Economic Crisis in the Anthropocene

Transcript

Archive Recording, Prime Minister Boris Johnson: Good evening. The coronavirus is the biggest threat this country has faced for decades. And this country is not alone.

Archive Recording, President Donald Trump: Today, the World Health Organization officially announced that this is a global pandemic.

Archive Recording, Queen Elizabeth II: I’m speaking to you at what I know is an increasingly challenging time.

Archive Recording: Congressional leaders appear to have reached agreement on what is by far the biggest stimulus package in US history.

Archive Recording, Senate Minority Leader Mitch McConnell: It will rush new resources onto the front lines of our nation’s health-care fight, and it will inject trillions of dollars of cash into the economy as fast as possible.

Archive Recording, Chancellor of the Exchequer Rishi Sunak: To all those at home right now, anxious about the days ahead, I say this: you will not face this alone.

Archive Recording, Director-General of the WHO Tedros Adhanom Ghebreyesus: Vaccine nationalism will prolong the pandemic, not shorten it.

Archive Recording, President of the European Commission Ursula von der Leyen: Only vaccine cooperation saves lives.

Archive Recording, Secretary-General of the UN António Guterres: None of us is safe until all of us are safe.

Archive Recording: The idea of the Anthropocene is that we’ve entered a new geologic age based on the global footprint of humankind.

Adam Tooze: Hello.

AT: Hi, nice to meet you, Elmira.

AT: So I’m recording now…

AT: So, first of all, perhaps it’s useful to just define what the Anthropocene is. I mean, the Anthropocene is the terminology derived from geology, in fact, for the period in which we think in retrospect, like future generations looking back on our period will recognize the moment at which humanity as a whole – and that is one of the rather controversial aspects of the definition, because it implies that humanity as a whole is responsible for a fundamental shift in our relationship to nature – so that we become, you know, next to volcanoes and wind erosion, a major geological force. If you think about the Earth-moving that’s gone on on the planet, we are driving an extinction event in terms of biodiversity loss – which is up there with the great meteor strike that took out the dinosaurs – and perhaps, front of top of stack for most people, the climate-change problem, the destabilization of the global climate, and all of the attendant follows on from there.

So, this has been diagnosed really over the last 20 years. It was, in a sense, fascinating to historians, because what happens here is that natural history – geology in fact – begins to overlay with political history, economic history, as we understand it. And this is one way of thinking about the fundamental dilemmas of our current moment. So, how do we stabilize – or, indeed, even just imagine – the future of 7.8 billion of us, mounting to ten billion perhaps by later on this century, on this planet. How does that story play out? So, we’ve been kind of waiting for crises to happen. And this one came out of left field a little bit, because most of the Anthropocene discussion has been focused on things like climate, rather than on zoonotic mutation, which is in fact part of the repertoire of dramatic changes which have been going on, been diagnosed for 50 years as well. Same timeline as climate science. And here it was, the monster arrived, and it erupted into the world economy in a way that we’ve literally never seen before.

But the wager of the book is to say, “Yes, that happened, but that didn’t mean that everything else was suspended.” So, think back to where we were at the end of 2019 or early 2020, if you read the [International Monetary Fund] reports from that moment, it’s kind of ghostly, because they see the China problem. They see the China-America rift. They see destabilization of Western democracy, inequality. They see financial risk. They see climate. And then by March, we’re in this totally altered reality. So, the book is trying to capture the intersection of those two different sets of forces: the old familiars, if you’d like, that go all the way back to the history of the 19th century – democracy, financial instability, geopolitical tension – with these new forces.

AT: Yes. Many people prefer – those coming from the left – prefer Capitalocene, because that points the finger where the finger should be pointed. It’s just so ugly that it really hasn’t caught on. It’s really quite difficult to say, but I think it’s more accurate. I mean, if you look at who’s actually doing the damage, it isn’t the bottom half of the global income distribution. They have precious little impact on the environment at the macroscopic sphere. They may destroy the ecology out of poverty. If you look at an island like Haiti, for instance, or rather if you look at Hispaniola, and you contrast Haiti with the Dominican Republic, it’s extraordinarily stark how poverty drives that. But they aren’t driving the whole thing. So, yes, it is indeed a highly unequal, highly dynamic economic system that is driving this.

Archive Recording: That deadly coronavirus outbreak has authorities taking new unprecedented drastic action today, as they try to keep a lid on it.

Archive Recording: Travel restrictions have been imposed on more than a dozen cities on the mainland, affecting around 40 million people.

Archive Recording, Prime Minister Boris Johnson: From this evening, I must give the British people a very simple instruction: You must stay at home.

Archive Recording, Chancellor Angela Merkel: Speaking in German.

Archive Recording, Prime Minister Pedro Sánchez: Speaking in Spanish.

Archive Recording, Lt. Governor of Texas Dan Patrick: Let’s get back to work. Let’s get back to living. Let’s be smart about it. And those of us who are 70+, we’ll take care of ourselves. But don’t sacrifice the country. Don’t do that.

Archive Recording: The coronavirus pandemic has ravaged communities and cost millions their jobs, leading to food insecurity across the country.

Archive Recording: The numbers are startling. Between 30 and 40 million households at risk of being evicted.

Archive Recording: As millions lose their jobs, they also lose their health-care coverage. And for so many, there are no easy prospects of getting affordable insurance.

AT: I think the, say, the third of [US President Joe Biden’s] investment packages, the Families Plan, reflects, to a degree, our understanding of the centrality of care, both to the economy, but also to the social networks that sustain our lives and our families. And that’s a very welcome addition, as it were, to the welfare-state agenda. It’s quite novel. In some ways, it’s the most novel of the three packages that he proposed. In Europe, what we saw was perhaps not a revolution, but we saw the triumphant vindication of the model of short-time working. which the Germans experimented with in 2008-09. And it’s now gone global. The Australians adopted it; the Canadians adopted it. That’s a really good model for managing large-scale labor-market risk and has proved itself. Whether or not we’re going to see, I think, long-term transformation anywhere, I think the jury is still out.

And again, I think it is useful here to have a bit of historical perspective. The big shift in policy in the wrong direction, many of us think, after 2008, came in 2010. So, the move to austerity does not happen immediately. It happens two years after the crisis. We’re not there yet. And those conversations are going to begin. They’re going to begin in the US. We’ve already seen them beginning in a sense in Congress about what priorities should be. The [US Federal Reserve] is anxiously eyeing its options. And in Europe as well, the whole fiscal-policy debate will commence. They’ve been pushing it off as long as they can, but I think it’s very difficult to foresee them being able to postpone it much beyond the second half of next year, which is pretty much the same timeline. At that point, I think we may be able to judge whether there really has been learning, transition, a deeper understanding perhaps of some of the necessities. But certain models have proven themselves already in the crisis.

AT: Well, explanation is really difficult actually. But their most severe is simply the failure to recognize the interconnectedness of the world that ought to have really been the driving force of our reaction in February.

AT: 2020. Exactly. There was a real sense that this was a Chinese problem that was going to be handled by Chinese methods that really didn’t have anything to do with us in the West. Whereas our first reaction should have been, “Man, if they are having to sever the connections between, you know, the ten-million city of Wuhan and Beijing, then we probably need to be looking pretty seriously at JFK and Heathrow at this point, because they’re next in line.” And that thought, even articulating that idea, I think, would have been very difficult in February. I don’t belabor the governments for failing to do it, but I think we have to recognize the fact that their inability to even pose that question at that moment suggests that we just don’t get it.

We are not yet at the point where we A) recognize the degree of our interconnectedness, and B) actually recognize the severity of this pandemic business. Because we had staffs that were telling us for years, decades indeed, all the way back to the 90s at least, about the seriousness of this. There is an entire profession of people whose job it is to warn the military and other security services about this. There was a constant fear of bioterrorism. There were plans all over the place to react. And yet when it happened, there was a sort of – none of those things went into place. And, you know, there’s been soul-searching postmortems on the American situation. And often, as it were, the trains of causation lead back to the Trump administration, but de facto, no one reacted well – or virtually no one. I mean, the sole exception might be Korea, South Korea. The Japanese got extremely lucky. But the norm was to act too slowly and not to recognize the degree of implication. There are entire press conferences in which the European bureaucrats lecture journalists about the “fact” that COVID is going to be an African problem, in March 2020, until the journalists kind of lose their patients and say, “But no, actually it’s in Northern Italy. And if it’s in Northern Italy, the rest of Europe is in trouble, too.” So there’s a really quite fundamental disconnect here. And it’s tempting to say, “well, this has to do with interests, right? There are powerful interests somehow preventing us from acting.” And of course, it’s difficult to lock down an airport and difficult to shut off air travel. But if we had taken our model seriously, we would now know, at least, or should have known even beforehand, that not to do it would result in a far bigger loss, right?

So, to that extent, that’s what I mean by saying it’s a problem of government. If the job of government is, as it were, to lead interests towards their higher self-interest – it isn’t, as it were, necessarily to oppose their self-interest, but to coordinate people such that their interests align and we achieve better things together – then clearly, the thing to have done would have been to pound on the table and say, “No, I know it’s going to hurt for the next three weeks, but believe me, if we don’t do this, you still won’t be operating normally 18 months from now. How does that look to you? Okay. So now we’re back to reality. We need to shut down now.”

Archive Recording, Fed Chair Jerome Powell: The Federal Reserve’s response is guided by our mandate to promote maximum employment and stable prices for the American people, along with our responsibilities to promote the stability of the financial system. We’re also committed to using our full range of tools to support the economy in this challenging time.

Archive Recording, Fed Chair Jerome Powell: We are deploying these lending powers to an unprecedented extent. We will continue to use these powers forcefully, proactively, and aggressively until we’re confident that we are solidly on the road to recovery.

Archive Recording: Breaking overnight: the Bank of England announced an emergency interest rate cut of 50 basis points.

Archive Recording: The key thing here is it’s not just about the rate cut. It’s about the stimulus measures below the surface.

Archive Recording, Former Bank of England Governor Mark Carney: That’s why the Bank is announcing today a comprehensive and timely package of measures to help UK households and businesses bridge across the economic disruption caused by COVID-19.

AT: I think at this point, it’s even too kind, and I don’t think it does justice to the dilemma, the almost tragic dilemma, that central bankers face. I mean, they may be unintended, but they’re very well documented and they’re very well known at this point. So really what they’re engaged in is tradeoffs. They understand that if you engage in the kind of monetary stimulus they engage in, the consequence is that you will boost the asset markets. That’s kind of the point of how this very blunt instrument of [quantitative easing] and asset purchases works. It’s a little bit like hitting an old black-and-white television with a hammer. No one really quite understands why it works, but uncles and grandfathers have done it through generations, and it kind of did. So that’s what we went on doing. QE has that kind of a quality. It’s a policy that works in practice, but not in theory, as Ben Bernanke put it.

So that’s what they’ve done. But one of the effects that we know that it has is that it produces the kind of lopsided recoveries that we’ve seen, and an Austrian-type economist will say it encourages bad behavior, right? Because it, as it were, builds up the expectation of being bailed out. It sustains concretely the expansion of those financial markets and helps to sustain a huge buildup of debt to the point at which it becomes quite difficult to step off the escalator, because if you did, you would bring this huge edifice crashing down on you. So, I think that’s the game that they are really quite self-consciously engaged in. I don’t think anymore we can say, “Whoops, unintended consequences.” It’s more in the manner of, “Okay, we’re going to have to do this again.” So that is going to be the consequence. I mean, they sort of know how this tradeoff is going to work. The answer of course is, to this objection, is “Well, okay, sure, you don’t like these consequences, but what is the alternative?” And the alternative is mass unemployment, substantial financial instability. What we didn’t, after all, see in 2020 – and this is a huge blessing – is a major bankruptcy of a financial institution, despite really spectacular turmoil in key financial markets.

AT: Oh yeah. Yeah. I mean, “change” is a little understating it. Like, it’s blown what we used to think the appropriate role of central banks was out of the water. I mean, you talk to any central banker now, they’ll sort of tell you – when they’re speaking honestly – because we used to think that their mandates were basically simple, that they were price-stability mandates. And the simpler you made it, the better, because then they would have a simple objective function, and they’d be more predictable, and the cost of achieving their target would be lower, and so on and so forth. This was the whole mantra of the 90s and 2000s. That’s gone out the window, because first of all, the inflation problem is not the inflation problem it used to be. We have a deflation problem, and a deflation problem turns out to be a license for effectively doing a kind of surrogate macroeconomic policy, which as, you know, Ben Bernanke started it, advocated it in Japan, but I think really [Mario] Draghi pushes it to its limit in Europe after 2015.

And then the other thing is financial stability. You know, once you recognize the risks from financial instability, you end up in the business, really, of, in one form or another, sustaining profit-earning private accumulation, speculation, and that’s what they’ve ended up doing. And in a sense, the question then is do you retreat, which to my mind is just unrealistic. I think that kind of paleo-conservative vision of what they should do just doesn’t accord with the realities of our situation. Or, do you move forward?

And what I think is interesting about the current crop of central bankers is that you see them moving forward and saying, “Right, if that limited definition of what we do is not good enough anymore, and we’ve de facto ended up doing all these other things, does it mean that we should start thinking about a third set of things, which are, as it were, the follow-on effects, or using the tools that we’ve got in other and important directions?” And the two areas that we’ve seen, the US Fed is much more heavily concerned with the inequality problem than ever before. An index like, for instance, the black unemployment rate – which, for a long time, was a left-wing cause. This was the way in which you attacked centrist policymaking, was to say, “It doesn’t factor in the racial divide; you need to measure unemployment this way.” – it’s now on the dashboard for every serious American central banker. It’s how they monitor how tight the labor market is. And in Europe, what you’re seeing is this remarkable expansion of the [European Central Bank’s], at least, horizon towards the green agenda, towards climate.

Archive Recording, Vice President Kamala Harris: The president promised help is on the way and today, help has arrived. Help has arrived for the workers who lost their jobs.

Archive Recording, Chancellor of the Exchequer Rishi Sunak: Support for the local authorities, support for the self-employed, support for people’s jobs and incomes. A plan to support the British people. And I commend the statement to the House.

Archive Recording: The bill includes $1,400 direct payments, funding for vaccines and schools, and $300 per week in jobless benefits.

Archive Recording: Plus, an expansion of the annual child tax credit. Now, $3,600 for families with children under six and $3,000 for children ages six to 17.

Archive Recording, Speaker of the House Nancy Pelosi: This is the most consequential legislation that many of us will ever be a party to.

AT: America suffered a constitutional crisis last year. I mean a full-on crisis of American democracy. I don’t think there’s any way around that. It’s difficult to talk about. In a sense, it’s a bit like a nasty disease. You’d rather just it hadn’t happened. It’s a little bit like the pandemic. We just kind of hope it’s over, and it isn’t over. And the constructive response to that, on the part of formerly centrist Democrats like [Chuck] Schumer, like Pelosi, is to say, “You know what? We have just got to keep the pedal to the metal. We cannot go into the first half-term of the Biden administration, with the midterms coming up in 2022, without just powering through in terms of fiscal policy.”

I think it’s a full embrace by the Democratic Party of the reality that they are in a life-and-death struggle for the future of American democracy and from their point of view – and I happen to share this view – that depends on their not losing the congressional majority to the GOP in 2022, which doesn’t necessarily end American democracy, but it takes us in a direction which is really bad. So that, I think, is the game.

Archive Recording, President Xi Jinping (translated): Socialism with Chinese characteristics is a fundamental achievement of the Party and the people, forged through innumerable hardships and great sacrifice. And it is the right path for us to achieve national rejuvenation.

Archive Recording: As the pandemic spreads around the world, the first country affected by the outbreak, China, has surprised many by the speed of its recovery. China’s the only major economy said to avoid a contraction last year.

AT: There might be reason for thinking that. That wouldn’t by itself be a reason for celebrating their model or thinking it appropriate to us, or even fantasizing about applying it here, because that’s, I think, the greatest fallacy that people make looking at China, is to think that somehow that could be for export. And it’s the highly peculiar product of an intensely violent idiosyncratic history that’s never going to be replicated anywhere else. So, whatever merits it’s got, they’re very unlikely to be easily exported. But they certainly do have some advantages.

They have obvious demerits as well. It’s a vast country; the reporting chain is wobbly; there’s huge incentives not to report bad news – all of which was very evident at the beginning of 2020. But they do have mobilizing capacity. And it’s really not – the interesting thing about it is not so much that it comes from the top down, as that it comes from the sort of mid-levels, right? They have a committee structure that operates across the entire country. The [Communist Party of China] is a real force, not just where you might expect it to have once have been, say in the old industrial rust belt, but in upper-middle-class modern housing developments in Shanghai. The Party is there and present. It has embraced modern technology in an incredibly aggressive way.

And the other thing that they have going for them is – it’s the flipside. Liberals, of course, will always bemoan the lack of respect for the rule of law, which is absolutely fundamental and characteristic of the regime. But it also gives them degrees of freedom. Now, if they want to, as it were, stop something from happening, there are systemic ramifications from that. We’re going to see that as, for instance, the Evergrande real estate conglomerate begins to implode. It’s going to be very interesting to see how they handle that. But they do have the capacity to intimidate and to shift the parameters on oligarchic interests, for instance, in a way that we simply haven’t shown in the West.

So, they do have certain advantages. They have a joined-up vision of government. They’re very uninhibited about boundaries between different areas of policy, at least behind the scenes – not in public. And all of that gives them advantages. But that isn’t any reason for saying, “Oh, well, you know, then our future is authoritarian.” It’s just not an option for us. We need to find our own route, our own means for dealing with these kinds of challenges. And, you know, we should at least stand up, however, to their competition and say, “Well, we should hold ourselves to that standard.” There’s some pretty basic metrics here, like how many people died per thousands of inhabitants from this disease that started in China, took them by surprise. They had the least time to react, and look how well they dealt with it by comparison with us. We should be humbled by that.

AT: The simple one is simply what happens in China matters to us. It isn’t really us learning from the Chinese as actually learning about China. I mean, we just need to be alert to what’s happening there. I don’t expect us to respond in the way that they do, but we seriously need to track what is happening there, because it will have ramifications for us. That’s the simple, the crucial point. And then there’s a degree where we need to cooperate with them. I mean, fundamentally with this virus, the crucial thing that happened is that a Chinese scientific team sequenced the virus’ DNA very, relatively early on, and then defying orders to the country, put the data on the web. And that’s what launched the vaccine programs outside China. So, that kind of cooperation is going to be crucial.

Archive Recording: It is unequivocal that human activities are responsible for climate change. That’s the finding of a new study by the UN’s Intergovernmental Panel on Climate Change.

Archive Recording: The UN secretary-general called the findings “a code red for humanity,” adding that it must be a death knell for coal and fossil fuels.

Archive Recording: The signs are all there, with fires raging around the world in Greece and Turkey and in California. And where there isn’t fire, there’s water. Once-in-a-century flash floods killed hundreds in Germany, Belgium, and China this summer.

AT: Well, it’s very early days. I mean, China in September last year finally made a commitment to achieve something like net zero by 2060, which is a revolution. It’s essential because it accounts for 28% of global emissions, which is the same as the entire OECD – so Europe, the United States, all the other rich countries put together. It’s also dynamically expansive in the way that they’re not. China’s growth since 2000 has completely changed the emissions equation. And so in all of those respects, there is no solution to the climate problem without them. And if they decide to commit to resolving it, it’s more important than any decision we can make in the West. And if they don’t make that decision, nothing we do in the West makes any difference. That’s the first thing. I mean, it’s really quite difficult to wrap one’s head around.

Is it the beginning? Yes. And is it going to be really difficult? Absolutely. So, we shouldn’t expect very rapid movement, because they have to shift the largest heavy industrial complex humanity has ever built. And they built it only in the last 10-20 years. So, it’s like scrapping the entire – all of the Industrial Revolutions to date, they’re going to have to now unwind, right? I mean, they doubled global steel production between 2000 and 2015. So, all of the history of industrialization – [Alfred] Krupp, [Andrew] Carnegie, everyone added all up – they replicated that in 15 years. And now they’ve got to unreplicate it and go in the other direction. So, you know, each individual Chinese province – I think there are eight Chinese provinces with more CO₂ emissions than Germany.

So, the scale of managing this shift is huge, and the politics are vastly complex, right? Because there is politics in China as well. And Xi Jinping will have to antagonize huge coal-heavy industrial blocks in making this shift. So, as powerful as that leading group within the Chinese Communist Party is, it’s hugely difficult. There are some people who say, “It’s all just for the birds,” but I find that a profoundly weird way of thinking about this problem. It’s as though we have the climate problem in our heads, and we somehow persuade the Chinese to take it seriously. It’s as though it’s like human rights or something. Whereas if we take the climate diagnosis seriously, it’s an inevitability, it’s a fate, it’s a physical natural force that will destabilize the entire world. And they have a long-term time horizon, as a serious authoritarian dictatorship wanting to govern for another hundred years. And they, therefore, have every reason in the world to take this problem much more seriously than democratic politicians who have a time horizon of three or four years at absolute most.

And so, there’s no reason, I think, fundamentally why we should doubt that they want to take it seriously. But we should just take seriously the fact that they have huge problems in implementing it. But they do now have a, you know – they’ve got the beginnings of a carbon-pricing system. They’ve modeled that on the European system. So, if it’s anything like the European system, it will take several years to begin to operate. And then when it does, it will actually work, and begin to change their energy-generating mix. So there are pieces there and, in key areas of renewables, in solar above all and in wind and electric vehicles, they’re in a league of their own, right? They dominate the solar-cell market and they are completely world-leading in terms of electric mobility as well.

Are they going to save the world? I don’t know. But do they have the interest in doing so? Yes. And are they making concerted moves, which are at least as serious as anyone in the West? Yes.

AT: It was a pleasure. Thank you for having me on.