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COVID vs. Re-Open: Business Experts Debate the Pros and Cons in Live Press Event

Experts from institutions including Stanford, Darden, and Johns Hopkins will participate in an expert panel to debate the pros and cons of re-opening the economy under the COVID-19 pandemic.

Reporters will be invited to ask questions right at the start of the event. No boring powerpoints!

This 麻豆传媒 Live Event gives media an opportunity to speak directly to the experts in a discussion of unique angles to the COVID-19 pandemic and the effects on all aspects of daily life around the world. 

Who: 

1. , University of Maryland, Robert H. Smith School of Business.  Rust can speak about the impact on front-line service workers, and what that implies for opening up the economy.
2. - Associate Professor - Johns Hopkins Carey Business School. Rebucci is currently working on the pros and cons of controls on international capital flows, and methods to estimate macroeconomic models of financial crises. 
3. - Professor of Finance -Stanford Graduate School of Business.  Pleiderer can speak on the regulation of financial institutions.
4. TBA

When: April 29, 2020. 2PM EDT.

Where: 麻豆传媒 Live event space on Zoom -

This live event will also be recorded and transcribed for use by media and communicators after it is concluded.

The transcript of this expert panel is available below.

THOM: Welcome to this 麻豆传媒 Live Press Event, we have an expert panel of three business school professors who are going to be able to talk about this ongoing debate of whether or not to reopen the economy in light of the current pandemic and the progress of that crisis here in the United States and around the world. I want to introduce our professors here. We have Paul Pfleiderer who is from the Stanford University Graduate School of Business, we have Roland Rust from the University of Maryland School of Business and we have Alessandro Rebucci from the Johns Hopkins University Carey School of Business. I want to get straight into some questions. I’ll start here with Professor Rebucci; what comparisons have you seen as you’ve studied recently, mandatory versus voluntary restrictions and stay at home orders or social distancing? As we talk about reopening the economy, this is really the crux of the matter, whether people need to stay home or whether they can go out in public. What have you seen in terms of those behaviors by the public and what that means for the economy?

REBUCCI: We recently completed a study comparing China with a few other countries for which enough data were available and what we found is that China was able to accomplish a degree of isolation of the population which is extraordinary low by intervening very early, by intervening within the first week of the epidemic in the Hubei province, and imposing mandatory lockdowns which were monitored neighborhood by neighborhood. In contrast, what we’ve seen in the United States and some other countries is initially a more tentative approach, either by the liberal choice like in the United States, in part because mandating people to stay at home is fundamentally, if not inconstant, fundamentally difficult to implement in the United States, where individual freedom is one of the pillar and the foundation of economic and social interaction. In Europe perhaps more because of inability or limitation in implementation. In Italy, mandatory restrictions were implemented but compliance initially was very low. We see very different outcomes in the epidemic, the steepness of the curve has been much higher in these countries than in China. What does this imply for the reopening of the economy? It suggests that continuing to go with a fairly liberal approach to reopening is potentially dangerous because we know from history that there is a concrete risk to see a second wave of infection, potentially more virulent than the first one. Based on the experience of China, but also acknowledging that this type of western society are not suitable for the type of approach taken in China, more coordination would definitely be useful, coordinating at the level of different geographies and also, the idea that eliminating the uncertainty generated by the epidemic, by the medical dimension of the crisis, would contribute enormously to reassure businesses and households that it is sage to resume interaction for leisurely and business purposes. 

THOM: Now, do you see that certain sectors of the economy might make more sense to lift certain restrictions before others?

REBUCCI: Definitely, we have learned a lot since the beginning of the crisis. We learned that some jobs can be more easily executed without social interaction than others. We need to focus on those that are less venerable to transmit infection as the first to be liberalized. We need to be thoughtful also in the process by which we liberalize and at the same time, continue to provide support for those sectors that inevitability cannot remoted back home. A haircut cannot be delivered at home or nail polish or a massage and so on and so forth. For those sectors, restaurants, entertainment, movie theatres and so on and so forth for which is not possible to do smart social distancing, we need to compensate with support for the businesses and individuals. 

THOM: You mentioned a lot of the jobs where it’s impossible to do remotely, that helps me to segway perfectly to our next panelist, professor Rust at the University of Maryland Robert H. Smith School of Business. Professor Rust, you’ve studied the service economy and tell us how this has hit those types of jobs and help us to understand more about what are those types of jobs that may not be able to come back quite so quickly, especially those who are deemed essential, these people are the highest risk of communicating the disease. Tell us about what you understand there and what we should know?

RUST: Economist’s tend to think about the economy as being numbers on a computer screen but really the economy is people. What we are seeing right now is a lot of individual people and individual mom and pop service retail locations being completely hammered. For example, if somebody has a small retail store for example, chances are they have a relatively how margin for what they sell. Many of them do and they simply don’t have the financial capability to withstand a long period of time without any revenues. You have a lot of these people unable to continue really. I’ve seen projections for example that 70 percent of the restaurants are going to be out of business after this. The reason is that they tend to be low margin businesses and those people just don’t have the amount of money set aside to be able handle something like this. You have the PPP that is supposed to be supporting small businesses, but the truth of the matter is, that money has been very, very slow to actually happen. Many of the businesses that have actually succeeded in getting the money have been big businesses that had good relationships with big banks. The small businesses typically are nobody to a big bank.

THOM: You say the aid is not going to the right places?

RUST: The aid is not going to the right places. You’ve seen for example some very large chains, with Shake Shack being the most dramatic example. These were companies that really should have been able to support themselves, they should have been able to handle this themselves. There is no reason for small business money to be going to Shake Shack, I know that they returned it eventually, that is not something that should have happened.

THOM: When we look at those types of small businesses that are truly getting hammered by this, they’re often family owned, they work on small margins, what, if any of those types of businesses would be able to make certain adaptations to reopen while still implementing certain practices of social distancing so that it could be safe for them, while still allowing them to generate some revenue? Would those kinds of things just have too much cost or is it just not possible for some jobs? A haircut for example, you can’t do from remote

RUST: Right, you can’t put a plexiglass screen between the haircutter and the client, that doesn’t work really. It’s a huge problem. This is going to really, really hurt the retail sector. You were talking about how can they accommodate the social distancing, etc., if they don’t have enough money to open, they can’t accommodate the social distancing, they are out of business. Many of these companies will simply not reopen. Of course, the retail community in general has been declining for many years because of online buying and so while you have Amazon for example, that’s going to come out of this just great, the big retailers are going to even speed up their decline and their demise. 

THOM: Let me ask you also, if there was the opportunity for some sort of transformation about certain aspects of the economy, while some businesses you’re predicting would likely just not reopen, are there other areas that have an opportunity to grow and come out of this stronger?

RUST: Sure. The things that are going to have the most trouble are the ones that have a lot of direct personal contact. For example, sit down restaurants are in big, big, big trouble. Restaurants that focus on delivery like pizza restaurants, are probably going to be okay. For example a fine dining restaurant or a restaurant that packs the people in, for example a bar, they’re in big trouble for awhile because first, even if the President decides he’s going to open up everything, first of all the service personnel don’t necessarily want to come and the clients don’t want to come. If you don’t have a customer and somebody to serve the customer, well you don’t really have a business. 

THOM: Thank you for those thoughts’ professor Rust. I want to go next to Paul Pfleiderer here at Stanford. Paul, I want to ask you about decisions to reopen the economy. How do you think that those decisions ought to be weighed? What sort of local and regional polices or uniform national policies? Does a state by state policy work or is it all of us in it or not?

PFLEIDERER: To a great extent all of us are in it because the US economy obviously benefits from all kinds of transactions that occur across state borders. We specialize in California in certain agricultural products and wine, Detroit continues to manufacture cars. We’re all in the same boat but we’re also in different boats, the water is lapping us in different ways. The state boundaries, if you think about it are really quite arbitrary. If you look at the New York metropolitan area, obviously that encompasses Connecticut and New Jersey, potentially into Philadelphia area, these states need to coordinate and it’s quite obviously that New York City is very different in terms of some of the challenges it faces from upper state New York. Coordination is obviously going to be important. Out here in the west we see some attempts to coordinate with the governors, certainly here on the west coast, also Nevada and Colorado have joined it. There is a lot of coordination that needs to happen but at the same time, the challenges that are being faced say in New York City versus rural New York are going to be different, density is different. It’s very clear that one size does not fit all. Actually, let me just take this moment to reiterate some points that have been made here. First of all, the economy is about people and we really need to be focusing on people. Economics is about scarce resources and allocating those in the right way. In normal times of course we can rely on the market to do that fairly well. These are not normal times, a lot of decisions are having to be made and I just want to pick up on the theme that we’re allocating resources in ways that are not what should be happening, they’re quite wasteful, to the extent that big business is getting bailouts and support when they can get money from others and then the so called mom and pop stores or small retailers are at risk and the money is not getting to them. That’s a huge problem and is potentially going to change the complexion of the economy, move it more towards a concentrated economy, which I think a lot of us would argue is not right. But even more, what we obviously need and I’m not a medical expert by any stretch of the imagination but we need a lot more of our resources being directed to testing, contact tracing and really fighting that. I hesitate to use the word war but I think in some ways it is appropriate and we’re just taking marginal dollars from the tax payer and paying them out in ways that are not efficient. I’ll probably have more to say on that but I think that’s a theme that all three of us are saying in various ways. 

THOM: Thank you for that. I want to go a little bit further with some of that because and we’re getting some questions from the chat and we’ll get to those here in just a moment, as soon as I ask Paul this one other question. You raised the fact that people and lives are part of this equation and it’s maybe not a pleasant thing to describe it as equation because when you start weighing the value of some sector of the economy versus a group of people’s lives, that’s not a good comparison to be making in a lot of people’s minds? How does, first of all in your mind, an individual worker weigh the cost of continuing to be out of work versus taking the risk to go out and be part of reopening the economy? This argument of reopening the economy in general and the dichotomy that it sets up between safety and adherence to the medical expert’s recommendations versus livelihoods and jobs and businesses? How do we weigh those things in a reasonable way?

PFLEIDERER: I think that’s a really difficult question, partly because there is so much uncertainty and the information that you see, how lethal is this? That’s changing. How do you contact this disease? Are you safer if you’re 30 years old, than 40 or 50? All these things are really difficult for intelligent discussion makers to process and it obviously depends also on one’s risk diversion as well. There is not one answer to that. Some people are going to be more willing to take risk than others. I think the policy question, the public policy question is, we need to get as fast as we can but at the same time be prudent about doing it, to a situation where people aren’t having to confront those risks in such a perplexing way because the problem quite frankly is and I think it’s already been picked up on here, even if the government were to open up everything, you can go to bowling allies, you can go to restaurants, you can go anywhere you want, people aren’t going to necessarily go there unless they feel safe. We’ve got to get people to a point where there is a notion that I’m not taking a risk. How do we get there? Obviously, we have to fight this disease. How do we do that? The answer that I’m hearing loudly and clearly from the experts is, we need to do more testing, we need to put more money behind contact tracing, we need to go all out on that. We’re talking on the order of 200, 300 billion dollars, which is a large amount of money but just to put that in perspective, the economy is losing that by some calculation every month. We have a 934 billion defense budget. We spend upwards of two trillion dollars to fight the Iraq and Afghanistan wars and our economy is basically at great risk, we should be willing to allocate more to these medial necessities that somehow, we’re still not doing. I think that’s a travesty.

THOM: Thanks, Paul. I want to go to professor Rebucci and I have a question, I think this will be a good one for you but maybe all of our experts would like to weigh in on this, from Niv at the Hill. For states that are beginning to open up, even before there has been a level of testing that a lot of people think are needed or contact tracing, do you think that we can expect a significant economic benefit of them starting to reopen or is it in some ways futile in your opinion?

REBUCCI: For what I think my colleagues are sharing the view because people essentially are scared at the moment. Even if you open up, they don’t necessarily go to show up at the store, we seen that in China. The medial situation is way more under control, where the epidemic curve is definitely being flatten to the no risk zone, business is open but customers are not coming. This is exactly the calculation that Paul mentioned earlier. Individuals look at the risk of getting infected on the one hand, then they take into account what it costs to forgo wages or business opportunity and then they have their preferences that are also certainly [INAUDIBLE -- 0:19:14.3] or being on and about. Risk is still so elevated that individuals are not willing to take chances. That’s why I think a lot of thought needs to be going into how and when to reopened but there is the risk of fueling further spreading of the epidemic without necessarily large economic gains. 

THOM: Professor Rust, do you have thoughts about that question? Reopening businesses in places where there hasn’t been adequate testing, is there going to be a benefit to it or futile?

RUST: I think the easy answer is futile. I think that what we don’t realize is that things aren’t just going to pick up where they were, it’s impossible. The people who were working at those places are probably completely laid off, out of work, most of them, many of them and they’re not going to have an easy time and the customers likewise. Then you have the problem from the retail side, not only do the service not want to show up but the owners can’t even open the stores, they can’t even do it.

THOM: They just don’t have the payroll or what is it?

RUST: They don’t have the money; the money is gone. They still have to pay their rent, they have to pay all their creditors and were counting on that revenue coming in and it’s not coming in and so they are in deep, deep trouble. The other thing that I think is worth pointing out is, many of the people that are the service employees that are at the greatest risk are basically low paid people. They are low paid people; they may even be in the gig economy. They may have not very much that they really have, these are people on the edge in society. These people are in serious trouble and if the place that they were working doesn’t open back up, think about what’s going to happen to them. You end up with the unemployment rate being at great depression levels. My greatest concern is that we actually are entering a great depression.

THOM: Very interesting. I want to ask professor Pfleiderer your thoughts too about the benefits of this rushed reopening, is it likely to result in much or is that part of the reason why you’d recommend against?

PFLEIDERER: I probably recommend against it. Again, I’m certainly not an expert in understanding all the dimensions that go into this and I should pause here to say that I’m very glad that I’m not in the position of having to make decisions that are really difficult, having to really trade off life and death and economics. Those leaders in that position I hope are going to listen to all the experts and try to make the best decision that they can. I think again, I’m just going to repeat to some extent what’s been said. Opening up the door of a restaurant does not mean that people are going to come into that restaurant. They are only going to do so if they are fairly confident or quite confident that they’re going to be safe. I remember when we had an earthquake here as we do every once and while, back in 1989, earthquake in California, perhaps you remember from that earthquake in 1989 the hi-ways, some of them collapsed and I remember for about a year as I was driving along the hi-way, I would drive very carefully so if there was a slow up in traffic I would make sure that I wasn’t going to be caught under an overhang of a bridge. That of course is something I no longer do but it took me a year to get over that. I think we’re going to see the same thing. People are going to be, a least a number of people are going to be very shy about social contact. The worst thing to do is to open up things and not too much happens on the economy but then we see a big spike in the virus again and that means the next time we open it up again, it’s going to be even more difficult perhaps. It’s a matter of doing this in a measured way and building confidence. I think opening it too soon is going to run the risk of undermining confidence that consumers have. It has to be done judiciously.

THOM: For professor Rust we have a question in the chat from Matis at German Business Week, he asked me to go ahead and ask it for him. There has been news about laid off workers collecting more in unemployment than their wages were while they were employed. First question from Matis about this is, is this really a real problem and if so, what should be done?

RUST: I think it is a real problem. What it really comes down to is there are a lot of very low paid people that perhaps get part of their income through things like tips. For example, if somebody’s a waiter or a waitress at a restaurant, they’re making a relatively, a very low wage rate that’s actually lower than the minimum wage. They make their money off of tips. In situation like that, sure if you take a look at what money the company says they are paying them, it’s not what they are actually living on. It is a problem.

THOM: Thank you. I want to go to one of our media in attendance. We have Gail from CPA Practice Advisor Industry Magazine. Gail, if I can get your audio live. Please, go ahead and ask your question.

GAIL: This has all been pretty bleak. I’m wondering in any of panelists are seeing or anticipating any surprises that we might see in terms of businesses that are going to flourish or maybe are already flourishing as a result of the shut down and the eventual reopening?

THOM: Thank you, Gail. Any of the panelists, it’s kind of an open if any of you would like to take it? Go ahead professor Rust.

RUST: I totally agree with that. I guess I don’t have that much to add. I think it’s really true.

THOM: Any predictions or certain types of businesses that might be positioned to do quite well?

RUST: The delivery places are going to do really well. The online retailers are going to do really well. They are already doing really well. Even groceries are doing well amazingly enough because people have to eat. Yeah, there are going to be winners. The problem isn’t the winners. The problem is there are going to be a lot of losers. The people who are out of work because their retail location went out of business, they’re not going to contribute to the economy and they’re not going to hire people. You have a multiplier effect that’s going in the negative direction.

THOM: Thank you professor Rust. 

I’ll just add something to that, that’s obviously obvious. Companies like Zoom are going to do spectacular, that’s obviously. What’s interesting to think about is when the dust all settles, to what extent will you have business meetings, people getting on airplanes and flying from Philadelphia from San Francisco to go for a two-hour meeting when Zoom works pretty well and people have gotten use to it. It could be that we all have Zoom fatigue in the end and people are just really anxious to get on those airplanes and go. I think this could change some of the cultural norms and the way business is done but that’s obvious, I think. 

THOM: Some transformations are likely to happen. Professor Rebucci would you like to add?

REBUCCI: Along similar lines, one maybe not too valuable but one silver lining here is that because the crisis is so protracted, businesses will have to adapt. There will be innovation that are likely to survive past this particular period and the US economy, because of its flexibility, because it’s a ability innovate and adapt, is uniquely posed in the world economy to take the most advantage. This is I think more positive. We were asking earlier how certain businesses may evolve, the restaurant is the best example. We will go in the direction of a lot more meals prepared out to the home to consume at home and that will be presenting opportunity for new type of restoration businesses of all sorts. From the famous chef to the mama’s and papa’s that will start to deliver and the fact that this crisis is persisting, is giving people the opportunity to experiment and find business solution that will emerge in the post crisis environment. That I think will inevitability associated with a big lose in productivity, at least in the short to medium term but longer term, the US economy is best placed compared to any other place in the world to take advantage of this aspect. 

THOM: Very interesting. Thank you, professor. I want to go one of our media. We have Rick Seltzer from Inside Higher Ed; he has a question. Go head Rick.

RICK: Thanks everyone for doing this, really good conversation so far. At the risk of rerouting this to the specific sector that we cover and I apologize for that. There was some discussion about the risk of reopening the economy and if the virus were to spike, that having a longer-term negative impact. We are seeing some colleges and universities starting to make some kind of aggressive overtures towards reopening campuses in the fall, bringing students back. I wonder if that same thinking that was mentioned with restaurants would apply for the higher education sector or if there are other ramifications that you would talk about with reopening?

THOM: Professor Rust, go ahead.

RUST: I think it is like the restaurant sector. Higher education at the top levels, let’s say the top 50 schools, top 100 schools, something like that are basically very dependent upon on direct personal contact between the professors and the students and also the students with each other, that’s a major part of it as well. The problem is, here’s what I think is probably going to happen. First of all, the virus is not going to have gone away by fall, that will not have happened. It may have gone down in the summer but it will come back. That is what Anthony Fauci is saying, I think it’s absolutely correct. Now, think about it from the standpoint of the student or the prospective student. Are they going to want to come to school, to spend a year that they don’t get what they think they really deserve based on the tuition that they are paying? I think a lot of people are going to say, “Let’s take a year off. Let’s do something else for year and then let’s go back.” Now, from the standpoint of higher education, there is not just that problem and that would be bad enough. There is also the problem, for example, especially in state schools, the state governments are in terrible financial trouble now and all state universities are taking a huge hit and I know that there are a lot of private universities that are also take a huge hit. I know for example Johns Hopkins just up the road here has taken a huge hit financially. The economic problems combined with the behavioral problems of students not wanting to be here, I think those combined to be a very, very tough problem to solve. 

THOM: Thank you, professor Rust. Any of the other panelists want to weigh in on this for Rick?

PFLEIDERER: Right before joining this Zoom call I had a faculty meeting and discussing how we’re going to open up potentially the university or more specifically the School of Business here in the fall and what we can do and of course the nightmare for any college, any university is having students come and Roland is absolutely right, do they have the confidence come but if they do show up and then we have to send everyone home in October or November, that’s a problem that’s even worse than it is for a restaurant. You can open a restaurant and then maybe have to close it again, that’s really bad for the restaurant. For a University it’s even worse if you have to send all the students home. It’s a really difficult problem. Again, I think we’re getting to this very important notion of restoring confidence, people feeling safe, people feeling that there is not the uncertainty that we’re now experiencing, both health decisions and financial decisions, educational decisions. It’s a big problem.

THOM: Alessandro, did you have anything to add to that?

REBUCCI: Yeah, keeping with my earlier remark. In the specific case of higher education, it’s inevitable to think that the students will either spend a few more months in distant learning or maybe be forced to take a year gab, will ask themselves and the families, “Is it worth to spend $70,000 and go back to campus as it was before?” I don’t think higher education will remain what we have experienced in the past several years and not all of that change is for bad. There are a lot of problems with the system of higher education and perhaps this is the kind of shock that is shaking the system so badly that will force providers and the government and the users or higher education to rethink, demand a different service and that’s potentially in the very long term is good, in the very short term, lots of pain for the universities, a lot of pain for our teenagers that are applying for colleges and those that are already in college.

THOM: Professor Rebucci, I have a question that I think might be a good one for you if you followed the story. Sue Ambrose from the Dallas Morning 麻豆传媒 is on the call with us and she would like to know if you or any of the panelists have noted Texas announcing a phased reopening beginning May 1st, that’s this Friday and any thoughts that you have about that?

REBUCCI: Specifically, not but I would like to point out to one consideration. In the individual decision whether to get out of the home and interact for leisure or work purposes there are three key valuables. There is the wage, there is support from the government, if I stay home there is risk but there is also this attitude toward freedom and toward being on and about. Some of these decisions reflect this desire to be unrestricted and it’s perfectly understandable, it’s cultural, it is also politically tainted, there is research work showing that compliance with the state varies with affiliation, so it is understandable. We can take two different views. On the one hand we leave it to individuals and they chose what is best for them, that’s all fine but fundamental dimension here of the epidemic is the fact that our externality, when I go out I affect also other individuals that have not chosen and they do not have the same preferences. It’s understandable. We understand where these early initiatives are coming from but there are problematic from a social standpoint in my opinion. 

THOM: Professor Rust, any thoughts about Texas proposed May 1 reopening?

RUST: Yes, I’m quite concerned about it, just because the lack of adequate testing. If it’s opened up too soon and I think that with Texas being mostly a red state, there is perhaps even more of a concern that many people might simply take that as license to go start living life completely normal again. If they do that, then there is going to be a rebound and I’m really worried about that.

THOM: Paul, any thoughts about Texas proposed reopening?

PFLEIDERER: I just want to pick up on the notion of externalities. First of all, it could be a positive externality, we get to see an experiment being done and we get to see the outcome and that could be useful information for other states to figure out what to do. That’s a positive externality. The negative externality is that if it goes badly, which I think is certainly possible, then people lose even more confidence when states do try to open up when it’s safe to open up. Externalities are really important here. It’s not every person for themselves, not affecting others, it’s not every state for themselves and that’s why some coordination I think has to happen here. There needs to be some leadership thinking about how one state effects another, how people in one city effect people in the suburbs and so on and so forth. As American’s, we don’t like to necessarily be told what to do and that’s a problem, that’s a benefit in many cases but that could be a problem here because we could get some bad outcomes here. We’ll have to see how it plays out. 

THOM: This is touching obviously on some of the politics of this and the notion for a red state that is a distance from the more densely populated coastal areas that have had the spikes happen sooner in this crisis. To what extent do you think that there is a false sense of security, that it’s gone slowly to get to Texas, so therefore it might not be as bad of a situation and therefore reopening on Friday is probably okay? Professor Rust, what do you think about that?

RUST: I think that’s entirely true. There are some parts of the country that are not that affected yet but it’s more a fluke of how people mix within the country. For example, if there are not very many people traveling from North Dakota to China, then you’re not going to have a problem in North Dakota as quickly as you will let’s say in New York City. I think that’s the big thing. I would be very concerned. If you think about for example North Dakota, can you say that if you live in North Dakota you’re not going to get the flu? I don’t think you can say that. This is going to be everywhere, just like the flu. Really, we need to be quite worried about people having a false sense of security just because the diffusion curve is late in their state.

THOM: Professor Rebucci, what do you think in terms of the recovery and the duration of the bottom of this recession? There have been obviously optimistic thoughts put out there about this could be V shaped once we solve the medical issue, people can immediately start shopping again and hiring again. Do you think V shaped a good prediction or are we looking at something different than that?

REBUCCI: V shape is the wishful thinking of the stock market because the stock market arises on these three months. I think V shape is out of the question. There is no possible reason to image the economy is going to be rebounding in the second quarter. It took us about six to eight years to recover from the global financial crisis, the peak, the trough was the second quarter of 2009 and I think the economy resumed growing seemingly normally something about two percent per year towards the end of 2016. This is by all accounts of one or more order magnitudes larger and as we’ve been discussing this afternoon, most likely way more persistent because there are real dynamics at play that will be protracted, how long it will take to reopen the economy and how long it will take for everybody to go back to seemingly normal behavior. Definitely, this is going to be looking like a U. The fear of I think most of or many of my colleagues is that it’s going to be an L, a situation where we go down and we stay low for quite some time. One thing that we can say, thanks to both intervention of the Fed and Congress is that we have avoided an I, a drop without bottom, right to the beginning. I think we saw the abyss, if I’m pronouncing the correctly, on Friday March 12th and reading off the lessons learned during the global financial crisis must fully stabilize financial market and provide the oxygen that is needed for large corporate American to keep breathing. What we are dealing here is the microeconomic plan being of the economy that is severely impaired. We’ve never seen anything like the whole economy staying home for two months and we have no idea how it’s going to play out. Most definitely we are going to be in for the long term. We’re going to be talking about this for the next 10, 20 years in my opinion. 

THOM: Professor Pfleiderer, we just had professor Rebucci draw some of the contrasts between the stock market looking at a very short horizon for how it behaves versus the reality of this potentially being much more protracted. What are your thoughts about how to analyze what we see in the Dow versus what the real impacts of this will be in that microeconomic way that professor Rebucci said?

PFLEIDERER: First I’d like to say that the Fed obviously is expanding its balance sheet back to the levels that we saw after the crisis. Once again, I think it’s supporting a small part of the economy. We’ve already noted that if you are a large corporation or investors in a large corporation, you’re much better positioned to get support, that arguably you don’t need as much other parts of the economy. We tend to look at the stock market, the Dow Jones or the SNP 500 as the way to figure out how the economy is doing and I just want to emphasize that that’s a part of the economy and we can in some ways prop up the stock market. The government could simply give all share holders and extra $100 and as soon as that’s announced increase the price of the share but that’s not doing anything for the overall economy, given where most of that money is going. I don’t remember the exact numbers but I think it’s the top one percent -- top eight percent of the -- 80 percent of the equity market in the United States is owned by the top one percent. Don’t quote me on that, it’s something like that, you’ve heard all those numbers before. Focusing on the stock market and not thinking about a huge part of the economy that is basically privately owned by small corporations, small to medium size businesses, self proprietorships is I think not focusing our attention where it needs to be. Propping up the markets, the stock and bond markets is not necessarily going to help those throughout the economy and I think that’s a problem. It’s going to potentially keep us from going into the abyss if everything went to hell and a hand basket because the government didn’t support anything, that would be a problem but again, I just want to come back to this theme, tax payers money is not being allocated in an efficient way to what needs to get done and that’s a lot of the political economy that we’re seeing played out.  

THOM: Professor Rust, we just had professor Pfleiderer mention the implementation of the aid, I imagine you have some thoughts about that, a lot of it going to places that you mentioned earlier example, large national chains getting big checks when they don’t really need it. What are your thoughts about how that’s been implemented in the right places, wrong places, what would you say about that?

RUST: I’ll start with a more general comment. That is that we have a serious problem in this country with inequality of income and wealth. What’s happening right now is that the people at the very bottom of the income and wealth distribution are the ones that are being completely hammered by this, worse than anybody else. That is very much of a concern. I think we need to think about what it is that for example the administration is really trying to do. I agree with Paul about trying to prop up the stock market, I think that’s absolutely what they are trying to do. President Trump talks about the stock market in his briefings. This is something that he is definitely wanting to do and it is also not a coincidence that the vast majority of the stock market is held by wealth people, investors that are simply going to have trouble with trying to keep the lower part of the distribution okay. Without the lower part of the distribution, eventually even the investors will hurt because you can’t have 25 percent unemployment, which is potentially where we are headed and have the economy be going strong, it’s simply is not the case, it can’t be happening. 

THOM: Professor Pfleiderer what are your thoughts as we experience this crisis and as you said, this may be something that lasts a lot longer than maybe the early wishful thinking might have suggested, professor Rebucci said we’re going to be talking about this for 10, 20 years. For people who are maybe out of work or people are entering the job market, people who are just graduating college this semester or just finishing up with graduate school, as those people enter the job market or get out of it, what are the long term impacts of things like earnings, the ability to save or even other behaviors as almost a PTSD out of this crisis that effect their live long spending habits, what are your thoughts about that? Are we seeing a whole generational thing that’s going to happen with people or all ages or what?

PFLEIDERER: I wish I could sound a really optimistic note here but the evidence that we have from the past is that those people that come into the labour market in a situation where you are in a recession or jobs are hard to come by, generally don’t have an overall wage profile throughout their life or income as high as someone who happens to be lucky, maybe born four years earlier or four years later and comes into the job market at a boom time. This obviously is a huge hit here; it’s going to have effects on how people think about risk. There is evidence that people that went through the depression invested and saved very differently from those who grew up after that. It’s going to have a profound effect. Again, all this calls out to the great importance of getting this right. Getting the health challenges met and getting the economic challenges met which are not the challenges faced by the top one percent, they are the challenges faced by the people that Roland was talking about that are at the bottom. I don’t want to be too alarmist here but since we’re going down that path, ultimately, we have to worry about the social fabric coming apart in this country, it’s challenged now as we can see just by having a shelter in place and people are rebelling against that. If long term inequality goes up and the economy is in a great depression, if you look back at history, it was only world war two that brought us out of the great depression and rallied people together and of course turned things around. We certainly don’t want to have to have another war, we just have to figure out how to make sure that everyone is taken care of across the whole income spectrum and restore some confidence and we need to think hard about doing that right away and getting things into place because I don’t think we’ve got a lot of time to get it right. We can’t just sort of ignore this problem and then think two years later we can solve it.

THOM: I’d love to get response from our other panelists about this too. Professor Rebucci, do you have something you’d like to add about this question?

REBUCCI: Yes, one of the Tweeter lines that I use the most is that the crisis is a great in equalizer as opposed to equalizer because the virus was caused by some celebrity. I share wholeheartedly my colleague’s preoccupation with the income equality and the wage life time profile of the young who will enter the labor market in these circumstances. Again, searching for optimism in this bleak picture, I think if we go further back in time, at the time of the great depression, the time of world war two, we also have to recognize that both an international order, a coordination and corporation and a lot of institutions are the fabric of the system here in the United States, were really designed and came out of those terrible experiences. My guess as I mentioned earlier, while at the same time for individuals there are opportunities, crisis always present the opportunities for the stock market investor, for the entrepreneur, for the scholar and so on and so forth. There is an opportunity for the system to address some of those very difficult issues that have divided Washington over the several years. We talk about education earlier, we know about income inequality, so I would not be surprised if the magnitude of the shock would trigger substantial institutional and political changes that will eventually, we’ll go to addressing some of the economic and social problems of society. I want to be optimistic; I want to hope that given the magnitude and the trauma that we are witnessing, something of that magnitude will take place. 

THOM: Thank you, professor. I think professor Rust wants to comment further on that too. Go ahead.

RUST: Just as during the great depression, there was a big push for more of a social safety net and that was when you had the new deal come in. I think that we are now finding out how inadequate our social safety net is because there are so many people that are in big, big trouble right now. I think inevitable result of this, if the democrats are in power after 2020, of course that’s totally unknown, but if they are in power, I have to believe that they are going to respond to their constituents who are a lot of these people that are being hit hard by the Coronavirus right now, their constituents are going to demand more of social safety net and I think that you’ll will find something, whether it’s called the New New Deal of whatever you want to call it, and this is different from the Green New Deal but I think you’re going to see a tremendous push for a more of a social safety net.

THOM: Very good. I think we’re just about coming up to the hour. I want to offer one last chance for any of our media on the call to chat a question. I’d love to ask all of the panelists to respond to one question here briefly if you can and we’ll see if we have any other questions from media. Talking about some optimism, of coming out of this with the possibility of transformation, that makes our economy a little bit more equitable in the form of a New New Deal or whatever that might be. Do you also see a potential restoration of trust and faith and confidence in science and experts and the kinds of institutions that we should turn to and listen to in these big, monumental types of crisis’s? Professor Pfleiderer any thoughts about that? 

PFLEIDERER: That would certainly be a very good outcome because certainly we’ve had a lot of mistrust of expertise and my understanding is Dr. Fauci is now a big hero, even on Saturday Night Live. I’m hopeful that they’ll be in the end a view that we need to listen to the experts and we see where people didn’t listen to the experts, that unfortunately didn’t play out as well as where people did and we restore trust in some of our institutions that are built on expertise. The jury is still out as to whether that plays out. I’m hoping that it is an infection point that, we’ll just have to see. 

THOM: Professor Rebucci, on that topic do you hope that we maybe listen to experts better about other crisis’s that could be solved with good science and research?

REBUCCI: It’s my impression, examples of Dr. Fauci expert has proven to be valuable to society, to government, to business, so will come out of the crisis with strength and credibility. What I am waiting to see is how the political landscape is going to change. We were talking earlier about potential demand for better and more reliable safety nets, it’s shocking to me that nothing has happened politically to this point and we are to the point where running the election itself is in question because we may not be logistically be able to do it but nothing has happened significant to polls and outcome of that kind. I think that will be something we will be seeing during the summer and it would be very interesting to see how this is going to play out.

THOM: Professor Rust, what do you think about the opportunity for restoring faith in science and research and these kinds of knowledge-based solutions to big challenges?

RUST: I think one thing to realize is that there is a substantial percentage of the country that simply doesn’t have the same access to information as everybody else. The result is, I think there is going to be 35 percent of the people that really are against science and against the government because they’re told that that’s the thing to do but I think one very likely outcome from this whole thing is that people now realize that there really is a role for government. In fact, because government has screwed up this particular response, people realize that government really needs to work. I think that’s going to be one outcome from this.

THOM: Thank you, very interesting. We do have one more question from media in attendance. We have Tom Ellis from a Greek publication called Kathimerini, I think I’m pronouncing that correctly. I’m exposed to a far amount of Greek around the office, Jessica and her husband speak Greek. Tell us your question Tom?

TOM: I’m just wondering given the fact that I’m calling from Europe or from abroad, let me ask, how do the panelists feel about the impact in international trade? Greece that’s based on tourism almost so it’s a huge issue but it’s not all confined to tourism, it’s also products, would there be a negative impact from China, from Europe, from the US, back and forth and what does this mean for GDP globally but also more specifically the US?

THOM: Thank you, Tom. For our panelists, what are your thoughts about the impact on going to international trade and reopening the economy, the continuation of the pandemic, any thoughts? Paul, would you like to answer?

PFLEIDERER: I think tourism is obviously going to be hurt and what we’re seeing of course is this is playing out globally. All countries are going to be affected. Emerging markets are going to he affected in absolutely huge ways. The worry of course is everyone’s worried, every country is worried about their domestic economy and tries to put into place various things to protect their domestic economy and basically does things that takes action obviously in terms of trade that actually hurt international trade in the misguided approach of trying to protect their own domestic economies. Hopefully, again, we’re all in the same boat and when I say that I don’t just mean in the United States, I mean globally. Just to pick up on some of the themes here, obviously tourism a lot of industry is going to be affected. Obviously, I wouldn’t want to be in the oil and gas business right now, that’s going to take some time to come back. It’s going to have a huge affect on international trade. I’m not an expert on this by any stretch of the imagination, I’m just parroting what I hear from some of my colleagues. 

THOM: Roland, what are your thoughts about the international and Alessandro we’ll come to you next.

RUST: He can go first.

THOM: Alessandro, please.

REBUCCI: I was just very quickly going to add that it’s going to be an accelerator the deglobalization trend that we saw pre-crisis unfortunately. The trade wars had already ignited that with some legitimate concern but also some other view on that, more nationalistic type of policies, trying to maximize the interests of individual economists. This is bad for the world economy in general. We know that trade has distributive problems, there are winners and losers that need to be compensated but overall the size of the pie tend to grow with trade so this is bad for trade and by Greece being a small open economy, depending on tourism and foreign investment, this is not good news for Greece unfortunately. 

THOM: Roland, what would you add?

RUST: I would add that the current administration is really using the Coronavirus crisis as a way to hit back at two things that the administration really doesn’t like very much, they are trade and immigration. Both of those things, if you cut back trade or if you cut back immigration, both of them hurt the economy. I think that’s what we’re seeing, it’s really political as much as anything else, what the current administration is doing and it’s going to hurt the economy.

THOM: Thank you so much professor Rust. With that we’ll go ahead and come to a close. I want to turn it over to my colleague Jessica, our CEO here at 麻豆传媒 for any final thoughts here before we close up here. Jessica, what did you think?

JESSICA: I thought it was great. Even if the outlook isn’t great, I really appreciate and I think everyone who was here appreciated professor Rebucci, professor Pfleiderer and professor Rust. All of your prospective were very helpful and sobering.

THOM: Thank you, Jessica. A lot of really good stuff to chew on. Thank you so much professor Pfleiderer at Stanford Graduate School of Business, professor Rust there at the University of Maryland School of Business and professor Rebucci at Johns Hopkins Business School. Thank you all very much. To our media, thank you again for attending. With that, we’ll go ahead and close. Stay safe and healthy everyone and good luck.