Will Consumers and Economies Be the Same Post Crisis? (w/ Pedro da Costa & Adam Posen)
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.