Latest / Stephanomics / Stiglitz, Roubini and the Post-Pandemic Future of Capitalism

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Stiglitz, Roubini and the Post-Pandemic Future of Capitalism · Stephanomics

• 0:08
  Speaker 1: Hello, and welcome to Stephanomics, the podcast that brings the
• 0:11
  Speaker 1: COVID global economy to you. And this week we're changing
• 0:15
  Speaker 1: the frame. I'm not going to be bringing you on
• 0:18
  Speaker 1: the ground insights from Atlanta or Madrid or anywhere else.
• 0:22
  Speaker 1: Because I had an opportunity to ask two of the
• 0:25
  Speaker 1: biggest names in economics where they thought the world was heading.
• 0:28
  Speaker 1: And I found a fascinating contrast between them that I'd
• 0:32
  Speaker 1: like to share with you. It wasn't in their basic
• 0:34
  Speaker 1: analysis of what was happening, because they both saw a
• 0:36
  Speaker 1: lot of the same worrying global trends, and they both
• 0:39
  Speaker 1: thought that many of them were likely to be exacerbated
• 0:42
  Speaker 1: by the COVID crisis. The difference laying whether they thought
• 0:47
  Speaker 1: there was anything anyone, any government, any of us might
• 0:50
  Speaker 1: be able to do to put us on a better course.
• 0:55
  Speaker 1: I talked first to new Real Rabini, professor of economics
• 0:58
  Speaker 1: at New York University, and then it was Nobel Prize
• 1:01
  Speaker 1: winning economist professor Joe Stigletts of Columbia University. It was
• 1:06
  Speaker 1: all part of Bloomberg's Global invest Conference, which this year
• 1:10
  Speaker 1: was held virtually over several days and multiple time zones.
• 1:14
  Speaker 1: I'll let you hear for yourself, which of those two
• 1:17
  Speaker 1: was more upbeat about our capacity to change our fate.
• 1:21
  Speaker 1: Let's just say you won't be surprised to hear Rubini's
• 1:24
  Speaker 1: nickname is Dr Do. In the third quarter of this year,
• 1:29
  Speaker 1: there's going to be a recovery after a very severe
• 1:32
  Speaker 1: session in the first and the second court. So for
• 1:35
  Speaker 1: a quarter or two he may look like a v
• 1:37
  Speaker 1: sha recovery. But the way I different from consensus is
• 1:41
  Speaker 1: that consensus believes that by next year the recovery is
• 1:46
  Speaker 1: going to continue, that growth is going to be something
• 1:49
  Speaker 1: like six percent in the United States, three times as
• 1:52
  Speaker 1: much potential, while I see the recovery being strong on
• 1:56
  Speaker 1: in the third quarter and phazically out by the fourth
• 1:59
  Speaker 1: quarter and and becoming very unemic by the next year.
• 2:02
  Speaker 1: And the main reason is not just the fact we're
• 2:04
  Speaker 1: gonna have a second or third wave, but if you
• 2:07
  Speaker 1: think about it, after the global financial crisis, firms that
• 2:11
  Speaker 1: were firing workers and they reire them in a way
• 2:15
  Speaker 1: that was different from the past. Not formal jobs, not
• 2:18
  Speaker 1: full time jobs with good wages and good salaries and benefits,
• 2:21
  Speaker 1: but big workers, part time workers, hourly workers, freelancers, contractors,
• 2:28
  Speaker 1: this time around, we have shared already something like between
• 2:30
  Speaker 1: twenty and thirty million jobs. And when the readings don't occur,
• 2:34
  Speaker 1: that type of precarious job is going to become the norm.
• 2:37
  Speaker 1: Most firms are highly leverage. They have to survive and
• 2:40
  Speaker 1: thrive by cutting costs and saving more. How they're gonna
• 2:44
  Speaker 1: do it by reducing labor costs and first firing people
• 2:47
  Speaker 1: and then rehiring them in a more flexible way. The
• 2:50
  Speaker 1: trouble is that what's my labor cost is somebody else's
• 2:54
  Speaker 1: labor income. And as the corporate sector deleverages by spending less,
• 2:59
  Speaker 1: saving or and doing less capacs, then there'll be a
• 3:02
  Speaker 1: more unemic recovery of labor income because there is more
• 3:05
  Speaker 1: precarious jobs, will be a very large unemployment rate. And
• 3:09
  Speaker 1: even the households have to be more cautious. They have
• 3:11
  Speaker 1: to be more riscoverse. Uss households have less than four
• 3:15
  Speaker 1: hundred dollars of liquid cash in the case of an emergency,
• 3:19
  Speaker 1: that be more risk, aversion that implies less spending, more saving,
• 3:24
  Speaker 1: less capital spending less with retential investment. And that's why
• 3:28
  Speaker 1: the RECOVID is going to become like a you the
• 3:31
  Speaker 1: thing that people are pricing in expectation for acovery of
• 3:34
  Speaker 1: growth and learning that are totally not consistent with the
• 3:37
  Speaker 1: fact that a COVID of the economy is going to
• 3:40
  Speaker 1: be a you rather than a be. Just to push
• 3:43
  Speaker 1: back a bit on on some of that you what
• 3:45
  Speaker 1: you've described, one way of putting it would be that
• 3:48
  Speaker 1: there is a system that came into this that had flaws,
• 3:52
  Speaker 1: many of which have inspired have inspired populism, rising inequality,
• 3:56
  Speaker 1: and you believe that the response to the crisis will
• 3:59
  Speaker 1: be exact acerbate those things. And that's that's certainly what
• 4:02
  Speaker 1: many people are forecasting, that we're going to see a
• 4:04
  Speaker 1: further further inequality and a further damaging of employment rights
• 4:09
  Speaker 1: and labor income, which will ultimately in it kind of
• 4:11
  Speaker 1: marks this way seeds that sows the seeds of its
• 4:14
  Speaker 1: own destruction. But there is a view that says, you
• 4:18
  Speaker 1: know what, this has been a wake up call, this crisis,
• 4:21
  Speaker 1: and even the people who doubted before that you need
• 4:24
  Speaker 1: major reform to make this a more inclusive world are
• 4:29
  Speaker 1: now going to realize they have to do something different.
• 4:33
  Speaker 1: Do you give any credence to that, whether in the
• 4:35
  Speaker 1: US or anywhere else, that actually you could have a
• 4:39
  Speaker 1: reset coming out of this that helps to slow down
• 4:44
  Speaker 1: or even reverse some of those trends that you're talking about.
• 4:48
  Speaker 1: Many firms right now are either bankrupt on the verge
• 4:51
  Speaker 1: of bankruptcy. They have to do and take action to
• 4:54
  Speaker 1: try to survive. And what are the actions that have have
• 4:56
  Speaker 1: been taken United States? We last in the United State
• 5:00
  Speaker 1: in the last few months, many more jobs that we
• 5:02
  Speaker 1: created in the last decade, depending on how you measure,
• 5:06
  Speaker 1: they've had between twenty and thirty million people have lost
• 5:09
  Speaker 1: their jobs, and the corporate sector first fires them, and
• 5:13
  Speaker 1: then when they're gonna be rehiving them, they're gonna do
• 5:16
  Speaker 1: what they've done after the global financial crisis and gig workers, contractors,
• 5:21
  Speaker 1: partime workers, hourly workers, freelancers. That's the reality. I don't
• 5:26
  Speaker 1: see a radical change in the United States in terms
• 5:29
  Speaker 1: of economic policy. Yes, if Trump were to be losing
• 5:33
  Speaker 1: the election, that's and if and if by them were
• 5:36
  Speaker 1: to becoming to power, maybe economic policy are gonna becoming
• 5:40
  Speaker 1: slightly more progressive. But there are major forces, including also technology.
• 5:45
  Speaker 1: The digital dis option is going to imply that over
• 5:48
  Speaker 1: the next few years there will be many more jobs.
• 5:50
  Speaker 1: They are being destroyed, not just by globalization, trade, or migration,
• 5:55
  Speaker 1: but by technological innovation that is capital intensive, skilled buyers,
• 6:01
  Speaker 1: and labor saving, there's gonna be is wrapting millions of
• 6:04
  Speaker 1: other jobs, for example, moral commation, more robotics. The fact
• 6:08
  Speaker 1: that's going to be reopened North America not gonna be
• 6:10
  Speaker 1: full of workers, gonna be full of robots. So unless
• 6:13
  Speaker 1: there is a very radical change in economic policies, the
• 6:17
  Speaker 1: trend of globalization, of technology, of the weakness of labor,
• 6:22
  Speaker 1: of unions, and so on, imply that labor is weak,
• 6:25
  Speaker 1: capital is mobile, and the entire system has been essentially
• 6:28
  Speaker 1: one where income has been going on from the workers
• 6:32
  Speaker 1: to capitalists, from wages to profits, and from those who
• 6:36
  Speaker 1: spend more to those who save more. And I'm not
• 6:39
  Speaker 1: sure that these major trends are going to be reversed
• 6:42
  Speaker 1: anytime soon. Just moving on to the death piece of
• 6:50
  Speaker 1: your of your analysis, I think there's there's been a view,
• 6:53
  Speaker 1: perhaps unspoken, those who have a more optimistic view of
• 6:57
  Speaker 1: the next five to ten years looking and investing the
• 7:00
  Speaker 1: markets on the basis of it that we're either going
• 7:03
  Speaker 1: to have more of the same coming out of this,
• 7:06
  Speaker 1: namely very low inflation, low interest rates. But with that
• 7:10
  Speaker 1: the affordability of this much higher debt stock corporate and
• 7:15
  Speaker 1: public debt around the world, or we might get inflation
• 7:19
  Speaker 1: and that might cause them bumps down the road, but
• 7:22
  Speaker 1: in the met it will at least make that debt
• 7:24
  Speaker 1: easier to grow out from underneath. Your view is actually
• 7:29
  Speaker 1: that that's that's just too optimistic that you can have
• 7:33
  Speaker 1: the inflation without really resolving the debt issue. Is that right? Well,
• 7:37
  Speaker 1: mynew is that certain? In the short run, I agree
• 7:40
  Speaker 1: that there are more deflationary rather than inflationary pressures. There
• 7:44
  Speaker 1: is a massive slack in goods markets, in labor markets,
• 7:47
  Speaker 1: in real estate, in energy, and commodities. So this year,
• 7:51
  Speaker 1: next year there will be low flationary and deflationary pressures.
• 7:55
  Speaker 1: But what I'm pointing out is there were two major
• 7:57
  Speaker 1: forces that kept inflation on law for the last decade.
• 8:01
  Speaker 1: One was globalization, and now we're in a process of diglobalization.
• 8:06
  Speaker 1: And the second one was major technological innovation that we're
• 8:10
  Speaker 1: also increasing productivity reducing costs. And right now we're gonna
• 8:15
  Speaker 1: have a digital wall being built between US and China,
• 8:19
  Speaker 1: and we're gonna have two separate AIS, two separate internet
• 8:22
  Speaker 1: to separate five g's two separate telecom system and so
• 8:26
  Speaker 1: on and so on. And for example, we may for
• 8:30
  Speaker 1: strategic reason not want to use the Y Way five G,
• 8:33
  Speaker 1: but the Y five gs thirty percent cheaper than the
• 8:36
  Speaker 1: one of Nokia and Rickson and twenty and more productive.
• 8:41
  Speaker 1: So you're gonna install a five G network, there's going
• 8:44
  Speaker 1: to be not hy way, it's gonna be fifty more
• 8:47
  Speaker 1: expensive than before. That's a negative supply shock. So both
• 8:51
  Speaker 1: technology and diglobalization imply negative supply shocks. Now, last time around,
• 8:56
  Speaker 1: when we had negative supply shots and we had easy money,
• 9:00
  Speaker 1: easy fiscal in the seventies with the two add sharks
• 9:03
  Speaker 1: of seventy three and seventy nine, when they that with inflation, stagnation,
• 9:08
  Speaker 1: recession and inflation. So either this that become unsustainable, or
• 9:14
  Speaker 1: if we're gonna try to wipe them out within inflation,
• 9:17
  Speaker 1: then we're gonna have a trap of stagflation. Historically, people
• 9:22
  Speaker 1: who have best against integration have tended to be wrong.
• 9:28
  Speaker 1: Many people would say, looking at the trends we've had
• 9:30
  Speaker 1: over the last few years, even if globalization slows down,
• 9:35
  Speaker 1: it can't it's not going to reverse and it could
• 9:38
  Speaker 1: still continue to cause bring enormous benefits that particularly perhaps
• 9:45
  Speaker 1: developing countries and countries across Asia especially. So what is
• 9:50
  Speaker 1: it about now that you think is different from the
• 9:52
  Speaker 1: other times we're declared the end of integration. I'm not
• 9:57
  Speaker 1: predicting for the time being a hot war between US
• 10:01
  Speaker 1: and China. I think that given the symmetry of power
• 10:04
  Speaker 1: conventional and conventional between US and China, that's unlikely. But
• 10:09
  Speaker 1: we're seeing every day an escalation of this cold work,
• 10:13
  Speaker 1: and that's already leading to a process of the globalization,
• 10:17
  Speaker 1: and it's not just the globalization on trade, but most
• 10:20
  Speaker 1: importantly on technology. And today those five G networks are
• 10:24
  Speaker 1: running our phones, but tomorrow they're gonna be running our
• 10:28
  Speaker 1: system of saying how Connor's vehicle, making sure the millions
• 10:31
  Speaker 1: of them don't eat each other. And tomorrow pretty much
• 10:34
  Speaker 1: every piece of consumer electronic in the Internet of Things
• 10:38
  Speaker 1: is gonna have a five G chip, even your lowly
• 10:41
  Speaker 1: Chinese toaster or coffee machine or microwave. And therefore, if
• 10:45
  Speaker 1: you're not going to use the five G of China,
• 10:47
  Speaker 1: you're not gonna also want to use the toasters or
• 10:50
  Speaker 1: microwaves of coffee machines of China, because they're potentially listening
• 10:54
  Speaker 1: device if you believe that there is a factor from
• 10:57
  Speaker 1: y Wesh five G to the Chinese government. So that's
• 11:00
  Speaker 1: where the war on tech becomes also a war on trade,
• 11:04
  Speaker 1: and it's going to only escalate over time. Unfortunately, I
• 11:07
  Speaker 1: think that's the trend we are facing. Of course, it's
• 11:09
  Speaker 1: not black and white. I'm not saying there's not going
• 11:11
  Speaker 1: to be any trade of any sort, but we're in
• 11:13
  Speaker 1: a trend towards gradual but persistent deglobalization. Couldn't they be
• 11:19
  Speaker 1: good news here? I mean, many people are investing into
• 11:22
  Speaker 1: high tech companies that seem to do fantastically well. It
• 11:27
  Speaker 1: seems odd to say we're going to have lots of
• 11:29
  Speaker 1: technological to change, but it's not going to produce growth
• 11:33
  Speaker 1: and it's not going to produce income for so someone
• 11:36
  Speaker 1: which might then be redistributed. Is there no good news here? Well,
• 11:41
  Speaker 1: the differences in the previous Industrial revolution jobs went from
• 11:45
  Speaker 1: agriculture into the industrial sector, and from the industrial sector
• 11:50
  Speaker 1: to the service sector. But what's happening right now is
• 11:53
  Speaker 1: not only that the factory of the future is going
• 11:55
  Speaker 1: to be a bunch of robberts and machine and just
• 11:57
  Speaker 1: maybe one person manning these chines, but now the same
• 12:01
  Speaker 1: process of AI, robotics automation is completely disrupting tons of
• 12:08
  Speaker 1: jobs in the service sector, from retail to transportation, to education,
• 12:14
  Speaker 1: to government services to pretty much anything under the sun.
• 12:18
  Speaker 1: So those who say we're going to create other jobs
• 12:21
  Speaker 1: is not clear what they're going to be. Those jobs
• 12:22
  Speaker 1: in the future are going to be created. For every
• 12:25
  Speaker 1: job that is created by Amazon, there is an average
• 12:28
  Speaker 1: ten jobs in retails are disappearing. So I think that's
• 12:31
  Speaker 1: a difference compared to the past. And then for the
• 12:34
  Speaker 1: time being, all these technology of disruption has not led
• 12:38
  Speaker 1: at the macro level to data they're showing an increasing productivity. Eventually,
• 12:43
  Speaker 1: of course, if there's gonna be a significant technological disruption,
• 12:47
  Speaker 1: there may be an increasing productivity. The economic pie is
• 12:50
  Speaker 1: going to become larger. But since technological innovation is capital intensive,
• 12:55
  Speaker 1: skill bias and labor saving those one financial real cave,
• 13:00
  Speaker 1: they are gonna do well. Those that are in the
• 13:02
  Speaker 1: top twent of distribution of skills, education, human capital gonna
• 13:06
  Speaker 1: do well. But if you are a blue collar worker
• 13:09
  Speaker 1: with law skill or medium skill. But now even if
• 13:12
  Speaker 1: you are a white collar worker with law skills or
• 13:15
  Speaker 1: medium skills, your income and your job is going to
• 13:17
  Speaker 1: be disrupted completely by technology. And therefore the issue is
• 13:21
  Speaker 1: not where the economic pie is bigger, but what's going
• 13:24
  Speaker 1: to be the distribution of the benefits and distribution of
• 13:26
  Speaker 1: barns are going to go to capital and those were very,
• 13:29
  Speaker 1: very high skilled and everybody else is going to be
• 13:32
  Speaker 1: left behind, and therefore the tension and the political backlash
• 13:36
  Speaker 1: against it's gonna become severe. So the pie is gonna
• 13:38
  Speaker 1: be bigger, the distribution of the benefit is going to
• 13:41
  Speaker 1: become even more uneven. Mm hm okay, Well, a newer revealing,
• 13:47
  Speaker 1: I guess. So the answer to is there any good news,
• 13:49
  Speaker 1: it's very it's it's hard for you to see the
• 13:51
  Speaker 1: good news. But we will be seeing if Professor Joe
• 13:56
  Speaker 1: Stigletts has a different perspective later on. But in the meantime,
• 13:59
  Speaker 1: new Rabini, thank you very much for joining us. So
• 14:09
  Speaker 1: that was Mauriel Rabini at the Bloomberg Global invest Conference.
• 14:13
  Speaker 1: Joe stiglets was next, and you might remember I interviewed
• 14:16
  Speaker 1: him about the future of capitalism last year for Stephanomics.
• 14:19
  Speaker 1: I started by asking whether he shared Dr Doom's gloomy diagnosis. Well,
• 14:30
  Speaker 1: I think the critical issue is what policy governments pursue.
• 14:35
  Speaker 1: The second critical issue, of course, is the pandemic itself,
• 14:39
  Speaker 1: and we don't know when that will be brought under control.
• 14:42
  Speaker 1: But assume that we got that under control, the big
• 14:45
  Speaker 1: issue is how will government policy respond, And we are
• 14:50
  Speaker 1: need to be frank, there's a lot of uncertainty about that.
• 14:55
  Speaker 1: For instinct. One side says we need to provide the
• 15:00
  Speaker 1: unemployed with assurance that we're going to continue the unemployment
• 15:04
  Speaker 1: insurance as long as the pandemic continues. It's what we
• 15:08
  Speaker 1: did in two thousand and eight in the global financial crisis.
• 15:12
  Speaker 1: The other side is much more hesitant to do that.
• 15:15
  Speaker 1: And now, picking up a point that Neuriel emphasized, a
• 15:19
  Speaker 1: big factor dampening the economy is uncertainty, precautionary behavior, and
• 15:26
  Speaker 1: that lack of assurance and the part of government that
• 15:29
  Speaker 1: it will be there is going to exacerbate the kind
• 15:33
  Speaker 1: of uncertainty that's going to lead to limits, limits on
• 15:37
  Speaker 1: consumption and investment. So how can governments confront that head on?
• 15:41
  Speaker 1: I mean, you you're quite right that we've seen this
• 15:43
  Speaker 1: precautionary savings. So how should a government try and get
• 15:50
  Speaker 1: over that problem? Because, of course, as you said, we
• 15:52
  Speaker 1: don't know if there's going to be a second way.
• 15:54
  Speaker 1: We don't know how long this procession is going to be.
• 15:56
  Speaker 1: It's completely rational for businesses and households to hold back.
• 16:00
  Speaker 1: So the first thing is we need to have an
• 16:03
  Speaker 1: assurance that government programs will continue so long as the
• 16:09
  Speaker 1: pandemic continues. You know, in the beginning, back in March,
• 16:14
  Speaker 1: people thought this was going to be a three week lockdown,
• 16:18
  Speaker 1: four week lockdown. Certainly by the beginning of June or
• 16:22
  Speaker 1: the end of July, things would be under control. No
• 16:26
  Speaker 1: one thinks that. Today. We're worried about us second wave,
• 16:30
  Speaker 1: a third wave, a perpetual wave. So we need the
• 16:34
  Speaker 1: assurance UH that the government isn't now providing. Some countries
• 16:41
  Speaker 1: are thinking about more specific ways of what you might
• 16:46
  Speaker 1: be calling collectivizing some of the risk, for instance, telling companies,
• 16:52
  Speaker 1: if you borrow to make an investment and the pandemic continues,
• 16:57
  Speaker 1: we will allow you to extend the payments, so you
• 17:00
  Speaker 1: don't you know, sometimes you're going to want to make
• 17:02
  Speaker 1: those investments, make them now, and we'll bear some of
• 17:07
  Speaker 1: the risk. UH. Some countries have provided for instincts time
• 17:12
  Speaker 1: dated spending vouchers to encourage people to go spend now
• 17:17
  Speaker 1: there's underemployment. From a social point of view, this is good,
• 17:22
  Speaker 1: but we understand your fear about getting in debt and
• 17:26
  Speaker 1: uh this is a way of encouraging spending today. There
• 17:31
  Speaker 1: is a lot of support going to businesses now, but
• 17:35
  Speaker 1: we don't know for sure that that is going to
• 17:37
  Speaker 1: go into investment or even into jobs and a bloomberg.
• 17:40
  Speaker 1: We've looked at how many big companies in the US
• 17:44
  Speaker 1: have been raising bonds very cheaply, raising a trillion dollars
• 17:47
  Speaker 1: worth in so far this year, more than in the
• 17:50
  Speaker 1: whole of last year, on the back of the FED
• 17:53
  Speaker 1: easing policies. But they're also cutting jobs. So do you
• 17:57
  Speaker 1: think there should be more string attached to some of
• 18:01
  Speaker 1: this support. Yes, there was an interesting study that pointed
• 18:04
  Speaker 1: out that particularly the p p P program seems to
• 18:08
  Speaker 1: have had no effect on retaining employment. It was an
• 18:12
  Speaker 1: extraordinarily badly designed program and even worse the implementation, with
• 18:18
  Speaker 1: the money going to those who were most connected to
• 18:21
  Speaker 1: the banks and to those who at least needed UH.
• 18:24
  Speaker 1: The money out. If you know, the government has never
• 18:28
  Speaker 1: spent so much money, and we ought to have a
• 18:31
  Speaker 1: say on how that money is used. It shouldn't be
• 18:35
  Speaker 1: a blank check. Uh. You know, when I was at
• 18:38
  Speaker 1: the World Bank, we always put conditions. I thought sometimes
• 18:42
  Speaker 1: they put too many conditions, but putting certain basic conditions
• 18:48
  Speaker 1: that you retain your employees, that you treat your workers
• 18:52
  Speaker 1: in a decent way, that you move toward green economy. Uh,
• 18:57
  Speaker 1: that we helped, you know, with a vision what kind
• 19:00
  Speaker 1: of an economy do we want emerging from the pandemic?
• 19:04
  Speaker 1: To me, this is one of the my major criticism
• 19:07
  Speaker 1: other programs. The idea behind them was we ought to
• 19:11
  Speaker 1: go back to where we were in January. There were
• 19:16
  Speaker 1: a lot of problems with the American economy and the
• 19:20
  Speaker 1: global economy. In January inequality, health status of Americans was
• 19:27
  Speaker 1: going down when not very not very good. Uh. We
• 19:31
  Speaker 1: hadn't begun the green transition. So there were so many
• 19:34
  Speaker 1: things that we need knew we needed to do. This
• 19:38
  Speaker 1: was an occasion with the government spending so much money
• 19:42
  Speaker 1: to help move our economy along in the right direction.
• 19:46
  Speaker 1: So I guess going back to the longer term, you know,
• 19:50
  Speaker 1: can central banks be part of that longer term answer?
• 19:53
  Speaker 1: Should we? You know, is this the end of an
• 19:56
  Speaker 1: era of independent central banks? That shouldn't be worried so
• 19:59
  Speaker 1: much about inflation, they should be helping to tackle inequality
• 20:05
  Speaker 1: raise wages. What was what's your view? Uh, First, I
• 20:11
  Speaker 1: think there is a limit to what central banks can do,
• 20:14
  Speaker 1: but they can do a lot, so they're really important.
• 20:18
  Speaker 1: I'm very supportive of the broader view that they've seemed
• 20:22
  Speaker 1: to be taken on. I've always criticized them in the
• 20:26
  Speaker 1: past for not taking into account the effects of their policies,
• 20:30
  Speaker 1: for instance, and increasing inequality. They put a big row
• 20:34
  Speaker 1: in increasing wealth inequality, and it seems that today they
• 20:38
  Speaker 1: are taking that more into account, apparently because that's very
• 20:44
  Speaker 1: much related to their main mandate. If you have increasing inequality,
• 20:49
  Speaker 1: you're going to have deficient aggregate demand, so you cannot
• 20:53
  Speaker 1: ignore the impact on inequality. You know, the I m
• 20:57
  Speaker 1: F has put inequality at the center of their agenda,
• 21:02
  Speaker 1: and when they first did Domini extras ka and said,
• 21:05
  Speaker 1: we're doing this because our manding is making sure that
• 21:09
  Speaker 1: global growth is strong, and you can't do that without
• 21:12
  Speaker 1: at least paying some more attention to win equality. Thinking
• 21:23
  Speaker 1: about the whole world, um we've done. Our economists have
• 21:28
  Speaker 1: looked at what response emerging market economies have been able
• 21:32
  Speaker 1: to do. Two COVID compared to the enormous amount of
• 21:38
  Speaker 1: money flowing out of finance ministries around the developed world,
• 21:42
  Speaker 1: and indeed all the central bank money printing, and it's
• 21:45
  Speaker 1: obviously it's a fraction. Most of these emerging market comes
• 21:48
  Speaker 1: have not been able to, if you like, fill the
• 21:50
  Speaker 1: whole that's been left by COVID or might be left
• 21:52
  Speaker 1: by COVID. Now, what are the risks coming out of
• 21:55
  Speaker 1: that for the whole world? But what should we also
• 21:57
  Speaker 1: be trying to What do you think is the best
• 22:00
  Speaker 1: so to that for helping them? Well, we are a
• 22:03
  Speaker 1: globally integrated economy, and we should remember that it was
• 22:08
  Speaker 1: the emerging markets that helped bring us out of the
• 22:10
  Speaker 1: two thousand eight crisis. We will not have a robust
• 22:14
  Speaker 1: global recovery unless all the world is recovered, and that
• 22:19
  Speaker 1: includes the emerging markets. The emerging markets are clearly more vulnerable,
• 22:26
  Speaker 1: both in terms of health, and they don't have the
• 22:29
  Speaker 1: economic resources, as you pointed out, respond anywhere near to
• 22:33
  Speaker 1: the extent that the United States or even Europe have responded. Uh,
• 22:39
  Speaker 1: there's gonna be a lot of countries that are going
• 22:42
  Speaker 1: to be facing sovereign debt problems that won't be able
• 22:46
  Speaker 1: to repay their debt, and there needs to be a
• 22:51
  Speaker 1: way of restructuring those decks. So far, the private sector
• 22:56
  Speaker 1: has given every indication that they don't understand that there's
• 23:00
  Speaker 1: a pandemic going on, and they have no humanity. You know.
• 23:04
  Speaker 1: They talked about social responsibility, they talk about all these
• 23:08
  Speaker 1: fancy words about now we get it, we understand we
• 23:12
  Speaker 1: have an important uh role to play in our society,
• 23:16
  Speaker 1: and they're acting in just the opposite way. A dollar
• 23:20
  Speaker 1: for them is worth thousands of people die in the
• 23:25
  Speaker 1: emerging markets. So I think this is going to be
• 23:29
  Speaker 1: a critical moment for global capitalism if the global financial
• 23:34
  Speaker 1: markets continue in their hardheaded way of squeezing these emerging markets.
• 23:41
  Speaker 1: Rabini was talking about the battle that's going on the
• 23:45
  Speaker 1: new Cold War. Well, American style of capitalism is going
• 23:50
  Speaker 1: to take a beating if America's financial markets continue to
• 23:55
  Speaker 1: behave in the way that they've been behaving. I guess
• 23:59
  Speaker 1: that was partly a part of some of the things
• 24:01
  Speaker 1: I was asking Neurial, because he seemed to see no
• 24:04
  Speaker 1: potential that capitalism might save itself in the way that
• 24:08
  Speaker 1: perhaps they might have done. We might have said that
• 24:11
  Speaker 1: there was a reset in the thirties in the US
• 24:15
  Speaker 1: and the in the forties in response to some of
• 24:18
  Speaker 1: the threats of populism and the threats to capitalism. One
• 24:22
  Speaker 1: question has come in from Michael check him. Can market
• 24:26
  Speaker 1: economies change reform to be more socially, environmentally, equitable, fairer,
• 24:32
  Speaker 1: all the things that you're talking about, while with companies
• 24:35
  Speaker 1: still being profitable. I guess that's the question. And if if,
• 24:39
  Speaker 1: if capitalism does reform itself and it's still built money,
• 24:44
  Speaker 1: I think the answer is absolutely yes. There are ears
• 24:47
  Speaker 1: responsible capitalism. I wrote a book called Progressive Capitalism. I
• 24:51
  Speaker 1: really believe that we can have a profitable capitalism dextters
• 24:57
  Speaker 1: all of our society. You epic change some of the
• 25:00
  Speaker 1: rules of the game. Uh. And and you can't exploit
• 25:04
  Speaker 1: the environment in the way that they did. You can't
• 25:06
  Speaker 1: exploit the workers in the way that you did. But uh,
• 25:10
  Speaker 1: you can. Actually I think we'll have a stronger, more
• 25:14
  Speaker 1: robust capitalism. The other question is the politics. Uh, can
• 25:20
  Speaker 1: we change the politics in a way that there will
• 25:24
  Speaker 1: be a change in the way the market economy works.
• 25:28
  Speaker 1: Quite frankly, I'm actually hopeful on that. You know, many
• 25:32
  Speaker 1: of the countries in Europe have created a kind of
• 25:35
  Speaker 1: social democracy where they've tried to temper capitalism, and in
• 25:42
  Speaker 1: many of the social indicators they do much better than
• 25:45
  Speaker 1: the United States, less in equality and some of the
• 25:48
  Speaker 1: marriage quite dynamic economies, So we actually have some proof
• 25:53
  Speaker 1: that one can have a more socially just environment very
• 25:58
  Speaker 1: mentally friendly capitalism. You mentioned populism, and I guess it
• 26:03
  Speaker 1: comes down to this much bigger question about whether when
• 26:06
  Speaker 1: we look back, will we say that this was a
• 26:09
  Speaker 1: real turning point for the global economy where long existing
• 26:13
  Speaker 1: trends kind of came to the fore and force change,
• 26:17
  Speaker 1: or whether it will force whether we'll some of those
• 26:20
  Speaker 1: negative trends will actually accelerate. You know, after the global
• 26:23
  Speaker 1: financial crisis, the legacy of that was to shake up
• 26:26
  Speaker 1: global politics and have populism, but populism that often pointed
• 26:30
  Speaker 1: in a not not in a constructive, in a worsening direction.
• 26:36
  Speaker 1: You think there's more chance of a sort of positive
• 26:38
  Speaker 1: form of populism coming out of this, that we will
• 26:41
  Speaker 1: shake everything up and actually end up heading in a
• 26:43
  Speaker 1: better direction. Or is it still to play for I
• 26:48
  Speaker 1: think it's still in play, and I won't call a populism,
• 26:51
  Speaker 1: but I do think the November election in the United States,
• 26:54
  Speaker 1: it's going to be a critical moment. The a rising
• 27:00
  Speaker 1: you might call it that in the United States for
• 27:03
  Speaker 1: racial justice really showed a dimension of the United States
• 27:09
  Speaker 1: solidarity that had not been evidence before. I take that
• 27:14
  Speaker 1: as a sign that ideals really do matter, and that
• 27:21
  Speaker 1: the conception of what a country together means really doesn't matter.
• 27:27
  Speaker 1: So I'm very hopeful that in November there will be
• 27:30
  Speaker 1: an outpouring and that will lead the United States to
• 27:35
  Speaker 1: go in a different direction that will have, I think
• 27:40
  Speaker 1: a very big effect on the direction in which the
• 27:44
  Speaker 1: world goes. The One of the issues you were talking
• 27:47
  Speaker 1: about before is the new code war between China and
• 27:50
  Speaker 1: the United States. Uh. And it's clear that those tensions
• 27:54
  Speaker 1: are very strong. But it's also clear that we share
• 28:00
  Speaker 1: the same planet and we are going to have to
• 28:03
  Speaker 1: work together to deal with the problems of pandemics, the
• 28:06
  Speaker 1: problems of of climate change. And so the question is,
• 28:12
  Speaker 1: in the midst of a you know, reordering of the world,
• 28:17
  Speaker 1: are we going to be able to get cooperation across
• 28:22
  Speaker 1: governments that fundamentally may disagree very deeply with each other.
• 28:29
  Speaker 1: You know, you're you can imagine yourself in a lifeboat,
• 28:32
  Speaker 1: the ship is sunk, and there may be some people
• 28:35
  Speaker 1: in that lifebuoat that you really don't like, but that's
• 28:38
  Speaker 1: not the reason why you should think the life quote.
• 28:41
  Speaker 1: And maybe that's a metaphor to say, you know, we're
• 28:45
  Speaker 1: in this together. There there are some others that we
• 28:49
  Speaker 1: may not agree with, but we have some common problems
• 28:53
  Speaker 1: basing the pandemic, climate change, global peace that we have
• 28:58
  Speaker 1: to work together on. Professor Stigler's it's a pleasure, as
• 29:01
  Speaker 1: you say, ideas matter, and it is great to hear
• 29:04
  Speaker 1: someone who I know has a very clear sense of
• 29:07
  Speaker 1: what is wrong in the world give us such an
• 29:09
  Speaker 1: upbeat sense of what could change and the potential that's there.
• 29:13
  Speaker 1: So I appreciate that. Particularly you're looking at a lot
• 29:17
  Speaker 1: of the same facts as Neil Rabini, but actually thinking
• 29:20
  Speaker 1: that we can change course. So thank you again, thanks
• 29:29
  Speaker 1: for listening to seven o weeks. We'll be back next
• 29:31
  Speaker 1: week with more on the ground insight I promise, on
• 29:34
  Speaker 1: how COVID nineteen is turning the global economy upside down.
• 29:38
  Speaker 1: Remember you can always find us on the Bloomberg Terminal, website,
• 29:41
  Speaker 1: app or wherever you get your podcast and for more
• 29:44
  Speaker 1: news and analysis from Bloomberg Economics throughout the week, follow
• 29:48
  Speaker 1: at Economics on Twitter. This episode was produced by Magnus Hendrickson,
• 29:53
  Speaker 1: with special thanks to Neuria Rabini, Professor Joe Stiglett, Mark Miller,
• 29:58
  Speaker 1: and the entire Bloomberg Live production team. Lucy Meekin is
• 30:02
  Speaker 1: the acting executive producer of Stephanomics, and the head of
• 30:05
  Speaker 1: Bloomberg Podcast is Francesca leading h m hm h