Niall Ferguson | Direct | On the response to COVID-19

[Music] well thank you very much for this opportunity to talk again thanks to the horrors of a tiny little virus too small to see by the human eye we're in isolation on different parts of the world in different parts of all but modern technology means we can communicate remarkably I want to begin by saying I've been really struck by the way in which you saw what was coming ahead of many other people that we would normally have expected to have been warning us and preparing us and right through it this whole episode you've been unpacking and brilliantly in a way that means that we ought to be paying a lot more attention to you if I can put it this way then some of the people frankly that we might have expected to have done a better job on leading us through so thank you very much indeed but um can I begin by focusing a bit on just how blind we seem to have been to a lot of what was coming and it was you who alerted me to the reality that between January the 21st and 24th of this year the World Economic Forum in Switzerland should have been I would thought very much focused on what was going to be should have been very obviously coming straight out this pandemic and yet it was completely focused as I understand err on climate change there were even representatives there from Wuhan Province in China but what came out of it what does it say about the way in which somehow rather we get this mob spirit this herd mentality that blinds us to the real and present issues well John I was at the World Economic Forum back in January and it was slightly surreal occasion for me because only topic of conversation seemed to be climate change Greta tunberg was there to be feted Donald Trump to be jeered at the Global Risk report that the World Economic Forum publishes annually had as its top-4 risks various aspects of climate change and I felt like a lone voice saying at the various meetings I attended we really ought to be much more worried about the impending pandemic that is is coming from from Wuhan and and why are we not talking about that and I've got some funny looks from people who are busy thought I'd become even more eccentric than usual but I've been in Asia the beginning of January in fact I was in Hongkong Taipei and then in Singapore and heard then about what was going on in in Wuhan as an historian I'm not an epidemiologist I hasten to stress as an historian I've always been fascinated by pandemics because they are these hugely disruptive events that come along in in history and I'd studied the 1918-19 influenza pandemic when I was a much younger man working on the first world war it's probably one of the reasons that the war ended in 1918 I remember delving into German military statistics and finding that this this huge increase in the number of soldiers reporting ill in mid 1918 and that correlates pretty closely with the collapse of the German army on the Western Front 'us as British and of course Australian and Canadian and New Zealand soldiers it Flick to decisive defeats so I hypothesized in my book the pity of war that the Spanish influenza as it was known was one reason the war came to an end so I've been interested in this for more than 20 years in my most recent book the square in the tar I made an argument that we'd created a perfectly networked world not only digitally but physically thanks to our extraordinary network of air travel and this perfectly networked world was a sitting duck for a virus like the corona virus that came from Wuhan so it was odd really to be at Davos and find so few people paying attention to it frankly was still the case when I was in Washington roughly a month later that people were paying too little attention I practically had to physically corner members of the administration to impress upon them that this was not going to be your seasonal influenza and a major problem was coming that would have huge economic ramifications and so it hasn't been easy because in my weekly columns and in various interviews since around January the the twentieth I've been I've been talking about this it wasn't really until mid March that the message got through and then governments in Washington and in London went from insouciance to to panic and I think we ended up in a situation that we've gone from one extreme to the other we've ended up with measures that have I regard us as overkill and I think we've ended up at least in Britain and the United States with the worst of both worlds we've we've not done enough to stop the virus spreading across our countries but we have done enough to crater our economies and that seems like a terrible policy outcome for what was supposed to be well prepared Nations I think that raises a very interesting point that again I think you've revealed that both Britain and the US had identified a pandemic as the number one threat frankly ahead of even terrorism to the social and economic fabric of their respective nations both plague came to be very well prepared in fact a major paper had been put forward in the United States only 18 months or so before this emerged setting up how America was ready to respond and as you put it on paper both nations were claiming not only to recognize how dangerous a pandemic would be but that they were ready for it in reality neither proved to be true so this comes again to this issue of the hard questions that need to be asked what went wrong I think there's been a certain amount of red herring consumption in the media about this the focus in the u.s. is almost always on President Trump and that leads to a constant debate about whether he was too slow to recognize the risk whether he's bungled the crisis and we have the same debate in the UK about Boris Johnson who of course in fact was taken very ill with with covered 19 I don't think that the real issue is what happened at the top actually if you look at at Trump he at least realized that he had to do something about flights from China in late January it was too late but at least he thought that there was a problem and he was criticized at that time by The Washington Post at that point the liberal media were crying foul and accusing Trump of overreacting that's all now forgotten because the narratives become that he he was too slow I actually think made multiple mistakes including playing down the virus on a number of occasions as just influenza but that's not really the the key point the key point is that both the United States and the United Kingdom had on paper rather well-crafted plans for dealing with a pandemic there are agencies in the case of the United States it's the Department of Health and Human Services whose sole job is by our defense there's an undersecretary who really has that as as his sole responsibility in 2018 the the undersecretary in question even gave a lecture on the subject warning that if there wasn't a sufficient insurance policy in place the US would be Sol in the events of a pandemic I didn't know what Sol meant because I was in the US Army it's short for out of luck now for the undersecretary responsible for bio defense to say that a month after the administration publishes a 36 page plan for preparedness in the events of a pandemic is kind of strange and it's even more strange when you find that the following year in 2019 ie last year Congress passed an entire act with respect to bio defense on paper the United States was well-prepared for this the bureaucracy had a plan it had people and it had resources so something went terribly wrong with the administrative state with the federal bureaucracy when it came to the crunch none of the things written down in multiple PowerPoint presentations worked and in fact the u.s. turned out to be completely incapable of the most important thing that you need to do early in in an epidemic which is to have lots of testing in place so that you can identify who's infected and then isolate them that's what Taiwan did that's what South Korea did that's what most well-prepared Asian democracies were able to do the United States completely flunked tears and as only just in the last week caught up with South Korea with respect to testing per capita so that's a shocking performance of a bureaucracy that was supposed to be ready and I could tell us somewhat similar story for the UK there will have to be a proper inquiry into what went wrong just as after the 9/11 attacks in 2001 there was a commission that looked into why it was that uh all the warning signs had been had been missed I think this is actually a worse case because a terrorist attack like that of 9/11 was I think a lot harder to predict than a pandemic arising from an East Asian coronavirus that that was a highly likely scenario and indeed numerous people had been warning about it for years I mean you can go back and look at TED Talks not just by Bill gates but by the epidemiologist Larry brilliant you can find discussions of this topic by numerous public intellectuals nasan Talib for example often talked about this as the number one risk so this was not exactly a Black Swan it was a grey rhino that you just knew at some point was going to come charging towards you and I still don't really understand why the state which was on paper so well prepared completely flunked the test it's important of course they're trying get as good a handle on how you debate your way through these things because coming out of this there will be any number of difficult decisions to be made so this question of how we understand it seems to me to be very important you wouldn't I think say and I would agree with you that if you want to understand the future you need to understand the past it seems to me almost impossible to think at that time they went right across the world countries have deliberately closed down their economies and then put them on life support to try and keep the Beast alive while it's in hibernation is there any precedent that you can think of from that that might help us understand a little how to manage that part of the press's there isn't an exact parallel because in in previous pandemics it was never thought necessary to shut down the economy in nineteen eighty nineteen although there was huge disruption and excess mortality and all those social distancing measures were introduced school closures and so forth there really wasn't an interruption of economic life of this sort in 1957-58 which by the way is a much better analogy because covered nineteen is not as dangerous as the nineteen eighteen nineteen influenza no way it is much more like the 1957-58 influenza in terms of its likely infection fatality rate and if you look back at nineteen fifty-seven fifty-eight the United States government did not do anything like this on the contrary life went on without any federal or indeed state orders to close businesses and factories there was minimal social distancing yes there was excess mortality but the Eisenhower administration thought that its priority should be to expedite research and vaccination and get a vaccine ready as soon as possible and it requested the startlingly small sum of 2.5 million dollars from Congress to accelerate vaccine research the contrast between that response and our response is absolutely extraordinary the only analogy that I can really come up with is that in 1914 when World War one brokered it was a huge surprise to most people and it caused a huge economic crisis across the world in response to which the authorities in most of the major economies shut down the stock markets because they did not want trading to continue as it would of course have revealed a disastrous sell off causing not just liquidity but solvency problems so we had a period in late 1914 when all the major stock markets were closed and they didn't really reopen until the end of that year during that time particularly August September 1914 there was an enormous economic dislocation not because anybody ordered factories to be closed but just because panic swept around the world and in the absence of of open stock markets and in conditions of great uncertainty a lot of businesses did shut down but there's a big difference between a pandemic and a war a war solves its own economic problem by enlisting overtime the able-bodied men placing orders for munitions from the major industrial concerns and so by 1915 the unemployment that had featured in the immediate aftermath of the outbreak of war was gone pandemics not like that there isn't the same demands for employment or manufacturing sure we need vaccines we need testing but that's not going to create the kind of jobs that are desperately needed now in any case what we've done was more than just a panic we we had a state mandated economic lockdown in some of the most important economies in the world New York State and California State in particular and I think that future historians will say this was a mistake that we thought we had to copy the Chinese in what they had done in Hebei which was to shut down the entire province lock down the economy and lock people in their apartments I think we drew completely the wrong lesson from Asia because we were looking at the wrong China if we looked at Taiwan we'd have seen that the correct response to this kind of pandemic is to ramp up testing and contact tracing and leverage not only the traditional mechanisms of social distancing that are appropriate nur and emic but the new methods that technology make possible like digital contact tracing we didn't do that we failed completely to learn from the time and ease Auden deed the South Korean example and I think we could have achieved the containment of the virus through those methods at a far lower cost than we are now paying for having essentially closed down economic activity in an indiscriminate way moreover just to add one final point we've sought to offset the shock that we've imposed on ourselves with unprecedented at least in peacetime monetary and fiscal measures and while you could argue that they were a reasonable thing to do for a short-term shutdown I don't think we are actually in a position to do this just for the short-term because I don't think we're going to get a v-shaped recovery that will allow us rapidly to normalize monetary and fiscal policy and so I think we've created a whole boatload of problems for the future by allowing all monetary and fiscal discipline to be thrown out the window this phrase whatever it takes has become a cover for extraordinary reckless measures which will have many unintended consequences so I actually give us low grades both for the supply-side shock which didn't need to be this big and for the compensating monetary and fiscal measures which I'm sure will have unintended negative consequences it's really a pretty shocking combination when you think about it and what makes me angry is that it didn't need to be this way because if we really paid attention to how to handle a pandemic smartly if we'd learnt from Taiwan and Korea if we'd had the right procedures in place rather than the ones that failed then we wouldn't really have needed to do the locked up there's beaten our lock down in Taiwan at any point and they have a minimal number of cases and a minimal number of deaths and guess what they're right next to the People's Republic of China they were as exposed as anybody to the risk so our failure to come anywhere close to that kind of performance is is deeply deeply disturbing to me I can only say I agree with you and I'm very concerned I would have to say I think the Australian Government has handled this quite well to this point and to this point in time and they've had good recognition of that in the polls and the numbers are very encouraging on the health side of the equation but how we handle from now on is going to be critically important because of the potential to the permanent damage at great cost particularly to coming generations and their interests now we've just seen in Australia something that is deeply disturbing to me about 250 many of them very well-known economists sign a letter open letter to the government keep the foot on the brake and there's no balance to be taken into account here you've just got to do everything you can to preserve lives don't start to ease the lockdown too early there's no analysis there's no argument it sounds vastly more like a political statement than a carefully thought through economic and social analysis of the realities that confront us as a nation and it's been absolutely smashed by two or three of our leading economists but it raises the point that it's very easy to be political very easy to be emotional very hard to be clear-headed and thoughtful and realistic and yet my observation not that you can move around much at the moment is that people in the street often much more pragmatic there now than our technocrats the people who set themselves up as experts and it makes it very hard for politicians in an age when they don't often enjoy the level of respect that they need to be able to carry us when difficult difficult decisions have to be made well I'm going to tread warily on the Australian material simply because I'm a long long way from from Australia you're right there and I haven't read the economists letter but let me just offer some contextualizing statistics if you just look at fatalities per million people since this pandemic began the UK is on 255 the u.s. is 136 Canada and 48 and Australia 2.9 so the UK has two orders of magnitude more fatalities in relative terms than Australia New Zealanders exactly the same statistic 2.9 something has gone very right in the Antipodes by comparison with the rest of the english-speaking world and it's worth pondering what that is given that Australia doesn't look less connected to whom a province than the United States so I think first of all credit where it's due both Australia and New Zealand have have handled this a great deal better secondly with that in mind it's clearly much more plausible but Australia should be considering a phased return to work in the same way that Germany is Germany's be of those European countries that's handled this relatively well and can now consider and is indeed now implementing the phased return to work what are the prerequisites for that I think it's all about having adequate testing capacity and contact tracing capacity because you are going to be playing whack-a-mole with this virus for months to come there isn't going to be a vaccine until next year at the earliest and we shouldn't be over optimistic about what a vaccine can do against a corona virus like this or indeed what kind of immunity you're gonna have with such a vaccine that means that as we return to work and indeed return to education it's highly likely that there will be second waves and maybe third waves look at Singapore which thought it had things under control and then notice to its horror that it's its foreign workers in their pretty cramped hostels were in fact invested with the virus I think every country is going to be playing this complex difficult game of trying to return to economic normality without letting the virus return in force to the population and I don't think anybody should be contemplating returns to normality to work until they have the right kind of testing and contact tracing capabilities in place and even then it's going to be difficult finally a critical variable here which distinguishes this pandemic from other pandemics is that it disproportionately kills the elderly the influenzas that swept the world in nineteen eighteen nineteen and in 1957-58 and indeed in 1968 were altogether less discriminating they killed kids as much as they killed seniors we should actually be pretty thankful that covered nineteen that goes after people who were at the latest stage of life and doesn't kill kids it's the thing I I wake up every morning and thank God for because I just can't bear the thought of how much worse would be if we were desperately worried about our kids and grandkids as well as about our parents and grandparents so I think that's important because it means that we know who the vulnerable are already quite well we also know the kind of comorbidities the other conditions that increase the probability that people will be will be killed by covered 19 and that creates some opportunities you can combine I think a regime of social distancing that makes it very hard to imagine any crowded event being possible in the near future but it makes it possible to imagine manufacturing resuming agricultural resuming construction resuming it's pretty hard to get covered 19 outdoors that's very clear from recent research it's very easy to get it in a crowded subway it's very easy to get in a crowded old folks home there there's a lot we now know about this virus that can help us craft a Smart return not to normalcy we shouldn't probably even use that word because it's not going to be normal for a while but a return to economic activity that allows us to function as a society yes I will be missing going to football and rugby I'm still not quite over the fact that the Six Nations season never concluded just as Scotland were rallying having beaten France but hey it's a small price to pay for containing a pandemic that we have to give up on on on live sports for a while but I think there's a lot that we don't need to give up on and and this is what I think that we government needs to get its head round what can you get back to doing and what you should and what should you avoid doing how can you protect the elderly and the vulnerable while allowing young people to get back to work or to study and and those are solvable problems that's why blanket lockdowns were and are a mistake and should as soon as possible be lifted I think part of the Australian success here relates to the fact that the Prime Minister chose wisely listened to people in with her talking there and who didn't so for example he declared Demming in australia book well before the World Health Organization did so and banned at some cost because he was accused of being racist then all sorts of things like that fights from China very early on and I think both of those factors reflect very well on he and those around him who were advising him to take those courses of action but it does raise the question again of China you have I think courageously and insightfully indicated that there are many serious questions that need to be put before the Chinese they should not be let off the hook on and one of those would be I think why it took them so long to admit what it must have been obvious for a lot longer that there's not only a problem but that this thing moved from human to humans why was it that when they locked down flights in and out of work on to other parts of China they didn't lock down the international flights what is the relationship between those various laboratories around the region that are quite close to the wet markets is there any linkage there has there been real transparency the danger is that China having been instrumental in if not if it's too simplistic perhaps to say they created the problem certainly letting it get out of hand they now want to be able to paint themselves as the heroes who are solving the problem for the globe how do we hold them to real account yeah that's a very important question in my view I assure article through a weeks ago asking six questions of Xi Jinping that I felt the Chinese government needed to answer needless to say those questions have not yet been answered though we are I think getting a little bit more insight into the realities for example I think we now know it probably wasn't a so-called wet market where the the virus first crossed to humans that it was more likely one of two Laboratories in whoo an engaged in research into zoonoses viruses or other pathogens that can cross from animals to people and a good article in The Washington Post a week or so ago published some State Department wires that essentially raised a flag about the safety precautions being taken at one of those laboratories it's important to stress that it's not being said and wasn't being stared by by the State Department it's a Pumped officials who went to Wuhan that there was an engineered virus but simply that research into natural viruses was being done in a sloppy way so that's a kind of partial answer to my first question second question hasn't really been answered when did the central government know there was a serious problem we know that the local officials in Wuhan and deep provincial officials in Hebei did cover up the seriousness of the situation so that they could keep the show in the road in Wuhan including some very well attended party functions and didn't fess up until the 20th or thereabouts of January that they had a serious problem their hands we don't know how much the central government knew but my guess is they did know well before January the 20th that there was a problem and I do think we need more answers to questions about why it was that the Chinese government and the World Health Organization took so long to recognize and to acknowledge publicly that there was a very serious epidemic of food in that part of China on the question of flights it's a very murky question I thought on the basis of records that I saw that flights had continued to fly from Wuhan to Western destinations after the the ban on flights on the 23rd it looks though it's not quite clear yet as if flights didn't go from Wuhan although they were recorded as being from Wuhan it's claimed that they now it's now claimed that they went from Guangzhou rather than Wuhan I wish I could say that the case was closed it I think that there's reason still to be a little suspicious I have yet to see an authoritative account of what happened at Wuhan Airport in January and I've yet to be entirely convinced that no flights left there after the 22nd so that still I think case not closed and then of course that there are some bigger questions that have only partly been answered how many people actually died in China to date of covered 19 they just increased the number that they acknowledge had died in Hebei by 50% rather do neatly by 50% I think so that that I think is another file that still open and I could go on that the Chinese government has some serious answering to do to questions like these if it's to have any credibility and I think it's attempt to bend the narrative and claim that actually it's the savior of humanity that's going to provide you with the tests and masks that you need is one of the most shameless bits of propaganda that I've seen since the end of the Cold War in fact it's a very disturbing feature of the last couple of months that the Chinese government has resorted to the kind of disinformation that we had previously associated with Russia the New York Times just reported that it was almost certainly Chinese agents who were responsible for trying to sow panic in the United States with whatsapp and other messages about an impending nationwide lockdown earlier in the crisis I argued a year ago that we were already in Cold War 2 and it was time to stop beating about the bush I I think the pandemic has revealed that very clearly anybody who thought we'd be sort of joining forces against a common enemy has been sorely disappointed by the conduct of the Chinese government and I find it frankly a scandal that a a spokesman for the Chinese foreign ministry who tweeted conspiracy theory claiming that the virus in fact originated in the United States this man is still in his job and that that surely reflects a great deal of bad faith from the Chinese side yeah I think you finished that article I think brilliantly you said China has a problem it is not the three broad it body problem which reminds us that the Chinese people are capable of great literature just as Chinese researchers capable of great science China's problem like Russia's before 1991 is the one-party problem and so long as a fifth of humanity are subject to the will of an unaccountable corrupt and power-hungry organization with a long history of crimes against its own people the rest of the world is also at risk and that's the Segway I think into the next point we're so into self loathing you and I talked about this in the past self loathing in the West we've so lost confidence and our own institutions the two if you like leaders of the free world as I've been tempted to say for so long America and and Great Britain as we talked about earlier are in even worse straits now as a result of this pandemic than they were perhaps six months ago in terms of carrying their people with a model for vitality in the future we've got to be powerfully reminded I think of just how bad the alternatives are to liberal Western democratic way of life and I think in this great rush particularly in this country to say ideologies dead you've got a Conservative government it's found money to respond to this crisis on a non ideological basis we need to be careful that we don't lose sight of a proper framework and a proper set of principles even values keep in mind as we try to work back out of this into some degree of a satisfactory place again in the future because what we're doing at the moment through our economies and indeed the way in which we've been prepared to restrict our freedoms in pursuit of safety is very risky I think Neil and expose us has been great dangers going forward and I'd love to unpack that a bit well John I think that the challenge is going to be this that we're leading people to expect a single curve that we have to flatten through sacrifice now and we're telling them that the the sacrifice in terms of economic lockdowns is going to be compensated with what amounts to universal basic income and modern theory nobody's using those terms but if you look closely at the monetary and fiscal policies being adopted in the US and the UK that's pretty much what's happening and there is a couple of big problems the first is that this isn't going to be one curve that we flattened it's going to be multiple waves that's nearly always the case with pandemics and I don't think people are psychologically ready for a second wave potentially in the summer or probably more likely in October when the weather cools in the northern hemisphere and and that that's that's very problematic for the the fiscal and monetary policy because how can you really extend the kind of measures that we've seen enacted in the last weeks through this year and into next year when we've already roughly tripled tripled the federal deficit in relation to GDP from its close to 5% going into the pandemic it's now going to be something like 15% we've got the federal debt on a trajectory to exceed in relation to GDP it's world war ii peak and and and that's on the basis of measures that have been enacted in a matter of weeks numbered in in trillions this can't continue it's creating a completely unsustainable fiscal position and I worry very much about what happens when say a year from now we're attempting to get back to some kind of normalcy let's be optimistic and imagine that there's a vaccine in place by then and we look around us and we find an enormous debt accumulation larger than that which we saw after the global financial crisis and the abandonment of any rules whatever with respect to monetary policy so there in effect the Federal Reserve and the Bank of England have have resorted to monetary financing of government as if we were at war and there are theories in place they've already been popular on the left for some time theories about universal basic income the government's just pay people regardless of whether they work or not and theories of modern monetary theory that say there's really no reason why there shouldn't be monetary financing of government and as an historian I can only say that way lies perdition because it's not conceivable to me that there is a smooth passage out of policies like these it's possible that you could end up with an inflationary outcome especially since we're seeing not only unemployment benefits going up to very high levels but also minimum wages likely to rise - there's gonna be some I think inflationary risk from from that as well as of course from the massive expansion of the Federal Reserve balance sheet but but if not an inflation risk and I think in the short run that's highly unlikely I think if there's any inflation risk in the developed world it's a problem for 2021 or 2022 if that's not the scenario then there's gonna be a scenario of a fiscal crunch because there will be nasty fiscal arithmetic with debt levels this high even if central bank's essentially like the Bank of Japan become responsible for fixing interest rates and unprecedentedly low levels in order to keep debt service down it's it's very interesting to look at the Japanese experience because I think we're going to find ourselves in that situation in the US and in Europe very soon with a very high level of debt to GDP and a very difficult to strike with monetary and fiscal policy essentially trying to achieve growth and consistently failing to do so that that's I think the the most likely scenario that we essentially are turning Japanese in terms of fiscal and monetary policy I was just in Japan late last year and it seems like a kind of viable future in the sense that Japan's a stable place it's so far handled the pandemic remarkably well but it's also a place with which feels like slow growth has become institutionalized as a as if it's almost a stationary state and when you look at the numbers you can see why with this extraordinary debt burden and and a monetary policy that is essentially a form of debt management they call it yield curve control but it's basically debt management so I think that's probably where we're heading and I don't think that's a particularly enticing prospects for societies that are much less homogeneous than Japan's try doing this in the multicultural deeply divided America of 2020 and I don't see it working nearly as well so those are the scenarios that worry me I think that the short-term expedients kind of dominate when you're staring at 70 million maybe 22 million lost jobs when you're staring at an economy that's essentially grads who a halt when you're staring a bigger supply shock than there's been when you're looking at a GDP contraction bigger than anything since the 1930s sure it's pretty tempting to say we'll do whatever it takes but we should be under no illusions that there will be consequences unintended consequences of these policies and as I say say if if we'd only taken a rational approach to the pandemic and avoided the the lock downs to begin with we wouldn't have needed to do half of this in a sense of course we went into the lock downs and into this massive attempt to feed the bear while it's in hibernation from a position of enormous economic weakness already because the great financial crisis or basically doubling of virtually every Western countries debt to GDP ratios from worrying levels to quite frightening level so nothing was done about it if I can divert for a moment and not wanting to sound too best for the Australian I think it's been interesting to watch what's happened here we had reforming governments of both political persuasions of you like between the early 80s and about 2005 7 when productivity was improved real living standards rose the Treasury was awash because of economic growth and the taxation revenues that flowed it's not true as as liberals as you would call them sometimes in your country progressives they might call themselves he would say I absorbed it because China kept buying Australian minerals in fact if you look at the prices we were receiving for them like weren't exceptionally high during a lot of the years when Australia was doing very well economically but I was part of a government in fact I was one of the five asked by Howard in 1996 so end the deficits and pay down the debt we went into the GFC with money in the bank no debt and we got to a point performed pandemic where the government was looking at another surplus the first for many many years but debt was up to 20% of GDP will come out of this whether it mean being all like 45 50 years and 55 percent of GDP that's a massive rise but my point is in a way we've been able to stand on the shoulders of government that did some pretty government's I don't want to be exclusive about did some pretty tough and at the time unpopular reform work but inherent in what you've been saying and I think I've been reflecting is a sort of a dull resignation to the idea that there probably isn't the willpower and the courage and the determination to tackle the sort of reforms that are going to be needed and we're going to wind our way out of this mess we seem to be unable to cope with the idea of cleaning up a mess anymore and I find that really disturbing because this won't be the LA shop whether it's a pandemic next time or something else of triggers another economic shot surely we require the discipline and the focus in western democratic nations and the leadership to say that we can't keep on ratcheting ourselves down forever somewhere sometime we've got to engage in some real reform we've got a look again at productivity we got a look at our tax systems destructing we've got the look at how we start to whine back public sector exposure I agree with that I think one of the worst tendencies that that we've seen in the last 10 years has been that that conservatives in in Britain and in the United States have made common cause with populist s-- who essentially jettisoned fiscal responsibility from the conservative menu and that was as true of of Donald Trump as it was of Boris Johnson and I I do regret that because I think it's it's an inescapable reality that unless you use the good times to stabilize public finances there will be no way of coping with the bad times and let's fiscal policy has been I'm afraid a signature of the Trump administration going right back to a very ill-advised tax cutting bill in 2017 as I said the deficit was already on track to be 4.5 percent of GDP at a time of full employment before the pandemic struck if you can get to full employment only through that kind of a fiscal stimulus combined of course with Federal Reserve policy that that had essentially blinked wimped out of normalizing rates and ending quantitative easing then it's not a healthy growth it's not a healthy prosperity it's a prosperity based on steroids and I think the US economy has been like one of these athletes that one used to see in the bad old days before the was rigorous testing so full of steroids that any gold medals really need to be handed back it's gonna be a very long road back to any kind of fiscal responsibility in the u.s. some of us have been talking about this for so long that were kind of almost hoarse with the effort but it doesn't stop being true just because nobody's he did these warnings for the better part of 20 years and it's been 20 years since the US was anywhere close to fiscal surplus so I think there's gonna be some painful adjustment not just by governments but by the conservative parties of the Northern Hemisphere Germany of course remained fiscally fool and had rules in place a breaking place to prevent there being a deficit Angela Merkel in the stronger position today to say we need to do exceptional things at the European level to help Italy out of the hole that it's in so there are some exceptions to the rule but I do I do look at the United States and and say to myself we have frittered away the opportunities to set the Houston order and it's a it's a shocking reflect on American conservatism but that's the case and I I do struggle to imagine how we how we get back to any kind of fiscal responsibility the conservative movement has sort of blown it and and won't be able to say anything with any credibility on this subject should we end up with a Democratic administration after after November I'm afraid that this is a very fundamental weakness of American conservatism they're just perhaps we've had some shocking insights into what really seriously phenomena collapses due to people's lifestyles their job opportunities and all of those sorts of things I mean you've had the corona virus is one example we can now if we're honest see the one-party state is hardly something we want to live under just perhaps to the obsession with climate change I'm not saying it's not important but I am saying the one-track mind that had everybody so focused on it that they missed this train coming at us will sober us up a little bit and make us determine to rethink our own freedoms rethink our own prosperity and the desirability of being able to afford things and think of our own children it seems to me though that until we are willing to to to pull together and focus on our common interests and stop dividing over everything that divides us in the West in our culture's it's almost impossible but hope to find the sort of leaders you know the good strong people who can with high intelligence and with deep knowledge and with deep courage take us forward we have to be worthy of them if I can put it that way there's in other words we're being held back economically by what we've allowed ourselves to become socially well I think there's a very important lesson to be learned from this pandemic and it's not the one that the left wants us to learn because the progressives here in the United States want to say you see this proves the case for big big government it proves the case for some kind of socialist health care system and it really doesn't do that at all actually what the pandemic has revealed is just how utterly defective big government is because we had big government set up to deal with pandemics as I mentioned earlier with its panoply of legislation task force's PowerPoint decks and 36-page reports and it failed it was the small nimble government of Taiwan but that excelled the other good performers interestingly in this crisis have included Israel smallish States used to having very few friends in the international community have outperformed the big lumbering states that that I've talked about in our in our conversation so let's turn number one you small technologically enabled smart government to contend with problems like pandemics and climate change I like I like you John I'm not saying climate change isn't an issue it clearly is and we're going to need to confront it's its challenges with equal smartness because if we're as stupid about climate change as we've been about a pandemic then we're going to create our economy all over again the next time there are severe fires or floods in some other part of the world so I think that's a really important insight that the pandemic has has given us and I hope that we'll we'll sit down and learn the right lessons from this because I do see a future for a slimmed-down lighter smarter kind of government dealing with problems of this sort that we're discussing in the way that I saw the time and he's doing that there are some terrific things to be learned from that China and some terrible wrong things to be learned from its giant one-party dominated neighbor but I do think that that for the Australian government as well as for the British and American governments it's important to see the need to reinvent the public sector in the 21st century so that it isn't the incompetent failing bureaucratic big government that I'm afraid we've seen on display in both Britain and the United States there are lots of countries that getting this right I could also have mentioned Estonia one of the first countries to really be tech-savvy about about government and I'm hoping that that this is an opportunity for us to take a long hard look in the mirror and say what has really not worked in our in our public sector what what did we get wrong here and how can we fix it there is I think therefore some basis for a new individualistic freedom minded but technologically enabled democracy I want to stress this because it's very important we have to use technology in a whole variety of ways to ensure that our societies are safe safe in this case from a contagious disease we cannot let that lead to a Big Brother kind of surveillance state of the sort that they have in China and what we can learn from a country like Taiwan is how you combine tech savviness with individual freedom and privacy they really have done a good job there by bringing into the government some of the kind of hacker libertarians that are very much on the periphery of of government in the United States so yeah I think there's some exciting possibilities if we only know where to look for them and the place to look for them is not Beijing the place to look for them is actually Taipei that's a very fascinating set of insights and it's probably a true as a truism of human nature that we've been prepared to give up some freedoms very quickly in terms of this lockdown of concern and fear about our own well-being the fleeing for security and giving up some freedom when you don't feel safe is understandable but we don't want to stay there we have to move back to a commitment to freedom if we would be worthy of of either I think but can I just then conclude on something else that I think is very important we need to be really careful not to overreact with the questions that are now being asked about globalization you know free trade has lifted countless millions of people out of poverty around the world or freer trade on the other hand we have to have secure supply lines I'm an Australian farmer we produce a great deal of food for other people the ratios about one farm for 600 people who eat which is quite extraordinary I think come but we can't do that without imported feedstock we're dependent on imported oil with a certain chemical ingredients so soon many parts we can't produce here anymore or don't produce a lot of our fertilizers these sorts of things so we've got to avoid extremes and overreactions as we hear calls for the re-establishment of manufacturing the reemergence of protectionism and so forth seems for me to be a real danger on the one hand on the other hand obviously you can't have a situation where America's dependent for 90% of its pharmaceuticals on Japan Australia 80% getting that balance right I think will be very very important for prosperity and for safety going forward on China not not Japan John I'm sure you meant to say dependent on China because I wouldn't be at all bothered if I Japan democracy with very high standards of governance look I think that one of the most important developments really of the last four years has been a fundamental shift in American attitudes towards China successive administrations essentially accommodated China's rise acquiesced in its bending of the rules of the World Trade Organization and for all his many flaws Donald Trump called time on that and changed the strategic direction of the United States I'm a free trader and like you I believe that there are enormous gains to be had on all sides from a liberal international trading order but we can't have the second largest economy in the world systematically breaking the rules and getting away with it and that's really that the situation that we've been in ever since China joined the WTO back in 2001 I think that the critical issue that needs to be addressed in the wake of the pandemic is how far China is willing to play bar rules and how far we're prepared to trust it to do so and after so many years not just of intellectual property theft but of systemic cheating on subsidies to state-owned enterprises the pursuit of a policy that is essentially one of self-sufficiency in semiconductors at the expense of fair competition all of that seems to me still to be unresolved and in a way the pandemic got the Chinese off the hook because they just committed to a very limited phase one deal with the United States now they haven't had to execute they haven't had to deliver on that so I think there's a lot of unfinished business to do on trade there's a lot of unfinished business to do on a variety of other issues one of those national champions that the Chinese subsidizing is Huawei and Huawei was poised to become almost the sole player certainly the dominant player in 5g technology networks around the world I'm glad to say that the pandemic has led at least one government the British government to rethink relying on on Huawei so I think there's a way forward which doesn't lead us to the 1930s doesn't leaders to a world of autarky and extraordinarily high tariffs there's a way forward I think also to a meaningful free trade regime for digital services but there will have to be standards there that that protects individuals from having their data exploited by one party States and the companies that operate within those states so I'm not entirely despairing I think that we can fight for a liberal international order and trade not only in goods but also in services but we will have to fight it's not going to happen by itself and it's certainly not going to happen if we simply take China's words at face value because they've made many protestations of of good faith on intellectual property and and other fronts but those have not been met by by actions not been matched by actions any more than their their fine words about climate change have been matched by actions they they ramped up coal consumption right now as part of their effort to get back to economic normalcy so I think in the wake of this crisis it's not just the questions that I asked Xi Jinping that need to be answered there's a whole range of questions that China needs to answer and if it's not prepared to give honest answers and make meaningful commits to a free trade order then we will simply have to conclude that it should leave the World Trade Organisation or we should create a new organization of countries that are sincerely committed to economic freedom that that's my feeling well they'll thank you so much the years of interests are you commitment to sound public policy that have been your life I think I've never been needed more than they are now so I hope that you are widely appreciated and listened to in these very uncertain times lest we end up failing to craft a secure future for our children and their grandchildren thanks very much adieu thank you John a pleasure to talk to you as always thank you for watching this episode we appreciate your support if you value vital conversations 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Channel: John Anderson

Views: 146,883

Keywords: Niall Ferguson, Donald Trump, Boris Johnson, John Anderson, China virus, COVID-19, Coronavirus, Lockdown, China problem

Id: J3s6pzmmvEg

Length: 61min 25sec (3685 seconds)

Published: Thu Apr 23 2020