Economic Implications of COVID-19

Economic Implications of COVID-19

Maranie Staab/Reuters
from Local Journalists Conference Calls and Webinars

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Economics

United States

Coronavirus

Labor and Employment

Edward Alden, Bernard L. Schwartz senior fellow at CFR, discusses the economic implications of COVID-19. Carla Anne Robbins, CFR adjunct senior fellow and former deputy editorial page editor at the New York Times, hosts the webinar.

Speaker

Edward Alden

Bernard L. Schwartz Senior Fellow, Council on Foreign Relations

Host

Carla Anne Robbins

Adjunct Senior Fellow, Council on Foreign Relations

Presider

Irina A. Faskianos

Vice President, National Program and Outreach, Council on Foreign Relations

FASKIANOS: Good afternoon and welcome to the Council on Foreign Relations’ Local Journalists Webinar series. Today we will be talking about the economic implications of the COVID-19 pandemic, with Edward Alden and Carla Anne Robbins. I'm Irina Faskianos, vice president for the National Program and Outreach at CFR. As you know, CFR is an independent and nonpartisan organization and think tank focusing on U.S. foreign policy. This webinar is part of CFR’s Local Journalists Initiative, created to help you connect the local issues you cover in your communities with global dynamics. Our programming puts you in touch with CFR resources and expertise on international issues and provides a forum for sharing best practices. Today's webinar is on the record and the video and transcript will be posted online on our website after the fact at CFR.org/localjournalists.

I previously shared the speakers’ bios but let me just give you a few highlights. Edward Alden is the Bernard L. Schwartz senior fellow at CFR, specializing in U.S. economic competitiveness, trade, and immigration policy. He's also the Ross distinguished visiting professor at Western Washington University. He's the author of the book Failure To Adjust: How Americans Got Left Behind in The Global Economy, and has served as the project director on several CFR-sponsored Independent Task Forces on subjects including the future of work, trade and investment policy, and immigration. He was previously the Washington bureau chief for the Financial Times and has reported for the Vancouver Sun and other publications.

Carla Anne Robbins is an adjunct senior fellow at CFR. She's the faculty director of the master of international affairs program and clinical professor of national security studies at Baruch College’s Marxe School of Public and International Affairs. Prior to that, she was deputy editorial page editor at the New York Times and the chief diplomatic correspondent at the Wall Street Journal. So Ted and Carla, thanks for being with us, I'm going to turn it now to Carla, to get the conversation going.

ROBBINS: Thanks Irina and thank you all for joining us today. I was reading a column I think it was in the times it might have been Ben Smith, who was saying we're not supposed to thank journalists for what they do and I've made a decision. I'm not going to thank national journalists for what they do. But I'm definitely going to thank local journalists for what you do, because you guys are frontline and in extraordinary times to work in. And so thank you for what you do and thank you for continuing to report on what is happening out there. So, Ted, let's go into it. Let's do the numbers as they say. So the Fed projected this week that the U.S. economy would shrink by 3.5% this year, which is less than the 6.5% decline they were fearing in June and the 9% contraction we saw between April and June. The Fed also said they expected the U.S. unemployment rate to fall to about 7.6% from the current 8.4% by the end of the year. So how should we read the U.S. economic numbers? Are things turning around in the U.S. faster than expected? I mean, it's hard to celebrate numbers like that. But are things getting better?

ALDEN: Oh, let me let me just say at the outset, thanks very much, Irina, for having me on the call. It's great to be here with you, Carla, and also delight to be with all the journalists on the call. I mean, yeah, I think there's no question the recovery has been stronger than a lot of economists had anticipated. The U.S. rebound is a little better than most of the European economies. Germany’s expected a lot better than what we've seen in the UK and other places. So yeah, I think there is some good news there. The not so good news is that unemployment remains extremely high. I mean, we had the new numbers again this morning. We're now twenty-six weeks into having weekly unemployment claims that are higher than any other week going all the way back to 1967. So you know we had, including the temporary and gig workers, about one and a half million new claims this week. So unemployment is a huge problem. It's particularly hitting lower wage workers in service industries of all sorts, restaurant, entertainment, you know, sports is back on television, which I enjoy. But you know, there's nobody in the stands and there's nobody working at food service in the stadiums and all of the spin off jobs that get created in those communities from sporting events, those are not back on the job.

So we're still in, I would argue a very, very dire situation and without a sort of clear path out of it, there's more talk in the past couple of weeks that I've heard about the possibility of a double dip recession, partly because there's expectations that we'll see a new surge in the pandemic in the fall as the weather gets colder. So you know, the economic situation is still pretty bleak. You wouldn't know that from the stock market, you know, the tech companies that make up so much of the Dow Jones and S&P are doing very well, right? We're all on Zoom and Zoom stock is now more than $400 a share, right, basically, three times up from the beginning of the pandemic. So they're parts of the economy, they're doing very well. But on the whole, still a pretty desperate situation.

ROBBINS:  So even that improvement, which is the numbers are still horrifying, but they're better than were predicted. And certainly, you said, like a 20 % drop in the UK. So you know, 9% , or 8.5% , whatever it is, it looks comparatively better. Can we expect that steady improvement? Because Jerome Powelll seemed to suggest even in the moderate sort of Fed speak, that you know Fed chair speaks, can we expect that improvement if Congress fails to pass another round of stimulus? And does that stimulus have to have money for state and local? Because it looks like the Republicans for reasons that escape me are determined not to give money to state and local.

ALDEN: Yeah, I mean, the state and local situation is dire. For the reporters on this call, all those states are required to balance their budgets and they're facing huge revenue shortfalls as a result of the economic downturn triggered by the pandemic. Chairman Powell was pretty clear yesterday, as you say, in cautious Fed speak that, you know, what he calls the fiscal dimension needs to be an important part of this. There's only so much that the Fed can do, I mean, money is basically free. The Fed is buying up bonds to keep down long term interest rates on things like, you know, car buying and home buying. Thirty-year mortgages are still at record lows, the Federal Reserve has been buying up corporate bonds, which has helped the balance sheets of big companies. The Fed is really doing everything it can do and some things we probably never expected it to do. And so the ball is very much in Congress's court right now. There's no question that the CARES Act, the first stimulus package, made a huge difference particularly, I think, the $600 a week in extra payments for those who are unemployed. I think that is a big explanation for why the U.S. rebound has been as strong as it is.

You see it in the in the trade numbers, you know, my focus tends to be a bit more international than domestic. And what you've seen kind of, ironically, is a surge in imports from China into the United States, the U.S. trade deficit with China is now back at the record levels it was in 2008, despite President Trump's desire to see it shrink, and a lot of that has to do with Chinese production recovering, and the U.S. economy growing more strongly than expected, in large measure, because so much money was going into people's pockets through that first package. Without another one, I think clearly the economy is not going to continue to recover at the pace it has been. State and local governments, you know, I think we're looking at significant cuts in education and fire and police service. It's going to have some health care impacts. So yeah, some of that will be delayed. I mean just speaking from the situation at my own university, which is a public university, there's a lot of conversation about what this means for the budget this year, we're going to take a hit. We'll probably be down sort of in the 3% to 5% range on the budget. But the concern is all about next year, because the way a lot of the state governments operate, you know, a lot of them, the legislature said early in the year and then they're looking at the budget forecast for that coming year. And if there's no money coming nationally, I think we're looking at really, really deep cuts in 2021, which is likely, of course, to further prolong the economic weakness into 2021.

ROBBINS:  So yeah, I mean, that's sort of, we're in a situation at the university I work with, in which all bets are off. Nobody knows what's going on because if you don't know if there's federal money coming in and how the impact that has on states, it’s impossible to plan, it's impossible for businesses to plan, impossible for local government to plan. How important is it you know, the relationship between local economies and the national economy? I know that like in New York City in late August, the MTA the people that oversee the bridges and the subways and everything else said that because of the loss of fares, tolls, and subsidies, that they're going to have to reduce subway and bus service by 40 percent next year unless they got a $12 billion federal bailout. I don't know if that number is the right number, or if they're crying wolf. But they haven't been collecting—they only just started collecting fares and going to New York City a few weeks ago. And ridership was down you know, for months by 90%. So, the impact on whether it is on firefighters, it's on teachers, it's on keeping local hospitals open people have to be feeling this pain. And so there are two things. One is, you say they have to balance the budget and are we going to see states and localities going under or are they just going to strip themselves? There's so many services, and does that lead to a national depression anyway? Or is there something else that's magically keeping the economy going that it bears no relationship to what's going on in people's own hometowns?

ALDEN: That's a big complicated question, to which there are a lot of dimensions. So let's start at the level of massive regional inequalities. I mean, if the journalists on this call do not already take advantage of the work that, apologies for this Irina, that Brookings Metropolitan Policy Program is doing the work, to give CFR credit, my former research associate, Rob Maxim, is now doing work at Brookings on this project. It’s this incredible wealth of data on regional inequalities in the United States, I mean, the big, particularly tech-enabled cities in the United States are doing very well, right. I mean, Seattle, for all of the political unrest, the economy is booming. You look at Amazon, you look at Microsoft, these companies are doing tremendously well, you wouldn't know that there was any kind of economic downturn from the way these cities are performing. That's part of why the markets doing so well, so much of the market is driven by the companies in these, these very successful tech-enabled cities.

The rest of the country, you know, a lot of smaller towns and cities around the country have struggled much more. This is not a new story, this is a two decade long story and Mark Muro’s work and Amy Liu and others at Brookings has really charted this out very well, I would encourage people to have a look at it, because one of the nice things they do is, you know, they collect data that goes down to kind of every small municipality across the country. So there's something in your local area that you can draw on there, that's helpful. They are arguing, I think, persuasively that the pandemic is hitting the places that were already struggling much harder than it's hitting the more successful places. So that's kind of top line. It's a very, very uneven picture. It's hard to, it's why it's increasingly hard to make statements about the U.S. economy, because there are some very different U.S. economies, depending on where you're living.

On the state and local point, I mean, state government budgets are not, you know, big enough that in and of themselves they're going to make a huge difference to kind of top line economic growth. I think there are two significant consequences. One, a lot of these are good middle class jobs, you know, cops and firefighters and teachers and nurses and others. So you know, given that we're already facing a big unemployment problem, you see a lot of those people laid off as well, that's just a whole other big hit on top of what we've already experienced. And then the other will be, you know, a crunch on services. I mean, we're, you know, out here in the West we're in the middle of the worst wildfire season we've ever seen. And, you know, firefighters just utterly overwhelmed. I mean, I'm not sure you could have a firefighting force who is big enough to deal with what we're facing this summer. But obviously, the demands on firefighters, the demands on police, both the expectations of how they're supposed to do their job and, you know, I mean rising crime issues and a lot place huge demands on police. Teachers have never faced a more difficult time. So if you're seeing cutbacks in those areas, that's going to have big negative consequences on the quality of life in the states they're making deep cuts.

ROBBINS: Right. Now, I do want to talk about the global economy, which is, of course, your transcendent area as a well of expertise. But I want to turn it over to the people on the call and as Irina knows, I always have twenty more questions to ask. But well, let's throw it back to Irina, thank you.

FASKIANOS: Thank you both. So now we're going to go to all of you. If you click on the Participants icon at the bottom of your screen, raise your hand there or else if you're on a tablet, click on “More,” and you'll find the raise hand button there. Please tell us who you are and the news outlet that you're with to give us context. So we're going first to Rickey Bevington. And please accept the unmute prompt.

Q: Hi, there. Can you all hear me? Great, thanks so much for this. This is right on topic for me, I'm looking for economic stories in the Southeast. This is Rickey Bevington, I’m with Georgia Public Broadcasting in Atlanta. I'm wondering what industries you see actually pivoting successfully from this pandemic and maybe absorbing the shock and then actually really getting creative and innovative in a way that may actually create new industries of the future or forever positively change those industries. That's a big question, but we have a lot of Fortune 500’s in Atlanta, we have a huge agriculture industry, we've got a very busy port that actually saw a boost last month. So I'm just looking for any broad trends that come to mind, thank you.

ALDEN: Great, thank you. That's an excellent question. The port numbers I fear are probably going to be a blip. I mean, part of what we are seeing is the recovery from the collapse of trade in March, April, May, in the early stages of the pandemic. And now that we've got production capacity recovering, it's actually very high demand in the United States, some of that going back to the stimulus package and the relatively better economic recovery. So I'm not sure we're going to see those port numbers stay up. But you know, trade is likely to continue to be depressed for the rest of the year. And that's going to be a big issue for companies like UPS and FedEx.  I'm giving you a negative answer when you want it a positive one, but let me finish the thought anyway. UPS and FedEx I mean there's, you know, there's a lot of struggling in the delivery industry, in part because of the curbing of passenger flights of all sorts, because a lot of those packages actually travel on or near commercial passenger flights, as opposed to special flights specifically for those companies and for their delivery services. So we've seen costs rise somewhat in the package delivery sector. So I think they're going to struggle a bit to deal with that. I mean, in terms of innovation, I hate to point to Amazon, but I mean, Amazon is going gangbusters, right? They've announced they're going to hire 100,000 new people. They have been clearly the biggest single winners. I think, you know—

FASKIANOS: I think we lost him at right at the Amazon point. So we'll have to get him to pick up right there.

ROBBINS: We will do that, yes, absolutely. So, Irina, what other ideas and maybe we can ask the group what other topics they would like to see, while we're waiting for Ted to come back.

FASKIANOS: That's a great idea. People can raise their hand or put it in the chat. Because we are collecting ideas for the next session of what we want to cover. We also have two questions in queue. Let's see. So just you know, please do feel free to send us suggestions, speakers, any aspects that you want us to cover. And I'm seeing great, why don't we Maureen, can you open up Wayne Heilman’s line? Great. While you're getting Ted, that's great.

Q: Okay, I'm really a tale of two economies here. The struggling part is leisure and hospitality, mainly tourism and restaurants. Although hotel occupancy here is the highest in the nation because we're an outdoor recreation market other services are also struggling, that's call centers, we have a lot of those too. But the big benefit, beneficiaries are business and professional services, mainly scientific and technical. That's defense contractors, they have 500 openings here, which is a like an 8% increase, and 4,000 jobs added in the last year and 500 openings now. Huge job growth for a sector of about 50,000 people. And then the other growth coming back to Amazon, we have a four million square foot Amazon fulfillment and sorting center under construction here. So that’s going to provide some huge growth in the first half of 2021.

ROBBINS: Where are you?

Q: Colorado Springs.

ROBBINS: And so that's the good economy. What's the bad economy?

Q: Like I said, leisure and hospitality, which is tourism and hotels and restaurants and call centers, other services. You know, they don't need as many people on the call centers because they're not selling as much, although most call centers are operating remotely now.

ROBBINS: Good, that's really helpful.

ALDEN: Apologies for my temporary internet outage there. I am back I'm sorry about that.

ROBBINS: You were talking about Amazon? Being creative.

ALDEN: Yeah, just I mean, you know, everything associated with the digital online economy, I think is going to come out of this very well. I mean, they're doing well, somebody was mentioning, you know, and, you know, online educational services, of all types that are responding with a lot of creativity to this. So I think really what, you know, what the pandemic has done is to accelerate trends that that were already out there, which is that businesses that have transitioned well to the online environment are doing even better. I mean, Walmart, for instance, was smart enough to start making that transition some years ago and is doing quite well, through this despite the, you know, the challenges at the at the retail. And so I think, you know, that's not a surprise, but I think that's, that's what's happened this was going to continue.

FASKIANOS: Great. Wayne, I know you contributed your thoughts on what was happening in Colorado. But do you want to give us, do you have a specific question or comment for Ted?

Q: Okay, I can tell you that two things to look for in your markets. Amazon is building a ton of these delivery stations, which are about the size of a grocery store. But they're also building a lot of fulfillment centers, which are about twice the size of a regional mall. Now, be conscious that those employ twice as many robots as people. And but they still employ, the average Amazon delivery state or fulfillment center employs about 1,500 to 2,000 people. So they're huge operations. And highly automated. So look for those in your markets. Those are Amazon's trying to build out its infrastructure nationwide, and I think they're spending, what didn't they say 100 billion dollars on that, if I'm right, Edward?

ALDEN: I think that's right, I'd have to double check. But they are, you know, they're using this as an opportunity to expand an already dominant position. And I don't see anything getting in the way of that, quite honestly. I mean, in a different era, this would raise anti-competitive concerns. But I don't hear any conversation on that at all, really in Washington right now. I mean, the president doesn't like Jeff Bezos, but apart from that, I think the issue is not really on the table.

ROBBINS: Although, you know, when the pandemic started, and we all realized how dependent we were on Amazon, Amazon realized how, you know, the potential opportunity, the huge opportunity there was there was a reaction from workers who A, felt that they weren't being adequately protected, knew that they were frontline workers. And there was a lot of talk about job action and some limited job action. Did Amazon just weather that or did they adapt, or are they just in so transcendently powerful that these really aren't middle class jobs?

ALDEN: No I think yeah, I mean, I think so far they've mostly weathered it, as you say, there was a kind of, you know, brief swelling up of small protests but they actually fired one of the main organizers of those protests, there was no significant consequences for the company. That is an issue I actually think will come back, particularly if we have a democratic administration. Obviously, you know, the position in the party for raising the minimum wage nationally I think is much more central to Biden's campaign than it was to the Democrats in the past. That's a piece I think Amazon will be under a lot of pressure over. I mean, it's employing a larger and larger share of the US workforce. The question of what those you know, distribution center, fulfillment center workers are getting paid and the working conditions that they're offering, I think that's going to become a bigger and bigger issue.

FASKIANOS: Great, let's go next, Amy Rivers, please. And tell us who you work for.

Q: Yeah, hi, I work for the Courier in Waterloo, Iowa. I've done a couple of these stories on, you know, businesses, especially small businesses, and how they're weathering the pandemic. But I was wondering more, like the larger industries, you know, our hospitals or universities and even our local governments, what do you see is that the canaries in the coal mine for when we should be looking as journalists for when they're struggling?

ALDEN: That's a really good question. Can I ask you just quickly before I answer your question, what you've seen in terms of the smaller businesses and how they're weathering it, if you could just share that. And then I'll give you my thoughts on the larger ones.

Q: I talked to several categories of businesses that had to be shut down. So here in Iowa, we did have a partial shutdown of all restaurants for a while, so that really affected people. And then some of them decided to come back online, and some of them didn't. I just talked to them about why they decided to do that. And a lot of people are sort of  split along partisan lines, you know, on that. They're seeing a lot of their customers either not wanting to wear masks or really wanting to wear masks to come back. So they're sort of making that decision on the fly and they don't know what's happening. So it’s really interesting.

ALDEN:  Yeah, very, very much. I mean, you know, I think with the larger companies again, it's hard to generalize. I mean, one of the one of the things that the larger companies have going for them is that they can weather, you know, long downturns in business. If you look at, you know, the airlines are managing to cope despite a severe drop off in passengers. They were recipients of significant federal aid which helped them through that. Live Nation, which does concerts, I mean, there's very little happening for Live Nation at all and yet it seems to have the resources to weather this. So a lot of this, I think, is going to depend on the duration of the downturn. So, you know, if we begin to see in the next few month’s signs of a double dip recession, where the economy, rather than continuing to recover the fairly good pace it has been, starts to slow, then I think it would really be worth looking into the situations of the larger companies. Because I don't think that many of them are in a position where they're going to weather a double dip recession very well, unless there's a whole new round of assistance from Washington. So I actually think this fall is going to be is going to be critical. I think if the, you know, if the economy continues to climb out of the hole the pace it has been, I think most of the larger companies will get through this just fine. I think if we see a second significant slowdown, then I think that's when you're going to see the crunch happen.

ROBBINS: And the double dip recession will be driven, if it were to happen, and let us hope more by a return of the virus, how much how important is this is another round of stimulus and certainly the extension of federal support for unemployment?

ALDEN: I mean, I think it's almost certainly critical, because I think, you know, what we're seeing —economic numbers always have a lag is as you know, Carla, so what we're seeing reported is the relatively good news coming out of July and August. And that was, you know, that was driven in part, I mean, I don't want to overstate it, but certainly driven in part by the fact the federal government's putting a lot of money in people's pockets. And that has stopped, there's some still with the, you know, the sort of partial top up the administration managed to maneuver by moving some money around in the budget. But that aid is really gone now and I think we're going to start to see the effect of that into the fall. The part of the economy that's still very confusing to me and a lot of other people is, is how much you can continue to prop things up, basically, on the on the spending of people at the higher end. I mean, people who are working, thanks Wayne. Yeah, I mean, it's, you know, we're seeing a lot of these programs, just, you know, running their limits right now.

You know, the people at the higher end, those who can work remotely and face at work kind of in that category, are still doing pretty well. And so, you know, that's again one of the explanations of why, you know, the tech companies are doing so well, because there's huge demand for their products, for companies that have got a lot of workers working remotely now. And so, you know, there's a whole economy there that's in some way a little bit disconnected from the situations of, you know, half or more of the country. And so, I don't have a crystal ball and exactly how that plays out in the fall. I think the tech companies are still going to do well, I think the people working remotely are going to do fine, but I think those who got hit hardest at the beginning are about to get hit again. And I mean, we can say with absolute confidence that that's going to hurt their lives and their towns and their cities. The effect on the larger economy in the aggregate, I don't have a great prediction on that.

FASKIANOS: Let's go to Lori Valigra.

OPERATOR: All right. Looks like we're having some technical difficulties if you could live chat your question?

FASKIANOS: All right. Let's go to Jerry DiColo. And Laurie, please chat your question so we can take it. We could not hear you.

Q: Hi, everybody. Thanks for holding this. My name is Jerry DiColo. I am at the Times Picayune in New Orleans. My question is related to you know, something we've all a lot of us been talking about, which is the accelerating trends to remote work and video conferencing that we've seen. New Orleans is incredibly tourism-dependent but outside of tourism and people taking trips and coming down here, it's also very dependent on business, travel and corporate events and filling our convention center. My question is on that end, have things, what you could guess at what the end state looks like in terms of — Do conferences and events come back? Do big corporations say this is an expense that we really didn't need, that was more of a luxury that allowed people to go take a free ticket to New Orleans or wherever they were going and say, well, we're doing business fine otherwise? Or does it become more like a luxury good where, you know, companies that, you know, are flush with cash can do this. And so they sort of start to return and do it. I just love to get your sense of how corporations might, how big corporations might be thinking about this, and what that end state might look like. Thank you.

ALDEN: That's a great question. So I think, you know, every major corporation right now is trying to take a careful look at its productivity during the shutdown. What has remote work meant for the performance of its employees, and its bottom line? And they're reaching very different, I'm going to go directly into the business travel, but they're reaching very different conclusions. I mean, if you look in, you know, particularly the Bay Area, tech companies, they all seem extremely comfortable with remote work. I mean, there's some exceptions, you know, some of the software engineers are going to return and work out of office situations because of the benefits of collaboration. But you know, Facebook and Twitter, and a whole bunch of others who basically told employees, you know, you can work at home, you know, for the foreseeable future. JP Morgan, you know, going to the other coast, has announced that it wants to bring a lot of its employees back into the office in New York, that they have seen fall offs in productivity, particularly kind of Monday- Friday among younger workers can't figure out why that might be. But they're urging more of their people to come back home.

And so I think that relates directly to the business travel question, because I think every company is trying to make an assessment of how much the face to face interaction matters in terms of their bottom line. And if they determine that it does, then I think we'll see a lot of the business travel conventions, everything else, recover. My guess is, this going to be an unsatisfying answer, but my guess is, it'll be somewhere in between. I think what they will discover is that a fair bit of business travel is probably unnecessary; that you can do, you know, things 95% as well, virtually as you can do them face to face. And so it will become more a question of, you know, the assumption, and a lot of companies and this is true in our organization, Irina, to be fair, that assumption, a lot of companies was travel's an integral part of what we do and the threshold for saying I need to get on a plane and go meet somebody was very, very low. I think that was the same with a lot of companies, you know, business conventions, which part of the way they did things business travel was routine. I think increasingly, companies are going to need justifications, managers are going to have to say this is something I critically need to do face to face, this is a meeting that's going to produce these kinds of returns, this convention has this value in terms of our future business, and then having once you've got people, the top of the company demanding that what we're going to discover is that business travel is curved fairly significantly, because a lot of what was done face to face can be done remotely.

I think, you know, it's hard to overestimate the technological changes that we are seeing, I mean, I do a thought experiment sometimes of this pandemic and ten years ago, in the infancy of a lot of these technologies, you know, I mean, we wouldn't be able to do any of this. And I think what we're discovering is all this stuff's on fast forward now. So the remote capabilities are going to get better and better and better. And, and that's, you know, if you look into what's going to happen with the coming of 5G and artificial intelligence and virtual reality, it's not even just meetings that we're able to do remotely. More and more actual physical work, you'll have people directing from abroad and operating robots at remote locations, and so I think, generally, I think business related travel is in for a long term secular decline, which is not greater New Orleans.

FASKIANOS: Right, but Ted, there will still be a huge inequity with those rural communities that don't have 5G, don't have access and of course, you know, people that can't afford the technology. So the disparity is going to widen.

ALDEN: I know, I agree. And, you know, if I mean, there are, you know, so many urgent national priorities right now, but very near the top of the list, it seems to me is, you know, the rollout of universal high speed broadband, there's a lot of parts of the country that still don't have good access and subsidies to make that affordable to everyone. I mean, you see in the educational context, right? I mean if you don't have access, and I see this with some of my students, if you don't have access to high speed internet and a laptop, then you're not getting educated. I mean, that's, that's an enormous national problem. So I agree, and I think it needs to be addressed urgently.

FASKIANOS: So Laurie has chatted her question, which is great. She's worked with the Bangor Daily News in Maine. How much might new types of businesses to help offset the declines of other industries like tourism and retail, for example, Maine legal recreational marijuana sales will start on October 9, could that help the economy to any significant degree?

ALDEN: I think, you know, unfortunately marijuana sales are kind of like gambling, you know, they tend to, its local money, right. And so, what places like Maine need is ways to bring in outside money, either selling products to the rest of country and abroad that brings in outside wealth or, you know, people coming as tourists or otherwise investing in the state. You know, marijuana just kind of takes money out of the pockets of people locally, so I don't think it drives economic growth in any significant way, though, it'll certainly create some new small businesses. I think the most interesting possibility for a lot of a lot of smaller places is in this remote work, right? As more and more companies have embraced remote work, geographical location doesn't matter as much as it once did, you know, you don't have to be in New York or in DC, or in Seattle, to do these jobs.

And so I think that the, you know, I've encouraged us here in Bellingham, where I live, to the local planners will take advantage of this opportunity. Bellingham is historically a resource town, we're about to lose our aluminum smelter just north that employs about 600 people at really good wages. I mean, you know, the timber industry is declining, a lot of the sort of traditional resource industries are going down, we've got a university, we've got a hospital, but clearly the economy of the future here is going to be wealthy tech refugees from Seattle who are going to come up and live here in a place like Maine. I think you have exactly that same sort of possibility, you know, you're within hailing distance of Boston, as we're within hailing distance of Seattle. And these places, I think, because they're, you know, generally less expensive, often very nice to live in, are going to become more and more attractive to tech refugees from the larger cities. So that may be I think, where some of the new opportunities arise.

And then of course, once you have people like that coming, then there's all sorts of local businesses that can start to take advantage of that because you've essentially got outside money coming in. At that point, you've got you know, money coming from Seattle or from Boston or elsewhere into the community. And so that's when you start to get small businesses of various sorts pop up to cater to the needs of the people who are moving to the area. I mean there are, you know, I understand sometimes their cultural tensions around that I see this here in Bellingham, you know, the Seattle tech people are not the aluminum workers, right? They're, you know, they're a certain number of tensions there. But I think you're going to see that play out in a lot of parts of the country and I think local planners are going to start to pivot to that as a way to capitalize on some of the trends we're seeing towards remote work.

FASKIANOS: Ted, Frank Zufall put something in the chat, which I think you should address since you're Canadian.

ALDEN: Well, American growing up in—

FASKIANOS: Right, American growing up in Canada and you're right on the border there so maybe you can address the fishing industry and what not. If you see that chat there.

ALDEN: Let me let me open it up. Sorry.

FASKIANOS: I'll read it to you then. On the other side of tourism for like New Orleans here in Northwest Wisconsin have seen a surge in tourism this summer as more people travel regionally and spend dollars regionally versus long distance destinations or overseas. Even the fishing has benefit as Canada close the border to the US and all those fishermen who might have gone there over the summer or coming to Northwest Wisconsin in other northern destinations.

ALDEN: That's, thank you for thank you for sharing that because you know you realize and all these things that that there are there are always two sides to these stories. I mean, where I am here you know, the places just across the border from Vancouver are absolutely reeling right you know, Blaine, Washington, Point Roberts Washington, which has literally been cut off from the rest of the country. Point Roberts is this funny little, you know, peninsula, which has got U.S. territory and then Canada and then the rest of the U.S. is here. Nobody from Point Roberts can get out of Point Roberts, their economy has tanked. The Blaine economy has tanked. All of the sort of regional economies that depended on Canadians coming down from the cities have really hurt but you're giving here a wonderful example of kind of the opposite, which is, you know, somewhat, you know, regions where tourists might have gone on over the border to holiday in Canada are now staying inside the United States.

And you're seeing, you know, you're seeing the tourism industry try to pivot on this right, you know, travel local and take advantage. So I, you know, I don't have any grand conclusion to draw from that, except that, you know, that there are always winners and losers in these things. And that's a really executive interesting example of, you know, a place where perhaps the border closure has benefited, you know, Wayne pointing out (inaudible) You know, I’ve traveled to Olympic National Park here recently and watching, you see a lot of people there, too. So I think a lot of people have done, you know, kind of camping vacations and, and hiking and other things. So it has moved, it's moved the dollars around some rather than just drying them up entirely.

FASKIANOS: Wayne has his hand raised. And then we can go back to Carla for other questions, while we wait for others to queue up.

Q: Question about the real estate market. Low interest rates, on the other hand, has forced up prices because people can afford to pay more. You combine that with historically low inventory of homes on the market. Is that eroding some of the advantage of these suburban and urban areas?

ALDEN: I mean, yes, you have not seen the sort of weakness in real estate that some people thought I partly again, it's kind of working out of home. So suddenly, people want larger houses, right, that have got workspaces in them. And as you say that historically low interest rates, I mean, the answer is probably, you know, the farther away you go from the big cities, the more affordable the real estate is, even if prices are going up in those places, right? I mean, prices have gone up where I'm living substantially, it's still a third of the cost of living in Seattle. And I think you see that in a lot of other areas. So relatively speaking, I think those advantages are there. Even if we haven't actually seen a real weakness in the in the real estate market. Again, one of the kind of interesting things out of this, and I think, you know, a lot of that has to do with historically low interest rates that we see,

Q: Although it's hitting the low wage workers the hardest in terms of apartment rents and things like that. The rent prices are going up two to three times the rate of wages.

ALDEN: Yep, no question. Yeah. I mean, you know, almost across the board in this, we've seen low wage workers take the brunt of this. Both in terms of, you know, their wages and job security and also, of course, in health terms, right? I mean, you know, work that you have to do face to face, which is true for almost all service work obviously for a lot of, you know, a lot of meatpacking and other kinds of jobs, those are the ones where people are taking the highest, the highest risks. You know, there was some of the early reporting on the pandemic was, oh, it'll be a great equalizer because everybody is vulnerable. But that's, of course, not at all what we've seen. Tt has exacerbated, already severe underlying inequality.

ROBBINS: So we're going into debate season. So allegedly, we're going to actually discuss some substance in politics, we'll see. And you noted in a very good piece in Foreign Policy recently, that when President Trump signed an executive order requiring federal agencies to purchase essential drugs and equip equipment in the United States only, he said, quote, we must never be reliant on a foreign nation for America's medical or other needs, end quote. So here's the question, and I think we're gonna hear a lot more of this in the political debates unfolding, which is buy American buy at home. Look what happened when we were dependent on foreign supply chains. And I think, interestingly enough, I'm not sure you're gonna get all that much pushback from the Democrats who have been traditionally, yeah, more than the Republicans, not the Trump Republicans, you know, traditionally, you know, the defenders of American produced goods. Why not? Why is it not the lesson from this pent up anger that we should control our borders more vigilantly going forward and produce our most basic needs at home? You know, I know that you are a globalist, I'm a globalist. But, you know, in this political debate A, who's going to push back and B, other than Ted Alden, you know, make the argument on the other side?

ALDEN: Yeah, I mean, I think you're right. I don't think you're going to see a lot of pushback. If you look at Biden's economic plan, it strikes many of the same notes as Trump's in terms of ramping up American capacity. I mean, to be fair, I think there are areas where U.S. capacities gotten weaker than it should be. And I, you know, I think some of these medical equipment, pharmaceutical areas, the country definitely needs to take a look at and make sure that we are prepared for crisis situations of one sort or another. And one of the problems of, you know, make it all at home solves, I mean, there are two problems. One is just cost, it's more expensive, in many cases to make this stuff at home. But the other is just, you know, it doesn't actually necessarily provide you with security of supply.

I mean, remember what took place in the pandemic here, which was a broad shut down of the economy, including a lot of the places that, you know, would produce these kinds of goods. And so the fact that you produce everything domestically, I mean, say, you know, we have a, you know, massive hurricane, we're seeing more and more of those that wipes out significant production capacity, or an earthquake or a pandemic, that forces a shutdown. Making it in America doesn't necessarily provide you with the resilience you want. That's not to say there doesn't need to be some rebalancing, I think there does, I think global supply chains became overextended. But you can easily go too far the other way. So that's, that's one concern.

Second concern, as I mentioned, is cost. We will we will pay for this as consumers and that may be a reasonable political judgment, that that's worth it, that we're prepared to pay higher prices for a little more security and assurance. The third issue, which I think is going to be the most, you know, this is more of a sort of DC issue, what I think is gonna be really interesting is, what are we willing to pay for it in terms of subsidies, right? Because these things are not going to happen without massive government incentives. I mean, the semiconductor industry to take an example this is the right now a lot of the, you know, debate vis-à-vis the United States and China is about the security of technologies. We've already kind of banned Huawei from the United States, which is going to slow the rollout of 5G, which we were talking about earlier, you know, you're reporting them and probably been following the TikTok Microsoft Oracle debacle. And so you know, the United States is moving to try to decouple itself from China technologically.

A huge area of concern here is semiconductor production. A lot of our semiconductors, even though they're designed in the United States, buy companies like Qualcomm and Intel and others, a lot of them are fabricated abroad. And so there's this big push to establish new semiconductor fabrication plants here in the United States. Those are enormously expensive enterprises, billions of dollars to set one of those up. Semiconductor industry came out, you know, yesterday, or maybe it was this morning saying, you know, we need at least $25 billion from the government to begin building new fab capacity here in the United States. Well, that's $25 billion that's not going into education, that's not going into roads, that's not going into health care, a bunch of other areas.

You've seen the same thing in the pharmaceutical area. I mean, some of the people on the call probably followed the sort of laughable debacle that Peter Navarro exercise, you know. Peter Navarro carried out vis-à-vis Kodak, right? The Kodak was going to be revived as a producer of precursors for drugs, for pharmaceuticals. And, you know, the government was going to give them money was a $760 million loan to make this transition and Kodak stock soared. Well, it turned out the insiders and Kodak were making out like bandits from this announcement that they knew was coming in, the whole thing seems to have collapsed. So you get, you know, when you're pumping government money into trying to get companies to do what they would otherwise not do for their own bottom line reasons, you have a lot of problems, both in terms of expenditures of tax payers money and cronyism. And there are gonna be lots of opportunities for good reporting of money that gets misused under the umbrella of oh, let's reassure production.

ROBBINS: So would you expect that sort of industrial policy to come in the recovery whether a Republican wins or a Democrat wins the next administration? Once we begin to crawl out, I mean, if you could just talk a little bit about sort of what the crawl out is going to look like and what it's going to take to rebuild the economy, beyond just getting a vaccine?

ALDEN: I mean, that's, that's a huge question. There are a whole bunch of dimensions. But I do think, you know, the narrow question of where maybe the election doesn't matter that much. I think the United States are moving much more in the direction of industrial policy, and a lot of that could be good. I mean, I think there are areas where we have really needed one. But there are very few differences between the Biden platform and the Trump platform such as it is, on the importance of reshoring production, on the importance of using by America laws vigorously. Keep in mind, of course, that when we use by America laws, other countries are going to do the same, you know, it's going to be by Canadian laws and by European laws and other things. So we're, you know, our companies are going to are going to lose on that side of the equation. But there's a, there's a real sort of inter party consensus on this. It's a rare area of bipartisan consensus. So I think, I think, regardless of the outcome, we're going to see a lot more of these initiatives.

ROBBINS: So back to the earlier question, which was the first question, which is, where do we look at, for what industries could be winners or at least early, you know, early crawling out of ooze possibilities here, for an industrial policy, for reshoring? If I'm looking in my town, is it going to be the local pharmaceutical manufacturers? Is it gonna be medical equipment manufacturers? Where is it, if you had to bet, where are the subsidies going to go and the reshoring possibilities going to be focused in the short term or in the near term in the medium term?

ALDEN: Yeah, I mean, I think we kind of know what the list is. And of course, you know, Carla, you know how Washington operates, there are lobbyists right now who are busy working to try to get their industries added to the list. But the list at the moment, I think is clearly pharmaceuticals, that's going to be a big one. The United States is heavily dependent on China and sort of, by extension, India, where a lot of the precursor chemicals are made for our critical pharmaceutical supplies. So I think that's very near the top of the list setting, you know, medical protective equipment, ventilators, all that stuff, I think that's on the list. As I say, semiconductors, they'll probably be other elements of the tech economy, semiconductors is already out there actively being discussed. The United States I think is going to try pretty clearly through subsidies to find a way to create new competitors in 5G and in the rollout of 5G infrastructure. We don't have a company in that space. Cisco kind of moved out of it some years ago. So you got Ericsson and Nokia and Europe and Huawei in China, which has now been banned from the United States and for many other countries.

I mean, to be to be clear, we're not we're not just banning Huawei, we're killing Huawei. The United States has choked off sales of semiconductors to Huawei, which is strangling the company, and is going to be a source of enormous tension between the United States and China because Huawei is their flagship corporate success. I mean, there are others like Tencent and others, but Huawei is very much at the top of that list. So I think, you know, there are going to be various subsidies that go into both, you know, creating competitors in the 5G space, and then rolling it out, because 5G is the enabling technology for the future economy. Somebody mentioned renewable energy, that will be clearly, that'll be more of a political thing. Like I think those four that I list is going to happen Democrat or Republican. Renewable energy I think will be much more of a democratic thing, I mean, I don't see any waning of President Trump's enthusiasm for fossil fuels. So I don't see heavy subsidies for renewable energy in a Donald Trump administration. In a Biden ministration, yeah, I think that's another area clearly where we will see significant subsidies.

ROBBINS: Other questions, or I can go on, I can continue to torture Ted.

ALDEN: Everybody’s staying on the call. So they must be good questions.

FASKIANOS: Kala West had just mentioned, we should cover homelessness in the pandemic and we can think about how we do that. But I don't know if you want to say a few words about that, and then Carla, if you have another question, which I'm sure you have many, we’ll go back to you.

ALDEN: Yeah, I mean, I'm not sure I have any, you know, special insights on the on the question of homelessness, but I think  it's going to get worse, right? I mean, we had, you know, eviction moratorium in various places. And Wayne mentioned rising rents in a lot of places I think the, I think the problem is going to multiply and, you know, our services for the homeless are hopelessly inadequate already. So I expected that that problem is only going to grow. It's pretty prominent here, where I live, you know, any place on the West Coast with a benign climate tends to tends to attract a lot of people who don't have other places to live. So I see it, you know, just anecdotally see it growing here, and I think it's going to grow elsewhere, too.

ROBBINS: So if we're turning around, somewhat, cut off from the rest of the world. And you wrote a book, which had a title that suggested that we were being left behind and other people were doing better. Compare us to the rest of the world. I mean, obviously, our COVID numbers are terrible. Our economy is doing better certainly than the Brits and other people. But what does this tell us about when, you know, the virus has beaten back about our competitive position globally? And do we have to worry about that? Or is the lesson here that we shouldn't be worrying about our global position anyway because we're such a big economy that we seem to be able to drag ourselves out anyway?

ALDEN: Yeah, I mean, that's another great question, Carla, to which I do not have an easy answer. I mean, we're potentially at an inflection point, right? And, you know, one possibility is that we make adjustments, you know, I talked about failure to adjust that we adjust and adjusting would be recognizing that we have some enormous competitive advantages as an economy and the quality of our universities, the quality of our top companies, I mean, those, those advantages have not really waned significantly. And we take advantage of those and that that does, I believe mean we still need access to global markets, I don't think we can cut the Chinese off entirely and succeed, we've got to figure out ways to be able to keep doing business with them. But we tackle this huge and growing list of problems at home, you know, healthcare being the top of the list, but infrastructure and, you know, a whole bunch of other issues that that we've known for years we need to be dealing with. So that would be kind of the positive outcome for, you know, my value judgment positive outcome.

The other possibility, though, is I think we move, you know, much more in a 1920s and 1930s style direction. I think, you know, the argument is, that we're big enough we can go it alone is very attractive to a lot of people, kind of makes intuitive sense even though, you know, if you look at growth, which is what fuels the economy, you know, that's all taking place in the developing world, and China and India and other places. I mean, if U.S. companies are forced to just deal with the U.S. market, then I think their competitiveness is going to erode significantly, because the market isn't growing fast enough to sustain the kind of innovation and competitiveness that we need to stay on the top. But I mean, we are in this moment, where come home America arguments of all sorts, I mean, you do national security stuff, so you're paying attention to it on that front, feel free to talk about that. But come home America arguments of all sorts have a lot of resonance.

I mean, this is, you know, I say this with a little bit of caution, but I'll say it anyway, I guess I wrote it in another Foreign Policy article. I mean, we're in a kind of tribalist moment and a lot of ways it's not even, it's not even just national, right? I mean, the pandemic is forced us all into narrower and narrower circles, you know, even states requiring quarantines on travelers from other states; when we're scared, we tend to turn inward, that's just a very kind of human thing to do. You know, you gather a smaller and smaller group that where you feel safe, and you try to build walls around all that uncertainty. Well, that's the moment that we're in right now. And we have a leadership, I think that is really accelerating those tendencies. So yeah, I think both of those directions are possible, I don't know which way we're gonna go as a country. I know which way I hope we go.

ROBBINS: Can we end on a more hopeful note? We were hopeful because we know there's some great journalism out there. And we look forward to, send us your stories that you do in your local communities, both, you know, both the stories of companies and governments that are struggling, but also innovation that's out there. And we'll share them around and I will turn it over to Irina now because we do end on time, because we know everybody's got to go back to work. So thank you, Ted. This has been great. It’s lovely to see you again.

ALDEN: Thank you so much Carla, thanks to everyone on the webinar.

ROBBINS: And back to Irina.

FASKIANOS: Yes, and thank you both Ted and Carla, and as Carla said, we are going to circulate the recording of this and transcript for you to share with you and your colleagues to review again. I encourage you to follow Carla on Twitter @RobbinsCarla and Ted @EdwardAlden. And of course, please go to CFR.org, ForeignAffairs.com, and ThinkGlobalHealth.org for resources, the latest analysis on the pandemic, and we have a whole Election 2020 hub as well. Send us your suggestions to localjournalists@cfr.org. And thank you all for being with us and we will be reconvening in a couple of weeks.

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