• Marco Annunziata

Who Would've Thunk It?


Nothing gives the measure of how much the world has changed better than hearing someone say something you would never have expected them to – the kind of statement that makes you think “Who would’ve thunk it?”


Exhibit A: When I worked at the International Monetary Fund, the insider joke was that IMF really stood for “It’s Mostly Fiscal”, because the institution believed sound public finances were the bedrock of good economic policy. But times have changed. As the Fund unveiled its January outlook update this week, it stated that “circumstances have changed in a way that justifies the rethinking of fiscal rules and fiscal frameworks” and governments should put concerns about debt sustainability on the backburner. Diplomacy is the art of hedging yourself, so of course the IMF added that “People have to take into account public finance risks and public debt sustainability,…” but it made it clear it sees these risks as so remote they should effectively be ignored in setting policy today.


Now, of course fiscal stimulus constitutes a perfectly appropriate response to adverse shocks like the pandemic. But governments have already thrown a lot of money at the problem, and debt levels have risen across the globe. Vaccinations should allow us to reopen our economies sometime this year, so fiscal stimulus is less needed in 2021 than it was in 2020. And at the heart of the 2008 Great Financial Crisis was a massive excess of leverage, which we have now recreated on an even larger scale. But the IMF has joined the crowd cheerleading for an ever larger public debt binge. Who would’ve thunk it?


Exhibit B: Speaking of Covid-19 vaccines, surveys in country after country show that health care workers are quite reluctant to take them. France appears to be one of the most egregious examples, with the Wall Street Journal reporting that some 75% of nursing homes workers don’t want to take the vaccine – significantly greater even that the already remarkable 60% for the general population. In the US a recent Gallup poll shows that less than 50% of health care workers are willing to take the vaccine. In Germany, a poll indicated that 50% of nurses and 25% of doctors are unwilling to take the vaccine. Similar results have been reported in other countries.


This is not just surprising, but profoundly troubling. These are people whose professional expertise we are supposed to trust when it comes to protecting our health. And a majority of them don’t trust the vaccine - even in highly scientifically-minded Europe. For almost a year we have saluted them as heroes for risking their lives every day on the Covid frontlines; and now they tell us they fear the vaccine more than the virus itself. If we follow their lead, we might as well not have bothered developing vaccines in the first place, because with 50% take-up the vaccines are not going to stop the pandemic. Who would’ve thunk it?


Exhibit C: Going back to economics, John Kerry, the Biden Administration’s environment czar and heir by marriage to the Heinz fortune, said that oil and gas workers who will lose their jobs under the new government’s policies can “go to work to make the solar panels.” This is the economic equivalent of Marie Antoinette’s “let them eat cake.” It’s also the perfect example of orthodox economic liberalism: if an industry contracts or shuts down, no problem, the market’s free hand will reallocate resources to new industries that will grow and offer new and better jobs. Truckdrivers will learn how to code software – there’s no reason to worry about self-driving trucks. This conveniently ignores the fact that reskilling is not as easy as changing into a fresh shirt. Especially for mid-career workers, not all new skills are that easy to acquire.


Don’t get me wrong: over time, the orthodox economic prescription wins out for the economy as a whole. We do want investment and employment to shift to the industries with better competitive prospects. Protecting or subsidizing industries to save specific jobs is highly inefficient. But that does not mean you can dismiss the disruption wreaked on workers by waving your hands and saying they’ll just get better jobs in new industries. This is exactly the attitude that makes “the elites” look out of touch and makes populism look good. It’s the kind of statement you’d expect from a freshly minted economics PhD out of the University of Chicago, not a leading politician from the party that supposedly champions the workers. Who would’ve thunk it?


What should we take away from all this? These are cautionary tales, warning us that stereotypes can be misleading, that the desire to conform or to push an agenda is too often stronger than the desire to think independently – or just to think – and to ask uncomfortable question. And that if we don’t ask the awkward questions, if we don’t try to think and honestly discuss issues, we’ll blunder into some very bad outcomes. If the Covid vaccines are more dangerous than the virus, we should by all means find a different way to combat the pandemic – but if not, health care workers should get vaccinated. If we decide that some workers should lose their jobs for the sake of the environment, let’s discuss if and how to support them, not pretend we’re doing them a favor. And if we believe today’s weak growth warrants a major fiscal stimulus, let’s honestly recognize the long-term financial risks we are creating and not hide behind the convenient “this time it’s different” arguments. At the very least, tomorrow we’ll be in a better position to honestly discuss how to solve the problems we are seeding today.

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