Zachary and Jeremi sit down to discuss the current and future economic impacts of the novel coronavirus.
Zachary kicks it off with his original poem, “The Pestilence Depression”.
This is Democracy, a podcast that explores the interracial intergenerational and intersectional unheard voices living in the world’s most influential democracy.
Zachary Suri 0:19
Hello, and welcome to this special episode of This is Democracy. We are recording once again from our dining room table, as our usual studio at UT is still inaccessible due to the Cova 19 pandemic, which now grips the world. In fact, we’ll probably be recording from here for quite a long time, at least for a few weeks. Yeah. Today we are going to talk with Professor Jeremy Suri, our usual host about the economic fallout and political implications of Kovac 19. And really what lessons we can draw from similar instances in our history. First, of course, though, I will read my scene setting poem entitled, the pestilence, depression, the pestilence, depression When does it hit you? This recessive parade. The charging bull bull market of Wall Street palms clasped in prayer or some uniquely American Idol, knee fallen to the ancient mother pestilence. I was not capable of economic thought last Nadir last slip into the slick remorseful suds of seemingly invincible bubbles. I have grown with the Dow reached five feet tall with the NASDAQ and learn to soar from West Texas Intermediate old Irish dance teacher. It’s eerie coming home on an overheated school bus to a city of the boom times city of the uncertain future. aware of something novel, something flapping unbroken wings and to wake the next morning to 3am School cancellations. Like I woke to a new decade and we children of the recovery What are we the generations slipping into the cracks ignorant promise to prophesizes of pension Doom Title One Americans fooled us on the streets that slip into the highway and when We’re also Trust Fund Americans hunger lists on the streets locked behind iron gates, and whatever everyone else, the listless 30 year olds with student debt, mortgages and $30,000 worth of car loans on a Hyundai. What will become of them? The children of 911 and one of the sick, the tired, the poor, those ever present huddled masses yearning to breathe clean air. When does it hit you the beginning of a beginning the fork in the yellow brick road, when do you begin to sense the leafless trees or find the sapling beneath the Ever Brown brush? When does it hit you? The beginning of a pestilence depression. This poem is really a very personal one. For me, it’s about what it’s like to to have grown up with this sort of bull market that has dominated the American Economic Forum for so long. And now to see it collapse in this oldest of pestilence is a virus and it’s really a very unique A surreal moment for our society.
Jeremi Suri 3:02
And quite sudden it seems Yeah. Yeah. Well, your poem I think captures the suddenness and it also captures the the dislocation it creates. It’s not just an economic issue, right. It’s a social and emotional issue as well. Right. Well done, Zachary.
Zachary Suri 3:15
Thank you. So So Jeremy, what are the basic EPA economic implications of this outbreak? Do you think we’re on the verge of a major economic depression?
Jeremi Suri 3:24
Well, I’m an optimist by nature as you and our listeners know, but but I have to say, I see a very bleak economic prognosis for our country. Now I see us approaching a very deep recession and perhaps a depression of sorts for three reasons. First, our economy has largely grown in the last decade or so based on consumer spending. And the corona virus hits directly at consumer spending in social distancing and not going to restaurants and bars and movie theaters and festivals, things like South by Southwest that are canceled, we are basically undercutting more than kneecapping really chopping off the legs of consumer spending in our society. And what we know about the history of consumer spending is when it dips, it often doesn’t rebound very quickly, even if the external conditions change and we feel healthy again and save in the mid summer, people will be worried about what will happen next. And so we’re likely to see a long term dip in consumer spending. That’s Problem number one. Problem number two is that the growth of the global economy over the last hundred years, certainly the last 30 to 40 years has been deeply connected to the growth of international trade. And our borders are closed. Our international trade was already coming upon major barriers, political and economic, with new tariffs and new trade wars in the last few years. But now we’re in a world of closed trade, and that’s going to undermine the growth of our market is going to make it more difficult to produce the things we produced and to generate Right the wealth to purchase those things. And then the third, I think perhaps most important element of this is that fundamentally, people don’t trust their leaders. And the decline of trust in the United States, in Western Europe, in Asia in leadership, makes it very difficult to convince people to make long term investments. And I think we’re going to see a lot of people who have access to capital sitting on their capital, we’re going to see people spending less money, buying fewer cars, buying fewer homes, and that’s going to create a deflationary spiral and deflation. The inability to raise prices, is what has been at the root of all major economic downturns. In the 20th century, the deflation that we might experience that we experienced in the 1930s meant that there was no incentive for companies to produce more to hire more people. And that led to long term joblessness and I think we’re in that space now. I think we are going to see very high unemployment numbers very soon and I don’t think we’re going to work our way out of this quickly.
Zachary Suri 6:03
So who will be most greatly impacted by this sort of economic fallout of the virus and will be there? Will there be people who will actually benefit
Jeremi Suri 6:13
from it? Well, there always are some isolated sectors that benefit from a downturn like this, especially the contours of the downturn that we’re dealing with right now. So those who do online delivery might do a little better. Amazon looks like they will, at least in the short run, be hiring more employees. People will be buying more from Amazon and trying to go to stores less. Obviously the biotech field, those who are doing the work with regard to testing, respirators, ventilators, different vaccines and medications, they will do well, they will get a lot of government funding, as well. Hand Sanitizer producers as well. But but these are really isolated sectors of the economy. They’re very small in relationship to what are the main sectors of the economy which remain consumer spending and Tech tech and industrial production that’s outside of pharmaceuticals and health cars. All American automobile factories have shut down right now, it’s still a major part of our economy automobile production. So there will be some sectors that will benefit a lot of sectors won’t. And as always happens during these periods of economic hardship. Those who are most vulnerable are hit hardest first. So hourly workers who don’t have insurance, homeless individuals, poor individuals, they get hit hardest. We do have the choice. And I’m sure this is where you’re going with your next question, though, to turn the hardship into an opportunity to create a more egalitarian benefits if we wish or not. We have both sets of experiences in our history. And I think that’s probably the way we want to turn in the conversation. Right? Yeah.
Zachary Suri 7:44
And it really add to that point, historically, what have government’s done right, similar situation, right, and what are some similar situations? Right?
Jeremi Suri 7:52
Right. So we do 19th century but only the second half of the 19th century we experienced the United States did many major downs. Turns 1893, for instance, is considered by many a depression, not just a recession. And it happened in part because of the collapse of railroad and other major investments at the time. We of course, had the 2007 2008 recession. And then of course, there’s the Great Depression of the 19, the 1930s, the US government pursued different policies in different periods, we have a very wide and rich historical record to draw upon. In the 1890s. The federal government did very little to try to address the suffering of individuals. Most of government aid went toward the businesses, railroads and others that had fallen under and to some extent, trying to shore up the capital markets, the banking industry and others. But what we saw in the late 1890s, was actually widespread starvation in parts of the United States, and major violence as different groups of workers and others who felt they were not being well served by government policy. rose up and demanded more action. And you had a variation of responses across different states. In the United States. It was that ugly moment that motivated people like Theodore Roosevelt and others, to move toward creating a more vibrant federal government to deal with these kinds of issues and address consumer needs. It’s out of that moment that we get many of the first efforts at eliminating child labor, anti Islam efforts by the federal government and the creation of the Federal Reserve and various other federal agencies to try to regulate the economy more. The Great Depression was very different. Franklin Roosevelt learned important lessons from the failures of American responses earlier, and the Great Depression produced the New Deal and the new deals extension through World War Two. Those policies were designed not to bait benefit corporations and businesses fundamentally, although they were part of it, but to actually provide jobs and basic needs to those who are most vulnerable across society. The best example of this being social Security, which is the first federal pension for elderly citizens who at the time were the poorest sector of American society the New Deal and World War Two the spending during World War Two that created jobs for African Americans and others who had not been provided with economic opportunities before. The New Deal created greater equality in the United States, and it aimed the benefits at the individual rather than businesses. 2007 2008. During the presidencies at the end of George W. Bush’s presidency, the beginning of Obama’s there was a lot of government intervention in the economy to try to alleviate the suffering during this major economic downturn. Most of the efforts, however, went toward firming up creating more stability in the financial sector, and benefiting bailing out large businesses like the automobile industry. It did not the policies of 2007 eight did not address inequality. In fact, they furthered the inequality in American society, those who were hurt at the bottom quarter of the American economy by The recession of 2007 2008 still have not recovered to this day. So we have very different sets of policies we pursued at different times aimed at benefit in different groups primarily during periods of suffering.
Zachary Suri 11:13
How can we begin to develop a policy similar to the New Deal for the 21st century? And where do we begin?
Jeremi Suri 11:22
Well, it’s, I think, a really important point to raise. And this is not a political statement. It is a historical statement, that if we want to find a model for what to do in a period of long term economic downturn, created by a shock, like a collapse in the stock market in 1929, or a collapse in the stock market now, precipitated by a major pandemic, the New Deal is our best model. It’s our best model for two reasons, because as I just said, and we just discussed, it alleviated some of the problems of inequality that were at the core of the difficulties and instabilities within the American economy. And second, by providing assets to To those in the bottom of the economy and making them more productive, educating them giving them jobs in factories and skills, it allowed for a much more productive American economy as a whole. That’s how we won World War Two. What would that mean today? I think it’s a little different from the way politicians have been talking about it. A new deal for today would mean first of all, the federal government, federal agencies, and Congress and the presidency taking it very, very seriously. That inequality in our society is deeply related to the problems we face today. Really focusing on inequality. Second, focusing on basic institutions that provide access and opportunity for those who suffer and healthcare would have to be at the top of the list. One of the problems we’re facing now is not simply inadequate testing and inadequate hospital beds. But this is already beginning to be reported upon certain people get access to tests before others. Why is that? Why do certain communities get better health benefits than others? So Investing in the institutions that provide the common benefits to raise up those at the bottom while also helping those at the top addressing inequality, not just of income, but inequality of access. And then third, we need a major set of government investments, major investments that are more than sending checks to individuals. But investing in the institutions, the schools, the infrastructure, the health activities and health opportunities that people need across the sector, it’s much easier to throw money at the problem by putting money in checks to people than it is to actually invest in institutions that are most significant. The legacy of the New Deal was nothing dollars. Nor was it the rhetoric, it was the institutions that were built Social Security Administration, the GI Bill, the creation of federal support for mortgages, the creation of the WPA, and all of the institutions that flute that that grew out of that the Civilian Conservation Corps, planting trees, building pathways, building our infrastructure, rural electrification, Tennessee. authority, quite literally the New Deal built the institutions to turn the lights on to create schools and to build opportunity in places like Central Texas where we live opportunities that very young Lyndon Johnson, were inconceivable before that there was not the money it was those institutions that made the difference, a new deal today would be an investment in institutions like that. And the problem is very few people on the left or the right are talking about that this is not a Democrat or Republican issue. There should be an inch an issue about building real capitalism, which is based on real opportunity for all citizens.
Zachary Suri 14:32
How, though? How do we make sure that? Well, well, first of all, why is this inequality that you speak of specifically, economically, so dangerous, but also how do we make sure that these institutions that we create don’t further inequality right,
Jeremi Suri 14:46
great, great question, and many criticize even the New Deal for sometimes doing that? The New Deal certainly reaffirmed racial segregation and inequality in the United States and all of its dimensions So we have to be careful what kinds of institutions we build. Why is inequality so harmful? Well, first, it contributes to political instability. But second inequality is harmful because it creates an enormous drag on the US economy. When you have inequality, those at the bottom end of the of the economy are not doing the things that they would want to do, and that they could do to become more productive members of the economy. They are instead, they’re instead stuck in circumstances where they might be doing things that make others wealthy, but are not making them any wealthier and are not providing them the incentives to be more productive and more productive economy is a more egalitarian economy. The times when America the American economy has become a beast. unequal have also been the most productive periods in our economy, the most significant being the mid 20th century. As inequality grows in our economy from the 1970s to the present, economic production and GNP, the growth in those things declines. So inequality correlates with slow growth equally Quality, the movement toward more equal opportunity in a capitalist system equates with more production and more growth growing the pie for everyone. So it’s political instability, and the overall economic prosperity that we are most concerned with. Now arguing for inequality is not arguing for everyone having exactly the same thing. So you can believe in a system of merit incentives and markets, and still believe that there should be some basic relationship between those at the top and those at the bottom. Capitalism going back to Adam Smith, is not winner take all. Capitalism is about a common market, where there are common obligations for people to pay into the market and to benefit from the market in a society where some are exploiting others, as was true in the late 19th century is a society that is less productive, more prone to instability, and more prone to a dislocation. As we’re seeing today. We are far worse off dealing with this pandemic, because of the inequality of Health Access that we would be if we had more equal Health Access. Our society if we were, in essence, a healthier society, we’d be better able to deal with this problem today. So to move toward a more equal society is to move toward what we saw in the mid 20th century after the Great Depression, a society where all sectors can do better, even those at the bottom.
Zachary Suri 17:21
So So what can all of us beyond just like creating more stable and more equal institutions on a national level? What can all of us ordinary citizens and influences are like? What can we do to combat the economic effects on services operate?
Jeremi Suri 17:36
That I think is the key question and then there’s where I am optimistic, and maybe this is a wake up call for us maybe this moment, that’s going to be difficult and I don’t want to downplay the difficulties for many people, particularly those who are already vulnerable, but maybe these difficult moments will be strong coffee for a strong morning coffee. There are about four or five things, I think That we can do each of us. And he’s drawn the history of how our democracy has renewed itself in moments like this. First of all, we all can get out there and pay attention to issues of equality and make sure that we care about these issues and that others know we care about them. Whether you are at the top of the bottom or like my students, somewhere in between. You have to care about these issues. And these issues have to be important to you. And you have to vote based on these issues. Don’t look for an easy Savior. Don’t look for someone who has easy slogans, look for someone who you think will address and care about these issues. What made Franklin Roosevelt a great president was not that he had simple solutions, but that he cared about these issues, he really cared about helping those at the bottom to get more opportunity. And he knew that doing that would benefit people like himself who were at the very top of society. Second thing we all can do is that all of us can devote our lives when we have privilege to helping those who aren’t in such privileged positions. It doesn’t mean that we have to become martyrs, all of us. But we can personally invest in the kinds of institutions that make a difference. The kinds of local institutions we care about the kinds of charities we care about many, many people do this to their churches. And that’s a that’s a long tradition in American history to work through your churches, and synagogues, and mosques, to help those who have been left behind. Third thing we all can do. And I think this gets even more important as we go along. We can actually try to ourselves, encourage a set of laws and policy changes that not just address inequality, but that address fairness in our society as a whole. I think we have to have more of a discussion about how large communications monopolies like Facebook operate. We need to pay attention to those issues, those issues, we need to see policy change and we need to see real policy change around infrastructure. And then the fourth thing that I think we all can do and it’s what we’re doing here is we can get involved locally. In local politics of this, making sure that within our cities and communities, even if we can change national policy, we can begin to experiment during the Great Depression. The states in the cities really were the great laboratory for democratic experimentation they should be as well. We’re seeing that happen with the pandemic. Now, different cities are experimenting with different policies for social distancing, but also also different policies. Also different policies for providing testing and health care and medical facilities for those who need them. So we need to really get involved locally along these issues. And then finally, I want to make a pitch for the arts. What do you do with your poetry Zachary? One of the legacies of the New Deal was the descriptive and artistic power to make people who didn’t before understand and care about those who were left behind. Think of the novels of Saul Bellow. Think of the art of Jacob Lawrence. Think of the music of what he got three some of the greatest American innovation is in the arts during periods of depression, arts that awaken our consciousness and mobilize us as maybe nothing else ever can. And that’s why your poetry is so important to our podcasts.
Zachary Suri 21:13
In this moment of economic instability and crisis, we all really need to rethink the choices we make, what businesses we support, what policies we advocate for, and how our actions impact others. But most importantly, we all need to think critically and ask, are we really doing our part to help those suffering around us? Thank you, Jeremy, for your insights. And thank you for joining us for this 83rd episode of This is Democracy.
This podcast is produced by the liberal arts development studio and the College of Liberal Arts at the University of Texas at Austin. The music in this episode was written and recorded by Harrison Lemke and you can find his music at Harrison Lemke calm calm. subscribe and stay tuned for a new episode every Thursday featuring new perspectives on democracy
Transcribed by https://otter.ai