A Conversation with Ed Steinfeld and Mark Blyth
Good. Afternoon I'm ed Steinfeld, I'm the director of the Watson Institute for International and, public affairs and, professor, of political science here, at Brown it's my pleasure, today truly to. First. Welcome, my friend and colleague mark Blythe who many, of you all of you know mark is the William R Rhodes professor, of international, economics, here at Brown and he's of, course professor, of political, science, and international and, public affairs at the Watson. Institute mark. And I over, the course of the next hour along, with you are gonna talk about the economic. Impact at, least so far of the kovat, 19 pandemic, but before, we begin the conversation. I want, to just make a couple of general points. The. First one is that, I'm. So happy, to, see you all participating. In this I know we have people watching. Directly. Through zoom and participating, through zoom we have people watching through Facebook, live, it's. So important. I think for, all of us to remain connected it's. So important, for all of us to, care. For how everybody else is doing and to keep, two-way communication. Going on and with respect to the public policy issues, that we're discussing, it's very important, to maintain, two-way. Communication. Multi-directional. Communication. In order to not just keep ourselves informed, but, to bring as many bright. Minds to, the problems, and challenges we, face as possible. And. On that note I want to talk a little bit before we begin about the mechanics, of this, session, mark. And I will have a conversation with, each other for the first 20, minutes or so but then we want to open it up to, all, of you in the audience, let. Me describe the the, three ways really, that you can participate. The, first way, or the first two ways really pertain, to those of you who are participating. With us via zoom, you. Can ask questions or, offer your comments by. Raising. Your hands so to speak using the hand, raised function, in in. Zoom and we'll be monitoring that so I'll be able to see who's, raising a hand and and I'll be able to call on you second. If and, when I call on you all enable your audio so you can speak second.
For Those of you on zoom' if you'd like to write, a question, to us rather than speak to us you can use the Q&A function, and, just. Type in your question and we'll be monitoring that and we'll then read. Those aloud. And then, third for, those of you who are participating through, Facebook, live feel, free to ask questions on, that platform we'll, be monitoring, it and I'll, get a, sense, of what kinds of questions are being asked, and then I'll ask mark, those questions. So. With that introduction. Mark. I want to get into the really. The heart of what we're gonna talk about the, crisis, we're facing so. You know Macy's just, yesterday, announced it's gonna lay off something, like 80,000, if it's a hundred twenty plus thousand, employees the gap is, laying. Off something like 80,000, employees, the. Whole retail, sector, now seems frozen at least in the United States and much of the world transport. Tourism. Industry, restaurants. So much is it's just frozen. Right. Now so. Tell me a little, bit how, you see. Either similarities. Or differences between, the, current, economic situation. We're, facing and what happened, in, 2007. 2008, with the financial panic. Okay. A great question so let's start with a very natural look, at this what. Happened in 2007. 2008, was a banking, crisis, and very short terms what does that mean it meant, that the banks had lent too much relative, to what the income streams that were coming in and when those income streams kind, of dried up the banks became fragile, and they fell at. That point government, stepped and because we discovered, this idea of systemic risk that as to say that the banks are too big to fail and all, interconnected. If the, whole financial sector, what went down it would be devastating, for the real economy therefore. We had to build a box that. Ballooned, out debt which necessitated. In some places more than others a period, of austerity belt-tightening. Which, increased, unemployment and, led to a recession and it took basically about eight years more or less to right the ship southern. Europe has still not been righted, that, was a serious. This, is similar. But also very different it's very different in the following sense imagine. That the whole economy is a bit like a bank that is to say that our assets out there in the world that generate income for the economy, and then, there are people who work in the economy whose, income seems in a sense valorized, those assets, right and the whole thing works together what's. Happened is we're about to make 30%, of those income streams, disappear. That's the unemployment, shock and. Then 2/3, of the economy, that's left is going to be working from home or otherwise sequestered, this. Is an enormous, challenge the, like of which we haven't seen before and it, has prompted, right across the world quite positively, an enormous. Set of fiscal responses, to try and compensate for, that shock if you had said to me just. Ten days ago or even two, weeks three weeks ago the, a Republican, Senate would pass a two trillion dollar, stimulus. And, liquidity passage. In addition. To one and a half trillion going out of the Fed I would, have thought no long odds against that but that's actually where we are which gives you a sense of how serious, this, crisis actually is in economic terms, that.
Makes A lot of sense you know your your, 2013, book austerity, the history of a dangerous idea is I mean it's been hugely. Informative, to me I think it's the best book written about that crisis. But. If I understood, your argument then. Correctly. It's that the, o7o, a crisis. Was fairly, typical, of. Manias. Panics. And crashes, that people. Bit up the value of a bunch of assets, they. Then base their economic, behavior on, this hugely. Inflated, value of assets, and once. Confidence. And the value of those assets, just eroded. Very quickly the whole system, collapsed. And there's. A kind of a stigma. That certain, cultures, and countries attach, to that kind of behavior you know that whether it was homeowners. Who borrowed too much money or the banks who pushed too much money on them the the attitude was people. Made mistakes they've got to pay the price hence, austerity, but, but this crisis. Seems like something different nobody, did, anything wrong it's just an act, of I don't know you know faith an act of God whatever we say, but it's a, this deus, ex machina came in and froze up the economy, so wouldn't, that doesn't that mean the present, is different, I mean is that why we're not hearing about austerity, today, that's. Part of it absolutely, another, way to think about it is in terms of the way that countries, have responded, to the virus shock and, that. Tells us a lot about how they're gonna respond, to this economically, over the longer term so. Let's, be very brief you to China, expert so correct me how wrong I am and what I'm about to say but the, way that China responded, to this was essentially, command-and-control when. You have millions of people who are Communist, Party members who can act with the authority, of the state you, can sequest, an entire neighborhoods, and get food delivery organized, you, can also approve, money through state-owned enterprises, get. The banks to lend directly to who you want them to you've, got capital controls, that other economies, don't have you, have a certain, growth model, which allows you, to buffer. The shocks in a certain way then. You get to Western Europe Western, Europe has long been trade dependent, and something economists, observe for a long time is that the more open you are to trade the bigger the welfare state you have because it's in a sense a giant shock absorber, so. If you're in Denmark, you pay huge amounts of taxes, and at times like this that means that you get a huge amount of consumption maintenance, through, those institutions. So, there's a different way of cushioning, the shock one's a welfare state one's a command-and-control state, when. You get to the United States is very different, the, United States growth model is basically optimized. To run with no buffers the, basic idea going back to the financial crisis which showed it last time is that. The economy, takes a shock you, protect, the financial assets you. Then allow the economy to just through wages and prices in other words price declines, and unemployment, and the idea is that type of short sharp, shock and, lows the economy, to come back without massive amounts of taxation, or state intervention etc, it's, painful, but it tends to work this.
Type Of crisis, is not good for that type of model because. Whereas China has certain ways of controlling this simply because it is a very large powerful, state that, can control, in a classical, sort, of state, oriented way and the Europeans, have lots, of different types of welfare institutions, they can use the buffer shocks everything. From shore working time to liquidity. For companies, through. To direct, cash transfer, payments, in the, United States we're not really built for that getting. A couple of checks in the mail for a couple of months to bill you over works, upon the assumption that this will be over in a couple of months but. If it's not over in a couple of months that becomes, very difficult for this type of economy in particular I. Find. Your discussion. Of models very persuasive, you have two great pieces you publish, them in the last couple days one in foreign affairs one, in foreign policy I recommend them to the audience where you talk about national models, I just want to make a quick point. About China you're. You're absolutely right, that there are command, and control, approaches. Institutionally. That are used in China that just, aren't available in, other kinds, of systems but you know it's, interesting to me that in. Democracies. Like South Korea even. There there. Was a much more proactive, response, I, think to the pandemic than what we've seen in Western Europe or North America and there was a a, willingness. I guess I would say on the part of the public to, very. Rapidly, engage, in social distancing, and to stop certain kinds of economic activity, and that, seems to me to touch, on issues, of trust, and social capital, and maybe a kind, of a legitimacy, that these governments, South Korea and China under, very different kinds of political, economies, different kinds of institutional, setups that they both seem, to enjoy. Visa. Vie the Western democracies. Yes. I mean in ten, years since the crisis were building up before the of I can plug another book and it's not mine is, Jonathan. Hopkin who's a political scientist at the London School of Economics is, that a bit comic called anti system politics, which I think is the best summary, of what's happened to party politics, over the past 15 to 20 years and Jonathan's. Argument, of for populism, and all of its outpourings, is that, we've essentially, fragile. Eyes the party systems over time we've. Lost. Confidence to. Put it that way in state, power and state institutions we've. Politicized. All the decisions are made by the state has always been in the favour of special interests etc and, then, when that happens it's very hard to generate, the types of public trust that you need to, get those types of measures working on a voluntary basis and we see this very, in the united states where some, communities, simply, continue, to think that social distance, and is some kind of liberal conspiracy to, unseat the president, and. Begs. A question why the italians, are going along with it or that's the case but, nonetheless those, polarization. Factors certainly don't make things any easier, you. Know on the subject, of national models, i want to talk with, you a little bit about, wage. Guarantees, so. It seems to me really is a non-expert that, given. That there's nothing, intrinsically. Wrong with say the tourist, industry or, the airline industry or the restaurant industry but, they've just been, pushed.
Into Hibernation for, some period of time it. Makes sense that the state would step in and just guarantee. The wages, of the employees, who are temporarily furloughed. After all in a few months hopefully those, jobs will be back in operation. But. It seems that not but some societies, are unexpectedly, willing, to do this to have their governments provide wage supports, direct wage sports and others like the united states aren't, what, why is that a, Ganic. Was back to the underlying, growth model in the united states to, compare, two examples, the united states the united kingdom the very similar in many ways what. Was very, interesting about the british response was they, went straight to wage guarantees, now. This was the country that ten years ago under Connor and Anne Osborne were the austerity champions, and this, time around no we're simply guaranteeing, it why, mark tell me tell me how the wage guarantee, works in the United Kingdom. Great. Question, what, they actually do is they say to employers keep, paying and the employer says well how can I do that I don't have any customers and they say don't worry we've got your back and the government goes to the banking system and says just, keep allowing them to pay and then, we will guarantee you, so, you already have, a system set up whereby wages, will flow it's, called how you pay wages people. Have bank accounts why, invent, the thing all over again in the United States for reasons I really can't understand, we decided, to start issuing cheques which, is like a 1950's. Technological. Approach I mean half the country, can get payments on their phones. Instantly. And yet we're cutting checks so again, a lot of the problems, here are the how-to of, politics, rather than the arguments, about it but, again to go back to the way they are tee's or you know consumption, maintenance the, British and American economies are both 80 percent consumption, that's what drives them and consumption, is driven by wages, plus credit people. Are having a hard time maintaining, their, credit because the wages are falling and because of becoming unemployed so, it makes sense this simply, plug that gap on the, expectation. Of this lasts a few months and then we're back this, however, brings us into the tricky, question of a different type of set of models the viral, models, which are being used to, predict. Where we go in this and that leads, to very different conclusions depending, on which model you look up there's one which we hope is right which says that many many people already have had the virus the, Oxford model and, that suggests, that after a very. Pretty. And. Intense, period of strain on health care services. We, will pretty much be able to go back to normal, there's, the one is driving, the debate the imperial, college one they did an update today and they basically said no sorry that's not gonna work only around three percent of people without the virus so far as far as we can tell which, means that things make it better for a while but the way we there will be multiple waves of this it's. Not I, can imagine that countries, like Sweden, and an extreme the, United, Kingdom can continue, with, subsidies, for multiple. Periods of time I'm, not sure the United States can do that and then, that begs the question what do you do when the money runs out. What. Do you do when the money runs out. What. Is that what does that mean to say the money runs out the. People literally have no money for groceries well, no, but I understand if the but what does it mean to say that the government's, money runs out or to put it differently in, the United States if I understand it correctly we're, telling people who've.
Lost Their jobs to. Apply, for unemployment claims. And then. They're these individuals, are gonna receive unemployment presumably. And they're, gonna receive a check in, the mail but all the disruption, of having to find another job and, then all. The destruction of losing job and then finding another job later and all the indignities, are suffered. Whereas if I understand, you correctly in, the UK and Denmark and Germany. Wages. Are being directly, paid, the employers, remain, intact. Then the state pays so, what. Would. Prevent the state from any. Of these states from undertaking, these wage supports, over extended, periods of time. Eventually. Someone has to want, to buy that debt if you're going to debt finance this know. The. Concern, Barkin the last. Crisis, was the huge buildup a debt would cause inflation, that didn't happen and then, it would cause insolvency. Well, a sovereign, government the princes own cash can't technically, go insolvent, in the bond debt issues because it can always swap out for cash the. Question, is do people want to hold those bonds, and also, to use the term what's the fiscal space that's available for, countries to do this so, if you'd already Italy, with the, ill I think it's the 17th, largest economy. Or 11th largest economy with the third biggest bond market in the world you, haven't grown in 20 years if it wasn't for the ECB buying, and barking your bonds, you would be in a terrible position already, if you're Bretton, you're in a better position but. There's probably some finite, limit on this one for the United States ironically, printing, the dollar the global reserve asset the constraints, are much less what. We've seen in this crisis as we saw in the last one is a flight, in takács and that means a flight into dollars so if you get to print the dollars that's good but. On the other hand markets. Aren't stabilizing. The way we saw the last time and continued. On certain financial, markets, on, continuing.
Their Issuance could, get problematic, for some countries, and. What we're seeing I think in China which, is going. First and in, a way. Much. Of society, is returning, to normal in, terms of, interactions. But the business, environment hasn't. Returned to normal yet and businesses, have been slow. To startup, in some cases because of regulations. Preventing, them from starting, up so even. Though the public health situation seems. Much better today the state. Of anxiety much. Lower the. Ability. Of the economy, to move fully into, operation. Seems, to be still an open question that, the duration in other words of the crisis, is as. Yet unknown absolutely. To go back to the different viral models the unknown, unknown, on this is the denominator, how many people have been infected and. If you really knew that then you could make some predictive, arguments, about when this will and how intensive will be but, it's just simply the lack of testing, particularly in the United States means that we have literally no clue as, to what, we're doing in, terms of saying oh well maybe it's Easter well maybe it's June we, simply, do not know at this point so, that's, unfortunate when we find ourselves I just, want to remind our audience please. Ask. Questions or, give. Us your comments for, those of you on zoom' you can raise your digital, hand. And. Or, you can write down questions, in the Q&A using. The Q&A function and those on Facebook live can write your questions on Facebook and we'll we'll get them mark. It sounds, to me as if you are generally. Supportive, of the idea of, wage. Guarantees, yes, what. About company. Guarantees, what, about whether, we call it bailouts, whether we call it. Subsidies. Whatever we want to call it what about governments, directly, providing. Resources, to, keep companies, alive. And keep their balance sheets solvent, so. It depends on the company and I've. Actually been quite skeptical, about the notion of the banks were too big to fail that they were all interconnected, because, if you can tell someone that you're strategically. Important. Then basically, you will get the money which licensed by the behavior so. Let's, think about some of the things that are supposedly strategically. Important Cruise, Lines I'm not, convinced, hotels. I'm not convinced, and part. Of the problem here is what carbonyl, ism is meant to be we have a Bankruptcy, Code for a reason so let's think about Airlines, let's. Say that United Airlines stock or American Airlines stock goes down to zero at. That point in time if and when things go back to normal, there will be planes there, will be pilots, there will be staff there, will be hubs, there will be airports. Those are expensive, and valuable assets. And people will want to travel again so, someone, else can come along and pick these things up and get it going if you were doing wage guarantees, fully you, could effectively, let those assets go to zero and pick it up afterwards let the shareholders.
Be, The ones that bear the cost after all that's why they get the side on the equity that's. A hard argument to make when the, people who control those assets are some of the most powerful, people in your society and that's. Where the political economy, of this comes in some. Sectors are definitely, more important, than others to support but supporting, the likes of Cruise Lines I really, just see this as a huge boondoggle. And a bit of a mistake because there's, no need to do that if you're actually doing the wage supports, which is the most important, part I guess. I don't fully, understand. So. Regardless. Of what we. Think of any one of these industries, none. Of them has, caused. This crisis, arguably. By their management, by, their by their approach, to conducting business. They are simply, simply, been hit by this they've, more, or less they would cruise lines transport, airline. 96%. Of free cash flow installed by bucks mmm, not so great none, of my point though is none, of their operations. Directly. Relates to what's currently, keeping them out of business which is to say a pandemic. A health crisis, and so. I guess, I don't fully, understand. Why it makes sense to let any of these companies, go. Under, as a result. Of this kind of crisis sort of put it differently, let me take the airlines because you've. Had your problems with him I'm sure traveling I've had my problems with them but a you know a company like American, Airlines I think it employs about a hundred 30,000 people and if you let it go under, of course, the aircraft, are still there the airports are still there but the amount of dislocation. That would be imposed. On, the employees, on the, various. Companies. Associated, would, be vast. So, why. Wouldn't, it make sense for. The time being at least just to sustain more. Or less everybody in place whether it's a restaurant. Whether it's a hotel whether it's an airline or whether it's a bank until. We can get through this Cygnus.
Shock. This exogenous crisis. So another paper that last, week was for the Institute, of Public Policy Research the United Kingdom with my, co-author Eric Lonergan and we, argue, for exactly. The situation which, is to say if you're, going to bail you should take a permanent equity, stick not. A controlling, stake this is no nationalisation, the f the argument, is we need to save these companies because they are worthy companies. In the sense that if these conditions were not there that would be making money then. If we're gonna provide the safety net you should get the upside on the way out so, if we're gonna take 1/3 of the shares of let's say American, Airlines we should put them into equivalent, of a sovereign wealth fund no, political, control passively, manager, give, them the liquidity that they need and then when they start flying again guess what those shares go up in value and that dividend, can go to the whole public who after all were the ones who were bailing them out so, there are different, ways of doing this we're just not there yet. Fantastic. Look, I have a lot more questions but, let's, go to some of the questions from the audience if that's okay with you absolutely. Let's. Start, with I'm just looking, at these now, there's, a question, from NOAA Pirani, great. To hear from you Noah and your, question, I'll just read it if that's okay for everybody. For the audience, Noah. Writes in the last few weeks the Fed has effectively, become credit, underwriter for all US corporate debt including, unsecured, commercial assets his. Mark are you optimistic that, federal, equity and the private sector could lead to a real redistribution, of wealth post cut coronavirus. Or is, a corporate, debt bubble going to blow up in the feds face while. The adam newman's of this world walk away unscathed. Well. Even Adam might be a little scared, if we want goes to zero.
So. This, is a story of perverse incentives, if you, keep interest, rates super. Low and if they're structurally, low anyway, as they seem to be then. It's a problem, for corporations. Because, they can borrow and issue bonds and write. Debt, if you will and then use the bonds to buy back their own shares and, not so much easier than making stuff and that's what a lot of corporates, have done and one side effect of this is a giant corporate debt pile that, corporate, debt pile at some point has to be reckoned with because corporations. Are not countries, countries. Have a printing, press countries, have intergenerational. Taxation, countries, have the capacity, to make credible commitments, across generations, so. Long as it a reasonable country, private. Sector firms simply, can't either so there is a reckoning. With this whether, it comes in the form of the Fed's balance sheet or whether it comes to collapse and asset values we'll see but in a sense that one was waiting to happen and would have happened eventually even without Corona. Great. Let's take a question from Solange, Hanson. Thanks. For weighing, and I encourage more of you to keep asking great questions so. Salons rights I read. The Canada, offered a much healthier, stimulus. Package, would. What Canada offered, work in the US and we'll we ultimately get, to that level of stimulus. And. Not entirely familiar with the real details of the Canadian pocket I believe that it's similar to what the Brits have done and to, me the question is rather than equity or, you know a healthy. Or stimulus, package and not since it's what's efficient and let's, just go back to the example, of what the Brits are doing the, Brits basically, will be saying we're, going to guarantee these wages and, we're going to do it for as long as it takes and we're going to use the existing, infrastructure, of weeds payments, and banking to make that happen all right I think, Canada's, gonna do something similar, we've decided to meal checks to people let's, hope we've got the right address, it. Seems to me that the question here is more of the efficiency, of how you're doing it rather than the fact that you've got a slightly different program, pretty, much everyone is on board with maintaining, consumption, for, an, indefinite but, hopefully, limited, period of time it.
Is Pretty remarkable to me mark that, countries. And, correct me if I'm wrong countries, like Denmark and the UK that had no tradition. Of providing, wage, supports, have, been very, short order stood. Up a system for doing that is. That the right yeah. Absolutely, and, the Brits are the classic I mean have completely unexpected, for them to go down this road but, in a sense has been building, for a while a lot of people have been talking about so-called, helicopter. Money which is a way of saying, of. Talking. About direct cash transfers, for, a while the czech central, bank two years ago came out with a piece saying that next time there's a crisis were gonna do this several, luminaries, in central banking have said look with rates on the floor this has to be the next step so in a way it was in it was in the stars it just wasn't aligned yet and that's what's happened now great. Dhiraj Kunta, Kunta has please. If I mispronounce, anybody's name, apologies, forgive. Me but, Dhiraj has a question, about some of the long-term effects. Siraj writes most of the assets the Fed got on its books in 2008. We're still on its books at the start of this crisis, in addition there's, a lot more intervention, from the Fed now than there wasn't in Oh 8 is. There going to be a long-term effect, of having six trillion, dollars, on the Fed's balance sheet and so, much credit available in the economy. What. Are the long-term, effects, in your view well, I do love that Browns sophomores, are asking more intelligent, and more important, questions and practically, anybody in the media so thank you for that well you, can include the, sophomores asking much better questions, that I'm asked. Absolutely. That, is a totally, brilliant question, I mean in a sense it's saying can we all become Japan, Japan. Manage the blow it's down to two hundred percent and, hasn't, really lost much in nominal GDP, but at the same time it's a very old Society and we're all getting older there's, a way in which you know this, is kind of baked into the cake as well even without the crisis, I think, the most important, reading you can do on this is the piece, by Olivier Blanchard at.
The End of I think it was last year at the end of his term of being the chief economist, at the IMF which. Basically, says don't sweat the debt and the reason is the following we. Took, 20% of the global money supply as bailouts. In 2008, through 2015. And chucked. It in the global economy and still couldn't generally any inflation. That. Was tells you something interest. Rates have been falling apart, from the seventies, and, eighties, through. The nineties for, about 3 or 400 years and they're, very low and they're gonna stay very low if not negative, in real terms put. Those things together so long as your economy, is positively. Growing, your, debts thought will shrink this. In a sense is the financial, repression track that was played by governments after World War two and now, it seems to be structurally baked into the cake so, so long as the rate of growth in your economy is higher than the rate of growth in your debt starting the interest payments they're off you, can balloon it out but ultimately it will shrink so, that, seems to be the, hope I know, I extract, it's a hope and, presumably. In the near term these payments. They're not generating. They won't generate growth per se this is not economic. Activity in so many parts, of the economy, but, instead they are I don't, know a guarantee. Of life support, during a period of hibernation as I understand, it so people will be able to continue to pay their rent people will be able to companies will be able to service their debt, they'll be just a basic. Stabilization. If if I've got it right that's exactly correct yep and, after all I mean maybe similar to the Great Depression what's, the point of throwing if, you're a landlord what's the point of throwing a renter out into the street when you're not gonna find somebody else to fill that apartment. So it's I think you alluded to this earlier its payments, in the near term simply, to guarantee, that people can purchase food, that they can remain. Solvent, in a sense until, the economy gets. Back going and, again this is you know my favorite little set starts for the United States and not regardless the why this is critically, important, there's, 330, million people in the United States there's. Two hundred and seventy million handguns. That's not even going for carbines, and rifles there's. 80 million, hourly workers and 20, million people have no health insurance, and the most fragmented, and expensive, health insurance system in the world you. Need to keep the whole and you need to keep these people fed otherwise, very, bad things can happen, right. We I mean just the numbers, from the week before last 3.3. Million people applying, for unemployment options. And you, know talk of perhaps thirty percent employment and if that happens, hopefully it's gonna be over a short. Duration. Of time rather, than an extended. Period let's. Turn to a question from Michael. Dennis, Michael. Writes we, constantly hear that we're, that. We're at war with the virus leaving. Aside the metaphor, what. Is there about war financing, that might lend itself to this moment it, strikes me Michael, writes that this is a very special deflationary. Moment, where the state's goal is to get money into the hands of consumers so.
That They're spending becomes, someone's, income how does the war metaphor the more financing, metaphor, work here, I think. It works on a rhetorical. Level on an ideological level. That. An apology. Is pull rise desires, the, one thing that we can't do in the one thing that will unite us is a common, enemy so if, the virus is the common enemy which it is then, the war metaphor is a good way of basically embolden. Anak, ssin amongst people who would normally knock together so. I think it's really operating, at the political level, it. Makes a lot of sense, let me remind those of you who are participating, on zoom' we'd, love to hear your audio, if you're willing to ask a question. Using your voice rather than your fingertips, typing on the computer so feel, free to, raise. Your hands so to speak and I'll keep watching for, you, here. On unzoom but. In that for the time being let's continue taking. The written questions from the audience and, here's one from Ivy Scott, Ivy. Writes if, and when things return to normal socially. Do. You anticipate that the speed at which businesses, rebound, will be the same as in China or, will, our failure to sufficiently, support, American businesses, atrophy, the commercial sector completely. This. Is of course Ivy, writes this is all of course dependent, on the question of how long yeah. And that's exactly the key thing how long so. Again to go back to those two models that are guiding so much of the hope and response, if it's the Oxford outcome, it's not that long and while. In, a large service, sector economy you're not gonna make up for the lost, restaurant. Meals or the massages. That you didn't have in a, sense that can, be cushioned, and that's what we'd support is about and we, have a hit we lose some GDP, and then, we move on that's, the good story the, bad story is that we take a long time to get over this it takes a while to get an effective treatment and we have to look through at least one more wave at. That point in time that's. When it looks very difficult particularly, for small businesses, it, you can pick up after a month if you've got three months cash flow support you can survive those three months possibly four but, if you have to survive a year that. Restaurant, doesn't open again and that's the big problem I think. The Chinese, case. Which is unfolding. Just a few steps in front of us time-wise the. Chinese case is instructive, and instructive, about the, ways in which we're connected globally so, at, one level the, Chinese. Economy, and society took a big hit because everybody, had to aggressively. Social, distance people were frozen in their homes people couldn't, go to their jobs, it was just too dangerous the government mandated, that everything.
Effectively. Stopped, all over the country, so that induces. The, first kind of economic, hit now. Things, have things, are starting, to loosen, people feel more optimistic they're. Able to go out some retail, has opened up some. Manufacturing. Is back in play but global, demand now has stopped so anything, that's export-oriented. Isn't. Really able to sell except maybe, medical. Devices and medical products we see that coming, up to speed and then there's a third, feature of this that my. Sense is that the Chinese state is being extremely, cautious. About, how. Much economic activity. And social activity, it, permits. To reopen because it's monitoring. Whether there's any, more outbreaks, of of, kovat. 19:00 and so, there's a certain tentative. 'no stare, and a recognition that things may have to be pulled, back. You. Know in. The near future and you can see analogs to that in the united states now as some, of the more vibrant parts, of the economy companies like Amazon are facing. Challenges, by employees, who aren't so excited, about being in that workplace if their, health isn't really protected. So there's, gonna be a lot of uncertainty and, a lot of continued, interconnectedness. Between how. The pandemic. Is unfolding, in different parts of the, world. Let's. Go, to the. Next question and I recognize, that some of you are also asking, questions, using, the chat function, so, as we, improvise. Here I'll be monitoring, that one too but Barbara. Stallings, writes in with a question. Oneechan. You get to go first okay. Barbara. Writes. What. If it's true that the Chinese have been lying to a significant, extent about the numbers related to the virus is it relevant and if so why, that, was directed toward me and then to mark Barbara. Asks, is there really us a quote-unquote, Swedish, model, that's, different. Even, then it's near neighbours if so what, is this model and is it something other country, should pay attention to and Mark I'm interpreting. Barbara's. Question, to refer, to the Swedish model of yeah. The mild mild, social, distancing, to say the least Barbara if we got that wrong correct us why don't you go ahead mark an answer so. The, Swedish model for people who haven't been intensely, following, this is basically. To do social distance, and but on an individual, basis the, Prime Minister, didn't, address where he got up and said look this is Sweden, we have higher levels of social trust that, means that an individual, responsibility, is there but the state has your back we're, not gonna mandate, lockdowns we're one of the most technologically, advanced societies, in the world half the country can work from home let's, try it and we're not going to do a draconian lockdown, so. 50%, of people immediately started working from home the cafes are still open, they haven't had a big spike yet, that. Seems to be very interesting, however if you follow what's going on in Sweden a lot, of the Swedish public. Health and infectious. Disease people are, getting, very very nervous if not very very angry with the government for essentially. Hoping. That, Sweden's, uniqueness, can see them through a crisis, which, doesn't care which country, you are so.
It May be the case that that particular version of the Swedish model may not last on the, other hand if it does it would be a superb, model. For everyone else but it's, always the problem in Sweden you kind of need to be Sweden to pull this off you need to have high levels of social trust high, levels of personal responsibility and, basically. To trust in your state, none, of which the United States really seems to exist a bit thought well you. Know on the Swedish model there's there seems to be another variant, of this in the Japanese, model if I understand, that correctly so Japan. Very. Early, in the, pandemic, closed. All of its schools and had a rather. Dramatic response. On a front but didn't move forward very aggressively with, social distancing, so still lots of interaction, and I think they are -, we're. Hoping. That there won't be a major. Spike, in Kovach cases, but people. Are watching, to see whether that experiment. And, how, that experiment plays, out a to your question Barbara about the data coming from China. Of. Course there's there's, a lot of skepticism and, on a lot of different fronts, and I would say first that the data. To. The best I understand them have been complicated. And problematic, from a lot of different countries so, whether, or not a given country is reporting. Deaths at home rather. Than just deaths and hospitals, that complicates. Some of the data the. Quality of some of these data across different countries is questionable. And sometimes, quite confusing, we. Know that at least initially in, China some of the local, level data in Wuhan. In particular, wasn't. Making it up I think we know it wasn't making it up to the center it was distorted, in various. Ways, that perhaps aren't entirely. Unexpected. I think there's a growing sense. Now. Unconfirmed. But a growing sense that the reported. Levels of deaths in China are probably low and particularly for, Wuhan. The city will Han and who Bay Province, generally, that there are certainly. Some, observers. Who feel that those, death. Rates are probably higher. Including. Some observers, from within China I think, more broadly though. The. General sense is that beyond, Wuhan. The. Level. Of outbreak, in other Chinese, cities wasn't. Particularly, dramatic or, that the just the normal, reports, we get through social media interactions.
Suggest, That all, of the social distancing, that was enforced. Prevented. Or at least was associated. With any kind of major spike. In, cases, and deaths which we would have heard about through social media, beyond. Wuhan. In particular, but I think, the underlying sense. Of your question, is is, right, that we just don't know about the quality, of data, at this point from China and beyond China as well. Let's. Take a couple, of more a couple more questions. So let's take, one. From. Christopher. Garrity, I see a question Nick. From, Nick's eager but I don't see. The rest of the question maybe you have fun, okay. Uh sorry. So let's go on the order that I'm getting them thanks for bearing with me folks let's go with the Christopher. Garetty's question, Chris. Christopher. Writes in your class, he's. Referring to your class marvelous. Absolutely in, your class we, read, about the dominance, of the dollar in international, financial markets, it appears that many post-soviet, states with their own new currencies, are seeing the value of, for. Example kirghiz, sums to dollars declining, is, this a common occurrence globally, right now and if so does it reduce the case for Euro Pound yen, un challenging. The dollar. Yes. And you could literally stop there. So. We've, been waiting for the dollar to fail forever and every time there's a crisis people want to hold dollars because. It's 60 percent of foreign exchange reserves, and denominates, almost the same amount of transactions, etc, etc so. When. Investors, get nervous and they want to flood into cash they do not want to go into the querque some they, want to go into the one thing that probably will go up when everything else is going down which tends to be the dollar the. Euro is relatively, stable at the moment the pound took a spanking. Mainly. In fact because of its announcement right over the gate of 80% wage subsidies, which, made investors, think all the deficits going to blow out of the deficit, blow though the import two-thirds, of their food that, means that the pound is gonna go down if the pound goes down the food's gonna cost more look at inflation through the import Channel which means that unemployment is gonna be even worse yeah, Britain's looking a bit crap let's dump the pound so, there was a structural, decline, in the pound because of that but in a sense that's the price that they're paying for doing the weights guarantees, which isn't, really that bad a price you, can deal with or with downward wage adjustment, but for the dollar no, it's as Mel Brooks once said that great economist it's good to be the king. Somewhat. Related to that let's just go to Peter deagan's question, so he asked whether, the. Pandemic. Will, affect protectionist, politics, around the worlds of tariff levels immigration. Levels but also include capital controls do you think the pandemic is going. To have any impact, and, if so what impact on, capital. Controls as well as things like immigration and protectionism, I think. It's already started, I mean back. In 2015.
When China loosened, capital, controls and a huge, amount of money exited, the country, which, which, sounded. Some alarm bells in Beijing, they've, been tightening, rather than loosening and if anything the lesson of this crisis is good to have capital controls, Argentina. Is basically, in default once again with the IMF I believe they've actually formally, said to the IMF we're not paying so, you can expect some carbonyl controls to go up there and then. You know in the end the broader sense, of being a technology. Of control, in moments of crisis, if you, continue, to see very, very rapid, declines in asset values, across, interlinked, markets, then governments, will step in to break those links there's, a debate back in Europe about whether short selling should be banned that's usually the first step you, got rid of the short sellers, and then you basically have holidays, and then you begin to buy up capital controls so if things get bad enough I mean Iceland, was the example or the last time around Iceland. Had managed the records economists so thoroughly that the only thing that they could do was capital, controls and they dead and they worked quite well so. Yes, I think that you know we're going to see more of that in. Terms of protectionist, policies, it's. A mixed bag, unfortunately. The, most important, commodity for the globe is food and we're. Already beginning to see signs of food protection as amongst countries we're. Going to see a really, strange blowback, effect on this those are immigration, policies, that are so popular with populace against, bringing, in migrant, workers well, in the combination of pythonic, pandemic, plus the, crackdown of migrant workers I'm not, entirely sure who's picking all the crops in the United States and United Kingdom any time soon at a time when we're sequestered, so, food could start to get very expensive, because of the way that these things play out so. I don't think it's a kind of linear response, but. The fact that all of these things have been taken for granted is, being, non-problematic, for so long was already politicized. Before we were hit by the pandemic, and the pandemic is going to continue, to make those things more problematic, than they've ever been, you know there's a little bit of a feeling maybe a lot of feeling, that. Even. When things return. Back to quote-unquote normal whether. It's months, or however long it is there's no real going, back I'm a lot of this stuff that's somehow institutionally. We're. In a different place and where we were before and there is no going back um. So. Moving from protectionism, to something else surveillance, well, what about the. Willingness. Of public's across many different kinds of countries to. Subject. Themselves to surveillance, because. Of the pandemic, whether, it's health, data, whether, its, geographical. Location 'old. Data where. Do you think we're headed and on that front well. I would, bow to your expertise, on this one because this is one word it seems that China. And the societies. In that part of the world are very, much ahead of Western, societies. Perhaps. Because of the liberal traditions, perhaps because of the concern for civil liberties etc. But we're very much behind the curve, yet places, such as Singapore South Korea show, us that these technologies to. Do with contact, tracing etc, can be incredibly, effective tools and very important, tools so, if we really are in a world then the Imperial, model predicts well by very few of us have been infected it means that any subsequent, wave can be very damaging therefore. If we manage to get a hold of this first wave and have, a breathing, space in which to rearm a really sensible, part of the rearm and would, be to deploy.
As Much technological. Monitoring, as possible, whether. We are equipped, to do this politically. Particularly. In more polarized, countries, that's, an open question but. It seems that is definitely, on the agenda and it's not going to go away what's your feeling on this side I think. We're equipped to do it politically I think we're doing it without, thinking very clearly about just as we've been doing it in the commercial side without thinking very clearly about it my concern and, I think there are lots of upsides whether it's for contact. Tracing of, humans, in the case of a pandemic whether its food. Traceability, there are all kinds of positives. From all of this data collection and analysis at. The, same time you. Know once you open that Pandora's, box it, is, really hard to put, things back in and I do, think our. Odyssey is. Somewhat. Non-existent, but it's. Also gonna put the whole issue of the Fung's Facebook. And, Google, etc back. On the front burner once we get out of this because, if it's those digital, platforms, which have been leveraged, to, both harvest, and then interpolate. And interpret all these data then. That, produces. Even more questions of political power and representation. In private hands and in, a more nationalistic, or less globalized, world in particularly. American, hands because all of those platforms are American, so, that brings up the whole issue of the splint, on that rather than the internet, etc again, things which could be accelerated by this moment, yeah, and whether its data in private hands or public hands it's not in the individuals, hands and right that's a problem when it's the individuals, private. Quote/unquote data and it's in somebody else's hands so so just, to plug the book that I still, have coming out in June called on green onyx one, of the things Eric and I talked about that is the need for countries. To sell their data so. We, sell mobile phone spectrum, for. Billions, of dollars, and then we give a license, to use certain frequencies, yet, when we use Facebook, we give up the data for free because you're getting to use the platform for free no, stop, basically. We should have an opt-in okto and if you want to opt-in then, your data is sold by the state on old term contract, to whoever wants the user and then, we get the cash back so. That there's actually a proper market contract, in this and then you could build your privacy, safeguards around, this this is not difficult to do this is just somebody having the vision to do it. You. Right, let's, let's take some, questions from our Facebook, participants. So this is a question for Emilia business and she. Writes what's. The downside of just giving everyone $1500, or pounds a month and simply ceasing, rent and mortgage payments, for the duration. So. The downsize is if you're a private landlord so. Let's see but not to say that they are the most important people in the world this is giving one example right so, you're the private landlord, and I'm no longer allowed to collect rent all right and then the, more I'm not elected I don't have to pay the mortgage okay, so then the mortgage servicer, isn't getting their car and then, somewhere, along the line someone really. Is receiving, no income, so, either you have to bail the entire system, all the way through or someone.
Is Left carrying the con and that's going to create a bigger hole that you're gonna have to fill somewhere, else so, while. Sort, of rent holidays, and, and cash transfers, I'm all in favor I'm a fully paid up member of the club I'm doing. This for up to six months I think would be difficult but non-problematic. Essentially. If you follow the logic through in this essentially, it's like well why not just a free public money and nor do Delisle into anything and when. You get to that that opens a whole host of questions I don't think the United States at all is prepared to even begin having that conversation so. It's. It's. Not clear, that you can do this beyond, having this as a temporary fix the, idea is that work, is exchanged, for labor that's the basic contracts, and, if you basically start saying that sustenance, will be exchanged, and there will be no labor extracted. That, begs big, questions, about how capitalism operates. And what the incentive, structure forgetting things done actually is yeah. It really is quite remarkable how this shock is asking. A lot of forcing us to ask a lot about, how capitalism operates. And and it forces us to recognize, how, quickly, huge, swaths of the economy, just can, stop, basically. And, cease you. Know you you just mentioned labor mark and Nick Sigler had a question. Related, to labor he asks. Do. You see the pandemic giving, unions more or less bargaining, leverage in company, level negotiations. Over wages and and I want to if I can just add situate, that in your, sense of different national, models. So. It's interfer. Labor to have a power. Labor would have to have some power so. In countries, where they are already still, at. Least more than the shell of collective, agreements etc or, they, have rules, for putting workers. On boards etc then I can see that those things would be reinforced. But, for getting them on the agenda in economies such as the UK, difficult. But not impossible the, us the. Outside. Of the public sector the labor movement, is tiny so, the idea that the pandemic is gonna give unions, more powerful as only power is only powerful to the extent that you have unions, to empower and if, you don't then they're, not I'm having. The sort of the Elizabeth Warren type solution, to that of we will appoint people to boards yes you can do that but then if you look at American corporate governance we have rules against, inside or compensation. Getting out of hand and that certainly didn't work. Let. Me also, go, to another one of our our YouTube. Live I'm. Sorry day. From YouTube this. Is a question again, for you mark do you think that crypto, is going to see wider adoption, due, to all that's happening, with these bailouts, No.
Why Not cuz, I spent. Two months once reading, everything I could about crypto, and I've. Come to the conclusion, it's. Not money it's. Just not so, if money's meant, to be three things in the textbook restore a value, its. Volatility, means that doesn't work it's, a unit of exchange nobody. Uses them to buy and sell things and it's a you know of a cone nobody banks in crypto everybody still banks in dollars and it's not a hedge against, uncertainty, it is as I believe the Chinese government. Designates. It I believe in 2014. It digital, gambling, asset no. If you want to put your money into a highly, volatile digital, gambling are set and then, try and pay the bills you'll just end up converting, about two dollars so, until. Until. Central, bank's actually do this until you get direct, accounts. At the central bank 400 individuals. Robin, I think you're you will see that in China first yes, and, that's the type of crypto that they're working on and that's the type of crypto, can work which, i think is more maybe, better understood as as a state. Provide. A digital wallet. Yeah. It's actually that this state is abandoning, all pretence of printing, anything and is simply doing direct electronic. Transfers from the central bank knocking. Out the commercial sector as intermediaries, which is easier to do in China than it is in Western, banking systems so, it's it's a CREP to a name but it's basically state money in its nature so that could go ahead that may happen but, in terms of the sort of the Wild West crypto, is no, they're, still just basically gambling, assets, it. Is pretty, extraordinary how. Widespread. Digital, payment is in China. You. Know that people just aren't handling, cash even for normal transactions. Buying fruit, from a street. Peddler, and. The. Ramifications. For. Flexibility. Are great but so - for privacy and and some of the other issues we were talking about earlier let's.
Go To a question, from Sarah Lewis Sarah rights if widespread. Testing would provide the best insight, into the scope and longevity of this economic crisis, potestas largely. Unavailable, in America. That's. Not what President, Trump says but alas if if, testing, remains largely unavailable, in America is there, any other way to make dependable. Predictions, about what the next few months may entail or should we operate under the assumption that this crisis, will linger for a long time. It. Depends. Upon one, crucial thing and the, Brits are investing, heavily on this antibody, testing, so. Testing, for the virus requires, PCR. Reaction, machines and getting, samples in the back of people's noses, and, lots of things that are quite difficult whereas, a simple blood test can do an antigen or antibody test, so, the Brits have ordered a million, kits and are trying to test up to 25,000, people a month going, forward from April and that, will give us in a large enough population, along with testing of a similar nature which is going on outside the outside, the UK an. Idea, as to the proper, spread of what's going on it will all I was in the sense that we do decay between, the optimism, embedded, in the Oxford model and the pessimism, of the Imperial, model and I, really, hope that we find out that 30% of. Public, have been passive, I've already got antibodies, and this, is short-lived and we can get but to walk but, until we have those data there's no way of making that call and particularly, United States because despite, what the president, says I little. I'm sitting here in Providence I'm. Well. Appointed professor at a great University, I don't, know how to get a test I literally, don't know how to do it, and. Of course there are other sources of data to, your earlier point whether. It's self self-reported. Symptoms, whether. It's fever that data, that's been collected and on. A on a very large scale, not. Obviously just in North America but but worldwide, and I think people will be monitoring, that for exactly the reasons that you you, mentioned you know we're reaching the the end of our hour but.
I Want to ask a question, that. Chris. Garrity, mentions. So mark. What's the the, most important, thing in your sense that the, public, and academia, is overlooking, during, the current pandemic is what's what are we not talking about that we should be, mmm. That's a really good question. What, are we not talking about that we should be talking about maybe. We should be thinking about this more as an opportunity. In. The sense that you know the last time there's a big financial crisis, there was all these articles I said you know don't let a good crisis, go to waste etc and, we absolutely did, but. Let's just think about health care regardless of what, you think in terms of your, economic. Ideology, or however you want to put it having. A health care system this twice as expensive as, everyone else where people like me who have coverage, or thousands, of dollars out-of-pocket before, we can even access our policies, and then. You have 20 million, 20 million people in your society all of whom will crowd the emergency, rooms and hospitals and in the, event of a pandemic that's. That's a very fragile system, so, whether, it's Medicare. For all whether it's some kind of insurance based, system like the Germans, have basic. Car dystrophic coverage, and access and then you can build on top of them this, is an opportunity to kind of get the partisanship. Out of this and say look we, just got wallet were a virus, a lot, of people died and it cost us an awful, or time, resources. To. Deal with us can. We make the system more robust can. We actually invest in such a way that we don't have to go through this again so, I think if we think about that in terms of healthcare and healthcare markets, we could also look at labor markets, it's, fine have an 80 million, hourly workers with no statutory sick, pay so long as everything's going great and no one can get sick but. We now know that things can go wrong and people can get sick and simply. Chucking, checks in the mail and hoping for the best is really a second, best solution, so, maybe what we should be thinking about are the creative ways in which, we can leverage this, crisis, to make sure that the next time we face something that's collectively, punishing, we're actually able to better weather the punishment, and to. Your earlier, points, about comparing, models I think it's interesting that. Countries. That have universal, health care aren't, necessarily, doing, better, it's, it may be a different kind of response but the, answers. To, what. The public health or what that what the healthcare solution is they're not obvious. They're not clear, but I think what is obvious, is that the current systems, in the world's most advanced industrial, countries most. Advanced industrial democracies, are generally. Not doing, that well they're not serving. I. Would slightly, the gentleman's didn't I didn't cut during the past ten years in the way the southern Europe has done part, of Italy's response has been ten years of budgetary austerity. You can't down your ICU beds because they're expensive you don't have any redundancies, Germany. Has tons of ICU beds and does massive testing because it was able to weather the crisis well and it chose to invest the, obviously the universal, systems such as the NHS, actually do do, better and will be shown to do better I think that the really weak chain here is the United States and we really need to have a good long look at what the system that we've built because, it is really not fit for purpose yeah. Great I haven't I love the comparative, analysis I, would, add something.
Maybe Perhaps obvious but, I think, true nonetheless the. Current, crisis. It's. It's, to. Some extent of Nagas to climate change there's certain kinds of human problems. That just. Don't care about borders, they're problems, that completely transcend, borders, and, that emphasize, and I don't mean this in a cliche since that emphasize how, interconnected we, are yet in recent years I think it's fair to say at least in the United States we, dis invent, distant. Disinvested. In, public. Health and we've disinvested. In the kinds of monitoring, mechanisms, that are needed the kind of bureaucratic mechanisms. That are meted needed, regardless of where we are in the political spectrum. Disinvested. And also disinvested. In the kind of information sharing, across borders. That, are increasingly. Important, I think or that we're seeing the importance of for identifying, these, kinds of crises before, they become. Crises. And how, we. Turn. That problem around in the coming years is I think gonna be a major challenge, I agree. I just I just say very quickly in closing and a way. That I think about this is to riff off of grete tun Berg I always, like her line when she says when you're arguing against climate change your arguing with physics when. You're arguing against. A virus you're. Arguing against the virus there. Are things we can argue against there call people but you can't argue against physics and you can't argue against, biology, to do so really as fuel futile. Yeah. Well, mark, we've reached the end of our hour but, I especially, want to thank you this is B you're so insightful as always, and I want to thank everybody in the audience, to me personally, it's so. Reassuring. To, see all, of you participating, here all of your great, questions and, ideas this, is really. A terrific expression. Of your. Resilience, and our determination to, keep, on going in the face of a major challenge I want to wish all, of you good health, and safety, and again, keep on participating. It's great for all of us thanks, everybody thank yo