Hello and welcome to GZERO World.

I'm Ian Bremmer.

And today, a look at where things stand with the global economy as we all wake up from the darkest days of COVID lockdown.

Was the cure worse than the disease?

Or did swift action help set the gears in motion for a quick recovery?

At least for some of us.

I speak to economic historian, Adam Tooze.

He's a professor at Columbia University and his new book, "Shutdown: How COVID Shook the World's Economy" tries to make a little sense of the last 18 months.

Then, the average student loan borrower in America holds $39,000 in debt.

Could the, Biden administration cancel it?

Don't worry.

I've also got your puppet regime.

You know when I first got here, they said you were just going to spill all over the place.

But first a word from the folks who help us keep the lights on.

Major corporate funding provided by founding sponsor, first Republic.

At First Republic, our clients come first.

Taking the time to listen helps us provide customized banking and wealth management solutions.

More on our clients at firstrepublic.com.

Additional funding provided by Prologis, Jerry and Mary Joy Stead, Harold J. Newman.

And by To all you kids down there.

I was once a child with a dream looking up to the stars.

Now, I'm an adult in a spaceship.

I also, I want to think every Amazon employee and every Amazon customer, 'cause you guys paid for all of this.

If these statements from Richard Branson and Jeff Bezos, two the world's richest men, felt cringe-worthy to you, you're clearly not alone.

Look no further than the woman sitting next to the former Amazon CEO.

As the pandemic increased inequality around the world, U.S. billionaire wealth skyrocketed by nearly 60%.

This massive gain in wealth for the world's richest aligns nicely with the increased interest in billionaire space travel.

But COVID-19 hasn't been as kind to people who aren't heading into space.

The IMF says that the Corona virus has pushed at least 120 million people into extreme poverty.

And the global economy could stand to lose $2.3 trillion by 2025 due to vaccine inequality, a burden that will be mostly shouldered by people in the developing world.

Even in places with high vaccination rates like the United States, access to education childcare and healthcare are posing big problems for the country's poor.

Despite these inequalities America's economy has rebounded quite quickly, both the International Monetary Fund and the Congressional Budget Office project that the U.S. economy is on track to grow by around 7% in 2021.

Americans today have less consumer credit card debt than they did before the pandemic, and unemployment has dropped precipitously since the post-pandemic high, but we may not be fully back in the black quite yet.

Economists disagree about how long increased inflation will last.

Global supply chain shortages persist.

And we're a long way from vaccinating the world's poorest populations.

Let's also not forget about the threats we still face from COVID-19 itself, including new variants and the possibility of reduced vaccine efficacy over time.

If 2020 was a dry run for our next big economic disaster, how did we do?

I spoke to economic historian, Adam Tooze about what lessons we should learn from this dark time, as well as his new book, "Shutdown: How COVID Shook the World's Economy."

Adam Tooze, economic historian.

So glad that you're joining me on GZERO World.

Thanks.

Pleasure to be here.

So last time we spoke, I, if I remember correctly, you said that it wouldn't be implausible if by the end of 2021, U.S. unemployment could be close to 20%.

certainly in the teens.

You know, to come down from the numbers that we're headed towards this summer, it wouldn't be implausible that you would be in the teens 18 months out from that and know the country.

In fact, I mean, given how high we're likely to go, you know, a number around 20% is altogether possible at this point.

That is not where we are right now.

Now I am not orienting this interview to do gotcha politics with Adam Tooze, but I do want to ask why you think the recovery has been so much more robust than you might've expected?

No, I mean, it's a fair question.

I mean, I think the last time we spoke, we were really in the middle of the economic meltdown spring, early summer of last year.

And I don't think any of us anticipated in our lifetime seeing the kind of headlines that we were seeing out of the American labor market, that at that time.

I mean, you know, those Thursday morning, 8:30 AM releases of the numbers of Americans signing up for unemployment benefits were harrowing.

They were, they were extraordinarily stressful.

Even for somebody who has secure employment is just worried about the state of the world.

I think there was a state of panic at that moment, and I think it was well merited and well justified.

And we know unemployment did indeed surge into the high teens and in many communities well above that.

So there was good reason I think to be as concerned as we were.

What I don't think we anticipated were basically two things.

The first is the vaccine.

I mean, that's the turnaround event, right?

It's the fact that we were able to get a grip on this disease in some of the advanced economies through the vaccine.

And we simply didn't have any reason to expect a vaccine to be as effective as it is, and to come as quickly as it did.

And the second thing of course is that we were still beginning to flex our muscles with regard to economic policy.

And the scale of fiscal and monetary stimulus that we've seen is as unprecedented as the shock of the spring of last year.

So we have seen a remarkable countervailing force put in play on a scale that I, again, I mean, I'm a historian of 2008 and nevertheless, it took me as it did other people by surprise how large the fiscal and monetary mass was, that was mobilized across the world to prevent the worst.

Yes.

Across the world.

Indeed.

And I mean, certainly not in any way coordinated, but nonetheless felt like everyone was reading from the same playbook, both from a fiscal and a monetary perspective.

Do you think, I mean, were lessons learned from 2008 that carry over constructively for the ministers of finance, the secretary of treasury, the central bank heads today?

Absolutely there were.

I think we know when we learn from history, we should recognize the fact, you know, it's the cliche is of course you can't and it's always even dangerous to do so.

But I think in this case, we can say that lessons were learned, you know, it's in fact, some of the key staff at the central bank, are veterans of 2008.

So when the order comes to buy assets to do QE, they really know how to do it.

And they do it on a scale, which is literally an order of magnitude, you know, 10 X larger than what we saw in 2008.

There was coordination in the, in the way it works in them global monetary system, which is, it doesn't have to be a sit-down meeting of the G20 Finance Ministers.

What you need is for the fed to lead.

And if the fed leads, it signals to the markets and by way of the markets to even emerging market central banks, that it's okay, despite the hemorrhage of foreign capital that was happening last year to lower your interest rates.

I mean a combination, we never thought we'd see that, you know, Indonesia would be cutting its interest rate in the face of the loss of foreign capital.

Indonesia, being at the heart of the Asian financial crisis of the late 1990s, suffering a huge legitimacy hit regime change, fully able to ride out the storm.

And that is enabled by the fed's actions more locally in the United States.

I mean, the learning on the part of the leadership of the Democratic party is palpable.

It's manifest.

I mean, they are trying not to repeat some of the mistakes they, in retrospect, accused themselves of having made in 2009.

They went too small.

They didn't go big enough in that first, the only stimulus the Obama administration got to fire off.

And they also went for industry.

They went for the banks, they went for the automotive companies.

They did not go for the social contract.

They didn't go for the average American worker.

Occupy Wall Street notwithstanding.

Is that also a lesson that is being learned today in the United States?

Well, I think there's two phases to this.

The Cares Act was a bodged together compromise, and a lot of very affluent Americans got a lot of money out of that.

But the really telling moment is the, the rescue plan the Biden administration launched in its first stimulus.

And that was very targeted money.

That went to middle America.

It went to working class Americans.

It went to those who needed it most.

And that is clearly a lesson learned, reinforced by, incorporated by the Democratic party, driven by the voices of the left.

I mean, this is learning in a sense by struggle, where the Sanders campaign and AOC in the Senate and the House respectively genuinely have exercised leverage over policy thinking.

From a political dysfunctionality perspective, the United States isn't offering many lessons these days, but economically, when you look at the latest numbers coming out from the IMF World Bank, the U.S. 2020-21 looks a hell of a lot more robust and resilient than the EU or the UK, or of course, Japan or Canada.

I mean, you're the economist here.

Tell us, you know, where you think the league tables look right now and why.

It's important not to confuse growth rates with levels here.

So it is true that the U.S. economy is bouncing back at a remarkable rate.

What we're doing though, is achieving the, you know, the, the not slight achievement of returning to the trend we were on before, even going slightly above it.

So, the United States is now growing back towards the trend level that you would have expected before 2019.

That is the achievement of economic policy in the U.S. right now.

Not to hope permanently slump below that trend, which is what we saw after 2008-9.

Compared to the Europeans, this is a remarkable achievement.

Europe is not expected to attain it's pre-2020 level of GDP, let alone the trend of as it were it hypothetically should have been until the end of this year or beginning of, of next.

It has not fundamentally changed the balance in the sense that China rebounded much more rapidly, and using the familiar formula of heavy industrial investment, is powering ahead.

So the gap between China and the United States, despite America's impressive growth rates right now, will continue to widen, because China is not just clawing its way back to where it should have been.

It's actually powering ahead on that growth trend to levels we've not seen before.

You know, the, the worries about China's growth are of course real and will continue to be real.

And they did go back to the old playbook of, of heavy investment.

And we're seeing that in their demand for iron ore and their demand for steel, for coal right now.

But that is I think the fundamental continuity.

Where the real hit is going to come, the world changing hit, is in the situation of the emerging markets and particularly Latin America, because the emerging markets came through 2008-9 relatively well, Latin America leading that charge because it was a commodity-driven boom with China sustaining their growth.

Latin America right now, still in the midst of a terrible pandemic there, is looking at a lost decade.

It does feel while the United States is now powering ahead that the developing world is further and further behind.

Not the globalization story that we were hoping for.

I think that's right.

And as far as the U.S. is concerned, you would hope that all eyes really are on the, on the, the rest of the western hemisphere.

This has got to be a matter, I would say of absolutely urgent concern in Washington.

Mexico.

I mean, our immediate neighbor coming through the crisis very hard hit.

In fact, one of the big beneficiaries of America's stimulus is Mexico's export sector, but the Mexican economy per se has taken a huge hit.

And the other of course giant piece of the Latin American puzzle is Brazil, where the crisis has been profound and how in the hugely polarized politics of Brazil, you know, Bolsonaro's future plays out against an increasingly worrying I think one has to say, financial backdrop.

Brazil, one of the players who in 2020 did a big fiscal action on the scale of an advanced economy.

10% of GDP, roughly.

Also quite progressive, as a result of pressure from Congress in Brazil.

Trickling down, spending down very substantial amounts of cash to the tens of millions of people who scraped by.

How any of that can be continued into 21 and 22 should really, I think be a fundamental concern of American policy.

That's the crisis that's closest to home for the U.S.

I mean, these are countries that don't have anywhere near the level of vaccine access.

They don't have anywhere near the level of capability, of funding, continued shutdowns, and disruptions to their economy.

I mean, if you want to play that out, I mean, Africa would seem to be where you'd have an even bigger problem from that perspective.

What is the mechanism that you see out there over the coming years, if Latin America is losing a decade, how does it get addressed?

What happens?

I mean, this is not just a job for the IMF.

Well, this, I think is the challenge, which the G7 began to lay out with the, what they call the B3W Build Back Better World campaign, which is supposed to be the west's answer, Japan, Europe, United States answer to one belt one road.

And that is where a policy should be.

I think one should say squarely.

Whether or not there will be a policy there is really the, the, the big question of the moment and whether it will be scaled to the adequate scale, you know, to be in this game, seriously.

You need to be talking trillions of dollars.

I mean, those seem like crazy numbers, but if you think about the development needs with the extraordinary demographic surge running through Sub-Saharan Africa now, or you think about the development needs of the poor parts of Latin America, those are just that's, that's, you know, the opening bid to get seriously in this game.

And the question is how that kind of funding is mobilized.

The talk of course immediately then turns to financial engineering, various types of complex leverage mechanism where maybe a couple of hundred million dollars from the Europeans, the Japanese and the Americans leverage out to be trillions of dollars from the private sector.

But that agenda has been on the books since 2015.

This is the billions into trillions agenda of the World Bank.

It has not gathered the momentum that we would expect and we urgently need, and we are still a long way away from, I think, in the west being ready to, to really mobilize to the scale that will be, that will be necessary to address those problems.

It's hard to imagine, I mean, given how limited COVAX has been on the vaccine front, which would be a comparatively small amount of money that would unlock far greater investment and growth.

You know, if you can't do that, if you can't begin to do that in a significant way for these countries, it's hard to get very excited about the broader and more and much larger needs long-term for infrastructure.

And it's one of the fundamental puzzles, I think, for a political scientist like yourself, or when economically minded historian like me.

I mean, we have certain basic premises.

Like, you know, that dollar bills aren't left, lying around on the street, right?

That just shouldn't happen.

And yet everything tells us indeed the major financial authorities, the IMF, the World Bank tell us that there are trillions of dollars lying around in the street.

Lying on the street.

In the form of the option of a joint-sustained truly globally orientated vaccine campaign.

If we put tens of billions in, we would achieve benefits running into potentially the tens of trillions.

And frankly, any member of the G20 with the possible exception of South Africa could fund this domestically and it would be a worthwhile investment.

Think of the political payoff.

If Germany had taken the lead in I don't know about Argentina Adam, I mean, I don't know man.

Okay, fine.

So let's take Argentina and South Africa off the large, credible members of the G20.

You know, if you come in with a bid, an opening bid of saying, "No, we're not coming with, you know, 500 million euros, we're coming with 20 billion because we actually want this problem because we're Germany and we're an export-dependent economy and we need this to go quickly."

Right?

And why those kinds of bids have not piled in and instead we're, you know, piecing, puzzling together as they did the G7 in Cornwall, you know, the necessary 1 billion doses so as to be able to announce those kinds of figures.

It's, it's a failure of political imagination.

So much discussion now about recent inflation numbers, particularly in the United States, higher than people expected.

Larry Summers, of course, you know, raised alarms on this early and was pushed back really hard by the Biden administration, most economists.

You're an economist.

What do you think?

I think we shouldn't exaggerate our fears around this.

I mean, the bounce back in prices, is real, there are a variety of different effects.

Some of them statistical.

If prices went down last year, they're bound to go up this year by larger percentage points.

There are real shortages.

If you've tried to build a house or do any repairs this year you'll know that lumber was literally just short, you couldn't get it.

But I think most people agree that these are transient effects.

And when I say most people, I mean the best informed decision makers in central banks globally, both on both sides of the Atlantic.

And also the markets have stuck with the fed in its assessment that this is transient.

And we again, should just have a sort of check on ourselves.

Like, why are we panicking?

And what does that panic relate to?

And to my mind, it still is a sort of undigested legacy of the trauma of the 1970s.

That's the last time there was any inflation in Western Europe and in the United States.

And you know, if we're still, as it were working off the hangover from 50 years ago, I think, I think we do need to update our priors.

We need to update our economic vision.

The problem, and it remains the problem, is in fact deflation lowflation.

The fact that we aren't able to push long run inflation expectations well above 2%, and why that matters, well, just look at our debt pile.

I mean, if you've got the kind of debt pile that we have, historically speaking, the gentle way to deal with that is have inflation just a little bit higher than interest rates and bite away at it year by year.

That's how Britain and America did it after World War II.

That's the comfortable way to work your way out from underneath the debt mountain.

So, as an economic historian and one of the world's preeminent in your field, having now gone through almost a couple of years of pandemic, what do you think is the biggest lesson?

Longer-term lesson that you've learned as we've, as we've experienced all of this?

That we need to take the Cassandra seriously, right?

Looking back on this, the emerging infectious diseases paradigm, the emerging infectious diseases paradigm so-called appeared in the 1980s.

It ran in parallel with the climate change diagnosis.

Both of these were predicted to be the consequence of modernity, of globalization.

And we did not take that risk seriously enough.

And we are in a sense, I think, still not taking it seriously enough in believing that we're done with this crisis or that it's over, and that therefore, you know, the world doesn't fundamentally change, and we grow back to where we were before.

Surely what's happened is a window has opened for us on huge risks, which are inherent to the system from which we prosper, from which we benefit, to which we are committed to irrevocably, I take it, that we will have to manage in future.

And those risks are not slow moving, not gradual, not, not measured in a percentage point of GDP here or there or in a thousand lives, 10,000 lives here or there.

They're measured in millions of lives and 20% of GDP loss occurring in a matter of weeks and months, right?

That's the sort of scale.

It's not trench warfare, it turns out.

It's Blitzkrieg.

It's something that comes at you with lightning speed.

And if you do not have the capacity to react quickly, you can be looking at the largest economic disaster in recorded history.

That's, I think for me, the lesson of 2020.

I mean, it's sort of appalling to digest it, but we at least do have a clear indication of one of the minimal things that we need to provide ourselves with insurance, which is a huge science apparatus.

And we were obviously terrible at the sociopolitical economic digesting of this.

We've got some welfare state apparatuses that work not so badly and the central banks do their job, but to address this problem, we're really, you know, hopelessly under-equipped.

But we do have a magic wand.

We do have the silver bullet, and we should be doubling down on that.

I mean, technology, if it is, it's perhaps not as it were the most holistic answer, but if it's an answer and it's our strong card, we really should be doubling down on it.

I think that's the same basic approach.

Also, it's a climate change.

Given the likelihood that we are not going to be able to address it in a holistic fashion, you would think that would be, we would be making enormously larger investments in technologies in that are.

Adam Tooze, economic historian and Columbia University professor.

Great to be with you, sir.

Pleasure to be here.

It's not news that millions of people have struggled to pay their bills during this pandemic.

Stimulus checks from Uncle Sam, of course helped keep many people afloat, but were unlikely to cover the full cost of housing, food, and other expenses.

Initiatives like the eviction moratorium and the federal student loan forbearance program were aimed giving people an extra lifeline over the past 18 months.

And while the moratorium has officially expired, the Biden administration just extended relief for student borrowers until January 31st, 2022.

That's going to help the 43 million people holding student loans in the United States rest easier, but America's student debt crisis did not start with the pandemic.

At $1.57 trillion.

Student loans have eclipsed consumer credit card debt and car financing as the country's top debt category.

Since taking office, President Joe Biden has canceled more student loan debt than any other president.

These cancellations though have only benefited 1% of federal loan borrowers, going primarily to people with disabilities, soldiers who fought in war zones, and those who've experienced fraud at for-profit institutions.

Progressive Democrats like Ayanna Pressley, Chuck Schumer, Elizabeth Warren all say more needs to be done.

President Biden could cancel $50,000 worth of student loan debt basically with the stroke of a pen.

Canceling more debt Democrats say, would help narrow the wealth gap between black and white borrowers, would provide extra relief from the pandemic, and help stimulate the economy.

Republicans see things differently.

They think this move would be unfair to current and future borrowers.

It would present an unfair burden on taxpayers, and unnecessarily subsidize high earning professionals in jobs that require advanced education.

And even some high earners are struggling.

In one study, 60% of millennials earning over a hundred thousand dollars a year say they are living paycheck to paycheck, in part because of student loan debt.

Feeling broke and actually being broke can be two different things, though.

Another study found that 20 years after starting college on average, white borrowers paid all but 6% of their original balance, whereas black borrowers still owed 95% of their bill.

Which begs the question: If the financial fallout from the pandemic plays out for years to come, what will happen to America's student borrowers after January 31st?

And now I've got your puppet regime.

You know, when I first got here, they said you were just going to spill all over the place, drown me even.

That I'd just be some kind of brain-dead chopped liver floating around while you ran the show.

But it doesn't really look like that now, does it?

Look folks I told you very strongly that sleepy Joe was a totally senile and sleepy and sad guy.

He's talking to milk.

But guess what?

After a few months on the job here, I think I like ya right where I gotcha.

Jeez.

Maybe I'll call you again in 2023, all right?

Puppet regime.

That's our show this week.

Come back next week.

And if you like what you see, why don't you check us out at GZEROMedia.com.

Major corporate funding provided by founding sponsor First Republic.

At First Republic, our clients come first.

Taking the time to listen helps us provide customized banking and wealth management solutions.

More on our clients at firstrepublic.com.

Additional funding provided by Prologis, Jerre and Mary Joy Stead Harold J. Newman.

And by.