On Plugged In…
The fragile balancing act ...
between public health …
and public wealth.
Coronavirus puts millions …
out of work …
sending the global economy …
toward recession.
((Larry Summers))
“I'm nervous right now. I'm nervous.”
Former Secretary of the US Treasury…
Lawrence Summers …
helps us navigate ...
the economic impact ...
of the pandemic.
And will entrepreneurship …
ever be the same?
((Doron Petersan))
“I wouldn’t call them profits. Right now, there are no profits.”
The challenges of doing business …
in the face …
of the worldwide economic decline…
On Plugged In ...
Coronavirus:
Global Recession
((Greta))
Hello and welcome to Plugged In.
I’m Greta Van Susteren reporting from my home in Washington, DC.
Coronavirus has taken an unimaginable toll on our collective health with around five million reported cases so far.
More than 300-thousand are dead from the virus.
But signs of recovery are emerging.
Lockdowns are easing across Europe.
Italy is opening bars, restaurants, cafes and hair salons with social distancing measures in place.
And much of Spain is in phase two of its reopening plan allowing people to meet in groups of 10.
In the United States the stock market has regained half of its earlier losses and now some states are lifting stay-at-home orders in hopes of reviving the world’s largest economy which is sliding toward recession.
More from VOA Congressional Correspondent Katherine Gypson.
((America Reopens - Katherine Gypson))
After two months in lockdown – a gradual re-opening as Americans wonder if the U.S. economy can recover.
((Donald Trump))
“I feel we are going to have a country that has one of the best years ever.”
((NARRATOR))
But trillions of dollars in government aid still may not be enough. Democrats say the U.S. needs to catch up on testing while sending more economic aid to Americans.
((Nancy Pelosi, Speaker of the House))
“We have to address it and we have to address it in a big way. It is a big price tag but the American people are worth it.”
((NARRATOR))
While Republicans are warning the national debt is expanding too rapidly and decisions are best made at the local level.
((Stephen Moore, White House economic advisor))
"Obviously, you need to keep nursing homes safe, where half of the deaths have been. But there are whole areas of the country — about the half the counties — have had almost no coronavirus cases. Those can be very safely opened up."
((NARRATOR))
Lawmakers heard there are encouraging signs in a remote hearing with health experts.
((Dr. Scott Gottlieb, Former FDA commissioner))
“We're seeing signs of a slowing epidemic nationally, but we're still going to be reopening against the backdrop of more spread than we anticipated.”
((NARRATOR))
One key element of opening up safely…contact tracing efforts like this one just getting under way…
((Tom Inglesby, Johns Hopkins Bloomberg School of Public Health))
“Contact tracing will need to be a key part of our strategy until widespread vaccination can happen.”
((NARRATOR))
With a vaccine at least a year away, health experts say the U.S. will also need to ramp up testing efforts – avoiding mistakes made at the beginning of the pandemic.
((Ashish Jha, director of the Harvard Global Health Institute at Harvard University))
“The outbreak got too big because we didn't have a testing infrastructure that allowed us to put our arms around the outbreak, and so testing was the fundamental failure that forced our country to shut down.”
((NARRATOR))
A shut down that’s become the key issue in a presidential election year – even as both sides look for a way out of an unprecedented economic crisis. Katherine Gypson, VOA News, Washington.
((Greta))
Finding bipartisan agreement on what to do next will likely be difficult.
But the chair of the US central bank Jerome Powell injected some optimism predicting the US economy will recover albeit very slowly as early as this summer assuming the virus does not rebound.
I spoke with Secretary Larry Summers who served President Bill Clinton as Treasury Secretary and President Barack Obama as his top economic adviser during the 2008 financial crisis.
Summers says a global economic recovery is inextricably linked to the health of the world’s largest economy.
((Greta interview: Lawrence Summers))
LS: The sense of security and rule of law in global commerce depends crucially on the United States. The capacity of the international community to mount collective initiative is very much related to the United States.
GVS: How dependent is the US on the rest of the world having a stable and strong economy?
LS: In a world where we are not able to export in a world where we are facing much greater uncertainty, much more problematic outcomes, it has got to hurt the performance of the US economy. And I think a greater emphasis on resilience is going to mean smaller, shorter supply chains. that's going to mean more domestic production in some crucial areas.
GVS: Can you compare and contrast the crisis we're going through now with the financial crisis of 2008 where it’s alike and where it's different?
LS: They differ in two important respects. This crisis is two or three times as serious, as measured by the extra unemployment, as measured by the drop in the GDP, as measured by the degree of instability that it engenders, that's the first difference. And the second is that the 2008 crisis came out of the workings of the economy and the financial system. And this one is much more attributable to something that's more external to the global system, in terms of the emergence of the virulent virus.
GVS: It seems like you know, it seems very different in terms of one is so much more drastically responded to the crisis. Is there, first of all, do you agree with me? Secondly, you know, what's the explanation for that?
LS: I do agree. I am very worried about market valuations which I think may not be fully discounting the seriousness of what is ahead. I think there is a sense, I'm not sure it's a well-placed sense, that the Federal Reserve by putting money into the economy can solve all problems, at least solve all problems for financial markets. I'm not sure that's going to prove to be a good bet. And I'm concerned about current market valuation levels.
GVS: But does everything change in how you look at this if there's a vaccine?
LS: We have a vaccine is safe, that people trust, that can be administered on a very wide scale, not just in the United States, but in the world, I think this episode will recede fairly, fairly rapidly. But my life experience with big projects is that they much more frequently come to fruition slower than the people carrying on them, expect them more rapidly. And so, yes, we may have some vaccine that has proven out in a laboratory by next January. But I'd be rather surprised, Greta, if we had a vaccine that was pervasively administered, even a year from now.
GVS: Already the Congress has authorized $3 trillion there's going to be more. Where is the United States getting that money?
LS: The United states is able to borrow, the United States is able to borrow because ultimately, its capacity to raise taxes on Americans, in order to pay its debts, is something that has been built up over 230 years. That's a credibility that we have that enables us to borrow at remarkably low costs. (Crosstalk) And think that's something we should be taking advantage of, in order to invest heavily in the country's future.
GVS: What better describes you -that you're nervous about the situation or cautiously optimistic that we can fix this and that we'll make the right decisions?
LS: I'm nervous right now. I'm nervous, ultimately, because I don't think we have a sufficiently clear and robust strategy for containing the pandemic, as we try to have Americans lives returned to normal.
((Greta))
More on my interview with Larry Summers a bit later.
Here in Washington, DC most businesses have been closed for more than two months and will likely stay that way for several more weeks.
One restaurant near the Capitol had been developing a strong following among vegan diners when the pandemic turned everything upside down.
Here’s Plugged In’s Mil Arcega
((Small Business Survival – Mil Arcega))
When we last visited Fare Well in February, business for the retro-chic vegan eatery was booming.
((Doron Petersan, Restaurant Owner ))
“They’re coming back to eat all the time, repeatedly and without that main customer base we wouldn’t be here so I’m extremely grateful for the people that make our restaurant happen.”
((NARRATOR))
Owner Doron Petersan is a nutritional expert – passionate about introducing animal free products to her menu … everything from plant based hamburgers to vegan pastries.
But then - the lockdown order in Washington, DC.
((DORON PETERSAN, Restaurant Bakery Owner))
“I guess it was March 16th. We started winding down just based on what was happening, pulling back operations, restricting seating – just kind of like minute by minute waiting to see what was happening. And we thought it was going to be two weeks.”
NARRATTOR
Two months later, Petersan – who owns two restaurants - struggles to cope.
((DORON PETERSAN, Restaurant Bakery Owner))
“Yeah, I wouldn’t call them profits right now, there are no profits.”
((NARRATOR))
She laid off a third of her staff… took out a second loan – and delayed her rent payments.
Take out and online orders – which used to be less than 15% of the business – now accounts for nearly all of it.
((DORON PETERSAN, Restaurant Bakery Owner))
“We are generating daily gross sales enough so that we can pay for the ingredients and pay for our current staff and keep them employed right now.”
((NARRATOR))
She wishes there was more guidance from the city and the federal government on how to receive financial assistance. As traumatic as the experience has been – Petersan says failure has never been an option.
((DORON PETERSAN, Restaurant Bakery Owner))
To be totally like honest and personal – failure for me means I’m losing my house, it means 50 employees are out of work.”
((NARRATOR))
Petersan says the business environment has changed forever. But she hopes changes caused by the pandemic will mean a greater focus on the health and well-being of communities … on the workers who make businesses run… and less - on the bottom line. Mil Arcega, VOA News Washington.
((Greta))
For businesses to survive the prospects for success will likely hinge on how quickly prospective customers feel safe enough to venture outside.
I spoke to an expert who studies the social economic trends of the 20th century’s biggest financial disasters.
Caroline Fohlin is a professor of economics at Emory University.
I asked her about what it will take to restore consumer confidencein a post-coronavirus economy.
((Greta interview – Caroline Fohlin))
CF: Broadly speaking, some comparisons for example, we're seeing massive dislocation of workers, very high unemployment. some people are estimating that the true unemployment right now could be as high as 24%, the president of the Minneapolis fed in particular has said that, and that is much like the Great Depression. The difference is that the Great Depression was set off by a financial crisis. And this recession is being set off almost intentionally, like putting the economy into a coma. So it’s very different from that standpoint. So that means that the remedies are going to be different.
GVS: is the Great Depression, more akin except for the magnitude, to the economic recession of 2008 and that was financial market provoked, rather than the one we have currently where we put the, we put we have deliberately put the production on stall?
CF: What most economists think right now is that if we suddenly fix the pandemic problem, we can return to quasi-normal production. we can put people back to work because we can put kids back in schools, and we can put workers back into in-person kinds of jobs that they've had to stop like going to restaurants, working in restaurants and people can go to restaurants again.
GVS: in the Spanish, Spanish flu or the flu pandemic whatever you want to call it of 1918. I don't recall, and it’s probably because I'm uneducated, as to whether there was a huge economic impact. certainly there was in 1929 with the crash to the stock market and certainly now. what was the economic reaction to that flu?
CF: What we find is that there was actually a pretty mild effect. there was an effect. And of course, they had closures just like we're having in this pandemic. And what they would do, and it varied by city location they would close down and they would change hours. so again I was saying I was reading the newspaper reading the new york times during the 1918 through 1920, they developed, they called it an epidemic schedule. And so they changed the work schedules and they had kind of rolling opening and closing of different kinds of business throughout the day so that it would kind of spread out the transportation needs. And then they would close theaters and bars and pubs and so on. But the impact was milder, there was definitely some unemployment. But the economy was structured so differently at that time. you know you had a lot more rural people.
GVS: So in a very similar ways that they were doing social distancing, the tool that we use today, in part, but the structure of the economy was so different. that you didn’t have these hugely dense populations like New York or Washington or Detroit or LA, that it was more agrarian or more of a farm. A lot of people had farms. and they weren't it weren't in the same spot. but it's interesting to see that they were using the same tool of social distancing.
CF: yeah well of course they did have cities I mean New York City was still densely packed ((CROSSTALK))that was like today, right,
GVS: but not as dense
CF: it wasn't it wasn't the magnitude of this large cities today.
But of course they did have factory production so you know you had textile mills and people would be working very close together. So there, there were impacts. but they would do social distancing they already knew and they wore masks. And I was as reading actually a, an article in the Chicago newspaper, and they were talking about spitting. They had a spitting ordinance, and anyone who was found not wearing a mask and spitting in public was to be hauled into court on site. and they actually enforced it and had hefty fines. So, you know, like you could be fined $100 in the 1918, that's a huge amount of money.
((Greta))
No country has been immune from the economic damage caused by the corona virus pandemic.
Japan announced its economy had fallen into recession.
Falling oil prices has inflicted economic pain on Saudi Arabia and Russia.
While economies that moved aggressively to contain the outbreak are expected to recover experts say nations which lack resources remain at great risk.
VOA’s Brian Padden has more.
((Global Economic Impact – Brian Padden))
South Korea, Singapore and Vietnam are examples of countries that acted early and effectively to contain the coronavirus outbreak by shuttering businesses, implementing widespread testing, and tracing people exposed to the virus.
As a result, economists say, these nations are having the most success reopening their economies.
((Stephanie Segal, Political Economy Analyst , Ctr. for Strategic & International Studies))
“If that's in place then as you reopen the economy, you actually can foster confidence, because among the unknowns here are the way that consumers are going to respond to a gradual reopening.”
((NARRATOR))
Advanced countries in Asia, Europe and North America have engaged in massive relief efforts to compensate businesses and workers for the loss of income during economic shutdowns.
Countries like Germany have kept unemployment relatively low by reimbursing companies to keep idle workers on the payroll.
In the United States, which is experiencing massive job losses, worker benefits are channeled through unemployment programs.
But gaps in these programs have left many Americans increasingly dependent on food assistance.
Developing countries struggling with widespread poverty before the pandemic have been hit especially hard by the steep decline in global exports and world tourism.
Warning of a hunger pandemic, the United Nations has appealed for nearly $7 billion in humanitarian aid to help those most at risk.
((Antonio Guterres, United Nations Secretary General))
"Humanitarian aid is not just a moral imperative. It is a practical necessity to combat the virus. If COVID-19 wreaks havoc in the poorest places, we are all at risk."
((NARRATOR))
Despite a growing need for economic assistance, fiscal conservatives are increasingly resistant to boosting U.S. government debt that already has ballooned by the trillions of dollars since the pandemic began. They warn that runaway spending will necessitate tax increases and austerity measures that will slow economic growth for years to come.
((Stephanie Segal, Political Economy Analyst , Ctr. for Strategic & International Studies))
“If we see that people are not going back to work, then there's going to be a need for further assistance. And at that point do you start to get fatigue, is one of the things that you'll hear mentioned.”
((NARRATOR))
But until a coronavirus vaccine or a reliable treatment is developed, economists say, it remains difficult to forecast how long or how severe the economic downturn will be. And they warn reopening businesses too early could prolong the crisis. Brian Padden VOA News, Washington.
((Greta))
Whether the recovery takes months or years many countries are adjusting to the new normal.
In Nigeria businesses have instituted shorter work hours and pay cuts.
Nigerian authorities estimate the new normal could leave one in three workers without a job.
VOA’s Africa Service takes us to Nigeria’s capital, Abuja to see how the newly unemployed are coping.
((Nigeria’s Labor Woes – Timothy Obiezu))
Emmanuel Noble searches his phone, hoping for a response from one of the many places he has approached for a job.
It's been a daily struggle for him since he was laid off as a bartender at an Abuja night club in March following Nigeria's coronavirus lockdown.
((Emmanuel Noble, Unemployed Bartender ))
"You can imagine in a situation where you stay and you don't have any source of income, it is very difficult to bear. We've been at home all through, nowhere to go, just sleep, wake up, walk around, nothing to do, no engagement.”
((NARRATOR))
Nigerian authorities began easing a nationwide lockdown last week, but maintained restrictions on schools, religious bodies and businesses like night clubs, bars, and gardens where crowds usually gather.
Millions of Nigerians whose livelihoods depend on these businesses and institutions are having a hard time.
((Emmanuel Noble, Unemployed Bartender))
"It even got to the extent that I wasn't able to get recharge cards to load in my phone. I can't make contact, it's just like most movies we watch you see most people hopeless in the movie.”
((NARRATOR))
Nigeria has been battling high unemployment for years but this is something new. Labor officials predict the unemployment rate may hit 33 percent by the end of this year.
The coronavirus pandemic took a bad situation and made it even worse, says the local head of the International Labour Organization.
((Dennis Zulu, Country Director, International Labour Organization))
"Over the past few years we've been seeing an increase in the number of Nigerians who are unemployed and also because of new and young Nigerians entering the labor market who are not able to find jobs, this has further exacerbated the situation. So now coupled with the Covid-19 pandemic, the situation is of very serious concern and it could get worse depending on how this pandemic evolves.”
((NARRATOR))
Businesses across Nigeria are adjusting to coronavirus by operating for shorter hours and cutting workers’ salaries in order to survive.
((Dennis Zulu, Country Director, International Labour Organization))
"We should not be oblivious to the fact that some of them are still struggling now because the weeks of shutdown really affected their ability to generate working capital which they need for their own business operations."
((NARRATOR))
The International Monetary Fund says Nigeria's oil dependent economy will contract by 3.4 percent this year because of falling global oil prices triggered by the coronavirus lockdowns.
That is not good news for Emmanuel Noble. He plans to keep looking for work, but his job search may go on for months to come if there is no major improvement. Timothy Obiezu, for VOA News, Abuja.
((Greta))
While workers who have lost jobs struggle to find their place in a post-COVID economy, Americans are looking to lawmakers in Washington to set aside political differences and find ways to help small businesses and the more than 35 million unemployed Americans.
Here is part two of my conversation with former Treasury Secretary Lawrence Summers.
((STOP))
LS: I mean, the current legislation essentially will have used up all its ammunition by the end of September. And certainly we're going to have very serious problems after that. And the current bill left untreated the problems of state and local governments who are facing very, very severe financial difficulties. And this certainly isn't the`` moment when we should be cutting back on the, on what state and local governments are doing.
GVS: Who wants to lend the United States money now? Looking at the US economy, who are the best bets in terms of picking up our debt?
LS: US citizens, pension funds, investors from around the world in environments that are less politically, less politically stable. People have to hold money in order to prepare for the future, for their retirements, for their children, whatnot. This isn't a moment when there are enormously attractive other investments to make. And that's why we're able to sell our debt on very attractive terms, Greta.
I think as long as we maintain our debt, in reasonable relation to our income, we probably don't need to ever repay it in full any more than companies ever run themselves down to zero debt. They pay attention to what they're doing with the money. And so I think as long as we borrow in order to invest, we're probably going to be in a reasonable position. If we were borrowing just in order to consume, that's not something we can do forever. But I think at a moment like this, when we've suffered a very substantial downturn and emergency, most people would tell you that borrowing was appropriate.
GVS: Is there anything in your mind that you think there's some sort of point like we won't be able to get anyone to lend us money. Is there anything at all on your mind?
LS: I'm sure there is a point to that kind, but I don't think it's close to where we are now. I think much the greater risk is that we will not borrow enough, we will not invest enough and the economy will spiral downwards. And so failing to take advantage of the country's credit in order to invest is I think, the much greater risk at this moment.
GVS: Okay, US and China, the two world's largest economy- China has that humongous Belt and Road initiative. How do you see this Coronavirus impacting China? Because of course China has an impact on the rest of us just like we have an impact on the rest of the world?
LS: I think that it remains to be seen what the impact of the Belt and Road Initiative will be. I think China is doing a constructive thing in many ways by providing funds to developing countries so that they can invest in their infrastructure. I think it's going to be important to make sure that those funds are well used. I think it's going to be important to make sure that they're not promoting corruption. I think that when countries run into debt problems, as many developing countries are now running into debt problems, it's important that all the creditors, the United States, to the extent that it is lent money, banks to the extent that they have lent money, China to the extent that it has lent money, take their part in those restructurings.
((Greta))
Larry Summers is not the only feeling nervous about the new normal. So is corporate America. More from VOA’s Anna Rice.
((The New Normal – Anna Rice))
What many hope are just temporary changes might have a longer-lasting effect on both the economy and the daily life.
Two months of teleworking has shown that at least some employees can successfully and efficiently work from home, which can mean a reduction in demand for office space.
((Michael Potter, CEO, Monarch Capital Group))
“Working in New York City is very expensive as are many other large financial centers around the world, these are very, very expensive to operate in and we have a very high fixed cost space, and number one is typically your lease and the office expense. If you can cut down by 20%, 30%, 40% the space that you need – that’s an enormous cost savings!
((NARRATION))
If the demand for office space goes down, this will force the lease prices to go down as well, experts say. Today, the average office lease price in NYC is $750 per square meter a year.
Coronavirus lockdowns have also shown that many employees can successfully do their jobs from home. And that means employers may now find it possible – and efficient – to hire employees regardless of where they are based.
((Dmitry Stasyuk, Real Estate Agent, Newyork Realty.US))
“Having employees work remotely saves a great amount of money. So, companies can not only decide that saving money on office space rent is a great idea, they might even start hiring people who don’t live in New York, people from other areas and states where average salaries are lower. That will also allow them to save money.”
((NARRATION))
The pandemic, experts say, may do more than just change the way whole business spheres operate. It can also alter business etiquette and routine. The number of conferences and business trips will go down significantly – especially when physical presence is not crucial.
((Michael Potter, CEO, Monarch Capital Group))
“I’m having virtual meetings with six people, eights people, ten people, and we’re learning how to do it more efficiently with clients or vendors around the world and around the country. I don’t need to get on a plane every time that I travel or my employees travel. Yes, they’re traveling for that meeting, but they are also missing the potential work that they could be doing otherwise.”
((NARRATION))
Smaller number of business trips will directly affect hotels that rely on business clientele.
Work with business partners may be structured differently, skipping face-to-face meetings when possible.
((Michael Potter, CEO, Monarch Capital Group))
“In certain situations that is still going to be very, very important, but in other situations it’s less important. And especially I think for the younger generation, I don’t think they need it that much. They are used to a more virtual world versus some of my older clients and customers who actually do want to sit down.”
((NARRATION))
Experts say changing work habits, lower demand for hotel rooms, office space and public transportation are just some of the changes that likely await corporations and business in a post-covid world. For Evgeny Maslov in New York, Anna Rice, VOA News.
((Greta))
Thank you for watching
this episode of Plugged In
We look forward to seeing you again..
next week....
as we continue to follow this crisis.
But for the latest updates…
please visit our website:
at VOANews.com.
And don’t forget…
to follow me…
on Twitter @Greta.
Thanks for being Plugged In.
We hope to see you again...
next week!
The fragile balancing act ...
between public health …
and public wealth.
Coronavirus puts millions …
out of work …
sending the global economy …
toward recession.
((Larry Summers))
“I'm nervous right now. I'm nervous.”
Former Secretary of the US Treasury…
Lawrence Summers …
helps us navigate ...
the economic impact ...
of the pandemic.
And will entrepreneurship …
ever be the same?
((Doron Petersan))
“I wouldn’t call them profits. Right now, there are no profits.”
The challenges of doing business …
in the face …
of the worldwide economic decline…
On Plugged In ...
Coronavirus:
Global Recession
((Greta))
Hello and welcome to Plugged In.
I’m Greta Van Susteren reporting from my home in Washington, DC.
Coronavirus has taken an unimaginable toll on our collective health with around five million reported cases so far.
More than 300-thousand are dead from the virus.
But signs of recovery are emerging.
Lockdowns are easing across Europe.
Italy is opening bars, restaurants, cafes and hair salons with social distancing measures in place.
And much of Spain is in phase two of its reopening plan allowing people to meet in groups of 10.
In the United States the stock market has regained half of its earlier losses and now some states are lifting stay-at-home orders in hopes of reviving the world’s largest economy which is sliding toward recession.
More from VOA Congressional Correspondent Katherine Gypson.
((America Reopens - Katherine Gypson))
After two months in lockdown – a gradual re-opening as Americans wonder if the U.S. economy can recover.
((Donald Trump))
“I feel we are going to have a country that has one of the best years ever.”
((NARRATOR))
But trillions of dollars in government aid still may not be enough. Democrats say the U.S. needs to catch up on testing while sending more economic aid to Americans.
((Nancy Pelosi, Speaker of the House))
“We have to address it and we have to address it in a big way. It is a big price tag but the American people are worth it.”
((NARRATOR))
While Republicans are warning the national debt is expanding too rapidly and decisions are best made at the local level.
((Stephen Moore, White House economic advisor))
"Obviously, you need to keep nursing homes safe, where half of the deaths have been. But there are whole areas of the country — about the half the counties — have had almost no coronavirus cases. Those can be very safely opened up."
((NARRATOR))
Lawmakers heard there are encouraging signs in a remote hearing with health experts.
((Dr. Scott Gottlieb, Former FDA commissioner))
“We're seeing signs of a slowing epidemic nationally, but we're still going to be reopening against the backdrop of more spread than we anticipated.”
((NARRATOR))
One key element of opening up safely…contact tracing efforts like this one just getting under way…
((Tom Inglesby, Johns Hopkins Bloomberg School of Public Health))
“Contact tracing will need to be a key part of our strategy until widespread vaccination can happen.”
((NARRATOR))
With a vaccine at least a year away, health experts say the U.S. will also need to ramp up testing efforts – avoiding mistakes made at the beginning of the pandemic.
((Ashish Jha, director of the Harvard Global Health Institute at Harvard University))
“The outbreak got too big because we didn't have a testing infrastructure that allowed us to put our arms around the outbreak, and so testing was the fundamental failure that forced our country to shut down.”
((NARRATOR))
A shut down that’s become the key issue in a presidential election year – even as both sides look for a way out of an unprecedented economic crisis. Katherine Gypson, VOA News, Washington.
((Greta))
Finding bipartisan agreement on what to do next will likely be difficult.
But the chair of the US central bank Jerome Powell injected some optimism predicting the US economy will recover albeit very slowly as early as this summer assuming the virus does not rebound.
I spoke with Secretary Larry Summers who served President Bill Clinton as Treasury Secretary and President Barack Obama as his top economic adviser during the 2008 financial crisis.
Summers says a global economic recovery is inextricably linked to the health of the world’s largest economy.
((Greta interview: Lawrence Summers))
LS: The sense of security and rule of law in global commerce depends crucially on the United States. The capacity of the international community to mount collective initiative is very much related to the United States.
GVS: How dependent is the US on the rest of the world having a stable and strong economy?
LS: In a world where we are not able to export in a world where we are facing much greater uncertainty, much more problematic outcomes, it has got to hurt the performance of the US economy. And I think a greater emphasis on resilience is going to mean smaller, shorter supply chains. that's going to mean more domestic production in some crucial areas.
GVS: Can you compare and contrast the crisis we're going through now with the financial crisis of 2008 where it’s alike and where it's different?
LS: They differ in two important respects. This crisis is two or three times as serious, as measured by the extra unemployment, as measured by the drop in the GDP, as measured by the degree of instability that it engenders, that's the first difference. And the second is that the 2008 crisis came out of the workings of the economy and the financial system. And this one is much more attributable to something that's more external to the global system, in terms of the emergence of the virulent virus.
GVS: It seems like you know, it seems very different in terms of one is so much more drastically responded to the crisis. Is there, first of all, do you agree with me? Secondly, you know, what's the explanation for that?
LS: I do agree. I am very worried about market valuations which I think may not be fully discounting the seriousness of what is ahead. I think there is a sense, I'm not sure it's a well-placed sense, that the Federal Reserve by putting money into the economy can solve all problems, at least solve all problems for financial markets. I'm not sure that's going to prove to be a good bet. And I'm concerned about current market valuation levels.
GVS: But does everything change in how you look at this if there's a vaccine?
LS: We have a vaccine is safe, that people trust, that can be administered on a very wide scale, not just in the United States, but in the world, I think this episode will recede fairly, fairly rapidly. But my life experience with big projects is that they much more frequently come to fruition slower than the people carrying on them, expect them more rapidly. And so, yes, we may have some vaccine that has proven out in a laboratory by next January. But I'd be rather surprised, Greta, if we had a vaccine that was pervasively administered, even a year from now.
GVS: Already the Congress has authorized $3 trillion there's going to be more. Where is the United States getting that money?
LS: The United states is able to borrow, the United States is able to borrow because ultimately, its capacity to raise taxes on Americans, in order to pay its debts, is something that has been built up over 230 years. That's a credibility that we have that enables us to borrow at remarkably low costs. (Crosstalk) And think that's something we should be taking advantage of, in order to invest heavily in the country's future.
GVS: What better describes you -that you're nervous about the situation or cautiously optimistic that we can fix this and that we'll make the right decisions?
LS: I'm nervous right now. I'm nervous, ultimately, because I don't think we have a sufficiently clear and robust strategy for containing the pandemic, as we try to have Americans lives returned to normal.
((Greta))
More on my interview with Larry Summers a bit later.
Here in Washington, DC most businesses have been closed for more than two months and will likely stay that way for several more weeks.
One restaurant near the Capitol had been developing a strong following among vegan diners when the pandemic turned everything upside down.
Here’s Plugged In’s Mil Arcega
((Small Business Survival – Mil Arcega))
When we last visited Fare Well in February, business for the retro-chic vegan eatery was booming.
((Doron Petersan, Restaurant Owner ))
“They’re coming back to eat all the time, repeatedly and without that main customer base we wouldn’t be here so I’m extremely grateful for the people that make our restaurant happen.”
((NARRATOR))
Owner Doron Petersan is a nutritional expert – passionate about introducing animal free products to her menu … everything from plant based hamburgers to vegan pastries.
But then - the lockdown order in Washington, DC.
((DORON PETERSAN, Restaurant Bakery Owner))
“I guess it was March 16th. We started winding down just based on what was happening, pulling back operations, restricting seating – just kind of like minute by minute waiting to see what was happening. And we thought it was going to be two weeks.”
NARRATTOR
Two months later, Petersan – who owns two restaurants - struggles to cope.
((DORON PETERSAN, Restaurant Bakery Owner))
“Yeah, I wouldn’t call them profits right now, there are no profits.”
((NARRATOR))
She laid off a third of her staff… took out a second loan – and delayed her rent payments.
Take out and online orders – which used to be less than 15% of the business – now accounts for nearly all of it.
((DORON PETERSAN, Restaurant Bakery Owner))
“We are generating daily gross sales enough so that we can pay for the ingredients and pay for our current staff and keep them employed right now.”
((NARRATOR))
She wishes there was more guidance from the city and the federal government on how to receive financial assistance. As traumatic as the experience has been – Petersan says failure has never been an option.
((DORON PETERSAN, Restaurant Bakery Owner))
To be totally like honest and personal – failure for me means I’m losing my house, it means 50 employees are out of work.”
((NARRATOR))
Petersan says the business environment has changed forever. But she hopes changes caused by the pandemic will mean a greater focus on the health and well-being of communities … on the workers who make businesses run… and less - on the bottom line. Mil Arcega, VOA News Washington.
((Greta))
For businesses to survive the prospects for success will likely hinge on how quickly prospective customers feel safe enough to venture outside.
I spoke to an expert who studies the social economic trends of the 20th century’s biggest financial disasters.
Caroline Fohlin is a professor of economics at Emory University.
I asked her about what it will take to restore consumer confidencein a post-coronavirus economy.
((Greta interview – Caroline Fohlin))
CF: Broadly speaking, some comparisons for example, we're seeing massive dislocation of workers, very high unemployment. some people are estimating that the true unemployment right now could be as high as 24%, the president of the Minneapolis fed in particular has said that, and that is much like the Great Depression. The difference is that the Great Depression was set off by a financial crisis. And this recession is being set off almost intentionally, like putting the economy into a coma. So it’s very different from that standpoint. So that means that the remedies are going to be different.
GVS: is the Great Depression, more akin except for the magnitude, to the economic recession of 2008 and that was financial market provoked, rather than the one we have currently where we put the, we put we have deliberately put the production on stall?
CF: What most economists think right now is that if we suddenly fix the pandemic problem, we can return to quasi-normal production. we can put people back to work because we can put kids back in schools, and we can put workers back into in-person kinds of jobs that they've had to stop like going to restaurants, working in restaurants and people can go to restaurants again.
GVS: in the Spanish, Spanish flu or the flu pandemic whatever you want to call it of 1918. I don't recall, and it’s probably because I'm uneducated, as to whether there was a huge economic impact. certainly there was in 1929 with the crash to the stock market and certainly now. what was the economic reaction to that flu?
CF: What we find is that there was actually a pretty mild effect. there was an effect. And of course, they had closures just like we're having in this pandemic. And what they would do, and it varied by city location they would close down and they would change hours. so again I was saying I was reading the newspaper reading the new york times during the 1918 through 1920, they developed, they called it an epidemic schedule. And so they changed the work schedules and they had kind of rolling opening and closing of different kinds of business throughout the day so that it would kind of spread out the transportation needs. And then they would close theaters and bars and pubs and so on. But the impact was milder, there was definitely some unemployment. But the economy was structured so differently at that time. you know you had a lot more rural people.
GVS: So in a very similar ways that they were doing social distancing, the tool that we use today, in part, but the structure of the economy was so different. that you didn’t have these hugely dense populations like New York or Washington or Detroit or LA, that it was more agrarian or more of a farm. A lot of people had farms. and they weren't it weren't in the same spot. but it's interesting to see that they were using the same tool of social distancing.
CF: yeah well of course they did have cities I mean New York City was still densely packed ((CROSSTALK))that was like today, right,
GVS: but not as dense
CF: it wasn't it wasn't the magnitude of this large cities today.
But of course they did have factory production so you know you had textile mills and people would be working very close together. So there, there were impacts. but they would do social distancing they already knew and they wore masks. And I was as reading actually a, an article in the Chicago newspaper, and they were talking about spitting. They had a spitting ordinance, and anyone who was found not wearing a mask and spitting in public was to be hauled into court on site. and they actually enforced it and had hefty fines. So, you know, like you could be fined $100 in the 1918, that's a huge amount of money.
((Greta))
No country has been immune from the economic damage caused by the corona virus pandemic.
Japan announced its economy had fallen into recession.
Falling oil prices has inflicted economic pain on Saudi Arabia and Russia.
While economies that moved aggressively to contain the outbreak are expected to recover experts say nations which lack resources remain at great risk.
VOA’s Brian Padden has more.
((Global Economic Impact – Brian Padden))
South Korea, Singapore and Vietnam are examples of countries that acted early and effectively to contain the coronavirus outbreak by shuttering businesses, implementing widespread testing, and tracing people exposed to the virus.
As a result, economists say, these nations are having the most success reopening their economies.
((Stephanie Segal, Political Economy Analyst , Ctr. for Strategic & International Studies))
“If that's in place then as you reopen the economy, you actually can foster confidence, because among the unknowns here are the way that consumers are going to respond to a gradual reopening.”
((NARRATOR))
Advanced countries in Asia, Europe and North America have engaged in massive relief efforts to compensate businesses and workers for the loss of income during economic shutdowns.
Countries like Germany have kept unemployment relatively low by reimbursing companies to keep idle workers on the payroll.
In the United States, which is experiencing massive job losses, worker benefits are channeled through unemployment programs.
But gaps in these programs have left many Americans increasingly dependent on food assistance.
Developing countries struggling with widespread poverty before the pandemic have been hit especially hard by the steep decline in global exports and world tourism.
Warning of a hunger pandemic, the United Nations has appealed for nearly $7 billion in humanitarian aid to help those most at risk.
((Antonio Guterres, United Nations Secretary General))
"Humanitarian aid is not just a moral imperative. It is a practical necessity to combat the virus. If COVID-19 wreaks havoc in the poorest places, we are all at risk."
((NARRATOR))
Despite a growing need for economic assistance, fiscal conservatives are increasingly resistant to boosting U.S. government debt that already has ballooned by the trillions of dollars since the pandemic began. They warn that runaway spending will necessitate tax increases and austerity measures that will slow economic growth for years to come.
((Stephanie Segal, Political Economy Analyst , Ctr. for Strategic & International Studies))
“If we see that people are not going back to work, then there's going to be a need for further assistance. And at that point do you start to get fatigue, is one of the things that you'll hear mentioned.”
((NARRATOR))
But until a coronavirus vaccine or a reliable treatment is developed, economists say, it remains difficult to forecast how long or how severe the economic downturn will be. And they warn reopening businesses too early could prolong the crisis. Brian Padden VOA News, Washington.
((Greta))
Whether the recovery takes months or years many countries are adjusting to the new normal.
In Nigeria businesses have instituted shorter work hours and pay cuts.
Nigerian authorities estimate the new normal could leave one in three workers without a job.
VOA’s Africa Service takes us to Nigeria’s capital, Abuja to see how the newly unemployed are coping.
((Nigeria’s Labor Woes – Timothy Obiezu))
Emmanuel Noble searches his phone, hoping for a response from one of the many places he has approached for a job.
It's been a daily struggle for him since he was laid off as a bartender at an Abuja night club in March following Nigeria's coronavirus lockdown.
((Emmanuel Noble, Unemployed Bartender ))
"You can imagine in a situation where you stay and you don't have any source of income, it is very difficult to bear. We've been at home all through, nowhere to go, just sleep, wake up, walk around, nothing to do, no engagement.”
((NARRATOR))
Nigerian authorities began easing a nationwide lockdown last week, but maintained restrictions on schools, religious bodies and businesses like night clubs, bars, and gardens where crowds usually gather.
Millions of Nigerians whose livelihoods depend on these businesses and institutions are having a hard time.
((Emmanuel Noble, Unemployed Bartender))
"It even got to the extent that I wasn't able to get recharge cards to load in my phone. I can't make contact, it's just like most movies we watch you see most people hopeless in the movie.”
((NARRATOR))
Nigeria has been battling high unemployment for years but this is something new. Labor officials predict the unemployment rate may hit 33 percent by the end of this year.
The coronavirus pandemic took a bad situation and made it even worse, says the local head of the International Labour Organization.
((Dennis Zulu, Country Director, International Labour Organization))
"Over the past few years we've been seeing an increase in the number of Nigerians who are unemployed and also because of new and young Nigerians entering the labor market who are not able to find jobs, this has further exacerbated the situation. So now coupled with the Covid-19 pandemic, the situation is of very serious concern and it could get worse depending on how this pandemic evolves.”
((NARRATOR))
Businesses across Nigeria are adjusting to coronavirus by operating for shorter hours and cutting workers’ salaries in order to survive.
((Dennis Zulu, Country Director, International Labour Organization))
"We should not be oblivious to the fact that some of them are still struggling now because the weeks of shutdown really affected their ability to generate working capital which they need for their own business operations."
((NARRATOR))
The International Monetary Fund says Nigeria's oil dependent economy will contract by 3.4 percent this year because of falling global oil prices triggered by the coronavirus lockdowns.
That is not good news for Emmanuel Noble. He plans to keep looking for work, but his job search may go on for months to come if there is no major improvement. Timothy Obiezu, for VOA News, Abuja.
((Greta))
While workers who have lost jobs struggle to find their place in a post-COVID economy, Americans are looking to lawmakers in Washington to set aside political differences and find ways to help small businesses and the more than 35 million unemployed Americans.
Here is part two of my conversation with former Treasury Secretary Lawrence Summers.
((STOP))
LS: I mean, the current legislation essentially will have used up all its ammunition by the end of September. And certainly we're going to have very serious problems after that. And the current bill left untreated the problems of state and local governments who are facing very, very severe financial difficulties. And this certainly isn't the`` moment when we should be cutting back on the, on what state and local governments are doing.
GVS: Who wants to lend the United States money now? Looking at the US economy, who are the best bets in terms of picking up our debt?
LS: US citizens, pension funds, investors from around the world in environments that are less politically, less politically stable. People have to hold money in order to prepare for the future, for their retirements, for their children, whatnot. This isn't a moment when there are enormously attractive other investments to make. And that's why we're able to sell our debt on very attractive terms, Greta.
I think as long as we maintain our debt, in reasonable relation to our income, we probably don't need to ever repay it in full any more than companies ever run themselves down to zero debt. They pay attention to what they're doing with the money. And so I think as long as we borrow in order to invest, we're probably going to be in a reasonable position. If we were borrowing just in order to consume, that's not something we can do forever. But I think at a moment like this, when we've suffered a very substantial downturn and emergency, most people would tell you that borrowing was appropriate.
GVS: Is there anything in your mind that you think there's some sort of point like we won't be able to get anyone to lend us money. Is there anything at all on your mind?
LS: I'm sure there is a point to that kind, but I don't think it's close to where we are now. I think much the greater risk is that we will not borrow enough, we will not invest enough and the economy will spiral downwards. And so failing to take advantage of the country's credit in order to invest is I think, the much greater risk at this moment.
GVS: Okay, US and China, the two world's largest economy- China has that humongous Belt and Road initiative. How do you see this Coronavirus impacting China? Because of course China has an impact on the rest of us just like we have an impact on the rest of the world?
LS: I think that it remains to be seen what the impact of the Belt and Road Initiative will be. I think China is doing a constructive thing in many ways by providing funds to developing countries so that they can invest in their infrastructure. I think it's going to be important to make sure that those funds are well used. I think it's going to be important to make sure that they're not promoting corruption. I think that when countries run into debt problems, as many developing countries are now running into debt problems, it's important that all the creditors, the United States, to the extent that it is lent money, banks to the extent that they have lent money, China to the extent that it has lent money, take their part in those restructurings.
((Greta))
Larry Summers is not the only feeling nervous about the new normal. So is corporate America. More from VOA’s Anna Rice.
((The New Normal – Anna Rice))
What many hope are just temporary changes might have a longer-lasting effect on both the economy and the daily life.
Two months of teleworking has shown that at least some employees can successfully and efficiently work from home, which can mean a reduction in demand for office space.
((Michael Potter, CEO, Monarch Capital Group))
“Working in New York City is very expensive as are many other large financial centers around the world, these are very, very expensive to operate in and we have a very high fixed cost space, and number one is typically your lease and the office expense. If you can cut down by 20%, 30%, 40% the space that you need – that’s an enormous cost savings!
((NARRATION))
If the demand for office space goes down, this will force the lease prices to go down as well, experts say. Today, the average office lease price in NYC is $750 per square meter a year.
Coronavirus lockdowns have also shown that many employees can successfully do their jobs from home. And that means employers may now find it possible – and efficient – to hire employees regardless of where they are based.
((Dmitry Stasyuk, Real Estate Agent, Newyork Realty.US))
“Having employees work remotely saves a great amount of money. So, companies can not only decide that saving money on office space rent is a great idea, they might even start hiring people who don’t live in New York, people from other areas and states where average salaries are lower. That will also allow them to save money.”
((NARRATION))
The pandemic, experts say, may do more than just change the way whole business spheres operate. It can also alter business etiquette and routine. The number of conferences and business trips will go down significantly – especially when physical presence is not crucial.
((Michael Potter, CEO, Monarch Capital Group))
“I’m having virtual meetings with six people, eights people, ten people, and we’re learning how to do it more efficiently with clients or vendors around the world and around the country. I don’t need to get on a plane every time that I travel or my employees travel. Yes, they’re traveling for that meeting, but they are also missing the potential work that they could be doing otherwise.”
((NARRATION))
Smaller number of business trips will directly affect hotels that rely on business clientele.
Work with business partners may be structured differently, skipping face-to-face meetings when possible.
((Michael Potter, CEO, Monarch Capital Group))
“In certain situations that is still going to be very, very important, but in other situations it’s less important. And especially I think for the younger generation, I don’t think they need it that much. They are used to a more virtual world versus some of my older clients and customers who actually do want to sit down.”
((NARRATION))
Experts say changing work habits, lower demand for hotel rooms, office space and public transportation are just some of the changes that likely await corporations and business in a post-covid world. For Evgeny Maslov in New York, Anna Rice, VOA News.
((Greta))
Thank you for watching
this episode of Plugged In
We look forward to seeing you again..
next week....
as we continue to follow this crisis.
But for the latest updates…
please visit our website:
at VOANews.com.
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