Why the Coronavirus Pandemic Wasn’t a Black Swan Event — and Why We Must Prepare for More Outbreaks

Adam Tooze Gary Doak/eyevine/Redux

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ADAM TOOZE

Professor of History, Columbia UniversityNew York

Adam Tooze, 53, holds the Shelby Cullom Davis chair of History at Columbia University and serves as Director of the European Institute. He is the author of numerous books, the most recent of which is Crashed: How a Decade of Financial Crises Changed the World. He is currently working on Shutdown: The Global Crises of 2020, which will come out in 2021, and Carbon, which will be published in 2023.

Barron’s: What are the big investment opportunities coming out of this pandemic?

Adam Tooze: The only thing we know, coming out of this, is the tech story: Without the marvels of the [tech] platforms, it’s unclear how we could have coped with this. The question is whether the power conveyed by the sheer obviousness of that fact triggers a backlash in terms of antitrust and regulation. We have seen this in Europe and China already.

What should be the main priorities of the incoming Biden administration?

There are so many. The most evident one is to control the epidemic and then secure an exit from the enormous economic hit that the U.S. has suffered. It’s the only thing that the Biden administration in the short run has to get a grip on. But after that, if the coronavirus is a consequence of the crisis of the Anthropocene [unofficially, the current geological age, in which human activity has most affected the climate and geology], then we need to consider that climate change and dealing with that should be a top priority. What that entails depends on the political circumstances after January. It could be regulation, international diplomacy, and investment. I’m tempted to say that the main problems facing the U.S. are actually problems of the political system rather than policy challenges. Most governments outside the U.S. think that the U.S. is no longer a credible actor.

Before the pandemic hit, you were working on a book about the changing relationship between humanity and the environment, and the consequences for the economy and society. As far as we know, the virus emerged from people eating wild animals. How does that fit into your thinking?

The thing that 2020 forces us to come to terms with is that this wasn’t a black swan. This kind of pandemic was widely and insistently and repeatedly predicted. In fact, what people had predicted was worse than the coronavirus. Since the early 1970s, scientists and social scientists have come to the view that humanity’s relationship with the natural world has become unbalanced. One facet of that is climate change. Another is the concern about “emerging infectious diseases,” which is what you get when more people go into areas that hadn’t previously had humans and start interacting with animals and catching new viruses. The classic cases are Ebola and AIDS, but you can also look at the new strains of flu coming from birds and pigs.

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At the same time, the transmission of diseases has been greatly accelerated by technology. It was in the late 1960s that people started worrying about “Old Plagues in the Jet Age.” The fear wasn’t about new diseases, but that an outbreak of an old disease somewhere in the world would end up spreading across the globe. Those places were generally very poor, so limited access to transportation used to protect against that, but nowadays you can have people getting infected in Wuhan and taking the disease to Europe and North America in under 24 hours. People knew about all these dangers, and there has been increasingly elaborate modeling about the risk of a catastrophe. What we’ve seen in 2020 was that the risk management failed.

We could rewrite the history of the past 20 years as a series of near misses. In 2004-05, there was a danger of a strain of bird flu that would have been as infectious as Covid but with 30% mortality rates. The U.S. government at the time responded with a lot of research spending. But then it stopped. The crazy thing is that the amounts of money you would need to spend are so low. Funding all of the known vaccine precursors in the world to Stage 3 would only cost $130 billion, which is peanuts compared with the amount of value lost to the pandemic. There is a huge disproportion between the scale of the problem and what we spend.

That’s actually great news, because it means we can easily fund a massive war chest of biotech, pharmaceuticals, and such. It’s a bright future for humanity because we will need lots of people working in advanced research. A lot of people criticize how much the U.S. spends on health care because it’s wasteful, but in general, it seems like a good idea to spend a lot on taking care of people.

A joke I’ve heard, which has a germ of truth, is that we accidentally discovered how to eliminate recessions with the Cares Act. Just give everyone enough money, and surprisingly, things will be OK. Are we going to learn from that experience how the government should respond to economic downturns?

I’m trying to write a book about 2020, and that’s the basic lesson. We have discovered some pretty fundamental things about how to do macro policy. America stumbled into how to avoid recessions—not just that, but how to avoid poverty, if you want to! The question is what you want to do with that knowledge. This is one of my big themes: the 50-year journey of realizing the power of a fiat money system. Initially, the response to the 1970s led to the shift toward inflation control, independent central banks, the push for austerity, and so forth. 2020 is the next great chapter in what is fundamentally a political question. It’s not a technical question about how we do it, but whether we should and who we should do it for. It’s a starkly political question, which may not be easy for a democracy to deal with.

It’s as challenging for the center-left as for the center-right. When Jerome Powell and AOC [Rep. Alexandria Ocasio-Cortez, D., N.Y.] agree about the power of fiat money creation and the irrelevancy of various constraints, then the political choices become a lot more naked. Now, if we allow Americans to be poor, it’s a choice. If we can confer enough income on people that they can live through a crisis like this, despite high unemployment, then it’s a choice when we don’t do it. Money and finance aren’t the constraining forces we had thought they were. Budgets, per se, aren’t paramount. We should think of them as legal conventions and distributions of power structures. None of them are binding if you want to maximize employment. What appears to be economic necessities are often just the consequences of pre-existing institutional power structures. We may choose to forget that knowledge, as we did after 2008 with the push to austerity, but it’s not necessary. You will always come back to the political.

But let’s not be naive about what happens when we strip away budgetary constraints. If politics is now about whether we care whether other people live or die, politics get much more toxic. Assuming you know what side you’re on, do you know that you’ll win? Since that’s such a bitter and explosive argument, you limit debate by saying you only have so many pennies to spend. This was why the post–World War II conservative liberals, people such as Friedrich Hayek, wanted to limit what governments could do by imposing essentially imaginary financial constraints. They may have been critical of the British welfare state, but what they were really afraid of was Hitler. 2020 has exposed the complexities of that. America is not a society organized to keep people alive efficiently, even if we can make sure that nobody goes bankrupt.

Finally, where would you like to go once the pandemic is over and it’s safe to travel again?

I crave Europe. I realized that my life in the U.S. is conditional on my ability to go places. [Tooze is British and grew up in West Germany.] I miss Europe. I miss all of it.

Thank you.

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Write to Matthew C. Klein at matthew.klein@barrons.com