own caucus in both houses. And all
Speaker 1: of a sudden, then the left has Leveridge too, and
Speaker 1: we know where they've you know, progressively moved in recent years,
Speaker 1: in part under the influence of radical political economy of
Speaker 1: different types, whether it's classic Caynesianism or m M T
Speaker 1: in any case, towards a aggressive assertion of the need
Speaker 1: for large, large fiscal action. And I think that's where,
Speaker 1: you know, that's how we've We've had this really rather
Speaker 1: remarkable moment that is an acute social crisis that isn't
Speaker 1: addressed by robust institutions. There's an uncertain recovery, there's a
Speaker 1: massive political imperative to do something that demonstrates the Biden
Speaker 1: administration has controlled of the situation, to give them a
Speaker 1: hope of not failing in the mid terms. And then
Speaker 1: I think there is a serious rethink going on within
Speaker 1: the ranks of the Democratic Party, and perhaps the pivotal
Speaker 1: people here are folks like Schumer who've moved from you know,
Speaker 1: a relatively cautious position to an open advocacy of really
Speaker 1: large scale fiscal spending, and so then the balance hinges
Speaker 1: very much on the on the swing votes between mansion
Speaker 1: on the one side and on the left on the other.
Speaker 1: You know, I'm curious you sort of you sort of
Speaker 1: hinted at it there, and I mentioned earlier in our
Speaker 1: discussion you recently wrote a very long essay about Paul
Speaker 1: Krugman's career intellectual trajectory. And at the same time that
Speaker 1: they interesting things happening within the Democratic Party, there's also
Speaker 1: interesting things maybe sort of mirroring it in the world
Speaker 1: of sort of economic thought. And you have some you know,
Speaker 1: as you say, some some high profile like thought leaders
Speaker 1: economists moving much more towards the sort of like old
Speaker 1: school Keynesie and MMT style thinking, whereas some of the
Speaker 1: old defenders of maybe Obama and clinton Omics, like Larry
Speaker 1: Summers and Olivia Blanchard don't seem to be at the
Speaker 1: at the forefront or at the center of influence right now, Like,
Speaker 1: how do you see that sort of like parallel track
Speaker 1: hang out within this sort of like economics world. And
Speaker 1: also as you describe in the Democratic Party, Yeah, it's
Speaker 1: it's a fascinating scene. And and and you know, I
Speaker 1: think we're only really beginning to sketch it's it's it's
Speaker 1: outlines at this point. And I have to say my
Speaker 1: opinions shift almost certainly weekly, if not daily, given given
Speaker 1: the chain of events. But I think one story here.
Speaker 1: I think there's maybe three different lines that are worth pursuing.
Speaker 1: One is, indeed, a sort of intellectually justified shift to
Speaker 1: the position that says inflation is not a serious risk.
Speaker 1: The Phillips curve isn't what it used to be. In
Speaker 1: any case, we have the monetary policy tools necessary to stabilize,
Speaker 1: you know, let's go for it. Then I think there's
Speaker 1: the even more radical position, which is Krugman's at times,
Speaker 1: which said, you know, this is all about politics. I
Speaker 1: don't actually care that much whether or not there might
Speaker 1: be some inflation risk. The far bigger risk to the
Speaker 1: American Republic is the prospect of the Republicans gaining power again,
Speaker 1: and so anything it's a sort of, you know, an
Speaker 1: overt embrace of political priorities over all other priorities. So
Speaker 1: one is, as it were, a technocratic argument that says,
Speaker 1: you know, the economic risks and not that severe. Another
Speaker 1: position is to say, even if they were severe, even
Speaker 1: more severe is the prospect of a Republican comeback. We
Speaker 1: have to prevent that at all costs. And they're sitting slightly.
Speaker 1: It's as aside from this R and D, the Blanchards
Speaker 1: and the Summers of the world, And I have to
Speaker 1: say that I've struggled with their position that a bit
Speaker 1: and actually feel that a greater degree of sympathy now
Speaker 1: we've seen the American Jobs Plan than I did before,
Speaker 1: because I think their position, after all has always been,
Speaker 1: you know, right, we don't need to worry about debt
Speaker 1: quite so much, and no one has made that case
Speaker 1: more consistently than Blanchard. But Summer as well, working with
Speaker 1: Furman and people like that, has consistently said that their
Speaker 1: main criticism of the you know, the first Biden stimulus
Speaker 1: was simply that it was a sugar high right, that
Speaker 1: this was delivering stimulus in a highly inefficient way, whereas
Speaker 1: the priority needed to be investment. And furthermore, this large
Speaker 1: initial injection of as it were, immediate stimulus would prejudice
Speaker 1: the chances of a large investment program in future, and
Speaker 1: so it was you know, dangerous from that point of view.
Speaker 1: And furthermore, with a view to two if the aim
Speaker 1: of the game is in fact to be in the
Speaker 1: best macro position possible ahead of the midterms, then coming
Speaker 1: off a sugar high from this immediate hitter stimulus may
Speaker 1: not be the best place to be. I don't think
Speaker 1: they said that out loud, but I think one can
Speaker 1: in further. And if you look at the jobs plan,
Speaker 1: you've got to say, you know, it is massively undersized.
Speaker 1: And when it comes to the Job's plan, it turns
Speaker 1: out that they are doing pay fors, which to me
Speaker 1: is sort of really topsy turvy because presumably it's an
Speaker 1: investment program, so that's precisely the kind of thing you
Speaker 1: would borrow for. But all of a sudden we're back
Speaker 1: in the pay for territory. And why because of politics,
Speaker 1: because basically they think that's what mansion will buy. And
Speaker 1: then you run the social justice argument that says, well,
Speaker 1: if we're going to have pay fors, what should they be, Well,
Speaker 1: they should be corporate tax increases, which is, you know,
Speaker 1: nothing wrong with that, it's just that there's only so
Speaker 1: much corporate tax increase that you can get through, and
Speaker 1: that then caps the overall size of your investment program
Speaker 1: at two trillion odd and to trillion odd over eight
Speaker 1: to ten years, is you know, doesn't address any of
Speaker 1: the big ticket icons You've addressed it too. It doesn't
Speaker 1: allow you to, you know, mount a credible challenge to
Speaker 1: China in the high speed rail stakes, and it doesn't
Speaker 1: allow you to address climate change really consistently. So I'm
Speaker 1: actually the you know, in a space of it doesn't
Speaker 1: doesn't negate what happened with the one point nine trillion,
Speaker 1: and it doesn't negate the historical significance of that move.
Speaker 1: But I'm beginning to worry that there isn't more wisdom
Speaker 1: in you know, some ass intervention on the question of
Speaker 1: the relationship between the initial stimulus and the investment part
Speaker 1: that's followed, and the way in which the political argument
Speaker 1: has shifted between those two components. And I am very
Speaker 1: much focused on on this question of how America establishes
Speaker 1: itself as a credible contributor to let alone leader to
Speaker 1: the to the to the global fight on on climate
Speaker 1: and this, this American jobs pan doesn't do it. It's
Speaker 1: it's far too small. So I'm trying to think how
Speaker 1: to phrase this next question. But I think a lot
Speaker 1: of people you know, listening to that would agree that
Speaker 1: there has been some sort of shift on the Democrat
Speaker 1: side two becoming more willing to embrace phiscal stimulus, you know,
Speaker 1: of one sort or another. There's still a lot of
Speaker 1: debate over exactly what that looks like, but in general
Speaker 1: they seem more willing to do it than they were before.
Speaker 1: What does a world where governments you know, embrace fiscal
Speaker 1: stimulus more frequently actually look like to you? And how
Speaker 1: does that change your existing understanding of the way the
Speaker 1: world or the economy works. Well? It it's tempting to
Speaker 1: imagine it as a return to a utopia. There was
Speaker 1: a lot of talk last year of you know, new
Speaker 1: social contracts. People who know some economic history were invoking
Speaker 1: the example of wartime exigencies and mobilization. I mean, it
Speaker 1: could be that kind of a world. That was the
Speaker 1: sort of vision, after all that the Green New Deal
Speaker 1: sketched for us, that we would, as it were, identify
Speaker 1: grand strategic targets and then head for them in a concerted,
Speaker 1: a concerted way, I mind, rather jaundiced. Disillusions sort of
Speaker 1: take on last year is that that that was sort
Speaker 1: of sugarcoating um the story rather in act, I mean,
Speaker 1: we saw policy of a very improvised type, or rather
Speaker 1: Frankenstein variety really, in which we stitched together a variety
Speaker 1: of emergency crisis responses, whether they were to the hiccup
Speaker 1: in the in the treasury market, which one shouldn't underestimate
Speaker 1: the significance of, or as it were, to the weakness
Speaker 1: of American social institutions which required, you know, the distribution
Speaker 1: of of checks. I mean people talk it about talk
Speaker 1: talk about it as the wealth welfare without the state right.
Speaker 1: So it's, as it were, a sort of unmediated relationship
Speaker 1: between the fiscal apparatus and American citizens without actually any
Speaker 1: intervening administrative apparatus that provides the security of a government
Speaker 1: apparatus administration. So in some senses, despite breaking with the
Speaker 1: old conservative fiscal rules such as they were, and in
Speaker 1: America they were always observed, in the breach, it still
Speaker 1: has a slightly Reaganesque feel to it. Look, you know,
Speaker 1: it's you know, it isn't really the government that's showing up.
Speaker 1: It's just a check um. So think there are there are,
Speaker 1: there are many different worlds that could unfold within an
Speaker 1: era of fiscal disinhibition, and they could in fact be
Speaker 1: the program for concerted state building with you know, essentially
Speaker 1: social democracy in America. That is, indeed, as it were,
Speaker 1: what as it were the left of the Democratic Party
Speaker 1: would love to see, but it could also be something
Speaker 1: much more ambiguous in its politics, in which, you know,
Speaker 1: we compensate for the huge shocks suffered by the most
Speaker 1: precarious population with the delivery of occasional checks which arrived
Speaker 1: depending on whether the president feels like signing or not,
Speaker 1: as we saw in December. Meanwhile, the monetary apparatus does
Speaker 1: the job of sustaining those of us who have financial
Speaker 1: portfolios and keeps that wealth growth ticking over by by
Speaker 1: keewee and other types of intervention. That's a very different
Speaker 1: scenario in terms of the future of America, indeed global society. Yeah,
Speaker 1: I think that's a that's a super fascinating point and
Speaker 1: one of the things I've been thinking about in the
Speaker 1: last year. And again, I know, or ago we were
Speaker 1: talking about the testing crisis and all this sort of
Speaker 1: like failure of U S institutions. One set of institutions
Speaker 1: that seem to hold up extremely well weirdly, and people
Speaker 1: will probably get upset. It's like large corporations executed their
Speaker 1: business extremely well. I mean, if you look at the
Speaker 1: Amazons of the world, of the wal Marts of the world,
Speaker 1: or the grocery stores of the world in the you know,
Speaker 1: in a period of incredible sort of crisis and stress
Speaker 1: to supply chains like there really weren't like massive shortages.
Speaker 1: Businesses managed to figure out a way to transition their
Speaker 1: workers to remote work very quickly. So you could sort
Speaker 1: of like imagine this nexus where we trust corporations for
Speaker 1: sort of governance of things, and then the government supplies
Speaker 1: the cash so that we have the spending power. Yeah,
Speaker 1: I mean couldn't essentially even in the financial sector r
Speaker 1: at this time, the banks weren't the proprim um, so
Speaker 1: that in an instance of that. But I completely agree
Speaker 1: that the the you know, the emergence of Amazon as
Speaker 1: a de facto public service provider was was an extraordinary phenomenon.
Speaker 1: But I guess the crucial thing is not to romanticize it, right,
Speaker 1: is the not to buy the corporate and to recognize
Speaker 1: the extraordinary inequalities that operate within those organizations, such that
Speaker 1: you know, there were hundreds of thousands of workers put
Speaker 1: in various types of risk as a result of our
Speaker 1: own ability to shield them properly, and I think that's
Speaker 1: the crucial thing. Absolutely, there's no there's no denying the
Speaker 1: affair efficacy of those organizations, and many of us, all
Speaker 1: of us on this call right now, rely on that infrastructure,
Speaker 1: you know, for the normality that prevailed in many of
Speaker 1: our lives throughout last year. I mean, we stayed at
Speaker 1: home and our relatively comfortable accommodation and got on with
Speaker 1: our jobs based on an electronic infrastructure that worked for
Speaker 1: us because we had access to it, whilst you know,
Speaker 1: hordes of workers took the risks of supplying us with
Speaker 1: the groceries that we needed and so on and so forth.
Speaker 1: Those inequalities I think that were were absolutely massive last year,
Speaker 1: and they took on a visceral quality. Right. It moves
Speaker 1: from being an inequality of just status or income to
Speaker 1: being to being a really immediate material reality of those
Speaker 1: who have to take risks and those who don't, those
Speaker 1: who those who have incredibly comfortable setups. You know, I've
Speaker 1: been more productive than ever in part because I stopped
Speaker 1: traveling and just sat at home, you know, in my
Speaker 1: comfortable domestic surroundings and cracked um. And I was able
Speaker 1: to do that because those surroundings are comfortable, and my
Speaker 1: university went on functioning as normal, and I didn't have
Speaker 1: to scrabble around like my my wife and her colleagues
Speaker 1: in the travel sector to just kind of keep things
Speaker 1: going and make ends meet. So the divisions, the divisions
Speaker 1: within the division of labor become very stark, even in
Speaker 1: one in which those corporations go on functioning the way
Speaker 1: they do. I think that could be also part of
Speaker 1: the agenda and the you know, the forcefulness around corporate taxation.
Speaker 1: I mean, if that discourse of inequality and just the
Speaker 1: streaming inequality and inefficacy, inefficacy of a tax system which
Speaker 1: doesn't manage to reach corporations, um. You know, it has
Speaker 1: become politicized over the last ten years. I think it's
Speaker 1: quite significant that there's really a convergence on both sides
Speaker 1: of the Atlantic behind going after corporate tax strategies UM
Speaker 1: and modes of corporate tax evasion, because because that is
Speaker 1: a crucial node UM in the in this new in
Speaker 1: this new in this new political economy, this new this
Speaker 1: new order. Adam, you mentioned the banks just then, and
Speaker 1: the idea that for once banks were not the problem,
Speaker 1: and I think the robustness of the financial system in
Speaker 1: this instance probably surprised a lot of people. Is that
Speaker 1: vindication for the post two thousand eight regulatory regime that
Speaker 1: was put in places, that why banks and other financial
Speaker 1: institutions were able to whether the crisis reasonably? Well, well,
Speaker 1: it's a counter factual. So we'll never know for certain
Speaker 1: how they might have behaved without the rules, but we
Speaker 1: know the rules were absolutely pushing in the right direction.
Speaker 1: And I certainly would oppose the efforts by you know,
Speaker 1: prominent and articulate and well, you know, well backed up
Speaker 1: spoke people from the corporate banking side that argued that,
Speaker 1: you know, if the regulations had been lighter, we might
Speaker 1: not have experienced the treasury market termoil that we did
Speaker 1: in March. Because you can kind of see that argument
Speaker 1: coming a mile off. I, I, broadly speaking, think that, yes,
Speaker 1: you know, these are all experiments we don't know counter
Speaker 1: of actually what a system without those kind of interventions
Speaker 1: would have looked like. But as a first cut, yes,
Speaker 1: forcing the banks to accumulate more capital, which they no
Speaker 1: doubt would probably have done anyway because they don't actually
Speaker 1: want to fail, but forcing them to do so and
Speaker 1: exercising the macro prudential oversight that we do is surely
Speaker 1: a step in the right direction, and what I think
Speaker 1: has also been remarkable as the extent to which it's
Speaker 1: been rolled out worldwide, the extent to which major e
Speaker 1: ends now also practice various types of macropodential supervision, and
Speaker 1: the new frontiers I would I would submitt has got
Speaker 1: to be to extending that to other actors and um
Speaker 1: the share obscurity of what happened in March. The fact
Speaker 1: that it's you know that that so many people have
Speaker 1: had the puzzle so long to find out who sold
Speaker 1: what when to whom in March is an indication of
Speaker 1: the fact that we need more and more transparency and
Speaker 1: more regulation of non bank financial actors, which are clearly
Speaker 1: at the forefront of new developments in the financial and
Speaker 1: then in the financial system. So yes, in broad brow
Speaker 1: broad terms, I think that is another area where we've
Speaker 1: seen progress. There was a great economist actual calculation of
Speaker 1: you know, what would have happened if the banks had
Speaker 1: been as poorly capitalized in twenty as they've been in
Speaker 1: two thousand and eight, And even if that was a
Speaker 1: sort of alarmist calculation done on the basis of some
Speaker 1: of the worst scenarios in the spring of twenty that
Speaker 1: that fact alone, you know, it would have been the
Speaker 1: fact that one could see the collapse of several large
Speaker 1: banks coming, would enough by itself have been enough to
Speaker 1: create a panicky situation in that spring. And and we didn't.
Speaker 1: We didn't have to deal with that. We didn't have
Speaker 1: to deal with a lot, you know, a truly massive
Speaker 1: imploding balance sheet like not I'm not even thinking of
Speaker 1: believing in that city or somebody like that, the really
Speaker 1: the really big, the big boys in A nine speaking
Speaker 1: of eight o nine, I mean, your your last book, Crashed,
Speaker 1: really talked about the sort of central role of the
Speaker 1: dollar system and the importance of the FED extending swap
Speaker 1: lines and sort of if there was any ambiguity, if
Speaker 1: there are two thousand and eight two thousand nine about
Speaker 1: the importance of the dollar, there really shouldn't have been.
Speaker 1: Um And then you mentioned earlier on the conversation in
Speaker 1: the comparison between US and Europe, there's still this sort
Speaker 1: of idea that the US, as as particularly the U
Speaker 1: S consumer is just there's no comparison. Uh, there's sort
Speaker 1: of the consumer of last resort. The US has to spend,
Speaker 1: and if you look at US the US trade deficit,
Speaker 1: it's absolutely blowing out. Something I'm curious about, though, is
Speaker 1: um like the future of China and how you see
Speaker 1: China fitting into your thinking right now, because obviously the
Speaker 1: economy has recovered pretty rapidly in China seems to have
Speaker 1: done a very good job by any measure of suppressing
Speaker 1: the virus. Where do you see it's role and it's
Speaker 1: standing and in the sort of the thing, you know,
Speaker 1: as you compare the different performance of different entities and
Speaker 1: thinking about it for your book, the trajectory that China
Speaker 1: is now, yeah, I mean this is this is I'm
Speaker 1: sure the most important issue really longer term and and
Speaker 1: also for European American relations because increasingly those will be
Speaker 1: defined by the stance that they respectively take towards China,
Speaker 1: and the China story frames everything that happened last year.
Speaker 1: I think, after all, this should have been an absolute
Speaker 1: disaster for Shijing Pings regime, even if let's just allow
Speaker 1: that they actually managed to ConTroll it in the way
Speaker 1: that they did. If the Western States had acted, you know,
Speaker 1: as one would ideally have imagined they would have acted
Speaker 1: in February and March and contained this. If China had
Speaker 1: simply taken the hit that it did in February and March,
Speaker 1: this would have been the most severe shock that the
Speaker 1: regime has suffered since nine because it was a very
Speaker 1: serious blow to the Chinese economy, where you know, the
Speaker 1: unemployment numbers for China are very contested, but that the
Speaker 1: labor market blow was at least as severe as that
Speaker 1: suffered by India, the other giant e m and in
Speaker 1: other words, absolutely catastrophic for the vast you know, the
Speaker 1: vast force of migrant workers fifty six seventy. I mean,
Speaker 1: it's really a it's a it's a it's a guessing
Speaker 1: game as the how severe. But we're talking about one
Speaker 1: of the biggest labor market shops in history, far worse
Speaker 1: than that in two thousand and eight. But we handed
Speaker 1: them a huge victory, right they've they've the failure of
Speaker 1: the West, the failure of Europe and the United States
Speaker 1: has if de facto handed the Chinese a giant propaganda victory,
Speaker 1: and also not just propaganda, but victory in terms of
Speaker 1: political legitimacy domestically, which should not have you know, which
Speaker 1: which is the obverse of what should have happened, And
Speaker 1: on the basis of that, I think we've seen a
Speaker 1: pretty concerted push by Shijing Pings regime to assert itself
Speaker 1: and to do so at the expense of stressing its
Speaker 1: relationships with Let's forget America for a second, because the diet,
Speaker 1: the pressure to and had to to escalate on the
Speaker 1: American side was so extreme in the late phases of
Speaker 1: the Trump administration, but with Europe as well, right, they've
Speaker 1: adopted an increasingly bullying attitude, culminating in the extraordinary events
Speaker 1: of the last couple of weeks where remember and December,
Speaker 1: the Chinese pulled off this coupe diplomatically by getting a
Speaker 1: Macron Meracle and fonder Layan to sign up to an
Speaker 1: investment deal with China, which was widely seen as a
Speaker 1: slap in the face to the incoming Biden administration and
Speaker 1: assertion of European autonomy that was heading in towards an
Speaker 1: increasingly uncomfortable relationship with appeasement with China fundamentally driven business interests. Then,
Speaker 1: as you as only predictable, the Europeans impose sanctions on
Speaker 1: some mid level Chinese officials directly involved in the grotesque,
Speaker 1: repressive regime and Shinjang and how does Beijing react. It
Speaker 1: could have just played it cool and said, well, whatever,
Speaker 1: that's a different issue. Investment is the priority. No, they
Speaker 1: slap sanctions on European parliamentarians, who are the people who
Speaker 1: actually have to ratify the investment treaty. So it's dead.
Speaker 1: So there's something going on on the Chinese side which
Speaker 1: I don't think we have a really good grip on yet,
Speaker 1: and that is going to be dispositive because I think
Speaker 1: the I think that the Biden administration would like to
Speaker 1: silo to as the Europeans were proposing. I think one
Speaker 1: of the shifts were seeing from the Trump administration to Biden.
Speaker 1: Trump was fusing all of aspects of American policy towards China,
Speaker 1: certainly by the summer, into an aggressive front. What you
Speaker 1: see with climate diplomacy particularly is carry wanting to say, look, no,
Speaker 1: we'll take Climbate off in a silo separately and do
Speaker 1: you know, do amicable policy interaction cooperation with the Chinese
Speaker 1: in that domain and then allow blinked in the State
Speaker 1: Department and the Defense for Hawks to run their policy
Speaker 1: towards China on a separate track. And Beijing has said
Speaker 1: to the Americans. I think on that too, that's not happening.
Speaker 1: So that forces a sort of continuous rearrangement of strategies
Speaker 1: in the West because it's not clear whether siloing and
Speaker 1: separating out policy domains. So you could separate out investment
Speaker 1: treatise or climate policy from issues of to do with values,
Speaker 1: to do with human rights, or just flat out geopolitical
Speaker 1: confrontation in the South China Sea, it's not obvious that
Speaker 1: Beijing will allow either the Europeans or the Americans to
Speaker 1: play that game. And I think that comes my guess
Speaker 1: and by no means like an inside China specialist, but
Speaker 1: my guess is that that comes from the sense on
Speaker 1: the part of Beijing that really now is the time
Speaker 1: throughout the anti the West is you know, is in
Speaker 1: a mess. China has come through this crisis relatively coherently,
Speaker 1: and they're going to push, and they're going to push
Speaker 1: quite assertively and set terms themselves. And that that makes
Speaker 1: obviously for a very precarious, very dangerous, very uncertain situation
Speaker 1: going into into this year and into the into the
Speaker 1: into the medium term future. So Adam, I'm looking at
Speaker 1: your Twitter feed at the moment and there's one tweet
Speaker 1: that I think sort of sums up the contrast between,
Speaker 1: you know, twelve months ago during the depths of the
Speaker 1: market sell off of versus where we are now. And
Speaker 1: it's a chart that shows changes in forecast GDP for
Speaker 1: the major economies versus pre pandemic, and the US is
Speaker 1: I think the only major economy that's expected to have
Speaker 1: higher GDP UH than before the pandemic. And you tweeted
Speaker 1: in it turned out a crisis in the US could
Speaker 1: be so severe that it triggered policy responses so massive
Speaker 1: that they raised the GDP outlook four years later, And
Speaker 1: I think that really encapsulates some of the surprise of
Speaker 1: all of this. But is there a sort of implication
Speaker 1: that the US has in some way overdone it on
Speaker 1: the policy response versus other countries or is it just
Speaker 1: that other countries haven't been able to get their act
Speaker 1: together like the US. Yeah, I know, that's a great chart,
Speaker 1: And first of all, shout out to Daily Shot, who
Speaker 1: is one of my regular sources of chart data. Fantastic newsletter.
Speaker 1: Everyone who has subscribed that chart is remarkable, and I
Speaker 1: don't think it shows overshooting or exaggeration. What it shows
Speaker 1: is this shift in politics is shifting the political economy
Speaker 1: of the United States that we've been talking about, which
Speaker 1: changed the parameters. And we know and we know how
Speaker 1: far below really long run trend if you project back
Speaker 1: to two thousand and eight, the United States has been
Speaker 1: it's been languishing below its long run growth trend. And
Speaker 1: so to that extent, no, I'm not I'm not in
Speaker 1: the overshooting camp. I'm definitely in the running the economy
Speaker 1: hot camp. I think through a whole variety of different reasons. Political,
Speaker 1: it's a matter of social justice, and I think it's
Speaker 1: an experiment that the United States should under take because
Speaker 1: if it's correct that we can, as it were, shift
Speaker 1: the envelope of potential productivity growth by keeping the economy
Speaker 1: on that high track, then this is a huge possibility
Speaker 1: for further you know, for for for for future growth.
Speaker 1: And this is the moment in a sense, this crisis
Speaker 1: has opened the door to that that possibility. In American
Speaker 1: policy thinking, it is it is a gamble as I
Speaker 1: think any conclusions that we draw from r but we've
Speaker 1: got a pretty good idea that we can contain the
Speaker 1: risks if they should arise in the form of inflation.
Speaker 1: And we have a political configuration in which at least
Speaker 1: one party is motivated to make this, to make this experiment,
Speaker 1: and I think it's it's it's it's fascinating um and draw.
Speaker 1: Broadly speaking, it makes me optimistic as that chart should
Speaker 1: truly do. It shouldn't distract us from the fact the
Speaker 1: pandemic everywhere else is ongoing. So those data, it may
Speaker 1: need to be revised even further downwards for other parts
Speaker 1: of the world, because that's the other shocking thing that graph, right,
Speaker 1: it's the downward adjustment for the emerging markets for Europe,
Speaker 1: and so we may see polarization coming out of this. Adam,
Speaker 1: it was It was absolutely great catching up with you,
Speaker 1: Absolutely great chatting with you, and we definitely got to
Speaker 1: do it again later this year. I think this is
Speaker 1: a story to follow, so that is an absolute peas
Speaker 1: as always, guys, thank you very much for having me on. Awesome,
Speaker 1: Thanks Adam, Thanks Adam, it's great catching up with Adam.
Speaker 1: I don't think there's anyone who like quite seems to
Speaker 1: have his knack, uh, and it's why he's had the
Speaker 1: success he's had, clearly, but his neck to sort of
Speaker 1: synthesize the combination of big ideas with current events quite
Speaker 1: the same way. Yeah, he's sort of like the most
Speaker 1: macro of all the macro people out there. UM, definitely
Speaker 1: able to range across a bunch of different things. You
Speaker 1: know what I was thinking when we were talking about
Speaker 1: this idea of corporations taking on more responsibility for social services.
Speaker 1: Did you ever read Margaret Atwood's Ricks and Creek, No,
Speaker 1: tell me about it. Yeah, it's like a science fiction book,
Speaker 1: but in there social services are provided by companies, and
Speaker 1: from what I remember, everyone sort of, you know, instead
Speaker 1: of being loyal to a country, they're sort of loyal
Speaker 1: to their employer and rely on them for protection and
Speaker 1: healthcare and food and things like that. So maybe that's
Speaker 1: the direction we're heading. I gotta read that now, and
Speaker 1: I really do think there is a lot there, because
Speaker 1: I think, you know, if you look at what the
Speaker 1: US government really delivered well in the last year, it
Speaker 1: was clearly the checks and writing being checked book the household,
Speaker 1: but also writing checks to companies and also writing big
Speaker 1: checks to pharmaceutical companies so that they would be able
Speaker 1: to safely or aggressively pursue the vaccination research. But then
Speaker 1: if we look at sort of like who I think
Speaker 1: performed well in terms of delivering I do think that
Speaker 1: you know, people would say, oh yeah, Amazon, A lot
Speaker 1: of people, particularly stay at home people who work from
Speaker 1: home and others would say that in terms of like performance,
Speaker 1: companies like Amazon and other like large corporations did their
Speaker 1: jobs very well. And you know, I think also, you know,
Speaker 1: you think about like the political splits in this country,
Speaker 1: like the increasing like sort of like alliance I would say,
Speaker 1: between the Republican Party and not business per se, but
Speaker 1: like small business specifically as this sort of like entity
Speaker 1: that doesn't quite you know, not did most small businesses
Speaker 1: did not quite thrive nearly as well as Amazon. A
Speaker 1: lot of resentment among small businesses for the expanded unemployment
Speaker 1: insurance that the government delivered. And so you could see
Speaker 1: how there's sort of like this, uh, you know, how
Speaker 1: how this ends up splitting politically. But I think it's
Speaker 1: a really interesting thing to think about. Absolutely. And the
Speaker 1: other thing is that chart that we were talking about
Speaker 1: at the very end showing pre pandemic GDP forecast. That
Speaker 1: one just sort of summarizes the whole situation to me,
Speaker 1: which is that the pandemic is ongoing in a lot
Speaker 1: of places in the world. But also if you got
Speaker 1: the policy response or the policy mixed right, there's a
Speaker 1: chance that you came out of on a better footing
Speaker 1: than you would have without COVID, which is pretty amazing. Again,
Speaker 1: contrasting that with where we were in our sort of
Speaker 1: mindset back in April or March of last year. Yeah, no,
Speaker 1: it really and you know, really shows uh how malleable
Speaker 1: the future is. And we had this really terrible recovery
Speaker 1: post Great Financial Crisis, and we had a fairly small
Speaker 1: fiscal stimulus of two thousand nine and then never really
Speaker 1: did anything further. But I think in retrospect, clearly we
Speaker 1: could have probably come out of it much faster with
Speaker 1: more aggressive action. And I think this time, due to
Speaker 1: sort of like maybe some luck the way the things
Speaker 1: happened politically, we obviously had way more aggressive action and
Speaker 1: we're seeing it, and I think it sort of speaks
Speaker 1: to how much the future can really just be be
Speaker 1: taken for granted, is like we know what it's gonna be. Yeah, absolutely,
Speaker 1: all right. Uh on that note, shall we leave it there? Yeah,
Speaker 1: let's leave it there. This has been another episode of
Speaker 1: the All Thoughts podcast. I'm Tracy Alloway. You can follow
Speaker 1: me on Twitter at Tracy Alloway and I'm Joe Wisenthal.
Speaker 1: You can follow me on Twitter at the Stalwart, and
Speaker 1: definitely follow our guests on Twitter. Columbia professor Adam Two's
Speaker 1: He's at Adam Underscore Two's and his forthcoming book, shut Down,
Speaker 1: How COVID Shook the World's Economy. It comes out in September,
Speaker 1: but you can preorder it now to definitely check that out.
Speaker 1: Follow our producer Laura Carlson. She's at Laura M. Carlson.
Speaker 1: Follow the Bloomberg head of podcast, Francesca Levi at Francesca Today,
Speaker 1: and check out all of our podcast at Bloomberg under
Speaker 1: the handle add Podcasts. Thanks for listening to