There have been far more lethal pandemics than Covid-19, but the scale of our response to Covid-19 is dramatically new. For the first time in human history, our civilization made a collective decision to shut much of the world economy down. Contemporary historian Adam Tooze helps us understand what happened, why it happened, and how we can learn from it.
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Adam Tooze holds the Shelby Cullom Davis chair of History at Columbia University and serves as Director of the European Institute. In 2019, Foreign Policy Magazine named him one of the top Global Thinkers of the decade. His most recent book, Shutdown: How Covid Shook the World’s Economy, is out now.
Twitter: @adam_tooze
Shutdown: How Covid Shook the World’s Economy: https://bookshop.org/books/shutdown-how-covid-shook-the-world-s-economy/9780593297551
Check out the Unf*cking The Republic podcast at https://www.unftr.com
Website: https://pitchforkeconomics.com/
Twitter: @PitchforkEcon
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Nick’s twitter: @NickHanauer
David Goldstein:
Hey, Pitchfork listeners, I want to tell you about another podcast we think you’ll like, it’s a smart show with a dirty name that tackles a lot of the same issues we talk about here on Pitchfork Economics. It’s called Uneffing the Republic, not its real name, but you know what I mean. So just type in the swear word and you’ll find it in Apple Podcast or wherever you get your podcasts. The show breaks down complicated issues of practical policy, examples and outcomes, and an appropriate amount of outrage and swearing. They don’t just shoot from the hip. Even when they’re talking about our joint nemesis, Milton Friedman, a recurring character in the show. In fact, I recently listened to their episode, F Milton Friedman, again, not the real title but we don’t have an explicit rating and don’t want to get one, and I loved it. Deep dive on Milton Friedman and how he really effed up our economy. So listen now at UNFTR.com or search UNFTR on your favorite podcast app.
Nick Hanauer:
Whenever you talk to people, the conversation almost inevitably drifts to what was it like for you and your family when the pandemic began and how did you respond? How has your life changed?
David Goldstein:
It’s fascinating to get a historian’s take on current events.
Adam Tooze:
Billions of people furloughed all over the world, family life disrupted by kids being sent home from school, everywhere in the world simultaneously. There’s never been anything like that before.
Speaker 4:
From the home offices of Civic Ventures in downtown Seattle, this is Pitchfork Economics with Nick Hanauer. The best place to get the truth about who gets what and why.
Nick Hanauer:
I’m Nick Hanauer, founder of Civic Ventures.
David Goldstein:
I’m David Goldstein, Senior Fellow at Civic Ventures. So Nick, every morning I wake up and wish that this whole COVID pandemic was over.
Nick Hanauer:
And history.
David Goldstein:
Yeah. That it was history. And one encouraging sign that it might be is that there’s a new book on the crisis by historian Adam Tooze, Shutdown: How COVID Shook the World’s Economy. And that’s written in the past tense and I’d like to believe it’s true.
Nick Hanauer:
That the pandemic is actually history?
David Goldstein:
Yeah. That it’s history, that it shook the world economy and that the shaking has all been done with, unfortunately, not quite yet. But that said, it’s fascinating to get a historian’s take on current events.
Nick Hanauer:
Adam Tooze is a remarkable thinker. I know he’s one of your favorites, isn’t he?
David Goldstein:
You know me, Nick, for work, I read a lot of books about economics. But for pleasure, I read a lot of works about history. I’m a recovering history major and I’ve really enjoyed his previous books. I’m currently reading his book on the economics of Nazi Germany and World War II.
Nick Hanauer:
Prefect. Yeah.
David Goldstein:
And of course, Adam wrote Crashed, which was really the definitive history of the finance, the 2008 financial collapse, the response to it and the Euro crisis that followed. So it’s really fascinating to see his take on the response to COVID and what we learned or didn’t learn from the previous economic crisis.
Nick Hanauer:
Right. Given that Adam wrote one of the defining books on the world’s response to the global financial crisis, his take on the world’s response to this crisis will be one that will be particularly interesting and well-informed. So with that, let’s talk to Adam.
Adam Tooze:
I’m Adam Tooze. I teach history at Columbia University in New York City, and my new book, Shutdown: How COVID Shook the World’s Economy, is out in September.
David Goldstein:
Obviously, the books just coming out, we got PDF, haven’t had a chance to read the whole book, but I have spent the last couple of weeks reading your previous books. And I’m kind of struck considering the periods you’ve covered, World War I, World War II, The Great Recession. You start off in describing your own disbelief at what was happening in 2020. If you could sum that up, at least starting from the personal perspective, what was so unbelievable about last year?
Adam Tooze:
Well it was to shut down, right? I mean, I started the year in Africa actually, and I was on the way back from Tanzania by way of Istanbul airport, March 6th, that Friday, and all of a sudden the headlines that we’d been dimly following. So I had really an eccentric, right, external perspective on this from being an East Africa at that moment. So you heard the news that something bad was happening and it was spreading from China. I’m somebody who follows the news quite closely and I got to this giant airport that Erdoğan has built in Istanbul and all of a sudden people from all over the world were wearing these freakish masks. Just, at that time, no one figured out, N95 weren’t a thing, so it was like construction workers mask, it was like a horror movie.
And there was this sudden shock of just, “Oh my God, this is for real.” This is going to affect everyone, literally everywhere in the world. And it’s going to affect me and my family and the city that I live in in a way that nothing in my lifetime has ever come close to matching. I think those people who’ve maybe lived through a really big war, had an experience of involuntary enrollment in capital H History. I was in Berlin in 1989, I guess it had the little bit that kind of a field, right? You just happen to be in a place that all of a sudden something that evidently is going to be written into the history books is happening all around you, and you struggle to make sense of it and figure out whether walking the dogs still makes sense.
Then, as we know, as you know, if you’re interested in the economy, stuff just started happening, but none of us I think would have thought possible. I mean, basically the thing we should have done in February is shutdown global air travel. And that wasn’t thinkable at the time, right? Just flat out you would have been laughed out of the room if you’d suggested it. By mid-March, everyone’s doing it everywhere in the entire world and global GDP falls by 20% by the second week of April, in a matter of weeks. In the recorded annals of economic history, such as we’re familiar with, there’s no moment like that ever before. Billions of people furloughed all over the world, family life disrupted by kids being sent home from school, everywhere in the world simultaneously. There’s never been anything like that before.
David Goldstein:
When you look at the economic data from 2020, in future books, papers, studies, whatever, you just have to put a giant asterisk on the year. You can’t even publish the charts.
Adam Tooze:
No, no, exactly. No, no, it fits, right? Remember that New York Times front cover where they just devoted the whole cover to the unemployment spike. And that was just the beginning. I mean, whatever, there’s that Thursday morning, 8:30, when they came out with the 6.1, what was it? 6.5 million number that had signed on in the last week. I mean it was just, like you say, yeah, economists are going to have a hard time running any of their statistical work on this because you basically have to bracket that entire period because the numbers are so freakish and then they produced rebound effects.
Nick Hanauer:
If you didn’t know the history, but just looked at the charts, you would think an asteroid hit earth or something.
Adam Tooze:
Absolutely. No, because it would have to be something like that. It doesn’t look like a war. It doesn’t look like a regular recession. It looks like something much weirder. And it’s so comprehensive. I mean, virtually every economy in the world is in recession.
Nick Hanauer:
So at what point in the pandemic, did you begin to see the story of it shaping up?
Adam Tooze:
Well, the reason I wrote the book is that I’d done this book on the 2008 crisis. And, as you know, so I flew back on the Friday, that was the 6th. Then we got to the weekend that that was the OPEC weekend when it turned out the Russians and the Saudis weren’t going to be able to get together. So oil prices started selling off on Asia by Sunday, and then markets opened in the West on Monday, the 9th and all hell broke loose. At that point, my email, my phone just started going off because the journalists and folks that had read the 2008 book, which really synthesized the coverage by The Journal, The Times, The Financial Times of that crisis, all just went, “Hang on, there’s this guy, we should talk to him.” Because this is the same thing again, it’s like repo markets. It really looked, at that moment, like a rerun of the worst moments of Lehman in ’08.
Nick Hanauer:
That’s right. You mentioned, Adam, some of the preliminary numbers that sum up the scale of the economic disruption, but if they’re handy, could you share more with our listeners?
Adam Tooze:
Well, the big, big one, the one that sums everything up is this GNP number, and one shouldn’t just skid over that, right? For GDP to fluctuate by 20% is unheard of because it’s such a huge thing. It’s like the Pacific Ocean shrinking by 20%, if that happens, you would expect the mother of all tsunamis coming next, right? The tide is going out and you are seeing something that you’ve never seen before. So for that to happen [crosstalk 00:10:09]-
Nick Hanauer:
Run for the hills.
Adam Tooze:
… run for the hills. I mean, this is just… and I think that inspired, well, the unemployment numbers in the US, the weekly beat of this, that Thursday morning number that came out, that just ticked up, right? Starting at four and then maximizing, I think late April the biggest number came out 6.5 million signing on. But around the world we think that 3.3 billion workers globally were under one or other type of furlough regime. And we think that 1.6 billion young people were furloughed from education, and we all know the havoc that wreaks in family life and work-life balance and people trying to juggle their lives.
So this is a shock of a type we’ve never seen before. In India, which has a giant labor market as you’d expect, second largest country world, we think the unemployment rate peaked in the early summer, 25%. Now think about that in a country where hundreds of millions of people are really just scraping by $2, $3 a day poverty and all of that casual labor, all of those jobs just disappear. Places like South Africa are just devastated by this shock and they still are. I mean, South Africa is a country struggling with probably the the highest rate of persistent unemployment in the world and the levels of poverty that they’re experience, all the way down to the present day, hence the rioting in South Africa this year. So those are some, I think, of the really extraordinary shocks.
For the United Kingdom.,The Bank of England estimates that this is the worst recession over the whole year, not just the immediate shock, which was terrible everywhere, but for the whole year, in 300 years. So Britain has long economic data series, takes us back to-
Nick Hanauer:
Wow. That is unbelievable.
Adam Tooze:
… the 300 years is Louis XIV, the guy who built the famous Palace at Versailles. Britain had fought a long war with him and then we had an epically bad winter, which wiped out the harvest, all those picturesque images of London, but the tins iced over. That was really bad if you were in an agrarian economy, it makes a nice chocolate box, but it’s terrible for farmers. That’s the scale that we’re talking about here, a 300 year shock. So like nothing we’ve ever seen before.
David Goldstein:
So as a historian, very familiar with the government response to previous shocks like this, what was your expectation in the moment? You had written Crashed. the book about the anemic response to the great recession in much of the world. What were you expecting to see?
Adam Tooze:
Well, the worry that immediately emerged confirmed your worst fears was in Europe. So when the crisis hit, Europe didn’t cope very well immediately. They were very slow to recognize that this was going to be a first world, rich country problem. Then when it hit, they immediately splintered. And then they started arguing. And by the end of March, April, very worried, terrified, and calls were going on between the capitals of Europe about whether or not this was going to be another Eurozone crisis. It really looked like that. It was particularly a bitter kind of irony of history, you might call it, or maybe just tragic that it was Italy that was hit worst. Right? If you remember, early on, before New York became the center of the pandemic and The West, in early March, it was Italy, Northern Italy. And Italy-
Nick Hanauer:
Yeah. Terrible.
Adam Tooze:
… Yeah. Absolutely. And it’s the weak link in the Eurozone economy because debt to GDP there started out the crisis over 130% of GDP and was now rapidly heading over 150% of GDP. So you get Eurozone debt anxiety. The other thing that we saw in early March that was terrifying, terrifying, properly was what was going on in the US treasury market, which was in some ways, even worse than what we saw in 2008, because the treasury market is normally, of course, the safe haven of last resort, you run out at mortgage backed securities, you run out at Lehman, and where you go to park your money safely is into treasure bills and 10 year treasuries. And that market was not functioning in the second week of March, second and third week of March. Then the British gilt market also began to basically malfunction in the third week.
The question then was what are they going to do? To be honest, the Fed gets a lot of credit now in retrospect, but I actually think they were a little slow, the late February, early March, they could have acted more decisively than they did. But then they really flipped the switch and we saw 2008 on steroids. Almost an order of magnitude, it was 10 times larger the interventions by the end of the month. And by the summer, the Europeans had got their act together too.
David Goldstein:
Once again, turning on the money tap didn’t just save the US, it also saved Europe and… the Fed played a big role in saving the global economy.
Adam Tooze:
This is the crucial thing, right? The dollar is the world’s currency, and essentially all of the world outside the zone which is most directly attached to China. So if you see an increase in the value of the dollar, which is what we saw in February and early March, people are running to safety into US assets. This puts a huge squeeze on anyone who isn’t long assets, but is long liabilities in dollars. So basically if you’re a dollar debtor, all of a sudden your liability-
Nick Hanauer:
You owe way more.
Adam Tooze:
… You owe way more in terms of local currency, that’s a nightmare. So what begins to happen then a credit squeeze ripples out across the so-called emerging markets, the middle income countries, which are normally one of the dynamos of global growth, that’s incredibly bad news. So when the Fed puts its foot on the gas in second week, third week of March, and then just continues to push dollars out into the economy, this makes life a lot easier for the Brazil’s of this world, the Indonesia’s, big chunks of the world economy, right? G20 members, very significant pieces, and very large societies, 200 million people in Brazil, over 200 million people in Indonesia, these are huge population hubs. Having an avalanche of dollars coming your way just makes life a lot easier. So it’s really remarkable, the emerging market central banks actually did quantitative easing, they loosened their monetary policy, even as the crisis struck, which is the opposite of what we would normally expect, it actually almost defines an emerging market that when the going gets rough, it has to tighten because people get worried about them and start pulling their money out. Instead, what we saw in 2020 was they were sufficiently confident, A, and B, the Fed had created an environment in which they could in fact, reduce interest rates as the crisis hit. That’s the first time really that we’ve seen that across the entire world economy.
Nick Hanauer:
Yeah. So in many ways we did the opposite of austerity.
Adam Tooze:
Yes, absolutely. The thing about austerity is, you don’t generally do it in the middle of a crisis, I mean, that would be really suicidal. Austerity after 2008 didn’t kick in until 2010. So the jury is still out on that, we could still have an austerity push a year or two down the line, that’s the big question mark about the Biden administration in many people’s minds. But certainly in the moment, those taps were open and fiscal policy as well on a huge scale, taxing, tax cuts and huge government spending pretty much the world. Again, it’s structured by where you are in the global pecking order, but everyone did something.
Nick Hanauer:
Right.
David Goldstein:
Right. So it wasn’t just the monetary policy, we had a ton of stimulus on the fiscal side. I’ll get back to the US in a moment, but how much of this was a break from the past in Europe?
Adam Tooze:
In Europe, it really is a surprise. So, I mean, the Europeans are famous for having basically failed to mount a serious fiscal policy response up to 2008. Then by means of tightening, having brought on the crisis, which really lasted from 2010 through to 2015, 2016, you could say. This time around, not so much, and there’s two layers to that, right? So at the national government level and the national economies of Europe, Germany is obviously a really big one, it’s like most of the East Coast of the US, but say Italy’s the size of a Texas or something like that, they do national fiscal policy independently. And basically the Europeans said, “Look, do whatever you need, no rules apply.” Because normally to manage the tensions within the Eurozone, there are these tight fiscal rules which prevent countries from going it alone and doing their own adventurous fiscal policy. So those rules came off.
The ECB, which is crucial here, the central bank, is buying everyone’s bonds. So countries like Greece and Italy now can borrow at negative interest rates, it’s mind blowing compared to what we saw after 2008. Then, and this is the architectural piece, the historical piece, is they did the steel called NextGen EU, which isn’t giant in terms of the scale of spending, but it’s very significant in that it’s funded through debt taken up by Brussels. So it doesn’t show up on the balance sheet of any of the European member states, which is great news for an Italy, for instance, which has got enough debt problems anyway, and it’s investment driven. So it’s a little bit like Biden’s infrastructure program, but they managed to stitch it together already in the summer of 2020. It took another 12 months for it to be activated. But in terms of the politics, they sent a huge signal to the bond market, which is this isn’t Eurozone 2.0. And that’s huge because then the yields came down, the pressure was off and they could get on with their national fiscal policies, which have carried most of the camp. Nevertheless, all told, Europe is lagging far behind the US in terms of the recovery and in terms of the fiscal stimulus that was delivered.
David Goldstein:
Do you think they, the European leaders, learned a lesson from The Great Recession and the Eurozone crisis that followed?
Adam Tooze:
Yes, for sure. Not all of them.
Nick Hanauer:
Yeah, for sure.
Adam Tooze:
There are calcitrants, there were the Dutch, the Austrians.
Nick Hanauer:
Some of the Germans.
Adam Tooze:
Some of the Germans, but German politics shifts, right? So we know Angela Merkel’s been Chancellor the whole time. But this is a coalition system. So the government that she had ruled with during the Eurozone crisis was with the liberals, the FDP, small majority. So a small party with a big party adds up to 55% of the parliament. So narrow majority, and a free market, liberal, quite nationalist party as a coalition partner. This time around, her partner are the SPD, Social Democrats, center leftists, pro European, and very much in favor of fiscal policy and investment if they get the chance. Also, very well connected with other equivalent parties in the rest of Europe, notably in France. And a deal was done, which is why we escaped the nightmare that we seem to be headed in between Berlin and Paris. Sometime, we still don’t really quite know exactly how it was done, but late April early May, the signals begin to go green in Berlin. And they say yes to this deal where the debt is put on the books of Brussels. That enables, then as it were, Europe to emerge from this crisis.
I’ve no doubt at all that the leadership of both the Finance Ministry, which is in the hands of the Social Democrats, and the people around Merkel herself have learned. I mean, I’ve spoken to plenty of them. I know that they read critical histories of that for earlier crisis. They do not want to be the people who repeat, as it were, the narrow austerity policy that Germany imposed on Europe twice. There was a very important leader in the Spiegel Magazine, which is the most influential weekly magazine in Germany. Like Time Magazine used to be on Newsweek, but still very impactful. It was this incredibly powerful statement saying we are being cowardly, we are betraying Europe, we must act, we cannot repeat the mistake that we made before. That kind of thing shifts politics. And it did. So there is real learning there. Yeah.
Nick Hanauer:
Adam, at the risk of sounding somewhat parochial, our team at Civic Ventures fights these fights in cities and states, on the ground, in the moment. And I would say that what was really striking was the ease with which we garnered the support and the political will to reject the austerity impulses in our own state very quickly. I mean, those impulses were impossible to stop after the global financial crisis. But in this instance, people had learned enough to not do that.
Adam Tooze:
Yeah. But I mean, we really got to pay attention here, right? Because we’ve got to be attentive to the timeline. Because we are, in terms of this crisis, essentially in 2009.
Nick Hanauer:
Right. Mm-hmm (affirmative).
Adam Tooze:
So we are still in that first phase. Right?
Nick Hanauer:
Right.
Adam Tooze:
The pushback from inside the Democratic administration, Obama’s famous, belt-tightening State of the Union speech, right? That’s the beginning of 2010.
Nick Hanauer:
Yep. Right.
Adam Tooze:
So that is the game to watch now is what trade-offs being done. And that, in Europe, is where the whole game is going to be, because the question is, when do the rules come back in? This is the big debate in Europe, was what we did in 2020 a precedent for further change, positive lessons learned from a previous crisis, a precedent set for the future? Or was it a complete exception that we did before a totally exceptional event, which was this pandemic, which no one could be blamed and therefore moral hazard and all those arguments don’t apply.
That fight has to be thoughtful, it’s exactly as you say, right, this isn’t science, this is persuasion, it’s rhetoric, it’s a power play. Who will win, who will lose elections on the basis of what kind of argument is being made. What kind of sway can you exercise? Can you embarrass people in various ways into acting in your interests? It’s all for play full still, I would really insist. And after all, the numbers are spectacular, right? I mean the levels of debt which we’re going to find ourselves at once we do finally begin to exit from this crisis are going to be eye watering and people are going to have to take… they’re really going to have to avoid panic because it’s going to be very easy for scare mongers to come in and say, “Look, we’ve got to drastically cut entitlements. We’ve got to do this. We’ve got to do that.” Because the numbers are going to be unprecedented.
Nick Hanauer:
Can we talk for just one second about how close we came to utter disaster?
David Goldstein:
I mean, we had the big orange guy in the White House, that had to be frightening the whole world.
Adam Tooze:
Yeah. It was, it really was. But again, I’m going to be a little devil’s advocate here, because I remember touring the IMF, for instance, in Washington in 2018, 2019, and folks there were terrified at Trump in the White House, right. Not just Trump in the White House, it’s really the Republicans in Congress that are, in some senses, even more potentially dangerous here. Folks were really concerned that America would not be able to act as a stabilizing force in the world economy because of the flatter of attitudes in some parts. Of the GOP. Hank Paulson wouldn’t endorse Trump in 2016, literally because he ran the hypothetical and imagine Trump had been in charge in 2008, it would have been a disaster. In fact, of course, it turns out that if there ever was a president made for fiat money who saw no problem whatsoever in just writing thousands of checks, so long as they have his name on them, it was Donald Trump. The man has not a bone of doctrine, principle, economic theory in his body.
Nick Hanauer:
Yeah, that’s true.
Adam Tooze:
He just doesn’t give a damn. Right? It’s all about the markets. It’s all about the S&P 500. It’s all about business. And it’s all about making sure the wheels keep spinning. If you have to have a chaotic, simplistic person in charge of the White House, those were the instincts that you’ve wanted in 2020. So basically, the only tie he lashed out at Powell, and he really did lash out at Powell in the second week of March, was because Powell was being too slow at the Fed. Once Powell really put the foot on the gas, you didn’t hear a word from Trump, not one.
Nick Hanauer:
Interesting.
Adam Tooze:
Because it was all good, that’s exactly what he wanted. Right? So we saw there, in a crisis like that, sure, I mean, he was terrible on the vaccines and public health and he’s every liberal fantasy, nightmare president. But in terms of populist, open pocketed management of a crisis within a capitalist society, Trump basically delivered the protection that was necessary. And frankly, in fairness to him, he was also totally in favor of this in 2008, ’09. If you go back to the record of his interviews with Fox, it’s always totally wrong [inaudible 00:27:37] the interviews, because they’re expecting him to cut out guns blazing against Obama and he doesn’t. This is before he pivots.
So it was a very mixed bag from that point of view. Also of course, having a Republican in the White House at that moment means that the GOP is much more likely in Congress to vote for the stimulus that was necessary. I mean, if we’d had a Biden in the White House, then God knows what would have happened? They might very well have attempted to obstruct, as they did to Obama. I mean, he couldn’t get a single Republican vote for a stimulus package. Maybe he got Susan Collins, but it was like one. There was no scope there.
Nick Hanauer:
That’s a fantastic insight. That is a fantastic insight.
David Goldstein:
Yeah. I guess sending people lots of money with your name on it during an election year might make some political sense.
Nick Hanauer:
Yeah.
Adam Tooze:
Yeah. I mean, exactly. The real puzzle, and this is where it gets interesting, is why the hell they couldn’t organize a second stimulus in the summer?
Nick Hanauer:
I know that’s just the craziest thing.
Adam Tooze:
That’s the craziest thing. Right?
Nick Hanauer:
It’s the craziest thing.
Adam Tooze:
Because the House Democrats had voted for it, so they’re on board. Then you end up in this incredible Russian roulette game between Mnuchin and Pelosi and the White House and McConnell that results in nothing. Right? That’s the apocalypse. I mean, I think you have to distinguish between, when you ask me that question, how close did we get to the complete implosion, I was thinking, do they mean March or do they mean November? November is when we did, November/December is when we did in the United States come close to a full-on crisis. Right? Because there’s no more stimulus, the unemployment checks are running out. There’s that horrifying few days in December when they stitched together the second stimulus package and Trump simply won’t sign it because he’s sulking and he’s preferring to play golf in Mar-a-Lago. That’s the moment when things really almost came apart. That’s the run-up immediately, of course, to 6th of January.
But in that March moment, it’s extraordinary how the political system coalesces around action. But then of course, by the summer, June, Black Lives Matter, culture wars, the whole thing just really begins to fissure in the most dramatic way. It’s difficult to exaggerate, I think, the scale of that crisis and we should not blind ourselves to the risk of a recurrence in future, because it’s spurring at the sign after all that the GOP is fundamentally changing it spots on this.
Nick Hanauer:
Right.
Adam Tooze:
America is borderline unstable as a political economy in the current moment.
Nick Hanauer:
Right. No.
David Goldstein:
Well, yeah. I mean, his is what happens-
Nick Hanauer:
We don’t call it Pitchfork Economics for nothing. Yeah.
David Goldstein:
Yeah.
Nick Hanauer:
No. For sure.
David Goldstein:
It’s also a problem when you have a two party democracy in which one party is the Democratic Party and the other party is the anti-Democratic party.
Adam Tooze:
Yeah. Yeah. So especially then, I mean added to which, then the Democratic Party, following on from our earlier conversation, is itself, or was until quite recently, hostage to, in the pocket of, run by, influenced by essentially an upper middle class professional managerial elite, right?
Nick Hanauer:
Yeah. Correct.
Adam Tooze:
So it was an incredibly lopsided structure and the emergence, I think, of a vocal left-wing presence within the Democratic Party, along with all of the other voices that speak within that very broad church, is I think crucial to balance out and to force, because it’s not just a matter of personnel, is it, around Biden? It’s the fact that given that there were basically no votes to be had from bipartisan deals, you have to listen to everyone within your own camp. Everyone. Obviously Biden has more voice, but the left has a voice too. And that balancing is very difficult from the point of view to the folks in the White House, but it produces a shift in the complexion of policy. We really saw that with the Rescue Plan because that basically came out of Congress, not from the administration, and it was really a very targeted push to learn the lessons of 2008, ’09, and deliver for middle income and low income Americans.
Nick Hanauer:
Yeah, for sure.
David Goldstein:
So this raises a point, we’ve learned some lessons from 2008, 2009, what are the lessons to learn from 2020 and beyond?
Adam Tooze:
The utopian lesson would be things like America needs an unemployment insurance system worthy of the name. For instance, wouldn’t it be nice if America could do something like the short time working system the Europeans used. Hardly anyone in Europe was laid off, people were just shifted to short time working. So all of the terror of losing your job, struggling to figure out where the next paycheck is going to come from, total reliance on the welfare office was taken out of the equation for Europeans. Their incomes fell in many cases, they had the same shock to their daily lives, but they don’t have that terror though. That would be, if you were just starting with a fresh blueprint, you’d say a society like America, subject to the economic shocks as it is, desperately needs that. Is it likely to happen? Of course not, right, because it requires a deal between the federal government and the states. It wasn’t undoing The New Deal because they couldn’t get it done then, it’s very difficult to do now.
The things I think which we can easily learn, are, let’s take this seriously as the shock that it was. So this was a pandemic, not just the common and garden economic recession, not even just the big economic recession, it really was a harbinger of the kind of environmental crisis we get to see coming towards us. Even if it turns out to be the case this thing leaked from a Chinese lab, are there many labs around the world? Yes. Are there some in the United States? Yes. Could we have a biohazard incident there like this or even worse? Of course we could. In any case, we need to be prepared for that kind of eventuality.
The one thing that really went right last year, not just the macro economic policy, was Operation Warp Speed. You could argue about the details of it, they should have done far more to expand capacity. The contracts could have been stitched in a way that were much better for the American taxpayer. But the ability to generate a virus beating vaccine, two virus beating vaccines, not just in the United States, but worldwide is extraordinary. Unprecedented, right? Beginning that year, we’d never done a coronavirus vaccine. Now we’ve got a whole suite of them. That is something that we clearly have an interest in building, expanding, having standing ready as a capacity, not just in the US, but worldwide because the tragedy now is of course we haven’t developed a global vaccination program. The IMF needs to go open up, was just tweeting out the numbers from this morning, we are so far below the promises and commitments that we’ve made to the wider world. It’s an absolute scandal. Moderna has basically not delivered anything to the United Nations COVAX package and Pfizer is, I think, maybe less than half of what it’s promised by the end of the year. Now we’re having to talk about third doses in US.
So we need far more capacity here. We need to be more agile, even more than we were and believe in that as a capacity. So that’s something that I think you could maybe build bipartisan commitments around. This was, after all, the Trump program, it worked really well in the end. And these are good jobs, right? Talk about industrial policy that would really bring huge benefits. Would you rather have a prison or a lab in your constituency, that’s what we should really be offering Congresspeople is, look, everyone should be part of this program of readiness for these kinds of risks because this has been anticipated for years.
David Goldstein:
You’d argue that this translates to the climate crisis as well, if we choose to address it, we could?
Adam Tooze:
Same problem. This is one of the things we discovered last year, right, is that, and this is a kind of mantra that runs through the book, John Maynard Keynes, the great British economist, [inaudible 00:35:37] radio program during World War II and he had this great line, which is that we can afford anything we could actually do. Money is not a problem, right? Money is a technicality, it’s a bookkeeping, it’s literally a bookkeeping entry point. The crucial thing is what we can actually organize to do. And we demonstrated the capacity to do vaccines. We should throw money at that until we really have that whole risk covered.
Same is probably for the climate. It doesn’t have to be anything like the war, right? All sensible estimates suggest that we need to be spending, ideally, this is a big number, but after 2020, if you just relax, a trillion dollars plus in investment every year for the next 10 to 20 years. On all sorts of different things, it’s an incredible wide stretch on the things we need to be investing in. Is that a lot of money? Yes, but it’s 5% of American GDP, which is a bit more than the Pentagon currently spends, on things that would transform America’s way of life in a positive way. It would reduce pollution, it would create a whole new generation of good jobs, it would make people’s houses more livable in, it would reduce their utility bills and it will save, make a contribution, at least to saving the planet for our children and grandchildren and great grandchildren.
Nick Hanauer:
Economically speaking, it would pay for itself.
Adam Tooze:
Absolutely. And many of these technologies now are not blue sky and don’t need much subsidy. I mean, especially renewable energy now, they could be red state technologies, right? There’s no reason why the likes of Oklahoma, Nebraska, Ohio, Missouri, Texas, should not emerge as green energy giants, they’re perfect for it. For the GOP to be obstructing on this in the way that it is, to my mind is, I mean, it’s parts of an, to my mind, inexplicable strategy in which they are essentially failing to offer their vision, conservative it may be, but their vision of what would actually work for the majority of Americans 20 years from now. It could easily be this. So I have a lot of hope invested in these new muscle cars, these giant trucks they’re bringing out, which must appeal to that part of America and they’re electric and they’re amazing pieces of engineering.
Nick Hanauer:
Yeah. So are there any other key insights from your book that we didn’t get to talk about?
Adam Tooze:
The other thing I think is the [inaudible 00:37:54] balancing of this, right? We touched on this, but that I think is the humbling aspect of that experience. When I look back at March and I think about my daughter, who’s a college student and her generation and how they experienced this. Emmanuel Macron, the President of France, he gets mocked quite a lot in the Anglosphere, he’s this pretentious French guy, but he came up with this great phrase when he said that this is an anthropological experience, an anthropological shock. It affects literally all humans on the planet at that moment. And generations, 10 years, 20 years, 30 years from now, everyone of a certain cohort, wherever they are in the world, will be able to look back at that moment and ask themselves, “Okay, where were you? What were you doing? How were you coping? Where did you get your masks from?”
There’s an aspect of that experience that it would be awful if that was lost and was just buried under Chinese-American antagonism or bickering in the Eurozone or the dysfunction of Mexican or Brazilian politics, right? Something happened that actually… I can’t remember anything like it. The sense of synchronicity, the concern that you had for what was happening in a place thousands of miles away from you, not just because the pictures were moving and it was upsetting, but also because it was going to happen to you. So you needed to understand what was happening to them because it was going to happen to you. And our great failure in February was simply to not understand that if something happened in Wuhan, China, which is not Chernobyl , it’s not some place far away that we don’t know anything of it. It’s a giant, very modern city, very closely connected, it turns out, by airplanes to everywhere else in the world. That really, really should have concerned us. We somehow relegated that, and I would include myself in this, to the China draw, right? That’s something that they’re dealing with and they’re going to have to deal with it. We didn’t understand that if it was happening to them, it was going to happen to us six weeks later.
Nick Hanauer:
Yeah. Well, and it happened in Seattle, Washington, for it happened to anywhere else. And we were there.
Adam Tooze:
And we didn’t understand that either. Right? People were just-
Nick Hanauer:
But it scared the living shit out of the people in Seattle, Washington, I’ll tell you that.
David Goldstein:
Though we were prepared in a way that a lot of the rest of the country wasn’t because we’d been planning, our public health system had been planning for a flu pandemic as the number one crisis, our emergency management system for 15, 20 years, we’d been-
Adam Tooze:
… Since SARS presumably right? Did Seattle have a big SARS outbreak?
Nick Hanauer:
No.
David Goldstein:
We didn’t-
Adam Tooze:
That was Canada wasn’t it?
David Goldstein:
… but it’s just the nature of avian flu, they expected it would start in China and hit British Columbia and the rest of the Pacific Northwest first. We always expected it would be here first because of our close trade ties to that part of the world. It did hit here first and part preparation, part culture, we ended up being one of the least effected parts of the country.
Nick Hanauer:
Yeah.
Adam Tooze:
Yeah. I mean, even New York, after all, I mean, it was a disaster in March and April, but since then the city has managed it. Right? We haven’t been through the, obviously I’ve got family in London, and they went through a series of cycles of opening up, locking down. We haven’t been, in New York, through any of that. So there’s also a lesson here about our ability to cope. But we do need to reckon with the fact that we are sitting on a massive runaway nuclear style reaction here, right? Our world, the way in which occupy it as modern people in modern societies with hugely sophisticated, rich economies, exploiting nature to the extent that we do, this is an absolutely precarious existence that we live in. We really have to be on the ball, right? That alertness that you’re talking about in Seattle is crucial because this isn’t, it’s a little bit different from climate change in that climate change operates over time horizons, which are longer, but the immediate shocks, a hurricane or whatever, come quick. But the problem itself is over a long time horizon.
This is, speaking in the idiom of my earlier, historical work, this is Blitzkrieg, right? If you do not contain this within the first hours, the first days, you’re done, you’ve lost, you’ve lost that first encounter. And then it’ll take you months, if not longer than that, to claw your way back to stability, which is what New York experienced. So that alertness and that willingness to expand our imaginations to the horizon that says, “Oh, this is really for real, right? No joke.” If that just happened in Wuhan, if they just had to shut Beijing down, nothing should be off the table. We need to be talking about the possibility of shutting JFK. If Cuomo had the sense to say, “Look, we need to start talking about ending air traffic to New York now.” We would not have had the disaster that we did in March. Of course it was unthinkable. I’m not blaming him personally, it’s just he’s indicative of the fact that none of us could conceive that.
Nick Hanauer:
Yeah.
David Goldstein:
So, final question, why do you do this work?
Adam Tooze:
Oh my God.
Nick Hanauer:
We ask everyone this question. Just so you know.
Adam Tooze:
Oh, good. Right. Well, somebody’s got to do it. No, it’s certainly in March last year, I felt a sense of shared responsibility with colleagues that were trying to make sense of this situation that we were all in and we had invested a lot of effort in trying to make sense of 2008, ’09, ’10. So it was time to pony up and see whether the ways in which we try to make sense of that moment could help us understand what was happening. And they did. In certain ways we’ve talked about they actually helped policy makers also make sense of the situation. I think that’s my sense of what I do nowadays is really that like journalists like yourself, being part of the public conversation about how we navigate the crises that we face in the 21st century. And as a historian, hoping that, as it were, my experience in thinking through those earlier moments can serve, if you like, as almost like a mental gym, you, as it were, tested yourself against some pretty heavy weights and now, okay, that helps us, gives us some confidence and just skill and some insight how that we might make sense of truly dramatic and novel things that lie ahead for us.
Nick Hanauer:
That’s fantastic. Fantastic answer. Well, Adam, thank you so much for being with us. It’s been an absolutely mesmerizing conversation and best of luck with the new book.
Adam Tooze:
Thank you. Look forward to chatting again.
Nick Hanauer:
Yeah, yeah. Thank you so much for being with us.
The thing that I would underscore the most is his point about the scale of the shared experience and how that is virtually unique in human experience. It really is true, right? I find it in my own life that whenever you talk to people today, and whenever you meet someone new, the conversation almost inevitably drifts to what was your quarantine experience? What was it like for you and your family when the pandemic began and how did you respond and what did you do and how has your life changed throughout this process? I mean, it’s true that I’ve never had another experience like this.
I actually asked my mom, who is 88 years old now, if world war two was similar and she said, “Look, I was a little girl during those days. So I was somewhat unaware of what was going on, but definitely this was far more impactful.” I mean, in the city in which she lived, which was Philadelphia, I mean, there were gold stars on people’s houses when a loved one had been killed in battle or something like that. And a bunch of the men were gone. But life was normal for the people who were at home effectively. I mean, certainly from the point of view of a kid. Definitely my kids will never forget the pandemic. It was a super impactful thing on their lives. It was a beautiful time to be two years old, if you lived in a prosperous family, it was just like mom and dad were home a lot more.
David Goldstein:
It keeps coming into my mind, I kind of compare the experience to 9/11, but it going on day after day, month after month, with the entire world at once, and with a much higher death toll. I bring that up because of how, how disruptive it’s been in similar ways. I mean, I remember those first weeks in March and April, we live here in Seattle where there’s a bunch of airports and it’s this north-south city and you hear airplanes all the time, but you weren’t hearing airplanes. I’d wake up in the morning, it’d be total silence, no airplanes overhead. And that was eerily familiar just like in the days following 9/11, but also similarly the way 9/11 had permanent impact on our lives. Again, with air travel, it’s changed air travel forever, it’s changed the experience at the airport.
The whole thing with the masks, I understand why some people don’t like mask mandates. I think we’re going to be wearing them forever. I mean, I just think it’s going to be a normal part of our lives that might not be mandated, but people are going to be wearing masks in public and it won’t be strange. It’s just going to be normal here like it has been in Asia for a very long time. I don’t think that people are going to work from home exclusively forever, but there will be a lot more work from home. It’s hard to know all the ways it’s going to change our lives and change our cities and change the country, but I think some of this is, well, as permanent as anything is in human civilization.
If there is one positive thing to come out of this, Nick, is, and I think it’s a very important observation he makes in the book, this idea that this was not the deadliest pandemic we’ve ever had, and yet we shut down the world, we shut down the world economy. He quotes in the book somebody who says we did it because we could, we could afford to do it. So we did it. And in our interview, Adam mentions this quote from John Maynard Keynes saying that we can afford to do the things that we actually can do. So we did a lot of extraordinary things in response to the pandemic, in an effort to save lives and to save livelihoods. And we did these things because we could. And he’s absolutely right that this translates to climate change as well, that these things that we need to do, they’re absolutely within our ability to do them, if we choose to do them. It’s not a question of what can we afford, it’s a question of what can we actually technically do? There’s so many things we can technically do that not only would reduce carbon emissions, but would improve our lives in so many other ways.
Nick Hanauer:
Right. Absolutely.
David Goldstein:
And just a reminder, the book actually comes out today. Today, it’s September 7th, when this podcast is released, it is now available. We’ll provide a link in the show notes where you can order the book or order from your favorite bookstore, get it today. Also if you love it, like me, I’d go and look at the catalog of Adam Tooze’s books and download those as well. Because I think there’s some really important themes that run through all of them.
Speaker 4:
Pitchfork Economics is produced by Civic Ventures. If you like the show, make sure to subscribe, rate and review us wherever you get your podcasts. Find us on Twitter and Facebook at Civic Action and Nick Hanauer. Follow our writing on Medium at Civic Skunk Works. And peek behind the podcast scenes on Instagram at Pitchfork Economics. As always, from our team at Civic Ventures, thanks for listening. See you next week.