An International Perspective on COVID-19 (w/ Pedro da Costa and Adam Posen)
PEDRO DA COSTA: Welcome to The Interview. This is Real Vision. I'm Pedro da Costa. It's my pleasure to welcome today Adam Posen. Adam is a former member of the Bank of England, and he's currently the President of the Peterson Institute for International Economics, where he was also my former boss, full disclosure. It's a real pleasure to have him today on the show because Adam is somebody I look to for guidance in times of crisis and this is certainly one of those times. Thank you so much for joining me, Adam. ADAM POSEN: Thank you, Pedro. I'm excited to be part of this project of yours. PEDRO DA COSTA: Just starting off with the most important question at the moment which is how are you doing? How's your family? Have you guys been coping with this stuff? How has this affected you personally? ADAM POSEN: We've been fortunate. I know you're looking after two young kids, you and your wife. For us, where we don't have anyone in the mess with us and both are-- my wife and my mother are safe in their apartments, locked down, so we're okay. It's like this was true before COVID but even more so now. The world is a pretty scary place. A lot of bad things happen, a lot of bad people. Fortunate for those of us who can sit tight, do our work and be okay. PEDRO DA COSTA: Absolutely. Especially when you look at the statistics of how many people just can't, either can't afford to or whose work requires them to be in a place, but I can only-- I think of your how much you travel, it must have changed your day to day quite substantially. ADAM POSEN: Absolutely. It's changed everything. I used to be on the road 35%, 40% of the nights, more than half of that abroad. I stopped traveling basically last week of January and haven't left town except for one school district in New York before I realized what was going on. Also, just priorities have changed. My biggest priority now running a small nonprofit is to make sure that I can pay-- we can pay for all staff, including meeting staff, operation staff, the publication staff you used to work with, as well as researchers. We can, we're fortunate, but it's an issue. Then of course, our workload changes to try to be useful in the face of this crisis. PEDRO DA COSTA: Yeah, I know. It's pretty staggering. Can we just start off by talking about US unemployment for a second because we've had this these four weeks of jobless claims now that amounted to 22 million people filing for claims, and that's probably, as you know, an underestimate because of bottleneck issues and people who don't know they need it or are eligible, I should say. Can you put that 22 million number in context over just the course of a month? ADAM POSEN: In context, there is nothing like it. We have never seen this rapid a jump in unemployment as long as with data and in the history of labor market data in the US, it's actually the most reliable data we've got and goes back a long way. Even in the Great Depression, by the time we got up to 25 plus percent measured unemployment, it took a couple years. Similarly, in 2008-2009, we got nowhere close to this, and this happened in the span of obviously several weeks. It is worth noting in context that without making light of the suffering, the hope is, and it is a reasonable hope, it's by no means for sure but it's a reasonable hope that within two months from now, many of the people currently unemployed will be back at work in their previous positions or something similar. The amount of human disruption, and then the probably 10%, 12%, 14% unemployment that will remain even two months from now is horrible. PEDRO DA COSTA: The thing I love about this format of is we get to take a step back and really just delving deep into questions. The Peterson Institute is the Peterson Institute for International Economics, I really would love to take a tour around the world with you and look at this issue from a global perspective because it really is when-- I tell my friends and colleagues there was ever a time where we were like, for better or worse united, this is it. ADAM POSEN: It could be for better, it could be for better. PEDRO DA COSTA: It could be for better. Exactly. That's exactly my question to you. Peterson Institute is at the forefront of promoting global integration, free trade, openness, international cooperation, that trend had been under threat before. It's still under threat perhaps more severely now. Of course, this crisis in general, some need for cooperation but there's also some tension. Can you talk about how you see those two things playing out? ADAM POSEN: I think we have to start by explaining just briefly why people at Peterson and elsewhere are committed to making globalization work and not reversing it. You see that right now. As my colleague, Chad Born has published a series of pieces, they're getting a lot of play deservedly. You can't disentangle yourself from global supply chains in order to get everything you need, whether it's food or medical supplies. People say, oh, we went too far, we shouldn't be getting this stuff from China or wherever, but the fact is, we're getting stuff from Canada, we're getting stuff from Mexico, we're getting stuff from the Netherlands, from England. Every time that President Trump or someone, either party who decides they want to cut us off from the world, they are making us more vulnerable. Those unemployed people, poor people in the US are the first to suffer because you're reducing supplies, you're raising prices. What happens is, that means it just goes even more to the rich, these medical supplies and services. Same is true food. Same is true of all these basic things. You cannot, it's not just a question of modernization or cost cutting or excessive globalization, for centuries, going back to the Roman Empire, you need lower income people to come pick your crops because higher income people won't do that work and then the food rots in the fields. Those people need to be able to cross borders in order to make their living. You cannot get away from this. This is even more true in the pandemic as you're talking about, Pedro, because you can't get away from the disease. We'd like to say, okay, cut off travel. If we'd cut off travel by this date from Europe or this date from China, we would then be safe. Go back to the Great Flu of 1918-1920, there were tiny islands in the Pacific that after a few months, got infected with the flu. There is literally no place on earth that didn't have the flu. That was in the aftermath of World War I with no commercial air travel, no internet, no globalization of the sort we know now. The reality, the hardheaded reality is-- PEDRO DA COSTA: [?] have infected my great grandfather in Rio De Janeiro in 1918, turns out he died of the Spanish Flu. ADAM POSEN: It's not like there was huge international tourism and travel back and forth from Rio or San Paolo in 1918. The rational realist thing is to think about how to make these international integration work, but you're absolutely right. Things are going backwards. PEDRO DA COSTA: Chad and your colleagues have pointed out in that context how actually some of the trade war disruptions that were happening ahead of this crisis have made it more difficult for everyone but also for the United States to get the goods and product, medical equipment even that we need. ADAM POSEN: No, absolutely. This is happening in Europe as well. It's not just the US, it's other countries. Europe put on this export ban on their medical supplies that they were producing, and it backfired on them. Even rich countries, even large, rich economies like the US or EU take it as a whole, can't fully self-supply. It's just not possible. Moreover, there's a lot to talk about the globalization issue but the biggest thing where globalization has not delivered is not for the people of the rich world, it's not for the people of China, it's for the people of Africa, Latin America, South Asia. Even there, we've delivered but we haven't delivered them all the way. In other words, the bottom line is there's going to be horrible debts and disruption in developing countries, it's already started. There's been a huge outflow of capital from those countries, the IMF, World Bank, and others are trying to get some money back in so that those people are not deprived of everything they need then they don't incur horrible debts they shouldn't have to. That is the real divide in the world right now. Everybody's got the disease, but it's how much you suffer, how resilient your society is. PEDRO DA COSTA: How worried are you about the emerging world as it's called, in terms of the crisis hitting health infrastructures that are even less, we're seeing just how strained rich countries are in the face of this virus. How do you see this playing out in the emerging world? Can you talk a little bit about things that you and others have argued that G20 can do to help? ADAM POSEN: Thank you for that. The picture is very grim. The one bit of good news is we're seeing increasing evidence that the disease, statistically speaking, is much less deadly, much more contagious, and much less deadly than we first thought. Like the news that just came out about this study, a small random sample of pregnant women being admitted for delivery in New York and it turns out, some vast share of them are infected, and very few of them are symptomatic. There's various other data points coming in like that. That's the one bit of good news. That's not about economics, that's about the fundamental biology, so that potentially, the death rate is going to be much lower once you count all the people who got sick, still going to be formal. Other than that, the public health's picture in developing worlds-- when I say developing world where the emerging is about PC, it's because there are certain developing countries like your friends in Brazil, a few others that are big enough and on the right side of the divide, that they can get away with running fiscal policy. They already have something of a welfare state. Our mutual friend, my colleague, Monica de Bolle, of course, has been pushing for universal basic income in this emergency in Brazil and Brazil can afford to do something like that. Then you've got a host of countries in Central America and South Asia, in Africa that can't do that. You get caught in not only is the healthcare system overtaxed, but you have people living mostly in very tight conditions, bad living conditions, not great sanitation, huge population density in and around urban areas. We have lockdowns as we've seen very visibly in India, which may or may not be the right thing to do in this context. That's a very real question but which clearly don't protect the urban poor and people sounds end to that. Unemployment is much more meaningful for the informal sector people in these countries. Once you saw the millions of people in Mumbai and Bombay, just to pick an example, who had to go back to their home villages, because they had no way of making a living, it was hand to mouth cash work to make a living day to day and when you have a lockdown, maybe the middle income enough people locked down, but then they stopped interacting with all those poor people, you have to go-- PEDRO DA COSTA: The notion of stocking up for two weeks of food is not feasible for millions and millions of human beings, including in this country. ADAM POSEN: Yeah, absolutely. That is part of the reason we keep hammering on this idea of making globalization work, because as much as people talk about inequality and problems of globalization, if you're closed and you're not taking advantage of the diversification, and the multiple sources of supply, and the checks on government and the flows of people and information for health purposes, all these things, it's the poor and vulnerable who gets it worst in the US as well as the poor world. You had said I don't want to be so negative, because there are things we can do that will make a material difference. You had said the work we've done on the G20, [?] and I edited a short piece, which I hope people will read. It's very quick, but about practical steps to make life better in the world. The key point is, going back to where you started, Pedro, this is about collective action. Usually, people are used to economists that think in terms of tradeoffs. Well, if we have more of this, we have less of that. For international relations, not as much as Donald Trump makes out to be. That's often thought to be zero sum if I'm gaining, China's losing and vice versa. There are situations in international economics where it's what we call collective action problem, where it's just there's no competition. If people join together and get past distrust, you could actually get things for everybody that you couldn't get other ones. It's not privileging one country versus another. It's not taking away from one to another. Those are the things we emphasize. Those are things like swap lines that give temporary liquidity in dollars to strained financial systems in emerging markets in developing countries. Emergency aid for the World Bank and the IMF is very cheap, but very important support for how to distribute vaccines, how to distribute antivirals when we have them whether it's refrigeration or safe distribution networks or administration instructions, restoring freer trade in medical supplies and food so that the people don't hoard in the rich world, and we have a better sense transparently as Chad and others argue about where the supplies are and where the bottlenecks are. Leaning against dollar appreciation, which sounds like a selfish US thing, but actually, in the current context, when all the world's money almost is flying into the US and a few other safe havens like Switzerland and Norway, the dollar goes up a lot and for poor countries who need to buy food, medicine, technology, pay debts in dollars, that makes it even worse. When you've got energy prices cratering, it's good for most people but of course, there are a bunch of countries who export energy and export copper and nobody's building with copper at all. There's room for us to all lean against excessive dollar appreciation, and that again, doesn't cost very much money at all, probably get most of it back and it helps everybody. These are the things we should be talking about at the international level. PEDRO DA COSTA: Beyond the health cooperation and actual medical know-how in supplies getting to the places where they need I imagine that there's a preventing a deeper financial crisis component to this as well. There's a lot of larger but less developed African economies and Asian economies that issued a lot of bonds in so-called good times. I would imagine that having financial crises in one or more of those countries would aggravate a pandemic, by definition. ADAM POSEN: You're absolutely right. We have to appreciate the scale but also the nature of what's happening right now. Even during 2008, 2009 global financial crisis, Asian financial crisis 20 plus years ago, you have huge flows of money out of these countries into, again, the safe havens and rich countries. That increases the amount of debt in real terms that these countries have to pay and decreases usually the amount of money they have. Also, because it's a recession, usually increases the amount whatever degree they have of welfare state and public spending increases the demands off. Now, take each of those factors and amp them up for the pandemic, more money's going out. We have more money leave the developing world in the last two months than left about more than the entire 2008, 2009 crisis, more of a recession, because you've talked about the horrible unemployment numbers here in the US, even if it's not sustained, God willing. It's an enormous contractionary shock. Then more demand for public spending and public services for global health pandemic even more than just trying to keep the poor going. This is an enormous burden on the developing world. Over 90 countries have applied for emergency loans or assistance of the IMF and World Bank simultaneously. In the worst crises, we've usually seen 20 at most. There's a huge challenge of how to do this. Now, there's one piece of goodness to that, which is the rich world knows that none of those countries fall. Wherever the disease started, it wasn't because some African government were in too much debt, or some South Asian government was too loose with their fiscal spending. That's not what's going on here. This is something that are totally not their fault, which suddenly changes their whole [?]. The big emphasis this week around the G20 and the IMF meetings, IMF-World Bank meetings, is to try to get some form of the same rollover debt, not building up new debt, not requiring current payments that we're trying to do for small businesses in the US. It's the same thing, try and do that for governments and some entities in the developing world. There's some real progress to be fair, there's some genuine progress the IMF and World Bank and the G20 have tried, but there are issues, as you've reported on and written about in the past about the so-called vulture funds and various holdout investors who this is the worst part of it. If you say the official sector says we're not going to ask you to make interest payments now to loans coming from us, but then maybe the private people still keep going. Think of it as the government says, okay, you can postpone your taxes till July 15th in the US for a household, but the local loan shark says you still got to pay me. PEDRO DA COSTA: Is there a risk? Who holds the bag on the northern side? Is there a risk to US, European financial systems from the lending that's been done in the emerging world? ADAM POSEN: I think it's a good question to ask. Certainly, in past crises going back to the crisis of the '80s, which you're all familiar with, there has been this issue of Western banks overextending getting themselves in trouble, which has had sometimes the beneficial side effect of encouraging the Americans and the Europeans to actually put more money into rescuing the poor countries [?]. Right now, I think that's actually much less of an issue than it's been in past crises. A lot of the money that went into the developing world was more liquid form on securities, investment funds, or investors who are not banks and hedge funds of various kinds. The banks themselves in the US and Europe are genuinely better provisioned and better capitalized than they were in say 2008. Now, I know your first two episodes were with two people I admire, Sheila Bair and [?] talking about the questions of how much has the supervision of banks really improved? How much has that been rolled back over the last couple years of changes at the Fed? That's a legitimate thing, but I think we have to recognize the reality as a forecaster that the US financial system, the European financial system, even if it's not ideal, are in much better shape to weather this than they would have been in the past. PEDRO DA COSTA: Well, certainly. I want to actually, before we get to the European context, I want to ask you about China because it straddles the developing and developed world. It's the bridge. It's also of course, the country where the crisis started so it perhaps offers a window into our future. How big an economic hit are you guys projecting China has taken and will take from this pandemic? Now, that you see some reopening happening, what are you hearing from your contacts out there because it's not like you sound the all-clear and everybody goes back to business as usual. ADAM POSEN: Absolutely and it's really interesting to think about China which you rightly characterized, Pedro, excuse me, as being part developing country and part rich big country. It is both. My colleague, Nick Lardy at Peterson, who's probably the best US analyst of the Chinese economy at least I still think so. He is a little bit out there in believing that the Chinese recession is less bad than many people thought, and the recovery is a little stronger than people thought. This is, again, this is not say, it's not terrible. It's just some of the numbers, as he view, is exaggerated. The way to think about it is China probably grew, Nick's numbers, something 1% roughly in the last three months. A good rule of thumb for all your listeners is rich countries, US, Europe, Japan, a recession is when you go below zero. Developing countries, because of population growth and because of the catch up, a recession is when you go below 3%, just rough order of magnitude. This was definitely a recession but it's not the contraction. Some people are seeing the data and it points to things like the industrial data, the pickup in energy is pickup in pollution, frankly, but also, as he and another colleague of ours, Mark [?] talk about, you can see going back to the issue of migrant workers, China has hundreds of millions of migrant workers within China who moved from the provinces, as they're called, to the coast, to the big cities to where the jobs are. We have seen, and again, like in India, how they were basically sent home when the economy went into lockdown. Well, as best we can tell, 80%, 90% of those migrants have moved back to where their jobs are. They're not as desperate as the poor Indian people [?], but they certainly would not move if there were not jobs really. We see it as potentially, I've referred to this for a number of the rich countries, and in this case, China is like a rich country, I think of it as having a checkmark, maybe a reverse checkmark, recovering. Down incredibly quickly, back up at less than half the slope it came down but definitely positive slope. Now, two cautions to the somewhat rosy picture in China. First, as many people worry about rightly, you do expect to have intermittent local lockdowns. We are already seeing that in one county, in one city in China, even if you've got the disease largely under control, and even if people do get immunity once they've survived the disease, at least for a while. You're just inherently going to have intermittent lockdowns and interruptions. The question is how you manage it. Do you stop it before it gets big? The second is retail hospitality. China as far as we can tell, have not come all the way back. This goes to issues like you said lessons for the rest of us. The intermittent lockdowns question and how you manage that disruption once most of the economy reopen is one issue. Another is just how much permanently do face-to-face retail and we associate real estate with that, restaurants, theaters, entertainment, tourism, how much of this there are permanent or at least persistent shift of people's tastes do they change? Nick also points out, Nick Lardy also puts out, reminds us of a blog he just put out that there's a lot of chatter about how dependent China is on exports. China actually is in the fortunate position like the US being so large and diverse that even though it needs critical supplies, as we spoke about, overall, the economic growth is not that dependent on exports. Even though China is recovering along with Taiwan, and South Korea, and we hope Singapore and a few others sooner than the West, they are not dependent on global demand. It'll be a small drag on them that they don't have much room to export, but it's not going to be a constraint I think. PEDRO DA COSTA: That's a perfect segue to Europe, which does have some export dependence. I want to ask you about it in the context of integration in the tug of war between globalization and nationalism that we were talking about earlier. Because of course, we had what, eight years out from Europe, having come to the brink and falling apart, it came back together sloppily. In this moment, it seems to be uniting fairly strongly and even the prospect that it takes a pandemic to have joined euro bonds is tragically ironic, I guess, but what do you make of the future of Europe in this context? ADAM POSEN: It's funny. In 2010 to 2012, which was when I was at Bank of England on the policy committee, that was the worst of the European crisis, especially the euro area crisis within Europe. A number of the issues you raised, I'm glad you raised the magic word nationalism, the evil magic word nationalism. We're part of that. Part of what happened in Europe was, let's call it, lack of solidarity or sympathy. That Northern Europe, Germany, the Netherlands, Finland, Austria is classified as northern for this purpose, were very disdainful of the moral hazard that Southern Europe, Greece, Italy, Portugal, Spain, and initially Ireland was considered Southern, brought this in some sense on themselves, this being the crisis of 2008, 2010. That was wholly unfair, as you've talked about, and we've talked about the past but anyway, so the question was this time around, [?] minutes go, since no one can claim that this crisis was because Italy was the only one to get sick, should there be more solidarity? What we've seen as the limits of solidarity they've ended up as Europe does in a model compromise. The ECB, the European Central Bank, is doing about as well almost as the Fed in terms of providing emergency liquidity, stabilizing markets, ending the financial panic, but that only gets you so far. It's a half empty, half full. You mentioned that Europe seemed to be coming together. My Peterson colleague, Jacob Kierkegaard, has written a piece recently arguing that, yeah, the package that the Europeans have put together beyond the European Central Bank really has some bonds, some spending for COVID response and therefore it is a step forward. There are others of us, myself included, who are more skeptical that if not now, when? If you're not going to give real solidarity and join bonds now, when are you going to do it? The junk bonds is really important. It's important politically and economically, because it's the one thing that keeps cropping up as the weakness of euro area, so you see the wedge, the spread between Italian and German government bonds has stayed around 200 basis points, which is a big number, especially when interest rates are so low. That's because there is no common fiscal capacity. The Netherlands and Germany and others have insisted that even if there are COVID bonds, they have to take the form of traditional loans and not be called mutual bonds and very limited. You end up with this halfway house that doesn't satisfy anybody. It may satisfy the financial markets literally overnight since there's enough money in there, and it certainly will help Italy and others cope, but the northern Europeans say, well, we're reopening. We're Denmark, we're Austria, we're already reopening because we ran it right and we have lots of reserves to pay for things so why did they get our money? Okay, it's an act of charity, we'll give you this little bit of money. The Italians and others in the south are saying, why the hell are we staying in the euro area or the European Union even if in this emergency, we don't do anything right. Oh, by the way, Italy says we've run a primary surplus for the 19 of last 20 years or something so don't talk to us about not running too much debt. We have a bit. I actually am not as sanguine and thrilled about Europe as some of my colleagues are. I hope I'm wrong. PEDRO DA COSTA: Well, it's a very good point and where does this leave Brexit by the way before we come back to the States, because is it on hold, or does it just accelerate a hard Brexit that has no real shape or resolution? ADAM POSEN: Well, again, the economic nationalism as a subset of real nationalism, obviously reared its ugly head very vociferously in Brexit. There's a lot to talk about there, but in terms of what happens from here, the government, the Conservative government, and Boris Johnson has done a number of U-turns, which I welcome particularly in fiscal policy, and now potentially on the NHS now that Boris Johnson, the National Health Service there know that Boris Johnson has been saved by it. Again, I'm not being unsympathetic to him. This isn't cynical if this leads to this damacy conversion that him seeing it in person with his life on the line how foreign nurses and doctors working under harsh conditions National Health Service save lives and that convinces him to change his mind, I'd love him and love Dodd for doing that. Brexit, there can't be a total reversal but there is this ridiculous wing of the euro skeptics, as they're called, who want Brexit to be implemented before yearend, even in the midst of all this. We've already seen that because of the Brexit uncertainty, not in the sense that they don't know what's going to happen but in the sense of the way the British government is handling it, there were three opportunities The Guardian reported for UK to join a joint buying scheme for medical supplies, PPE, personal protective equipment, things like that, like New York is doing with several other states of US and the UK blew it three times. There are very tangible costs that are going ahead with the Brexit mindset brings an implementation right now. PEDRO DA COSTA: Coming back to the US context, since we're going to be stuck at home for a while now it seems, I wanted to ask you a couple of things. The administration and others have presented the reopening of the economy as a tension, like either you reopen the economy now, or if you actually address the pandemic, then you risk a deeper downturn. Can you talk about how keeping the economy shut a little bit longer might actually be pro-growth? ADAM POSEN: Well, we know a lot from past pandemics, including the 1918 great flu, including the flu that happened in the '50s and elsewhere, that you can't overwhelm the economy and overwhelm the healthcare system and come out again. There are two realities. The first is what everybody's been talking about, which was the critical question, which is what was the total limit on the ability of the US healthcare system to deal with the number of truly sick people, and this is a question of there's a finite number of ventilators, finite number of respiratory ICU units, but it's also a question of hospital human resources, and everybody from orderlies and cleaners to nurses, doctors, pharmacists, all that, but also facilities. Now, it turns out, as I mentioned earlier, it's looking like, thank God, that the rate of infection is much higher and the mortality rate, the seriousness of symptoms is much lower. As a result, we may if the curve for the US as a whole in New York, and places like that specifically is bending right now, is peeking. We may have come in well underneath what the hospital system could handle. It's been horrible for the frontline workers, it's been a huge burden but for reasons you've talked about, like the battles between states and lack of coordination on purchasing and stockpiling and all these things, to worse than it had to be. Anyway, ultimately, we're seeing that like the emergency hospitals in Central Park and in the Javits Center may not be used just to give an example in New York City, maybe we're through that. That's the first constraint. If we're not going to be overloading the hospital healthcare system, again, too soon to say for sure, but it's starting to look that way, then you can start thinking about reopening. Then it comes to a different trade off, and this is the other basic fact, which is people look after themselves. People are not perfectly rational, obviously, they get scared, sometimes they're in denial. There are great differences in that view of the disease and how it's being implemented across the US, but the bottom line is, if people think it's not safe to go back to work, think it's not safe to spend, think it's not safe to go to a restaurant or a store, think it's not a good idea yet to invest, whether it's a small scale business or a large scale investor, President Trump going, going out there and saying, have fun, go out, spend money isn't going to work. We've seen this in history. Again, people initially underplays an illness, and then over time, they start to take it seriously. We cannot force the economy open more than people believe it to be reasonable. Additionally, it shows up in economic cost. What we've seen in history was that when you prematurely reopen the economy, you end up losing on balance, because what happens is you end up with more deaths, more illness, more restraint, more of a panic when it reemerges. You don't really gain that much back opening the economy before the health situation is under control. Now, again, in the US, it's very distinct by region. There are places in the south, places in other parts of rural America, not at Southwest entirely, the [?]. The Atlantic and other reporters have written about where there is insufficient health care, where there are problems, but the main constraint, the main reason you don't want to reopen prematurely is because it doesn't gain you anything. PEDRO DA COSTA: Were you surprised by the strength and robustness of the US policy response? You might have expected it from the Fed, but the fiscal stimulus came together pretty rapidly. What did you make of that process, and how do you see it progressing as the crisis? ADAM POSEN: Yeah, I was pleasantly surprised. This was, frankly, great. I give it an A minus, and I think a lot of people will. The defense response was terrific, and that did basically put a floor under financial issues without them directly supporting the stock market or doing any direct bailouts but just providing liquidity, providing sense so that's been great. The fiscal package, also, I think it's really been genuinely very good. I've been pleasantly surprised by some of the Trump administration officials, in particular Treasury Secretary Mnuchin, to some degree, NEC Chair Kudlow. They deserve a lot of credit. I wasn't in the room to be clear, but I've heard from many people, and it's well reported that Mnuchin and his team worked very constructively in a substantive way without crazy ideas give and take with Pelosi and her team, with people in both houses of Congress, both parties and the package we ended up with, first the initial version from Pelosi and Mnuchin together and then what got passed, is genuinely good. Just to give you a sense of benchmarks, they passed about 10% of GDP in stimulus. This is totally historically impressive. I think it's roughly the right number, we may need to add a bit more but remember, the Obama era stimulus against the crisis 2009-'10 was about 3% of GDP over two years. PEDRO DA COSTA: And much more hard fought. ADAM POSEN: And much more hard. You're absolutely right. There's back and forth with Congress, Pedro, there was a lot of doubt about it throughout, then it was immediately carved about. Second, as you emphasized rightly, my colleague, Jason Furman, who ended up as Obama's CEA chair and was there for the Obama packages in 2009-'10 and contributed to the congressional discussions this time, when he points out this is done in a matter of weeks, the Obama packages took a month to pass. Then what I would emphasize is the content of the package is actually genuinely very good. The vast bulk of it is going directly to households or directly to small businesses. They're calling it loans to small businesses, mostly grants because that's the way you disperse it. It's like Germany after World War II, the Marshall Plan funds were dispersed through so-called business loans, a lot of it was grants. It's tied to employment to try to keep jobs in real estate supported in local areas. The Small Business Administration and the Treasury haven't gotten out everybody's checks yet. I know that there's genuinely pain when they don't but the scale of this effort in the matter of weeks is extraordinary. No, I think I think they've done great. Bailing out the airlines is wrong. Bailing out big businesses is wrong. There's a certain amount of fraud and waste, it's always going to be there, especially in this administration, and when they take away inspector general's oversight, but compared to where the package was, a lot of that even got excise. The policy response on the economic side, including the Fed, I think, has been great, frankly. What's scary is the public health side, going back to where you were a minute ago on the portrayal of the being a tradeoff, lockdown and failure to coordinate among states on supplies and the denial, and all these things that are well known, that's terrible. The economic policy response, I think, has been really good. PEDRO DA COSTA: In this period, bipartisan love in a time of pandemic, looking to the future and to how we reenter real or reignite economic growth, if you've been thinking about any long term ways in which you see the economy changing, in which we could use lesson learned to enhance productivity, or even a lot of the stoppages have brought the earth back to life in ways that are shocking how quickly it happens, is there a way that we can reenter the world with a smaller footprint, if you will? ADAM POSEN: That's a great aspiration, Pedro, and it's like we hope like the famous Earth picture from outer space that watching the skies suddenly clear up in the Himalayas and in Los Angeles and in Beijing, the message to people, I'd love that but I'm not sure about that. I'd like to focus on [?} now, everybody thinks are still important things. I think that in terms of changes in behavior, we are talking about seeing signs of this in China. Even if I'm on the relatively optimistic end about the ability of the US and the other rich countries to bounce back, partly because I think the policy response has been good, I do think there's going to be very fundamental changes in consumer behavior, are people going to save more? Are people going to be less interested in retail? They're going to be more risk averse. Some of this may not be bad. It's just a question of getting used to it, but some of it will reinforce what Larry Summers and others called secular stagnation in order to reinforce a low returns economy, a low wage growth economy if people are more scared, and so those are fundamental trends I'm worried about. PEDRO DA COSTA: It's a depression mentality of sorts. The people who grew up in the depression had certain saving behaviors that they'd never let go. ADAM POSEN: The people in the generation behind you or two generations behind me since I'm old, like who came out of the 2008 crisis and then get whacked again, putting off marriage, putting off buying homes for the two thirds of Americans who do, there could be lasting changes in behavior, some of which are okay, some of which are not. In terms, though, more hopefully in the spirit of what you're saying about the environment, but I think more directly is the question of a welfare state. The US is on the fly making up a better unemployment system, a better automatic stabilized system, a better safety net. Here is where I think we can learn from Europe, we should learn from Europe and Australia and Canada and essentially every other rich country that isn't US, that jobs should not be this fragile. Connections to jobs should not be this loose. People who we don't have an informal sector quite the way say in India does, or Nigeria does, or people who are in the low wage when it comes call it low attachment to the workforce jobs, minorities, people have so-called low skill, there has to be better provision for them. The hope I would have is, people see that it's not just during a pandemic, that it's not these individuals' faults, that they just can't, in the current system save enough. They can't self-insure. They're not going to become lazy and wasteful if you give them a decent amount of security. That's where I hope the battle goes in the US that these measures become a permanent change. PEDRO DA COSTA: That's a good point. Actually, I also hope that even on the pipeline issues that we were discussing, the way these payments are delivered, the connections between people and their government, that they become more solidified in ways that maybe the next time around, we don't have to scramble so much. ADAM POSEN: Absolutely. It's an efficiency issue. It's a political issue. There's stuff being learned, you talk about lessons being learned about how the stimulus was dispersed '09, '10 versus now and how people perceive the role of government. I agree with you. PEDRO DA COSTA: It's great. Well, thank you so much, Adam. I want to jump into a portion of our interview called The Intersection, which is a quick rapid fire series of questions that we asked all of our guests. Thanks for bearing with me. ADAM POSEN: You left them in the actual studio. Okay. PEDRO DA COSTA: Exactly. This is it. You got it. The first one, is there one person living or dead whom you'd like to sit down for an interview with, you being the interviewer? If so, who and why? ADAM POSEN: Either Ted Williams or John Maynard Keynes, because they both are the best who ever lived in each of their professions. PEDRO DA COSTA: What is the book or books that have changed your view of the world and how so? What are you reading right at the moment? ADAM POSEN: I must admit rather shamefully that I'm reading very little beyond COVID and economics straight up. I saw the thing New York Times the other day about Joe Stiglitz is reading every literary novel in history book. Joe Stiglitz is six standard deviations more smart than I am. PEDRO DA COSTA: I'm trying to catch up on my COVID literature myself. That's great. What about long term, what books have [?] your life? ADAM POSEN: Particularly thinking about this week, thinking about the G20 and the efforts we've tried to explain why collective action is not just some fantasy, but as deliverable benefits, there was a fabulous short book called The Logic of Collective Action by Mancur Olson came out nearly 50 years ago now. It's just full of insights and how to think about this. I also I think that the history is in many ways as so many people are now saying is the most important thing to read. I think Jared Diamond's work in big picture history is sometimes sloppy, of course, overgeneralized but getting from him into the literature about what pestilence, large scale changes have meant for the world in the past, I think it's really important. PEDRO DA COSTA: Thinking of over the course of your career, I was wondering if there's a particular juncture or a person that you think of where you think things just made a big change and put you on the path that you ended up on. ADAM POSEN: There were three. First was when I came out of grad school in economics. I've had a rough time in grad school, I didn't do very well. I took leave for a while to work. I didn't like grad school and grad school didn't like me very much. I got a job at the New York Fed and Rick Michigan teach at Columbia at that time, become the Executive Vice President, chief economist, and he gave me an opportunity to really do good work and encouraged me in a way that was incredible for my career. Similarly, a few years after that, Fred Bergsten that I founded with the Peterson Institute, who was the director, who you know, he gave me the chance to come in and be a fellow and take risks and do writing and opine like I was a big grown up at a very early stage in my career then, and that was enormous for my opportunity in my life. Those two, there were other people and other opportunities, but those were the critical junctures for me professionally. PEDRO DA COSTA: Can you think of a roadblock or like a failure or something that happened that like that sets you straight, or that taught you a lesson? ADAM POSEN: Again, I'll pick two. One was just simply really flaming out my first couple years of grad school and having to think hard about why I was doing that. Again, it's not tragedy, but it's very emotional and burdensome at the time when you're doing that. There are people, one my grad school classmates is Michael Kramer, who won the Nobel Prize this year, and he was lovely human being in addition to being a fantastic scholar, and so you're-- PEDRO DA COSTA: If you don't know, 50% of economics candidates dropped out of their PhD program, I believe, or something like that. ADAM POSEN: It's not a very friendly, welcoming profession. Again, I was [?] perfectly fine but there's been a lot of documentation about women, people of color, anybody who doesn't come from a privileged background that I did gets even worse. Grad school was very hard for me. It taught me to be a little more humble, a little more risk taking, but ultimately in the end, and this was borne out by things that I wrote about faced in the crisis a dozen years ago, a lot of the stuff that I thought was just fundamentally wrong, either ideologically or too academic in grad school, turns out I was right. I wasn't smart enough to know how to write them and point them out in a persuasive way at the time, but I was writing about some of those things that proved to be very wrong. The other issue was in 2003, I have a neck injury, which led to a stroke and I lost part of my vision. Luckily, I'm basically healthy now except for being fat. PEDRO DA COSTA: I had no idea. ADAM POSEN: Well, so I might have been smarter before that happened. That took me a good six months, I'm out of rehab, but just getting myself back together and psychology, and my wife was wonderful. Anyway, just like for many people, it gives you and that was in my early 30s, so it gives you a sense of vulnerability and fragility of life that I was already somewhat cognizant of because my father have been very a lot of my childhood, but it reinforced it and again, like with grad school though, I came out the other side, I was fortunate enough to live, it's now 16 plus years later and I'm still okay so that again, gives you a sense of humility and gratitude but also a sense of okay, this too shall pass. I can survive. Sorry to go a bit heavy but those-- PEDRO DA COSTA: Not at all. Actually, that's a wonderful way to end because I think that that's not-- you didn't just make it 16 years past, you thrived then you accomplish so much, you became a global central banker and you run a fantastic think tank and you have all these intellect to offer us and our viewers so thank you so much for sharing them. ADAM POSEN: Very generous, my friend. Thank you for having me and thank you for continuing to be a voice of progressive but honest real values in the economic debate. JUSTINE: If you're ready to go beyond the interview, make sure to visit realvision.com where you can try real vision plus for 30 days for just $1. We'll see you next time right here on real vision.