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