Latest / Trumponomics / What the Sanders or Warren Wealth Tax Means for Inequality in the U.S.

Transcript

What the Sanders or Warren Wealth Tax Means for Inequality in the U.S. · Trumponomics

• 0:04
  Speaker 1: Hello, and welcome to Stephanomics, the podcast that brings the
• 0:07
  Speaker 1: global economy to you. Now. I should start with a
• 0:15
  Speaker 1: warning for anyone listening with a fragile disposition who has
• 0:18
  Speaker 1: more than thirty million dollars in the bank. You might
• 0:21
  Speaker 1: find some of the content of this episode of upsetting,
• 0:24
  Speaker 1: because we're talking about taking some of your money away.
• 0:27
  Speaker 1: Three men in America now own as much as the
• 0:30
  Speaker 1: lower fifty percent of the population and the richest one percent.
• 0:34
  Speaker 1: That's you, with your thirty million odd own around forty
• 0:39
  Speaker 1: of the nation's wealth. At least two prominent contenders for
• 0:43
  Speaker 1: the U S presidency, and quite a lot of economists
• 0:46
  Speaker 1: think that needs to change. I'm going to talk later
• 0:49
  Speaker 1: to two of our europe based economists about the experience
• 0:52
  Speaker 1: of wealth taxes here, and I'll also be talking to
• 0:54
  Speaker 1: Bloombergs Jiano Randall in Frankfort about the thirtieth anniversary of
• 0:58
  Speaker 1: the fall of the Berlin War. But first his o
• 1:02
  Speaker 1: U S economy reporter Cat Dmitrieva with the low down
• 1:06
  Speaker 1: on wealth taxes and the US presidential race. Today, we
• 1:20
  Speaker 1: say to Wall Street and the billionaire class, you ain't
• 1:32
  Speaker 1: gonna get it all anymore. That's Bernie Sanders. Yes, that
• 1:38
  Speaker 1: is a two cent tax on fortune's over fifty million dollars.
• 1:43
  Speaker 1: Your first fifty million, don't worry, you're in the clear.
• 1:48
  Speaker 1: But for your fifty million and first dollar, you gotta
• 1:53
  Speaker 1: pitch in two cents and two cents for every dollar
• 1:58
  Speaker 1: after that. Just and that's Elizabeth Warren. Their voices are
• 2:04
  Speaker 1: becoming more and more familiar as campaigns heat up for
• 2:08
  Speaker 1: presidential election. Both have big plans to reshape US tax policy.
• 2:13
  Speaker 1: Their goal narrow the gap between the haves and have nots.
• 2:19
  Speaker 1: America is now the least equal developed nation, largely because
• 2:23
  Speaker 1: of outsize gains among the rich. For the majority of Americans,
• 2:27
  Speaker 1: their wealth has actually declined in the past decade. That's
• 2:31
  Speaker 1: despite a record stock market, the longest economic expansion in history,
• 2:35
  Speaker 1: and the lowest unemployment in fifty years. Inequality also played
• 2:40
  Speaker 1: a role in the election. Donald Trump won in part
• 2:44
  Speaker 1: by promising jobs and an improved life for those left behind.
• 2:49
  Speaker 1: Where you're born, where you went to school, if you
• 2:51
  Speaker 1: went to school, how rich your parents are. These all
• 2:55
  Speaker 1: dictate where you'll end up in America. So how do
• 2:59
  Speaker 1: you solve an issue that's so complicated and runs so
• 3:04
  Speaker 1: deep Sanders and Warren think they have the answer. Make
• 3:08
  Speaker 1: the rich pay more. For Warren and Sanders, a wealth
• 3:12
  Speaker 1: tax is a way to even things out, to redistribute
• 3:16
  Speaker 1: economic gains. More broadly, we have something that's just fundamentally
• 3:23
  Speaker 1: wrong with an economy that isn't performing well for broad
• 3:28
  Speaker 1: majorities of the population. Stephanie Kelton is an economics professor
• 3:32
  Speaker 1: at Stony Brook University and she advises the Sanders campaign.
• 3:36
  Speaker 1: You know, this is an economy that on the surface
• 3:39
  Speaker 1: might look pretty healthy in terms of the headline unemployment
• 3:42
  Speaker 1: numbers or GDP growth, but underneath the surface there is
• 3:47
  Speaker 1: a lot that isn't working, which growth has stagnated this
• 3:51
  Speaker 1: year despite a tight labor market. Those without a college
• 3:55
  Speaker 1: degree make less than half with someone with a master's
• 3:58
  Speaker 1: degree makes. If they go to school, they're likely to
• 4:01
  Speaker 1: get saddled with huge amounts of debt. Meanwhile, health care
• 4:05
  Speaker 1: is becoming more and more expensive. For people making the
• 4:09
  Speaker 1: media income and working multiple jobs, life can feel impossible.
• 4:15
  Speaker 1: The outcome can be tragic. More people, especially white, middle
• 4:19
  Speaker 1: aged men, are committing suicide or dying of drug overdoses.
• 4:24
  Speaker 1: So why is taxing the solution? Gabrielle Zokman, the economists
• 4:28
  Speaker 1: who advise Standers and Warren, explains, you know, look, taxation
• 4:34
  Speaker 1: is one of the key determinant of the long run
• 4:39
  Speaker 1: concentration of wealth. That's one of the big lessons from history.
• 4:42
  Speaker 1: You know when when when the tax system was much
• 4:46
  Speaker 1: more progressive, that also when inequally was lower. And uh,
• 4:51
  Speaker 1: if you care about reducing the concentration of wealth, then
• 4:59
  Speaker 1: the most direct and powerful tool would be a progressive
• 5:03
  Speaker 1: wealth dext Zuckman says wealth translates into political power and
• 5:08
  Speaker 1: an erosion of democracy. He is one of several economists,
• 5:11
  Speaker 1: including Thomas Peaked and Emmanuel Says, who have elevated the
• 5:15
  Speaker 1: issue in their field. Kelton, who thinks that generally a
• 5:19
  Speaker 1: government doesn't need to raise taxes to spend acknowledges the
• 5:23
  Speaker 1: reality on Capitol Hill and the question how are you
• 5:26
  Speaker 1: going to pay for it? I mean, this is the
• 5:29
  Speaker 1: sort of way it works in Washington, d C. Right,
• 5:33
  Speaker 1: You're you're a candidate or you're a lawmaker, and you
• 5:35
  Speaker 1: want to do some big, ambitious stuff and you've got
• 5:39
  Speaker 1: an agenda, and it's going to cost a lot of money,
• 5:42
  Speaker 1: and well, if you have to go where the money is, okay,
• 5:45
  Speaker 1: where's the money. Well, I guess the rich people have
• 5:47
  Speaker 1: all the money. You know, everybody knows that there are
• 5:50
  Speaker 1: these concentrations of income and wealth in the hands of
• 5:53
  Speaker 1: a small number of very, very well off people. Here's
• 5:57
  Speaker 1: a breakdown of the plants. Sands is more ambitious, with
• 6:01
  Speaker 1: his plan, cutting the average billionaire's well than half in
• 6:04
  Speaker 1: the next fifteen years. The annual tax would apply to
• 6:08
  Speaker 1: about one hundred and eighty thousand households. Warren's would apply
• 6:13
  Speaker 1: to seventy thousand because her wealth threshold is higher. In
• 6:17
  Speaker 1: a nutshell, both candidates would raise several trillion dollars from
• 6:22
  Speaker 1: multimillionaires to be spent on social programs. But some research
• 6:30
  Speaker 1: has shown that redistributing income may not be all that effective.
• 6:34
  Speaker 1: William Gale is co director at the Tax Policy Center
• 6:37
  Speaker 1: in Washington. His research shows that a small boost in
• 6:41
  Speaker 1: taxes for the rich has a pretty negligible effect on
• 6:44
  Speaker 1: overall inequality. After all, even if a billionaire hands over
• 6:49
  Speaker 1: tens of millions of dollars, there's still a huge gap
• 6:52
  Speaker 1: between them and someone working several part time gigs at
• 6:55
  Speaker 1: a minimum wage. One question, of course, is how much
• 6:59
  Speaker 1: should you is taxes? A second question is is that
• 7:02
  Speaker 1: really the best or only way to narrow the inequality gap.
• 7:07
  Speaker 1: We need to consider both government spending uh and tax policy.
• 7:14
  Speaker 1: There's no guarantee of success. In fact, fifteen countries in
• 7:18
  Speaker 1: Europe have tried to implement some kind of wealth tax
• 7:20
  Speaker 1: in recent years, but only four still have one. Why
• 7:25
  Speaker 1: the levies didn't raise a lot of money and they
• 7:28
  Speaker 1: were pretty tough to collect. More on that in the
• 7:30
  Speaker 1: next segment, what's the ideal solution? Then, Gail suggests closing
• 7:36
  Speaker 1: income tax loopholes, improving education, and bolstering the social safety net.
• 7:42
  Speaker 1: It's also messaging. It's not about punishing the rich. In fact,
• 7:46
  Speaker 1: some rich people are actively supporting higher taxes. I'm more
• 7:51
  Speaker 1: s Pearl. I'm the chairman of a group called the
• 7:53
  Speaker 1: Patriotic Millionaires. We have a group of hundreds of wealthy
• 7:57
  Speaker 1: business people and investors who are very concerned that the
• 8:01
  Speaker 1: growing inequality is going to destabilize our country. We're at
• 8:05
  Speaker 1: a turning point and we might end up with, you know,
• 8:10
  Speaker 1: pitchforks or taxes, and I'll choose taxes. Pearl was formerly
• 8:15
  Speaker 1: an executive at black Rock, one of the world's largest
• 8:18
  Speaker 1: fund managers. There's a growing understanding that inequality isn't just
• 8:23
  Speaker 1: an issue of morality but also basic economics. If the
• 8:28
  Speaker 1: majority of people aren't increasing their wealth, they're spending is restrained,
• 8:33
  Speaker 1: business formation is lower, and the economy that relies so
• 8:38
  Speaker 1: much on consumption won't grow as fast. I made a
• 8:41
  Speaker 1: lot of money because people pay their mortgage bills on time,
• 8:46
  Speaker 1: and their cell phone bills and their iTunes bills, and
• 8:50
  Speaker 1: money's trickled up from all of these people paying these
• 8:53
  Speaker 1: little bills every month to those of us who have
• 8:56
  Speaker 1: invested in the companies like Amazon and Google and Verizon,
• 9:01
  Speaker 1: and the banks who make money from those monthly bills
• 9:04
  Speaker 1: coming in. And without people who can make their payments
• 9:08
  Speaker 1: every month, investors can't make money either. Wall Streets flagged
• 9:13
  Speaker 1: some concern about a war in presidency as she rises
• 9:16
  Speaker 1: in the polls. Others like billionaire investor Ray Dalio, and
• 9:21
  Speaker 1: even ratings agency S and P have said inequality is
• 9:24
  Speaker 1: one of the biggest issues putting the economy and political
• 9:28
  Speaker 1: stability at risk. There's been some movement. A handful of
• 9:33
  Speaker 1: places in the US have started rolling out taxes that
• 9:37
  Speaker 1: hit companies, worsening the income divide. Portland, Oregon added a
• 9:41
  Speaker 1: surcharge to companies where the top executive earns one hundred
• 9:44
  Speaker 1: times more than the typical employee. Still, there's a long
• 9:49
  Speaker 1: way to go for national policies to come and force,
• 9:52
  Speaker 1: and the election is a full year away. The good news,
• 9:57
  Speaker 1: politicians and voters have a lot of options, and look,
• 10:01
  Speaker 1: the wealth taxes one policy that can help address the
• 10:04
  Speaker 1: rights of inequality. But the other policies that are equally
• 10:07
  Speaker 1: are almost as equally important. You know, fixing the income tax,
• 10:10
  Speaker 1: corporate taxation, but also you know, anti trust, regulation of
• 10:15
  Speaker 1: intellectual property, UH, access to education, reforming the healthcare system,
• 10:21
  Speaker 1: and all of these matters. And UH, countries choose the
• 10:25
  Speaker 1: level of inequality that they have through government polysis, and
• 10:30
  Speaker 1: the choices really ours to make. For Bloomberg News in Washington,
• 10:35
  Speaker 1: d C. I'm Catty Dmitrieva. So in the debate about
• 10:45
  Speaker 1: wealth taxes, one claim you hear a lot in the
• 10:48
  Speaker 1: US is that wealth taxes would make America or European.
• 10:52
  Speaker 1: Howether that's a good thing or a bad thing, I
• 10:54
  Speaker 1: guess it depends on your point of view, but wealth
• 10:57
  Speaker 1: taxes certainly sound like something Europe would have a lot
• 11:00
  Speaker 1: off with all of its emphasis on social solidarity and redistribution.
• 11:05
  Speaker 1: So you might be surprised to hear that Switzerland's currently
• 11:08
  Speaker 1: the only European country that raises a significant amount of
• 11:11
  Speaker 1: money from wealth taxes. It's true that more than a
• 11:14
  Speaker 1: dozen European countries have had wealth taxes at some point
• 11:18
  Speaker 1: in the last few years, but nearly all of them
• 11:21
  Speaker 1: have abolished them, and two countries that have largely junk
• 11:25
  Speaker 1: their wealth taxes are Sweden and France. We have a
• 11:28
  Speaker 1: Swedish economist in residents now at Bloomberg Economics, Johannah Jansen,
• 11:32
  Speaker 1: based in Stockholm, and a French economist, Maiva Kuza, who
• 11:36
  Speaker 1: is currently in Switzerland. So I thought it might be
• 11:38
  Speaker 1: useful to talk to them about the experience there of
• 11:41
  Speaker 1: wealth taxes. Yohannah, let me start with you tell me
• 11:44
  Speaker 1: what happened to wealth taxes in Sweden. Well, you're right,
• 11:47
  Speaker 1: we have abolished them. We abolished them in two thousand
• 11:51
  Speaker 1: and seven after sixty years. Actually, and you're right, it
• 11:55
  Speaker 1: was not because Swedes have a problem with taxing the rich.
• 12:00
  Speaker 1: Actually it was that the tax after several years, included
• 12:04
  Speaker 1: so many tweaks and exceptions that it was deemed to
• 12:07
  Speaker 1: be unfair. In the end, and that is something that
• 12:10
  Speaker 1: you hear a lot that it's not so much the
• 12:12
  Speaker 1: principle of wealth taxes, it's the fact that you're then
• 12:15
  Speaker 1: you and people try so hard to avoid them that
• 12:17
  Speaker 1: they end up a very very extorting and messy exactly,
• 12:21
  Speaker 1: that's it. And we had a number of well known
• 12:24
  Speaker 1: corporate leaders that threatened to move abroad, and some did.
• 12:29
  Speaker 1: Henderson Marrit's h and MS founder Arlen Passion did move also,
• 12:34
  Speaker 1: i ke as in Rakampra did so too. Uh And
• 12:37
  Speaker 1: in a bid to keep nohow in capital in the country,
• 12:39
  Speaker 1: certain shares in publicly owned companies were actually made exempt
• 12:43
  Speaker 1: and that, in combination with a fairly low threshold for
• 12:46
  Speaker 1: this wealth tax, that meant that the tax was paid
• 12:49
  Speaker 1: not by the wealthiest but by many middle and above
• 12:52
  Speaker 1: average in com earners. But it does it does seem
• 12:56
  Speaker 1: odd though, when you have a country that you know
• 12:58
  Speaker 1: where high income folks are paying very high marginal tax rates.
• 13:02
  Speaker 1: Do you think there was something just more visceral about
• 13:05
  Speaker 1: people feeling that wealth should be shouldn't be taxed in
• 13:09
  Speaker 1: the same way as income. Well, perhaps I think it's
• 13:12
  Speaker 1: also that what we're seeing in Sweden now is that
• 13:16
  Speaker 1: and It's like that with tax policy. If if it's
• 13:20
  Speaker 1: like pruning a garden, if you tax something heavily, it
• 13:22
  Speaker 1: will wither. If you reduce taxation, it will likely grow.
• 13:26
  Speaker 1: And what we're seeing in Sweden now is that because
• 13:29
  Speaker 1: capital taxes have been lowered while labor income taxes are
• 13:32
  Speaker 1: still high, people tend to start their own companies. Even
• 13:36
  Speaker 1: consultants start their own companies and instead of having a
• 13:40
  Speaker 1: labor income, they make it a capital income. May even
• 13:44
  Speaker 1: let's talk a little bit about the French experience. I mean,
• 13:46
  Speaker 1: I don't quite remember it, but I know when I
• 13:48
  Speaker 1: was first studying economics, President metals introduction of the wealth
• 13:53
  Speaker 1: tax when he came in one was talked about as
• 13:56
  Speaker 1: being the great kind of move against the tide of
• 13:58
  Speaker 1: global opinion. Remember an eighty one. It was a period
• 14:01
  Speaker 1: where market reforms were coming into the fourth Ronald Reagan
• 14:05
  Speaker 1: and Margaret Thatcher, and his wealth tax was kind of
• 14:07
  Speaker 1: symbolic of the fact that France was taking a different direction.
• 14:11
  Speaker 1: But we have now Prepresident Macro has basically got rid
• 14:14
  Speaker 1: of it in the last couple of years. Is that right, Yes,
• 14:17
  Speaker 1: that's correct. So it was introduced your right by in
• 14:21
  Speaker 1: one and it was partly abolished by Macro follow in
• 14:24
  Speaker 1: the twenty seventeen addiction. So out of the wealth tax,
• 14:29
  Speaker 1: they have kept the tax on housing wealth, which is
• 14:32
  Speaker 1: about it the fourth of the total tax base that
• 14:38
  Speaker 1: was in place before, and they have abolished the tax
• 14:41
  Speaker 1: on financial wealth more generally. And the stated objective was
• 14:45
  Speaker 1: actually to um increase productive investment into the French economy
• 14:50
  Speaker 1: by avoiding that. Actually some capital moves apart or in
• 14:54
  Speaker 1: UM look tax loopholes to avoid to avoid the wealth tax.
• 14:59
  Speaker 1: Do you think it's going to have any of those effects?
• 15:01
  Speaker 1: I mean, do you think it was ever a sort
• 15:03
  Speaker 1: of negative in its effects as people said, and is
• 15:05
  Speaker 1: now going to cause this great rebirth of growth or
• 15:08
  Speaker 1: has it become more symbolic. So clearly there was a
• 15:11
  Speaker 1: symbolic effect, and I think the signaling that President Macron
• 15:15
  Speaker 1: was really poor business was quite strong from abolishing this tax.
• 15:20
  Speaker 1: We're quite lucky that there has been a committee set
• 15:23
  Speaker 1: up to assess the impact of the change to the
• 15:26
  Speaker 1: wealth tax and the change to the taxation of capital
• 15:30
  Speaker 1: um and they have given their first reports earlier this month,
• 15:34
  Speaker 1: in October to last month, and so far it's realy
• 15:37
  Speaker 1: to tell how much impact that will have It's quite
• 15:41
  Speaker 1: difficult to know actually how much tax exile had happened
• 15:45
  Speaker 1: before the tax was partly abolished, so it's difficult. But
• 15:50
  Speaker 1: the French treas or the French Minister of Finance is
• 15:56
  Speaker 1: starting to publish a lot of data and an animalized
• 15:59
  Speaker 1: data and back season wealth taxes and wealth in general,
• 16:02
  Speaker 1: so pretty that will be a good laboratory to understand.
• 16:05
  Speaker 1: How so as well if taxes can affect behaviors and inequalities, well,
• 16:09
  Speaker 1: I guess there is a bit ironic that you've got
• 16:12
  Speaker 1: Macron kind of getting rid of largely getting rid of
• 16:16
  Speaker 1: the wealth tax, just as American politicians and it seems
• 16:21
  Speaker 1: like an awful lot of economists are all saying that
• 16:23
  Speaker 1: maybe these kind of taxes are a good idea. And
• 16:25
  Speaker 1: it is partly actually because of the data that that
• 16:28
  Speaker 1: the French economist Thomas Piquity has been putting out there.
• 16:31
  Speaker 1: So is this do you think that we will be
• 16:34
  Speaker 1: sort of internationally moving more in favor of taxing wealth
• 16:38
  Speaker 1: in one way or another, even if maybe the French
• 16:41
  Speaker 1: way of doing it was not the right way of
• 16:43
  Speaker 1: doing it. So generally wealth taxation is progressive because there
• 16:48
  Speaker 1: is accomredation between with an income. So that means that
• 16:52
  Speaker 1: if you start taxing higher were for the weddest households,
• 16:56
  Speaker 1: so it's equivalent to increasing the effective tax rate and
• 17:00
  Speaker 1: but with higher income. So I think that's the first
• 17:02
  Speaker 1: that's a fast fashional way we might see more well spectation,
• 17:06
  Speaker 1: especially if you feel that income including capital income is
• 17:10
  Speaker 1: actually more difficult to tax. Because we're within equality has
• 17:14
  Speaker 1: taken such a prominent focus in the debate, it's probably
• 17:19
  Speaker 1: something we will see debated more in the next and
• 17:23
  Speaker 1: we are seeing our heady debate in more in the
• 17:26
  Speaker 1: economics and of physical or government policy debate. We're going
• 17:30
  Speaker 1: to have a lot more debate around asset taxation, I
• 17:33
  Speaker 1: think everywhere, but certainly as economists we probably is. It's
• 17:36
  Speaker 1: annoying for people to hear, but economists tend to focus
• 17:39
  Speaker 1: on the details of these things and it's going to
• 17:41
  Speaker 1: matter quite a lot. I think about the details of
• 17:44
  Speaker 1: those proposals on the US presidential campaign, and maybe we'll
• 17:48
  Speaker 1: come back to it in a few months time, but
• 17:50
  Speaker 1: in the meantime, Johanna Jeanson and Stockholm and may have
• 17:53
  Speaker 1: a kuza in Zurich. Thank you very much. Thank you
• 17:55
  Speaker 1: for having me. Thank you. Before we go this week,
• 18:05
  Speaker 1: we thought we should go to Germany to reflect on
• 18:08
  Speaker 1: one anniversary and one new beginning. The anniversary, of course,
• 18:12
  Speaker 1: is the thirtieth anniversary of the fall of the Berlin Wall,
• 18:15
  Speaker 1: and the new beginning is the arrival of Christine Lagarde
• 18:18
  Speaker 1: on Monday this week for her first day in the
• 18:21
  Speaker 1: office as President of the European Central Bank. Well Yana
• 18:24
  Speaker 1: Randall is an economy and central bank editor of Bloomberg
• 18:27
  Speaker 1: based in Frankfurt. Yanna, let's talk about the ECB first.
• 18:30
  Speaker 1: That's your your bread and butter day to day. What
• 18:33
  Speaker 1: have we seen of Christine Lagarde since her arrival at
• 18:36
  Speaker 1: the u c B on Monday. We saw her walking
• 18:39
  Speaker 1: into the c B, which which was actually quite nice.
• 18:43
  Speaker 1: He took a few minutes to chat to reporters on
• 18:45
  Speaker 1: on her first working day, and then she disappeared very
• 18:49
  Speaker 1: quickly saying, um, she has a lot of catching up,
• 18:52
  Speaker 1: a lot of people to get to know, to do.
• 18:54
  Speaker 1: And the first speech she gave actually that very same day,
• 18:58
  Speaker 1: Monday evening in Berlin to uh to applaud the efforts
• 19:03
  Speaker 1: and and Lord wolf and Schoy Blue, former Finance Minister
• 19:06
  Speaker 1: of Germany, She hasn't spoken about monetary policy yet, so
• 19:11
  Speaker 1: that is something that we're very much looking forward to.
• 19:14
  Speaker 1: But she has paid tribute in that sense to to
• 19:17
  Speaker 1: a great leader that she knows very well from her
• 19:21
  Speaker 1: time as French finance minister and um as head of
• 19:24
  Speaker 1: the IMATH. Yeah, and wolf Going was a pretty towering
• 19:27
  Speaker 1: figure during the whole of the Eurozone crisis. But you
• 19:30
  Speaker 1: you literally wrote the book on Mario Drug with your
• 19:33
  Speaker 1: Bloomberg colleague Alessandro Spetziel, behind the scenes look on how
• 19:39
  Speaker 1: he saved the euro I think it's available in Italian now,
• 19:42
  Speaker 1: but I think hopefully in English suit in all good bookstores.
• 19:46
  Speaker 1: What do you expect to be the big contrast between
• 19:50
  Speaker 1: the two, Christine Lagarde and Mario Drug. I think we
• 19:55
  Speaker 1: will see a lot more from Christine Lagarde in the
• 19:58
  Speaker 1: in the public eye. UM. I expect her to be
• 20:01
  Speaker 1: much more outgoing, much more engaging with the public. To
• 20:05
  Speaker 1: see her show up at events, give interviews, give speeches.
• 20:09
  Speaker 1: That's something that Mario Druggi hasn't really done over the
• 20:12
  Speaker 1: past couple of years. UM. He has basically only communicated
• 20:17
  Speaker 1: during press conferences, the ones following the ECB decisions. Testimony
• 20:22
  Speaker 1: in Parliament that sort of thing, but he hasn't really
• 20:25
  Speaker 1: been out there explaining ECB policy to the public. And
• 20:29
  Speaker 1: I think, um, look, guard, that's one of her pot
• 20:32
  Speaker 1: forte's um to engage with the people. She's a very
• 20:34
  Speaker 1: charming person. She likes to be with people, talk to people.
• 20:39
  Speaker 1: So I think that'll that will do the institution very well,
• 20:42
  Speaker 1: especially in the light um of criticism lately, especially in
• 20:47
  Speaker 1: Germany where the CP isn't particularly well regarded or its
• 20:51
  Speaker 1: monetary policy. You should say you're right about the charm.
• 20:54
  Speaker 1: I mean, I think Mary Drug is quite charming. But
• 20:55
  Speaker 1: I've interviewed Christine Laguard many times over the years, and
• 20:59
  Speaker 1: she as a way she she can be quite kind
• 21:02
  Speaker 1: of conspiratorial. You know, before the cameras are running, she
• 21:05
  Speaker 1: compliments you have a little conversation around your boots that
• 21:08
  Speaker 1: you're wearing or whatever it is. You know, She's just
• 21:10
  Speaker 1: she's very good at putting people at ease and then
• 21:13
  Speaker 1: communicating well, you're right. And it's the risk that she
• 21:16
  Speaker 1: actually knows some of these people too well, particularly politicians.
• 21:19
  Speaker 1: You know, if the ECB needs to stand as a
• 21:22
  Speaker 1: bulwark against political pressures in Europe, just as any Central
• 21:27
  Speaker 1: Bank hast too. Do you think that might be an
• 21:29
  Speaker 1: issue that she has such strong relationships already with the politicians.
• 21:34
  Speaker 1: I think actually quite to the contrary. She is somebody
• 21:38
  Speaker 1: who really grows attached to the institution she leads. You
• 21:43
  Speaker 1: saw that at the IMAF she adapted very quickly to
• 21:46
  Speaker 1: the to the spirit of the institution and became a
• 21:49
  Speaker 1: very outspoken defender of the institution, and I think we'll
• 21:53
  Speaker 1: see something similar. And if anything, the close relations to governments,
• 21:57
  Speaker 1: to finance ministers, to heads of states well help her
• 22:00
  Speaker 1: do her job, because if you look at it, um,
• 22:03
  Speaker 1: the e c B is really coming to an end
• 22:05
  Speaker 1: of the line. They are running out of tools. It's
• 22:09
  Speaker 1: of course something that a policymaker would never admit, but
• 22:12
  Speaker 1: interest rates are already at a record low. Quee has
• 22:17
  Speaker 1: limits and um, although they say, you know, they have
• 22:20
  Speaker 1: some way to go. Ultimately she needs governments to to
• 22:24
  Speaker 1: step up their game. They have been calling on governments
• 22:27
  Speaker 1: to step up fiscal stimulus, UM, structural reforms, that sort
• 22:31
  Speaker 1: of thing, and I think her relationships with the political
• 22:35
  Speaker 1: elite in that sense can only help. Well, we shall see,
• 22:39
  Speaker 1: you will see how things go, and we'll be back
• 22:42
  Speaker 1: to talk to you, I'm sure in the in the
• 22:44
  Speaker 1: next few months. But a last word on the big
• 22:48
  Speaker 1: historic anniversary that Germany has been commemorating the thirty years
• 22:53
  Speaker 1: since the fall of the Berlin Wall. It's hard to
• 22:56
  Speaker 1: imagine a euro without a unified Germany. Thirty years ago
• 23:00
  Speaker 1: we didn't have the Eurozone. Um. If you go to
• 23:03
  Speaker 1: Berlin now, the on the surface, the unification process seems complete.
• 23:09
  Speaker 1: You know, you wouldn't. You can't identify East and West
• 23:13
  Speaker 1: just standing on that border in in in Berlin. But
• 23:16
  Speaker 1: I know underneath, if you look at the economic data,
• 23:19
  Speaker 1: and certainly if you look at the political polling for
• 23:22
  Speaker 1: far right parties, it's still quite a divided nation. Is
• 23:26
  Speaker 1: that what you find, Yana? Yeah, I would agree with that,
• 23:30
  Speaker 1: And I think a lot of it has to do
• 23:32
  Speaker 1: with how that unification or reunification came into being. A
• 23:38
  Speaker 1: lot as rooted in the in the political decision, the
• 23:41
  Speaker 1: economic decisions that were taken right in the nine nineties,
• 23:44
  Speaker 1: in the early nineteen nineties. Um, And what you can
• 23:47
  Speaker 1: what you can still feel today is that many Eastern
• 23:51
  Speaker 1: German people are still scarred from from the process. About
• 23:55
  Speaker 1: three million people lost their jobs in the early nineteen nineties.
• 23:59
  Speaker 1: Now the labor force was only nine million people big,
• 24:02
  Speaker 1: so that's a third of the labor force right there.
• 24:05
  Speaker 1: And unemployment was was a total foreign concept for for
• 24:09
  Speaker 1: somebody from from a communist country, so so that hit deeply.
• 24:14
  Speaker 1: And um, things have obviously recovered since then, but unemployment
• 24:19
  Speaker 1: is still higher in the East than it is in
• 24:21
  Speaker 1: the West. People are actually working longer hours, they're making
• 24:24
  Speaker 1: less money, they're less likely to get into leadership positions.
• 24:28
  Speaker 1: So there is a sense of feeling left behind still
• 24:32
  Speaker 1: among a lot of people in East Germany. And that
• 24:36
  Speaker 1: is also one explanation why you see people voting for
• 24:41
  Speaker 1: populist parties, populist on the right and on the left.
• 24:44
  Speaker 1: And I think, you know, if anyone listening to this
• 24:45
  Speaker 1: wonders where the economics really matters, that was the time
• 24:48
  Speaker 1: when economics really mattered, because there was that the decision
• 24:51
  Speaker 1: I think you were you're talking about it yet, the
• 24:53
  Speaker 1: decision to have the conversion rate between the old the
• 24:57
  Speaker 1: most mark and the mark deutschebak be one for one,
• 25:01
  Speaker 1: that was the politically important thing, and all the economists
• 25:04
  Speaker 1: at the time said, if you do that, you've got
• 25:07
  Speaker 1: very unproductive Europe. East German workers who will overnight be
• 25:11
  Speaker 1: put out of work, and that's exactly exactly what happened.
• 25:13
  Speaker 1: Taken a long time to come back from. That shows
• 25:15
  Speaker 1: that economic decisions really can make a difference. Yeah, very
• 25:18
  Speaker 1: much so. I spoke actually many years back to the
• 25:22
  Speaker 1: vice president of the East German Central Bank about exactly this.
• 25:26
  Speaker 1: He said, Yeah, we knew that this was wrong from
• 25:29
  Speaker 1: an economic point of view, but really politically there was
• 25:33
  Speaker 1: no other way around, because how do you explain to
• 25:35
  Speaker 1: people who have saved, who have worked, who have done
• 25:37
  Speaker 1: nothing wrong, that their savings are basically worth only half
• 25:41
  Speaker 1: of what they thought they were. Um. So that was
• 25:45
  Speaker 1: one very very big decision that was taken as a
• 25:48
  Speaker 1: matter of fact, you know, when when you looked at
• 25:51
  Speaker 1: which companies were actually um productive or competitive in that sense,
• 25:56
  Speaker 1: after after that whole transition, there was one company in
• 26:00
  Speaker 1: all of East Germany which was and um it's the
• 26:03
  Speaker 1: one that makes fancy China fancy porcelains. I should ask
• 26:09
  Speaker 1: you personally, you were born in the East of Germany.
• 26:13
  Speaker 1: What what's your memory I know you're terribly young, but
• 26:16
  Speaker 1: what's your memory of the of the fall of the
• 26:18
  Speaker 1: Berlin Wall? I have I have quite vivid memories of that.
• 26:21
  Speaker 1: I grew up in Leipzish, which was one of the
• 26:24
  Speaker 1: places where the Monday demonstrations were probably strongest leading up
• 26:27
  Speaker 1: to the fall of the Berlin Wall. Um, so they
• 26:30
  Speaker 1: led right by our house where we lived each Monday,
• 26:33
  Speaker 1: and and it was a mixture of terrifying views and
• 26:37
  Speaker 1: also very um hopeful views. The day it finally happened, Um,
• 26:43
  Speaker 1: it was a very strange atmosphere, a strange atmosphere throughout
• 26:47
  Speaker 1: the city. I remember going to West Berlin with my family,
• 26:52
  Speaker 1: taking the train up there the Sunday, after walking across
• 26:56
  Speaker 1: that border and and being greeted by presumings of other people.
• 27:01
  Speaker 1: There were so many people and and and so many
• 27:04
  Speaker 1: people from the east, so many people from the West
• 27:06
  Speaker 1: just coming out to see to to give the kids
• 27:10
  Speaker 1: chocolate and the parents coffee and and um, strange things
• 27:15
  Speaker 1: that that you wouldn't necessarily give us gifts, but that
• 27:19
  Speaker 1: were usually part of the packages that traveled from east
• 27:22
  Speaker 1: to west. One of my most vivid memories is actually
• 27:26
  Speaker 1: going into um a fruit and vegetable store, on on
• 27:30
  Speaker 1: Sunday in West Berlin, you know, on the weekend after
• 27:33
  Speaker 1: the wall broke, and just seeing what was on display there.
• 27:37
  Speaker 1: I think we must have stood there for minutes, just
• 27:40
  Speaker 1: John's dropping. I'd never seen a pineapple in my life.
• 27:43
  Speaker 1: I didn't know, you know, half the fruits that were
• 27:46
  Speaker 1: on display. That's kind of the luxury that that you
• 27:49
  Speaker 1: as a kid did not remember, or walking by a
• 27:52
  Speaker 1: toy store. It just, you know, it felt like heaven. Um,
• 27:57
  Speaker 1: it felt like coming to a foreign place. Essentially, well
• 28:00
  Speaker 1: we should. It is good to remember. Amazing things can happen.
• 28:03
  Speaker 1: Yan at round Out. Thank you very much, pleasure, Thanks
• 28:14
  Speaker 1: for listening to Stephanomics. We'll be back next week with
• 28:16
  Speaker 1: more on the ground insights from around the global economy.
• 28:19
  Speaker 1: In the meantime, you can find us on the Bloomberg
• 28:21
  Speaker 1: Terminal website, app, or wherever you get your podcasts. We'd
• 28:25
  Speaker 1: love it if you took the time to rate and
• 28:27
  Speaker 1: review our show so it can reach more listeners. And
• 28:30
  Speaker 1: for more news and analysis during the week from Bloomberg Economics,
• 28:33
  Speaker 1: follow as Economics on Twitter. You can also find me
• 28:37
  Speaker 1: on at my Stephanomics. The story in this episode was
• 28:40
  Speaker 1: written and reported by Kata Dmitrieva. It was produced by
• 28:44
  Speaker 1: Magnus Hendrickson and edited by Scott Laman, who is also
• 28:47
  Speaker 1: the executive producer of Stephanomics Special Thanks to to Mevakuza,
• 28:53
  Speaker 1: Johannah Jeanson, Yana Randau and Ben Holland. Francesco Leviy is
• 28:58
  Speaker 1: the head of Bloomberg podcast thre