I’m stealing those lines from my buddy Peter Atwater, who used them in a LinkedIn post recently to describe the shifts that might occur in global supply chains after the Covid-19 outbreak. But as I mentioned in response to Ed’s last note, the phrase also captures where the economy overall is headed. If the past 40 years were about efficiency, the next 40 will be about resiliency.
The signs are everywhere. Witness calls from progressives such as Elizabeth Warren and Alexandria Ocasio-Cortez to put a halt to mergers in the middle of a pandemic. Or Republican senator Marco Rubio’s prescription for “creating a more resilient economy” as laid out in his New York Times opinion article. As Swamp Notes readers will know, there’s little daylight between the Rubio and Warren view of industrial policy. Which means that these shifts are likely to come no matter who’s in charge after the November elections.
In an Open Markets/OECD webinar last week on creating a more shockproof global economy, one of Warren’s economic advisers, Ganesh Sitaraman, made a sharp observation: “Resiliency is a policy choice.” This is so true. Over the past four decades policymakers on both sides of the aisle often tossed responsibility for choosing between the needs of various interest groups to the markets, which really meant throwing it to the Fed. Central bankers did the only thing they could to manage that responsibility, which was control interest rates and the flow of money, smoothing out and prolonging recoveries.
They couldn’t change the on-the-ground story — only politicians could do that (as if readers need reminding, you can see that divergence between the markets and the real economy right this minute). Unfortunately, few had the backbone to do so, and most were being advised by the same linear economic thinkers that I am calling out in my latest column on why the economics profession as a whole needs to become more heterodox in response to the post-Covid world.
But I think we are now at a tipping-point away from what another conference participant Michael Masters — the founder of Better Markets and a former commodities trader who gave a landmark 2008 Senate testimony on how the financialisation of things such as food and oil can lead to rising inequality and social unrest in the real world — calls “the cult of efficiency”. Masters, one of the most astute observers of financialisation, points out that efficiency should be only one goal for markets and policymakers; robustness and justice should be two others. One has only to think of a pre-Covid disaster such as, for example, the Rana Plaza factory collapse in Bangladesh, to realise that things that look “efficient” on the balance sheet of a chief financial officer in a corner office in some rich country may be neither robust nor just. Efficiency can bring fragility.
The challenge, of course, is that efficiency — at least when it’s defined as profit maximisation — is also easy to track. Robustness and justice can mean different things to different people. In the US, a country with food, fuel and consumer demand, it’s easy to understand why politicians on both the right and the left are pushing the idea that more localised supply chains are both “robust” and “just”. Smaller countries outside the main political orbits of the EU or China probably don’t feel that way. How can we negotiate a new world in which both groups have security and inclusivity? That’s the geopolitical conundrum for the next generation.
For myself, I’d love to see this process start in some bright post-Covid, post-Trump world with a new transatlantic union over labour, environmental and digital data standards. Powerful interests on both sides will make that tough, but there’s also much common ground. Such an alliance would, to my mind, bring efficiency, robustness and justice.
Ed, what’s your policy wish for 2021?
This piece in The New York Times is one of the most beautiful and poignant articles I’ve read about the shutdown. As a former waitress and one-time food writer, I can attest to the truth of this line from the piece — “the word ‘family’ is thrown around in restaurants for good reason”.
A well-written dispatch from Texas, also from The New York Times, highlights the heart of America’s oil boom turned bust.
I am catching up on my New Yorkers and spotted a salient piece on loneliness by the great Jill Lepore.
I have to push my own Lunch with the FT featuring Kiril Sokoloff — a must-read for understanding our moment.
And just for laughs, Brad Pitt as Anthony Fauci on Saturday Night Live.
Edward Luce responds
Rana, I have one overriding policy wish for 2021 — and for 2020 if I'm feeling lucky: the development of a Covid-19 vaccine. Admittedly, the emergence of a vaccine wouldn't in itself qualify as policy, rather as a result of good policy and scientific luck. Nothing else, not even the important aspirations that you mention on resiliency and justice, could transform our lives in the same way as an effective vaccine. That's the only game-changer on my horizon.
The policy preparation is just as important as the vaccine itself. If and when a vaccine comes, we need the capacity to produce billions of doses and disseminate them at very low cost to most of the world's population. That's one way it could happen. Another is that initial access is at first restricted to the country, or countries, that developed it. That latter scenario does worry me. If a Covid-19 inoculation becomes a weapon of geopolitical leverage, which is most likely if it is developed in China or the US, things could turn much nastier than they already have.
I would like to see massive global collaboration in pursuit of a vaccine. Some of that is happening. There are 90 vaccine projects under way worldwide and seven are in clinical trial. But there are also zero sum forces at play. Covid-19 has accelerated and deepened the clash between the US and China.
Once a vaccine has been made available, I would like to have a face-to-face cocktail. I much enjoyed our most recent Zoom drink. My second policy goal for 2021 is to have an actual one.
And now a word from our Swampians...
In response to Tata’s lessons for the post-Covid world:
“I have been involved as an investor and non-executive chairman in several companies that were brought to the edge of failure as a result of a paternalistic culture. It required new capital and mean old nasty demanding capitalists as new board members to save these companies and turn them into companies that could thrive. And in every single instance, the management and employees who survived the turnaround were exceedingly grateful to the mean old nasty demanding capitalists who were critical to saving their companies and infusing new energy and excitement into them. All of these situations were, however, before Millennials entered the workforce in mass.” — Henry D. Wolfe, chairman, De La Vega Occidental & Oriental Holdings, Chicago, Illinois
“I’m guessing with so many work from home arrangements, many local stores and coffee shops are likely to spring up close to home. Hopefully rather than car-oriented suburbs, we end up where we all started a century or so ago, with fewer cars, more mom and pop stores, more cycling and a village vibe! Here’s hoping anyway.” — Denis Culligan, property manager, Vignon, France
“Business CEOs that see social democratic principles as important to sustaining and improving their corporate human capital should be an increasingly influential constituency to support much more extensive social democracy in governments, which have awesome risk-sharing capabilities that are underutilized and now obviously much in need. Some of tomorrow's revolution might just have a corporate imprimatur.” — Paul Myers, accountant, Corona del Mar, California
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