Latest / Stephanomics / The Inequality of America’s K-Shaped Recovery

Transcript

The Inequality of America’s K-Shaped Recovery · Stephanomics

0:03
Speaker 1: Hello, and welcome to Steconomics, the podcast that brings the
0:06
Speaker 1: global economy to you. No want to start this series
0:10
Speaker 1: with a story about tennis, or more precisely, the All
0:13
Speaker 1: England Lawn Tennis Club in Wimbledon. When the Wimbledon Championships
0:17
Speaker 1: were canceled earlier this summer, a lot of tennis fans
0:20
Speaker 1: and sponsors pretty upset. But someone who probably wasn't so
0:24
Speaker 1: unhappy was the person who persuaded the club many years
0:27
Speaker 1: ago to take out something called pandemic insurance. The premiums
0:32
Speaker 1: were around two million dollars a year, which must have
0:35
Speaker 1: seemed a lot of the time, but that policy meant
0:38
Speaker 1: the club could cancel the championships all together and come
0:43
Speaker 1: out ahead with the total pay out of nearly a
0:46
Speaker 1: hundred and fifty million dollars. Well done, that person. Why
0:50
Speaker 1: do I tell you this? Well I thought of that
0:52
Speaker 1: number recently when I read about the Global Pandemic Insurance Facility,
0:56
Speaker 1: which the World Bank set up a few years ago.
0:59
Speaker 1: That programs also been paying out this year, and the
1:02
Speaker 1: total payments for all of the world's least developed economies
1:05
Speaker 1: will be just over a hundred and ninety million dollars.
1:09
Speaker 1: So that's a hundred and fifty million for twenty two
1:12
Speaker 1: tennis courts in Southwest London for the sixty four poorout
1:17
Speaker 1: countries in the world. Today's program is about winners and
1:22
Speaker 1: losers in the COVID economy and the case shaped recovery,
1:27
Speaker 1: the phenomenon we're seeing everywhere where. Some of the economy
1:31
Speaker 1: is taking off coming out of this recession, but other
1:34
Speaker 1: parts are still heading down. The director of the London
1:37
Speaker 1: School of Economics, Baroness Minus Chefik, is going to give
1:41
Speaker 1: me the global picture on that in a few minutes.
1:43
Speaker 1: While some countries have done a good job of protecting
1:45
Speaker 1: the poor in this crisis, some clearly haven't. I'll also
1:49
Speaker 1: be talking to our China Economy editor James Meager about
1:53
Speaker 1: life in China without COVID. They haven't had a case
1:56
Speaker 1: for six weeks. But first we have a report from
1:59
Speaker 1: Bloomberg senior reporter Sean Donald from Cleveland, Ohio, where the
2:04
Speaker 1: gap between winners and losers lately has been very stark. Indeed,
2:11
Speaker 1: six eight seven, Oh bail us one LC versus klais
2:15
Speaker 1: gatingsas hi, I'm as Gatings. How are you God morning?
2:22
Speaker 1: I'm finding you on September four, nursing assistant Calais Gatherings
2:26
Speaker 1: did something many of us have been doing in this crisis.
2:29
Speaker 1: She dialed into a zoom meeting. Only this one was
2:32
Speaker 1: a little bit more consequential than most. Gathings was joining
2:36
Speaker 1: an online session of the Cleveland Housing Court. She was
2:39
Speaker 1: before Magistrate Mark Wiseman because she was being evicted after
2:43
Speaker 1: falling behind on a nine dollar a month rent on
2:46
Speaker 1: her home in the city's Mount Pleasant neighborhood. It's okay,
2:50
Speaker 1: it's out of control, oka'n't It's okay? Where would you
2:56
Speaker 1: go if you were evicted? The shelter? I have no
3:00
Speaker 1: where to though. That's why I need a couple of
3:02
Speaker 1: weeks to find somewhere too. I've been looking. I'm sorry
3:06
Speaker 1: to ask all these personal questions, but a new program
3:11
Speaker 1: going on with the with the government that was instituted
3:13
Speaker 1: by the CDC, so for me to find out some
3:16
Speaker 1: of these questions. Did you get a stimulus check? Yeah? Okay,
3:22
Speaker 1: all right. So around the same time, in a twenty
3:28
Speaker 1: minute drive west of Gaffin's house, tech workers Nathan Hodge
3:31
Speaker 1: and his wife, Erica Schulstad were pondering something rather different.
3:35
Speaker 1: The finishing touches for the four bedroom house in the
3:38
Speaker 1: suburb of Lakewood that they had snapped up in a
3:41
Speaker 1: booming market over the summer. Let's see, so there's a
3:43
Speaker 1: lot of our space, like a nice big back and
3:46
Speaker 1: uh front porch. We made a list to justus like
3:51
Speaker 1: must have in our house. One of the one of
3:53
Speaker 1: the things we like to say as a Reese Wither
3:56
Speaker 1: June um porch couch. If you want to understand how
4:00
Speaker 1: the US recovery is reinforcing a legacy of inequality that
4:04
Speaker 1: has often been based on race, those two stories are
4:07
Speaker 1: pretty good starting points. The reality is that the gap
4:11
Speaker 1: is growing between the solidly middle class and the working
4:14
Speaker 1: poor in one of the world's richest economies. In an
4:17
Speaker 1: election year, people talk a lot about political polarization, but
4:21
Speaker 1: an equally consequential and growing economic divide has materialized as well.
4:27
Speaker 1: Think of it as the divide between bread baking America.
4:31
Speaker 1: That's those of us working from home and learning to
4:34
Speaker 1: bake sour dough and breadline America, those who are lining
4:38
Speaker 1: up at food banks and joining the growing ranks of
4:41
Speaker 1: the food and housing insecure. A lot of that is
4:45
Speaker 1: the result of who has been hit by the COVID crisis.
4:48
Speaker 1: Lower income Americans working for restaurants and hotels and small
4:51
Speaker 1: businesses have borne the brunt of the job losses. Of
4:55
Speaker 1: Americans earning less than forty thousand dollars a year laid
5:00
Speaker 1: off as a result of this year's crisis, according to
5:02
Speaker 1: the Federal Reserve, and many of those jobs aren't coming
5:06
Speaker 1: back as quickly as others. Housing is also playing a
5:09
Speaker 1: big dividing role in what the economy looks like. Almost
5:13
Speaker 1: half of renters pulled by the US Census Bureau in
5:16
Speaker 1: September said they were likely to be evicted in the
5:19
Speaker 1: next two months. A similar survey found less than twenty
5:23
Speaker 1: percent of homeowners were worried about foreclosure. The shape of
5:27
Speaker 1: the recovery and what that means for the most vulnerable
5:30
Speaker 1: parts of the American population, has a lot to do
5:33
Speaker 1: with policy choices. The FEDS response to the crisis, cutting
5:38
Speaker 1: policy rates and pouring liquidity into financial markets has brought
5:42
Speaker 1: mortgage rates down to historic laws. That's fuel to boom
5:45
Speaker 1: in home purchases and refinancings. If you are a homeowner
5:50
Speaker 1: or looking to buy and are able to work from home,
5:53
Speaker 1: your personal corner of the economy looks pretty good right now.
5:57
Speaker 1: That's the current reality and many of Cleveland's pre eminently
6:00
Speaker 1: white suburbs, and for people like Hodge, it's weird that
6:05
Speaker 1: so crazy that you think about like people want more
6:10
Speaker 1: space and interest rates are historically For someone like ga Things,
6:15
Speaker 1: who was laid off from her job at a nursing
6:17
Speaker 1: home and fell behind on the rent, your life looks
6:20
Speaker 1: pretty different, especially when Congress has been deadlocked from most
6:24
Speaker 1: of the past few months on how to roll out
6:26
Speaker 1: any new assistance for everything. And it's just like I
6:30
Speaker 1: wasn't getting a proof for anything, and then when I
6:32
Speaker 1: went back to work, I'm not working as many as ours.
6:36
Speaker 1: It's just that I just can't keep up with There's
6:38
Speaker 1: too much on my own. Ja Thing's fate that they
6:44
Speaker 1: took four minutes and forty five seconds to decide. The
6:47
Speaker 1: most important decision made by the magistrate was that she
6:50
Speaker 1: wasn't eligible for a national moratorium on evictions that have
6:53
Speaker 1: been announced two days before. She didn't even know it existed,
6:57
Speaker 1: and the reason she wasn't eligible to magic straight ruled
7:01
Speaker 1: was that she hadn't made a good faith effort to
7:03
Speaker 1: apply for rental assistance, something she also didn't know about.
7:08
Speaker 1: She might have learned about all of these things if
7:10
Speaker 1: she had only known that she was entitled to help
7:13
Speaker 1: from a free lawyer as well. Judge Mona Scott, who
7:17
Speaker 1: earlier this year became the first black woman to take
7:20
Speaker 1: charge of the Housing Court, says such problems still plagued
7:22
Speaker 1: the eviction process. That's even after the city became one
7:26
Speaker 1: of America's few to enforce a right to counsel for tenants.
7:31
Speaker 1: She sees a crisis building before her. Cleveland is a
7:34
Speaker 1: city that bears the scars of years of housing discrimination
7:38
Speaker 1: against its black residents, and like other US cities, it
7:41
Speaker 1: also hasn't tackled bigger structural problems. Even is taken up
7:47
Speaker 1: people's pay So we're not really addressing some necessary issues.
7:53
Speaker 1: We're not having these hard conversations. This current economic crisis
7:57
Speaker 1: is also building on the legacy of the last one.
8:00
Speaker 1: Cleveland was one of the epicenters of the subprime mortgage
8:03
Speaker 1: and foreclosure crisis more than a decade ago, and housing
8:06
Speaker 1: activists like Zach Germaniac will tell you that they are
8:08
Speaker 1: still dealing with the scars. We're one of the most
8:11
Speaker 1: heavily segregated cities in the country and quite Frankly, real
8:16
Speaker 1: estate is really at the centerpiece of that, uh, that
8:20
Speaker 1: tragic history. Hodgen Schulstad saw their new house three hours
8:25
Speaker 1: after the listing went online. They made an offer an
8:27
Speaker 1: hour later, and discovered that there were already a half
8:30
Speaker 1: dozen others. They ended up pleading their case in a
8:33
Speaker 1: letter and raising their bid to ten tho dollars over
8:36
Speaker 1: the asking price. Importantly, the final price that they paid
8:40
Speaker 1: was more than double what the previous owner paid for
8:43
Speaker 1: it in two thousand and eleven. Julie Weast is a
8:47
Speaker 1: real estate agent who specializes in some of Cleveland's western suburbs.
8:51
Speaker 1: Cleveland's really strong. I mean you're agoing, you know, downtown
8:54
Speaker 1: market people are buying left and right, um, all the
8:57
Speaker 1: way out to the suburbs. You know, it's really the
9:01
Speaker 1: pandemic has really not flowed anybody down. In some predominantly
9:05
Speaker 1: black zip codes of Cleveland, however, prices have tumbled by
9:09
Speaker 1: a fifth or more over the past year. Activists say
9:13
Speaker 1: that decline is caused in part by another phenomenon born
9:17
Speaker 1: in the last crisis, house flippers and out of town investors.
9:21
Speaker 1: The home gas Things lived in until she had to
9:24
Speaker 1: leave at the end of September is a prime example.
9:27
Speaker 1: In one two year stretch, the house sold seven times,
9:30
Speaker 1: including four times in just one month last year. It's
9:35
Speaker 1: current owner is an anonymous shell company called b l
9:38
Speaker 1: U s one LLC. But dive into public records and
9:42
Speaker 1: do a little slew thing and you end up talking
9:44
Speaker 1: to tebeau Gallan. He's a French real estate agent and
9:48
Speaker 1: he runs a Miami based company that specializes in selling
9:51
Speaker 1: Cleveland houses to French investors. Bongeour Devi Nat and found
9:58
Speaker 1: to tours Love is a London certain don't don't connection,
10:07
Speaker 1: says what is great about Cleveland's property market is that
10:11
Speaker 1: you can buy houses cheap and get fantastic cash flow
10:14
Speaker 1: from rent. Gathings home would have gotten your gross and
10:17
Speaker 1: your return of six and you're just a complimentary market
10:22
Speaker 1: or my print. Investors that are looking for um castro
10:28
Speaker 1: and properties. Housing activists don't see it quite the same way.
10:35
Speaker 1: They argue the out of state investors have actually contributed
10:38
Speaker 1: to the economic decline at Cleveland's East Side neighborhoods at
10:42
Speaker 1: the same time they're inflating rents. Germanic is a housing
10:46
Speaker 1: lawyer who works in the Slavic Village neighborhood, which has
10:49
Speaker 1: seen its own influx of new absentee landlords. He says
10:52
Speaker 1: they are often more focused on cash flow than what's
10:55
Speaker 1: happening to their properties or the community around them. That
10:58
Speaker 1: ends up hitting neighbors who do care, eventually forcing them
11:01
Speaker 1: to sell into a skewed market. I think a lot
11:04
Speaker 1: of times people find that, you know, the house that
11:07
Speaker 1: they had, you know, put so much time and money
11:10
Speaker 1: in fixing it up. They put on teen tens of
11:14
Speaker 1: thousands of dollars, They read did the roof back in?
11:16
Speaker 1: You know, two thousand three? They you know, all this stuff,
11:19
Speaker 1: and they find out, hey, guess what that that that
11:22
Speaker 1: house that you care so much about is worth fifteen dollars.
11:26
Speaker 1: The churn certainly hasn't contributed to an appreciation in the
11:29
Speaker 1: price of homes like the one gaff Things was evicted from.
11:33
Speaker 1: It reached a peak value of ninety three thousand dollars
11:36
Speaker 1: in two thousand four, after nearly a thirty years of
11:39
Speaker 1: ownership by just two families, according to property records. By
11:43
Speaker 1: the time Gallon's French investor bought it last year, that
11:46
Speaker 1: value had slumped by a third, which brings us to
11:49
Speaker 1: the current crisis. And how many people worry it isn't
11:53
Speaker 1: done yet. When it comes to the Cleveland or the
11:56
Speaker 1: broader US housing market, so far, neither have been hip
12:00
Speaker 1: by the wave of evictions many have feared. In Cleveland's case,
12:04
Speaker 1: that is largely due to a rental assistance program that
12:07
Speaker 1: is running out of money. According to Kevin Novak, who
12:10
Speaker 1: runs HN Housing Partners, a community group and developer that
12:14
Speaker 1: oversees the program, I'm not sure that really get through
12:17
Speaker 1: the end of the year with what we have available
12:19
Speaker 1: for our three months of emergency assistance. UM. It seems
12:23
Speaker 1: to me like this is a crisis that's going to
12:25
Speaker 1: go beyond the end of the year. The national moratorium
12:28
Speaker 1: announced in early September did not come with any new
12:31
Speaker 1: funds for rental assistance, and it did not include any
12:34
Speaker 1: measures to forgive tenants their debts, which means landlords are
12:38
Speaker 1: watching the past you rent bills pile up. To Judge
12:41
Speaker 1: Scott of the Cleveland Housing Court, the question is not
12:44
Speaker 1: whether or new evictions will come, it's when it's a moratorium.
12:49
Speaker 1: Does not mean your ring, does not mean you don't
12:52
Speaker 1: pay your car now, does not mean you do not
12:55
Speaker 1: pay your gas and light your cell phone bills. It
12:58
Speaker 1: still means that you have to pay these deals, um,
13:02
Speaker 1: because it's not if they come to collect, is when
13:05
Speaker 1: they come and collect. When that new wave of evictions
13:09
Speaker 1: does come, it will have other consequences as well. One
13:12
Speaker 1: recent study of thousands of evictions in Cleveland found they
13:15
Speaker 1: resulted in not just housing instability, but children missing more
13:19
Speaker 1: school and kids and families that are evicted also being
13:23
Speaker 1: tested less often for lead poisoning, a persistent problem in
13:26
Speaker 1: the city. Meanwhile, homeowners and better off suburbs can look
13:31
Speaker 1: forward to a property market fueled by low interest rates
13:34
Speaker 1: for some time. The Fed in September indicated it expected
13:38
Speaker 1: not to raise rates until three which is when it
13:42
Speaker 1: expects things to get back to normal in the US economy.
13:46
Speaker 1: But for those hard pressed neighborhoods on the East side
13:48
Speaker 1: of Cleveland, getting back to normal would not be much
13:51
Speaker 1: to celebrate. For them and countless neighborhoods like them in
13:55
Speaker 1: today's America, that would mean just lagging ever further behind.
14:02
Speaker 1: For Bloomberg News, I'm Sean dar So I'm delighted now
14:17
Speaker 1: to talk about some of the broader issues raised by
14:20
Speaker 1: that piece with Minu Shafik, now Baroness Shafiq, Director the
14:25
Speaker 1: London School of Economics. But I think she's one of
14:28
Speaker 1: few people who before that held very senior positions at
14:32
Speaker 1: the World Bank, the i m F and the Bank
14:34
Speaker 1: of England, where she was Deputy governor most recently. So
14:39
Speaker 1: welcome on the Welcome on Stephanomics. Um what I'm struck by.
14:45
Speaker 1: And obviously there was a sort of vivid demonstration in
14:47
Speaker 1: that piece of the Tale of Two Cities that this
14:52
Speaker 1: is a recession. I mean, recessions always have an unequal
14:55
Speaker 1: impact on people, but this one it seems rare, even
14:58
Speaker 1: by the standards of recess to have one in which
15:02
Speaker 1: a big chunk of the economy has been hit by
15:04
Speaker 1: this record recession. But actually quite a lot of people
15:08
Speaker 1: on the upper end of the income scale have done
15:11
Speaker 1: better as a result of this recession. They've now got
15:15
Speaker 1: savings that they didn't expect to have. We've seen soaring
15:18
Speaker 1: savings rates which presumably will go it could well go
15:20
Speaker 1: into their pension pots, all their wealth, and we've actually
15:24
Speaker 1: seen their existing wealth go up because of what's happened
15:26
Speaker 1: to the stock market. Has that been true globally or
15:30
Speaker 1: would you say the only equality was particularly stark in
15:32
Speaker 1: the US well. Some people have called COVID the Great
15:36
Speaker 1: revealer because it's revealed all of these fundamental inequities and
15:41
Speaker 1: weaknesses in our in our economies, and in our societies.
15:45
Speaker 1: And I often think about the impact of COVID as
15:49
Speaker 1: case shaped. You know, people have debated is it going
15:51
Speaker 1: to be a V shaped, you shaped, L shaped recovered.
15:53
Speaker 1: I think K is the right letter, because you have
15:55
Speaker 1: a sharp drop. And then some things go up and
15:59
Speaker 1: some things go down. And what we're seeing is that
16:01
Speaker 1: some sectors and some parts of society I'm doing better
16:05
Speaker 1: and others have done much worse. Those that have done
16:08
Speaker 1: worse have tended to be women, the young, and those
16:11
Speaker 1: who are precarious or flexible work. Is the US worse?
16:15
Speaker 1: I think the US is worse for two reasons. One
16:17
Speaker 1: that the safety net in the US is much thinner
16:21
Speaker 1: and got more holes in it than in other countries.
16:23
Speaker 1: And to the US has a higher proportion of its
16:26
Speaker 1: workforce inflexible work relative to other advanced economies. We had
16:33
Speaker 1: actually quite a significant boost to incomes, even at the
16:37
Speaker 1: lower end as a result of that enormous fiscal support
16:41
Speaker 1: package in the US earlier in the year, but as
16:44
Speaker 1: we know, those higher unemployment benefits, some of which were
16:47
Speaker 1: higher than what people had previously gotten. Wages have run
16:50
Speaker 1: out now and the President has said that he's not
16:54
Speaker 1: going to try and do a deal on a further
16:57
Speaker 1: stimulus this side of the election. What's the implications of that,
17:01
Speaker 1: do you think? Well, I think the implications for for
17:05
Speaker 1: for the poor in the US are are are devastating. Um,
17:09
Speaker 1: you know, the US has always been on the sort
17:10
Speaker 1: of stingier end of unemployment insurance. In the US, typically
17:14
Speaker 1: if you're unemployed, you get you get insurance for about
17:17
Speaker 1: six months. In continental Europe, it's more typical to get
17:21
Speaker 1: from one to two years of unemployment insurance. Also, the
17:25
Speaker 1: level at which you're compensated tends to be higher. In
17:27
Speaker 1: the US you get about, you know some typically around
17:30
Speaker 1: half your previous wage. In other parts of the world
17:33
Speaker 1: you're getting a much higher proportion of your previous wage,
17:35
Speaker 1: so you're able to sustain your standard of living. And
17:38
Speaker 1: so the fact that that basic income support will be
17:42
Speaker 1: withdrawn will have very negative consequences for inequality and poverty
17:46
Speaker 1: in the US. And we've heard the head of the
17:50
Speaker 1: Federal Reserve actually warning about the pace of the recession
17:53
Speaker 1: at the recovery itself facing a threat from that that
17:57
Speaker 1: you could have this sort of double dip that's entirely
18:00
Speaker 1: reduced by by policy. I wonder, I mean, in your
18:03
Speaker 1: in your previous very illustrious jobs, you have spend quite
18:07
Speaker 1: a lot of time advising countries on policies, but developing
18:11
Speaker 1: and developed. If you're sitting in I don't know, the
18:15
Speaker 1: UK Treasury now or chanceries across across Europe, how does
18:21
Speaker 1: the sort of unevenness of the impact of the virus
18:25
Speaker 1: and the recession affect how you think about the recovery
18:27
Speaker 1: because countries are trying to think about how to help
18:29
Speaker 1: countries grow out of this, but they're still living with COVID.
18:33
Speaker 1: You know, the initial reaction was to just put a
18:36
Speaker 1: bottom on people, put a floor on people's incomes, and
18:39
Speaker 1: the things like furlough schemes, unemployment insurance, those were always
18:43
Speaker 1: to just keep people supported in the early stages. But
18:46
Speaker 1: I think we're moving to to another stage in which
18:49
Speaker 1: there must be much greater differentiation, and we know that
18:53
Speaker 1: some jobs will disappear permanently. You know, I don't think
18:55
Speaker 1: anyone's going to be ordering new airplanes for major airlines
19:00
Speaker 1: anytime soon. For example. Uh, and we know, but things
19:04
Speaker 1: like retail, the retail sector will change fundamentally. We were
19:07
Speaker 1: already seeing that starting to happen. We know that's likely
19:10
Speaker 1: to be permanent, and so we can't go against the
19:13
Speaker 1: grain of those big economic structural changes. But we have
19:16
Speaker 1: to We have to basically support people through the transition
19:19
Speaker 1: to move to jobs which are going to be in
19:22
Speaker 1: those parts of the economy that are growing. And other
19:25
Speaker 1: countries manage this. Uh, you know, I always hold Denmark
19:28
Speaker 1: up as a fantastic example. They spend one point seven
19:31
Speaker 1: percent of GDP on reskilling workers. That's a normal times
19:35
Speaker 1: not even with COVID. Most countries spend that. But it
19:41
Speaker 1: means you're able to get people back into work quickly.
19:44
Speaker 1: They have income support when they lose their jobs, but
19:47
Speaker 1: they're very quickly supported to get back into new jobs
19:51
Speaker 1: through training. We're done in partnership with employers to make
19:55
Speaker 1: sure that the skills they acquire are relevant. So this
19:58
Speaker 1: is it is a doable thing, but it does require
20:03
Speaker 1: much more serious resources to help people move on then
20:06
Speaker 1: most countries dedicated. Yeah, what's it called is flex security
20:10
Speaker 1: or there is their model. Yeah, so you feel secure
20:13
Speaker 1: and you're you're secure that you're going to have a job,
20:16
Speaker 1: but it's not necessarily going to carry on being the
20:18
Speaker 1: same job. It's it's frustrating how often Denmarks seems to
20:22
Speaker 1: appear at top of the list on all these all
20:24
Speaker 1: these comparisons I see actually, and I'm sure it's related.
20:28
Speaker 1: They have done pretty well managing the virus and they
20:31
Speaker 1: come very high on the trust in government measures, and
20:37
Speaker 1: of course those two things go together and we are
20:39
Speaker 1: not so then go together in the UK absolutely, and
20:43
Speaker 1: they also ranked top of the list on happiness, so
20:46
Speaker 1: it's sort of you know, it's all a virtuous cycle.
20:48
Speaker 1: But people, I think that is part of the legacy
20:51
Speaker 1: of COVID is that all of you know, people are
20:54
Speaker 1: carrying too many risks on their own, risks of unemployment,
20:58
Speaker 1: risks of ill health. And one of the solutions to
21:02
Speaker 1: this is to share those risks more widely in society.
21:06
Speaker 1: And it's not just socially desirable, it's also economically more efficient.
21:17
Speaker 1: Of course, if we did come out of this saying look,
21:20
Speaker 1: government needs a look bigger role, not just right now
21:23
Speaker 1: where it's been forced to sort of put flaw under
21:25
Speaker 1: people's incomes, as you said, but longer term. We need
21:28
Speaker 1: to put back some of those supports for people risk
21:31
Speaker 1: sharing mechanisms that we've taken away over the last few decades.
21:37
Speaker 1: You know, that's going to cost money. And I just
21:39
Speaker 1: wonder when you hear things like that's the story in
21:42
Speaker 1: Cleveland and other places where the gaps in income but
21:45
Speaker 1: also wealth are very stark um, does it open up
21:50
Speaker 1: the potential to talk about wealth taxes there's a way
21:55
Speaker 1: of paying for the cost of this crisis or the
21:58
Speaker 1: cost of spending we know we have coming down the road.
22:02
Speaker 1: Do you think that's easier now? If we've seen very
22:05
Speaker 1: graphically have some you know, the stock market has kept
22:07
Speaker 1: going up as people's incomes this year have gone down. No,
22:11
Speaker 1: wealth inequality has gotten very, very extreme, and this has
22:14
Speaker 1: gone up a political agenda. I think you know there
22:18
Speaker 1: are three ways you can tax wealth. One, you can
22:20
Speaker 1: tax it when it gets past to the next generation
22:22
Speaker 1: through inheritance tax. Two you can tax it things like
22:26
Speaker 1: capital gains and dividends, and that's also very common. Most
22:31
Speaker 1: countries have some kind of inheritance tax and some kind
22:33
Speaker 1: of tax on capital gains. The thing that's really difficult
22:36
Speaker 1: in which people are debating much more now is taxing
22:39
Speaker 1: the stock of wealth which people have accumulated over the
22:43
Speaker 1: course of their lives. There's only four countries in the
22:46
Speaker 1: world that I'm aware of that have that try and
22:48
Speaker 1: do that. Norway, Spain, Switzerland and Colombia. Many other countries
22:53
Speaker 1: have tried and failed and changed their minds. So Finland, France, Iceland,
22:59
Speaker 1: Luxembourg and Never and Sweden have all attempted to tax
23:03
Speaker 1: the stock of wealth and have found it too difficult,
23:05
Speaker 1: mainly because frankly, the wealthy and their accountants are very
23:09
Speaker 1: good at devating wealth taxes. So you've got lots of
23:11
Speaker 1: grief and very little revenue. And so while I think
23:15
Speaker 1: politically wealth taxes might be part of the solution to
23:19
Speaker 1: the current fiscal challenges, I think in the end, broad based,
23:25
Speaker 1: fairly designed taxes with few loopholes are much more likely
23:30
Speaker 1: to be able to sustain a sort of generous, effective
23:35
Speaker 1: social safety in those countries. Mhm, well, we shouldn't. I
23:39
Speaker 1: shouldn't let you go without talking a bit about the
23:41
Speaker 1: rest of the world, about the developing world, because um,
23:46
Speaker 1: the gaps that we're seeing there, particularly in the sort
23:50
Speaker 1: of level of support that governments are able to provide
23:53
Speaker 1: in response to this recession obviously much larger even than
23:57
Speaker 1: we're seeing in most parts of the US. I mean,
24:01
Speaker 1: I was looking at numbers the other day. I mean
24:03
Speaker 1: that the poorer countries have largely not suffered a lot
24:06
Speaker 1: of COVID deaths. And you know that much much higher
24:08
Speaker 1: population of developing world still seeing a total number of
24:11
Speaker 1: deaths um much lower on the same order as the
24:16
Speaker 1: developed world, but they've got completely hammered by the global downturn.
24:20
Speaker 1: You know, what's what are the priorities? What can the
24:24
Speaker 1: rest of the world, What should the rest of the
24:26
Speaker 1: world be doing about that? I mean, you're absolutely right.
24:29
Speaker 1: The good news partly because of demographics, because they are
24:32
Speaker 1: younger populations, the death rates have been lower, but the
24:35
Speaker 1: economic consequences have been devastating. The good news on the
24:38
Speaker 1: economic side is that most developing countries are now have
24:41
Speaker 1: mechanisms in place to transfer income to the poorest households
24:45
Speaker 1: very effectively. So more than a hundred developing countries now
24:49
Speaker 1: have cash transfer schemes where they can get small amounts
24:52
Speaker 1: of money in onto the mobile phone banks bank accounts
24:57
Speaker 1: of poor people very quickly, and so from jip to Ethiopia,
25:01
Speaker 1: to Tanzania to to Peru. Those systems have worked really
25:06
Speaker 1: pretty well. So the mechanisms have been there. The problem
25:10
Speaker 1: developing countries have is they don't have enough resources to
25:13
Speaker 1: put through the mechanisms, and that brings us really to
25:17
Speaker 1: the problem of the global financial safety net and how
25:21
Speaker 1: for rich countries, you know, there have been literally trillions
25:25
Speaker 1: spent to support the economy during this crisis. For poor
25:29
Speaker 1: countries that just hasn't been possible, and there hasn't been
25:32
Speaker 1: anywhere near and adequate international response in terms of providing
25:37
Speaker 1: financing to the poorest countries to help them cope. Baroness Chafi,
25:41
Speaker 1: thank you so much for joining Stephanomics pleasure. Thank you,
25:45
Speaker 1: Stephanie m h. We've been talking about inequality in this
25:57
Speaker 1: program and the gaps between the halves and I have
26:00
Speaker 1: not but when it comes to countries, there's now a
26:03
Speaker 1: pretty large gap between the countries that have apparently tamed
26:07
Speaker 1: the virus and those that are now bracing for a
26:10
Speaker 1: second wave. So for this last part of the program
26:13
Speaker 1: this week, I wanted to give you a sense of
26:15
Speaker 1: how the other half lives. Visiting a place where hundreds
26:19
Speaker 1: of millions of people are going on holiday this week,
26:21
Speaker 1: traveling meeting family, going to the movies, all the things
26:25
Speaker 1: we might dream of doing without a care in the
26:27
Speaker 1: world when this pandemic is finally over. But it's not
26:31
Speaker 1: a dream. It's happening right now this week in China.
26:35
Speaker 1: And here to tell us more is Bloomberg's China Economy editor,
26:38
Speaker 1: James Mega. James, I guess you should tell us a
26:41
Speaker 1: bit about how special this week is in China, and
26:44
Speaker 1: then what's actually been happening This week is a big
26:48
Speaker 1: holiday week. The first of October this year was this
26:50
Speaker 1: China's National Day, of course, and then it was also
26:53
Speaker 1: the mid Autumn Festival, which is a big it's kind
26:55
Speaker 1: of like Thanksgiving in the US. Families get together, people
26:58
Speaker 1: gather to celebrate the festival. Those two both fell on
27:01
Speaker 1: the same day. And so there's a week long period
27:04
Speaker 1: of holidays this for the first week of October. And
27:07
Speaker 1: and how as you said, hundreds of millions of people
27:09
Speaker 1: are traveling across the country. People are taking this week
27:12
Speaker 1: after go the movies, go shopping, going holidays, to the beach,
27:15
Speaker 1: that kind of stuff. So it's a massive week for tourism,
27:18
Speaker 1: and it's a massive week for for you know, for
27:20
Speaker 1: for shopping and going out of course, there's been quite
27:23
Speaker 1: a lot of discussion in the States and across Europe
27:26
Speaker 1: about whether or not Christmas is going to be canceled
27:29
Speaker 1: this year. Certainly a lot of talk about how the
27:31
Speaker 1: limits on numbers and constraints on hospitality, all the things
27:36
Speaker 1: we've grown used to are going to affect our ability
27:38
Speaker 1: to celebrate Christmas or Thanksgiving. But it doesn't seem like
27:42
Speaker 1: those kind of things are impinging. I mean, people are
27:45
Speaker 1: deciding to just go for it. It's been six weeks
27:49
Speaker 1: now and since there was a confirmed case of COVID
27:52
Speaker 1: on the mainland in China. So people are obviously not
27:56
Speaker 1: concerned that they're going to get sick if they go out,
27:59
Speaker 1: if they go to the movies, if they catch a plane,
28:01
Speaker 1: if they get on a train. They're just not worried
28:03
Speaker 1: that they're going to be sick, and so they feel
28:05
Speaker 1: free and they feel confident that they can do all
28:07
Speaker 1: of these things. You know, in Europe or American maybe
28:10
Speaker 1: the case there may be restrictions, But even if there
28:12
Speaker 1: was no restrictions, I mean, how confident are people going
28:15
Speaker 1: to be to travel across country to go have Christmas
28:17
Speaker 1: and their parents or their grandparents place, you know, if
28:20
Speaker 1: there's a chance you could die or we get very
28:22
Speaker 1: sick to have that turkey. So the situation in China
28:26
Speaker 1: is now that people are confident that they can do
28:28
Speaker 1: these things and not get ill, and so they're going
28:30
Speaker 1: out and doing them. You say that people are basically
28:34
Speaker 1: feel like they don't have to fear catching COVID because
28:37
Speaker 1: there's so little around. But do you think there's a
28:40
Speaker 1: risk now when you have so many, hundreds of millions
28:42
Speaker 1: of people getting on trains going to beaches, that we
28:46
Speaker 1: will get a return of the virus in China. I
28:49
Speaker 1: think some people are concerned. I mean, I've heard that
28:52
Speaker 1: some schools have told parents that if they go on
28:55
Speaker 1: holidays somewhere and there's and there's an outbreak of COVID
28:57
Speaker 1: in that place, when they come back from from their holidays,
29:01
Speaker 1: their kids will have to quarantine at home for two weeks.
29:03
Speaker 1: And so I've heard that many families are not going
29:06
Speaker 1: on holidays just because they don't want to take the
29:08
Speaker 1: risk of having to then quarantine at home again for
29:10
Speaker 1: two weeks and go back to home schooling, which is
29:13
Speaker 1: everyone now knows is not a great situation. I mean,
29:16
Speaker 1: I've been doing that myself for for a little while,
29:18
Speaker 1: and it's not the best educational experience for for parents
29:21
Speaker 1: or students, and so I think a lot of families
29:24
Speaker 1: maybe are just you know, don't want to take their risks,
29:27
Speaker 1: so they're not traveling. So yeah, the numbers of people
29:29
Speaker 1: who are traveling down on last year. Um, But you know,
29:32
Speaker 1: I think for the most part, people are confident that
29:34
Speaker 1: they can they can go away and then they won't
29:37
Speaker 1: be there won't be an outbreak. And if there is
29:40
Speaker 1: an outbreak, I mean, China's shown that it has the
29:42
Speaker 1: ability and knows what to do to sort of stop
29:44
Speaker 1: that in its tracks. There was a series of small
29:47
Speaker 1: outbreaks in Beijing up in the north of China earlier
29:49
Speaker 1: this year, and the government very clearly quickly stepped in
29:53
Speaker 1: and squash those and I think if if there is
29:55
Speaker 1: another outbreak after this holiday period, they can do that again.
29:59
Speaker 1: Do we think this is part of just back to
30:02
Speaker 1: normal for the Chinese economy generally or there as there's
30:05
Speaker 1: still parts that are showing weakness. I mean, in general,
30:09
Speaker 1: we've said that it's been a bit of a two
30:11
Speaker 1: track recovery even in China, and that consumption hasn't got
30:15
Speaker 1: back to where it was but is this perhaps a
30:16
Speaker 1: sign that things are changing. I think in China, I mean,
30:21
Speaker 1: it's it's definitely still the two track recovery. I mean, obviously,
30:24
Speaker 1: if you're taking if you're going to the beach in China, uh,
30:28
Speaker 1: you know, you're not going to be the poorest people
30:29
Speaker 1: in the country. And a lot of the people who
30:31
Speaker 1: are traveling are those people who may have gone overseas,
30:33
Speaker 1: may have gone to Japan or Thailand or South Korea,
30:36
Speaker 1: and now can't go to those places because you know,
30:38
Speaker 1: they still have cases there and so they're stuck at home,
30:41
Speaker 1: so they're traveling domestically. I think a lot of the
30:44
Speaker 1: poor people in the country, they're not traveling. You know,
30:46
Speaker 1: they lost their jobs. Maybe they maybe there's only for
30:48
Speaker 1: a few months or six months, but they still lost
30:50
Speaker 1: their job. They didn't have any income for that period,
30:52
Speaker 1: and so they're not obviously going to be able or
30:55
Speaker 1: willing to to sort of spend money now in this period.
30:58
Speaker 1: So there is a recovery, but I think, you know,
31:00
Speaker 1: it's it's the kind of a case shaped recovery that
31:02
Speaker 1: other people are talking about. The wealthy who were able
31:05
Speaker 1: to work from home for the last six months or
31:07
Speaker 1: whatever are doing okay, and now they're spending and they're
31:10
Speaker 1: out shopping. The poorer people, the people who lost their jobs,
31:13
Speaker 1: that people who are really struggling, they're still going to
31:15
Speaker 1: be struggling and not spending as much. And we're seeing
31:18
Speaker 1: that in the data. Retail sales data is not really
31:20
Speaker 1: coming back at all. So there it is again, the
31:23
Speaker 1: K shaped recovery. There's a lot of people going on
31:26
Speaker 1: holiday in China this week, but just as we heard
31:29
Speaker 1: earlier in the US, there's a big chunk of the
31:31
Speaker 1: population that isn't celebrating and has been hit pretty hard.
31:36
Speaker 1: Before we go, James, I should say we were interrupted
31:39
Speaker 1: when we first tried to start this interview by someone
31:41
Speaker 1: coming to take your temperature in the hotel you're staying
31:44
Speaker 1: in for two weeks quarantine. Can you explain what's going on?
31:48
Speaker 1: So my family and I flew back to China about
31:51
Speaker 1: about ten days ago now from Australia, where we've been
31:54
Speaker 1: for the last few months. And prior to flying we
31:56
Speaker 1: had to have a COVID test and then as soon
31:58
Speaker 1: as we arrived at the airport, we had another test.
32:00
Speaker 1: Then we were taken to our hotel. Since then, we've
32:02
Speaker 1: had another COVID test, So now three times people have
32:06
Speaker 1: shoved things up my nose um. And then we also
32:09
Speaker 1: had a blood test to see if we had antibodies
32:11
Speaker 1: for the virus, to indicate whether we had had it
32:14
Speaker 1: in the past and have recovered. And then every day
32:17
Speaker 1: someone comes to my hotel room and takes the temperature
32:20
Speaker 1: of my my wife, myself, and our two kids, so
32:23
Speaker 1: morning and night. So we're we're in this hotel for
32:27
Speaker 1: for two weeks. So I mean that's an indication of
32:29
Speaker 1: how seriously you know, the government is taking this. Everyone
32:32
Speaker 1: who comes to China has to go through this, Everyone
32:35
Speaker 1: who wants to travel internationally has to do this when
32:37
Speaker 1: they come back. And I think it's that kind of
32:40
Speaker 1: effort that the government is putting into this to really,
32:42
Speaker 1: you know, control. It is one of the things that
32:45
Speaker 1: is making people now confident that they can go out
32:47
Speaker 1: and they can enjoy themselves. Well, we will be very glad,
32:50
Speaker 1: Blueberg will be glad to have you back in Beijing.
32:52
Speaker 1: We should say that this was all before you were
32:54
Speaker 1: even going to be allowed to be back in Beijing,
32:56
Speaker 1: but I hope we will talk to you when you
32:58
Speaker 1: are James Mago, thanks very much, Thank you, very much.
33:07
Speaker 1: Thanks for listening to Stephanomics. I should probably go back
33:10
Speaker 1: to that story about Wimbledon, because it's not entirely a
33:12
Speaker 1: happy ending for the All England Lawn Tennis Club. After
33:16
Speaker 1: they had that big payout this year, the head of
33:18
Speaker 1: the club as confirmed that he's not expecting the club
33:21
Speaker 1: to get pandemic insurance at any price for one. We'll
33:26
Speaker 1: be back next week with more on the k shape
33:29
Speaker 1: recovery around the world and more on the ground reporting
33:32
Speaker 1: an analysis. Remember you can always find us on the
33:35
Speaker 1: Bloomberg Terminal, website, app or wherever you get your podcasts,
33:39
Speaker 1: and for more news and analysis from Bloomberg Economics all
33:43
Speaker 1: the time, follow as Economics on Twitter and you can
33:46
Speaker 1: also find me on at my Stephanomics. This episode was
33:50
Speaker 1: produced by Magnus Hendrickson. Sean Donand's report from Cleveland, Ohio
33:55
Speaker 1: was based on an article for Bloomberg Business Week, which
33:58
Speaker 1: was edited by Robert Friedman, Christina Lindler. Special thanks to
34:02
Speaker 1: Baroness Minus Chafik of the London School of Economics and
34:05
Speaker 1: James Megan. Lucy Meekan is the executive producer of Stephanomics
34:09
Speaker 1: and the head of Bloomberg podcast is Francesco Levy, m