A year into a crisis of world-historic proportions, and what have we learned? After flubbing every aspect of the pandemic response, from masks to contact tracing, the U.S. has been rewarded with a return to what seems a lot like normal life. The market — following a series of erratic plot twists and what looked like it should have been another Great Depression — seems to have bounced back stronger than ever. If there’s a moral to this story, no one has internalized it. 

To gain a clearer sense of what we’ve all just seen and experienced, we spoke with Adam Tooze, an essential guide to these strange financial times. Tooze is the Kathryn and Shelby Cullom Davis Professor of History at Columbia University, where he teaches modern European history and economic history. He is the author of The Wages of Destruction: The Making and Breaking of the Nazi Economy (2006); The Deluge: The Great War, America and the Remaking of the Global Order, 1916-1931 (2014); and most recently a comprehensive account of the 2008 recession, Crashed: How a Decade of Financial Crises Changed the World (2018). His book on the pandemic, Shutdown: How Covid Shook the World’s Economy, will be published in September. 

We asked Tooze to help us think through the past year’s economic headlines, the Green New Deal, the Biden administration’s plans, the U.S.’s relationship with China, where things stand in the E.U., and what comes next. 

Tell us the economic story of this year, as though we went off the grid and had no Wi-Fi from February of 2020 until now. What happened this year? 

Well, something happened that had long been predicted. Economists had done the math on it and concluded that it would be very bad, but never quite believed that it would happen, especially to the richest countries in the world. Estimates made by the IMF of the impact of a potential pandemic tended to assume that the damage would be mainly to poor countries. And, in fact, the Covid-19 pandemic struck the three largest hubs of the world economy in succession: it struck China, Europe and the United States, which between them account for about 60 or 65 percent of the world economy. And we found ourselves doing something which I don’t think we could have imagined before — it certainly wasn’t part of anyone’s script. We deliberately shut down public life and much economic activity. 

By the end of March and early April 2020, it wasn’t just the main centers of the world economy that were shut down, but the vast majority of the world’s population. The ILO thinks that 80 percent plus of the world’s labor force was subject to one or another type of restriction by early April. 1.6 to 1.7 billion young people were furloughed from education. So it’s the most massive, most comprehensive, most sudden interruption of not just economic life, but ordinary, day-to-day life that the world has ever experienced. President Macron of France called it an “anthropological shock.” That’s a little depoliticizing, but broadly speaking, I think it captures the sort of generic universal quality of the experience quite well. Twenty years from now, young people like yourselves will be able to talk to people of your same age group anywhere in the world and commiserate about the way in which your lives were interrupted. 

We think that global GDP, at its lowest point in early April, was down by 20 percent. Over the course of the Great Depression of the ’30s, GDP did contract by that much, but not in such a short span of time. If you draw a graph of global GDP over centuries, last spring looks like a jagged, downward depression in the otherwise relatively smooth upward trajectory of overall economic activity. 

There’s really never been anything quite like it. Hundreds of millions of people were rendered unemployed, tens of millions in the United States. We think over 20 million people lost their jobs in a matter of a month in the U.S. In China and India, which have bigger labor forces, it was correspondingly far worse. Maybe 120 million Indians lost their jobs in March and April. In China, the real unemployment numbers are not public, so we aren’t certain, but imagine a shock of a similar kind there as well. And by April, the leading experts, the IMF, the World Bank, and WTO were expecting a Great Depression-style shock. 

And then something almost equally strange happened, which is that governments around the world actually stepped up, and stepped up very quickly. When I say governments, I mean everything from central banks to treasuries to parliaments to Congress, which enacted the CARES Act, the largest single stimulus the United States has ever seen in peacetime. The Europeans through their short-time systems prevented unemployment from happening, and the United States, despite a catastrophe in its labor market, saw an extraordinary rollout of public spending. That benefited businesses on a huge scale, but also families, with a disproportionate impact on low-income households.

Despite the shock to the American labor market, we think disposable incomes actually went up, which is historically unprecedented. And the emerging markets, low-income and lower-income countries, which we expected to suffer an absolutely devastating shock to their financial situations on top of the struggles that they were having, nevertheless came to the crisis much better than we anticipated — they’ve been able to actually ride it out. They were able, by the end of the year, to attract large amounts of foreign capital back in because the Fed had inundated the world with very cheap dollars.

It’s a remarkable demonstration of, on the one hand, the scale of the anthropocentric challenge, its truly comprehensive economic impact, and then, as it were, a vertiginous effort to somehow juggle the situation such that it didn’t become the historic economic and social crisis that many people anticipated. And that, I would broadly say, is the story up to the beginning of 2021. And the question, of course, is what comes next.

Will middle income and low income countries essentially lose a decade of growth? Will they be thrown back into a prolonged period of depression and stagnation? And will the prospects of an entire generation of young people in the emerging markets suffer irreparable damage? That’s definitely a possibility. The World Bank estimates that unless remedial measures can be taken in the educational sphere, the losses in terms of missed school months to that cohort of students could run to over 10 trillion dollars. In the U.S., lower-income and more precarious families will suffer a spectacular shock to the education of an entire cohort of their kids. The most vulnerable will be most severely damaged, and those who are more fortunate — who have more cultural capital to fall back on — their kids will ride this out with barely a blip. The story isn’t over, in other words.

After the immense rupture of this year, what has changed in terms of economic policy? What’s different now than it was a year ago? How has the general thinking — and your own thinking — evolved? What have we learned? 

Well, some things we already knew or had learned from the 2008 shock and its aftermath — and you see that everywhere in the world — you see that the emerging markets have acquired a much more robust toolkit for dealing with external financial shocks. The Europeans managed to avoid failing the way they did after 2010, and the European Central Bank has been much more proactive. And in the U.S., the hit team that operated the Fed after 2008 and ran the three phases of quantitative easing under Ben Bernanke swung back into action again, and we saw truly grandiose interventions by the Fed in March. They were buying a million dollars of assets a second in late March — 70 to 80 billion dollars a day. They bought five percent of the U.S. Treasury market in a matter of weeks. They didn’t hesitate and there were no second thoughts. There has been a lot of learning and thinking about the things that didn’t go as well as they should have after 2008. Notably with regard to fiscal policy, there’s been a protracted conversation within the Democratic Party about missed opportunities under the Obama administration. I don’t necessarily even mean in the Biden administration itself, but in the staff around Chuck Schumer and Nancy Pelosi. Many of those staffers are avid readers of the histories of the Obama administration. 

Some new things happened in 2020 that were truly alarming — notably, the disturbance of the U.S. Treasury market, which is the biggest financial market in the world. It’s the one that’s most important because it’s the safe asset that everything is anchored to, and it was showing some truly erratic behavior in March. The market wasn’t functioning. And I think there’s an ongoing process of trying to figure out what on earth happened there, because if that were to melt down, it would be a deal-breaking disaster, worse even than what happened in 2008. 

Now everyone’s trying to figure out what Bidenomics amounts to, whether there’s been a really fundamental shift. We’re only just out of the first hundred days and I think it’s still in flux. I’m pretty convinced that they’re making it up as they go along too — we’re seeing competing agendas. We’ve seen, on the one hand, the rescue plan, the $1.9 trillion stimulus, which I think basically came from Congress but was signed off on by the Biden administration. And we’ve now seen the family plan, which is an important intervention in American social policy, in addressing one of the really crucial issues that affects every family in the United States. Sandwiched in between is the jobs plan, which notionally is the administration’s answer to the Green New Deal, but is, I think, profoundly underwhelming for everyone I know in the serious climate and political economy community. They don’t necessarily want to dump on it because it is our best hope and better than nothing. But the plan itself is just undersized. It really needs to be ten times bigger. 

So does the Biden administration represent a profound rethinking of economic policy? Up to a point, yes. But it’s more patchy than I think some of us felt it was a month ago, before we really saw the outlines of the investment plan. Certainly, some of the inhibitions of the Clinton era are gone — they’re no longer obsessive about the budget deficit. The problem is that if you hitch spending to taxes, you cap the overall size of the program, because there’s only so much tax increase they’re ever going to be able to get away with.

What do you make of the Green New Deal, and, as you say, Biden’s answer to it? Is the New Deal a good historical model for the kind of sweeping changes we’ll need in order to deal with climate change?

I had to be argued off a cliff by the better angels of my nature, or rather by my politically engaged left-wing friends in America because: No, it’s a terrible analogy. It’s a bad idea. As a European, it strikes me as vaguely perverse that Americans should have to have recourse to a 1930s analogy. It’s the equivalent to Britain’s ghastly “blitz nostalgia.” And it should stick in the gullet of any self-respecting progressive. 

This isn’t to say that I’m a New Deal skeptic. The New Deal had huge historical merit. But our problems are different — the moment is different. And what I find particularly objectionable is the way in which the New Deal analogy so easily morphs into a World War II analogy. You would find all of these Brooklyn lefties gushing about FDR and a program for the construction of a giant fleet of bombers. Freedom’s Forge, which is this boosterish account of the role of American business in FDR’s armaments program, was an inspiration for AOC advisors. As a historian of World War II, you end up offended on so many different levels. 

But then, my realistic American political friends say, “Adam, shut the hell up. This works in an American political context. This is not about historical accuracy. What it’s really saying is that American government can be a force for good, both externally and domestically. That’s what it stands for. That’s useful. No one needs a history lesson.” 

Ultimately, I’m in sympathy with that kind of pragmatic argument. What I do think is undeniable, however, is that the return to the New Deal points to the deep hold of a national historical imagination on the American left. It’s a feature of American politics, which we’re seeing incredibly vividly with the Biden administration. And as the Biden administration is also demonstrating, it may be a way of rallying American politics for action. 

What everyone should like about the Green New Deal is that it’s basically right in the architecture of its diagnosis. It says that we have an interconnected problem, which consists of the challenge of the Anthropocene and the environmental challenge; the inegalitarian, profoundly dysfunctional structures of American society; and the unstable, disequilibrated dynamic of capitalism — and we need to address all three at the same time and harness those responses together. If you do, there are all sorts of win-win options for progressive politics across those three domains. Even as the Green New Deal went down to defeat on both sides of the Atlantic in 2020, nothing could have confirmed more dramatically the basic rightness of that diagnosis than the Covid shock, which is why it’s been, broadly speaking, incorporated into centrist politics. 

Another question you have to ask about the Green New Deal is: what is the coalition that backs it? Its supporters do exert a countervailing force in Congress right now, and much the better for that. But that’s not the same as building a coalition capable of carrying the full scale of your program into effect as governmental policy. And that is something it seems to me that the Green New Deal was always missing. It was picking too many fights with too many people simultaneously. And if you look at the historic New Deal, one of the ways it succeeded was to enroll various types of business interests in an alliance with its progressive social democratic aspects. And it’s difficult for me to see how you avoid that, especially given that there’s frankly a huge open door in large parts of American capital and business right now for a win-win green modernization-type agenda.

Connect this moment to history — to WWI, or the Great Depression, or 2008. Does this feel on the scale of those events? How does it stack up?

The starting point is really a materialist reading of the curve of long-run economic growth. There was this economist, Angus Maddison, who worked for the OECD, who compiled extraordinary long-run data for global GDP purchasing power parity, adjusted so that we can compare them over millennia across all of the world’s countries. Now, obviously, this is an extraordinarily bold statistical exercise. It’s no more than a rough best guess of how we think the global economy develops over time. But what it shows is a graph that starts two millennia ago and is basically horizontal through to the early modern period, then begins to pick up, and then in the 20th century goes sharply up and in the period after World War II becomes vertical, and from the 1970s even more, so to speak, sharply vertical. If you look at the global population growth, the same is true, right? We see this extraordinary curve of human population to the point where we’re now touching eight billion.  

That’s the narrative within which we should situate what’s just happened to us in 2020. In other words, I take the emerging infectious diseases paradigm at its word. They have been predicting for half a century, more or less, the sort of crisis that we’ve just seen. It’s a result of the densification of the human population and the animal populations that we rear so as to enable us to feed ourselves at an ever increasing standard of living with more and more meat, more and more dairy. That creates the perfect incubator for various types of zoonotic mutation. And that’s what we’ve experienced. As a first approximation, that seems the best way to understand it, side-by-side with a diagnosis of climate change. It’s not analogous to the 1930s. It’s not even 2008. I mean, we wish it were 2008. It’s much scarier than that. And there’s an arc of a dramatic acceleration, with ever greater intensity, ever greater risk of which this was a harbinger. We should expect shocks like this one and even worse. We’re progressing towards a society where folks that previously thought of themselves as safe — as we once thought ourselves safe in the face of pandemics — realize they really aren’t. 

All this goes hand in hand with everything else. It goes hand in hand with financialization — the financial flywheel on this is absolutely massive. The scales of instability are massive too. And we have to reckon with the rise of China, which totally changes the geopolitical game. That was also one of the really striking things about 2020, and it appears to be a continuing vector of escalation that the Biden administration seems quite committed to. Ever since the ’70s, folks have been predicting that we’re entering a new age of multipolarity in which Asia will return to its status as hub of world affairs that it previously always occupied. There is a fundamental question about whether or not the United States can live with that. The Biden administration shows no signs of being willing to really accommodate itself to what is not even any longer a prediction or a prophecy, but simply a fact. 

So these are the three vectors I see 2020 located within: massive environmental change; the ongoing, highly unstable, financially leveraged growth of the global economy; and the nagging question of the global balance of power. The question is the ability of the American political system to adjust itself to all three of those realities. And that, you might say, is the fourth narrative within which we must locate the 2020 crisis. 

The other night, Biden said “we’re in competition with China and other countries to win the 21st century.” What do you make of that kind of rhetoric? And how can we understand the relationship between the U.S. and China, post-Trump? How should we look back on Trump vis-a-vis China?

I agree it’s haunting. I think the most charitable interpretation is that Biden imagines the world as some sort of European soccer league — a friendly competition. He doesn’t begrudge the Chinese their ambition, he just intends to meet it. And then there’s another version of the same thing, which is Biden at his first press conference, when he said that although China wants to be number one, “That’s not going to happen on my watch.” That’s slightly different. That’s slightly more hard-edged. And then there is the accompanying memo to the American jobs plan, which says America needs to get its act together and do this historic investment program to meet the great challenges of the moment, which are on climate and the increasing assertiveness of authoritarian China — at which point we’ve gone from friendly competition to comparing China’s authoritarianism to previous historic challenges, like Hitler’s Nazism or the Soviet Union’s Stalinism, and to climate. And then there’s the new American report on AI, which Eric Schmidt authored. It’s 750 pages long and contains 250 instances of the word “win.” Practically every third page says we’re going to win something. On the one hand, he’s a former corporate executive, and they can’t help themselves. But on the other hand, it’s actually a concerted program to deny China access to key technologies of various types. This is another way of thinking about China: you’re vulnerable on certain key technologies, and we’re going to do our damndest to ensure that you stay weak. It’s about actually damaging China’s industrial development and capping it — an explicit strategy of containment.

These are different ways of looking at China, and depending on which bit of the American state apparatus you prod right now, you get a slightly different answer. A lot of the more hard-edged stuff was started by the Trump administration, and the Biden people haven’t backed away. The Trump administration itself had many different faces, like this one. One face was: America needs to be made great again, because basically it is inferior. It’s saying, it’s not a question of preserving primacy, because we don’t have primacy. Trump could be seen as a sort of realistic appreciation of American decline at one level. But then you have the Navarros and the Pompeos who were very much continuous with a hawkish Cold War style. There’s a very high degree of continuity here, between the two administrations. I think it has been evident for several years that one of the very few things that Congress can actually agree on is anti-China measures. 

The pandemic is starting to feel over in the U.S., but of course it isn’t over almost anywhere else. Global vaccine distribution is a nightmare. How do you think about the conflicting interests at play in the issue of vaccine-sharing? Would we ideally want to pursue a kind of Marshall Plan for vaccines?

The point to start with is that so far America has not exported any vaccines of note to anyone, barely even to Canada and Mexico, its immediate neighbors. Zip, nada, zero, practically nothing. The E.U. has exported something like 40 percent of all the vaccines it’s produced. China has exported about half of all the vaccines it’s produced, and India has exported a similar share, about 30 to 40 percent. There is one absolute standout instance of vaccine nationalism in the world, and it’s the United States of America. 

It’s a completely deliberate policy on the part of America’s political elite to master the manifest crisis in the United States, which was alarming the entire world by early January of this year. It’s an attempt to get a handle on the epidemic — because all other measures had failed in the U.S. — by very, very rapid vaccination. And it succeeded. But it really is a “put the oxygen mask on your face first” strategy. America did what was necessary to stabilize the American situation. 

Meanwhile, the Europeans exported huge quantities and kept it schtum because they didn’t want to have to sell it to their populations. Europeans were eagerly awaiting vaccines, which they weren’t getting, in part because the vaccines were being exported. If Britain has a lead in the vaccination race, it’s because it imported its vaccines from Europe, and Europe allowed those factories to honor their contracts. It isn’t the E.U. any more than it’s the U.S. that makes these vaccines. It’s private firms. The question is, will the governments allow them to honor their private contracts? And the E.U. said, of course we will. China and India too (though India, forgivably enough, given the huge crisis it’s facing, is limiting vaccine export right now). America requires its producers to honor contracts to the U.S. first. 

The fact that America sat on 60 million doses of AstraZeneca that weren’t even licensed should be shaming. So forget any talk of Marshall Plans. Let’s not dignify this with any of that kind of language. America’s vaccine policy under Biden is: America First. If Trump had said it, liberals would be on the warpath; Biden just did it. And because they don’t sell it as that, everyone’s cool with it. I’ve benefited from it, as you may have. We got vaccinated quite quickly, and we’re now beginning to touch the limit on the number of Americans who will allow themselves to be vaccinated. It’s now obviously incumbent on the United States and very much in America’s best interest to export as much vaccine as possible. Obviously, the U.S. should be offloading as much as it possibly can to Brazil and to India, where the crisis is shockingly out of control and where the risk of virus mutation is most extreme. But let’s be clear about the continuities: America could not have implemented a more radical demonstration of the Trumpian principle of “America First” than it did with the highly successful Biden vaccine program. 

U.S. commentators spent the whole pandemic blaming Donald Trump for how badly we were doing in the fight against Covid without really paying that much attention to the fact that Europe was often doing just as badly. Now, with vaccine distribution, this stark disparity that you’ve been talking about has emerged between the U.S. and Europe, and we’re in vastly different positions. How does the E.U. look coming out of this year?

Yeah, it’s been a roller coaster. I’ve already indicated that I think the success of the American vaccine program should be taken with a pinch of salt, and the Europeans should be given credit for their willingness to supply vaccines to the entire world. (Though let’s be clear, the Europeans aren’t principally supplying their vaccines to poor countries. They’re supplying them to rich countries that bought them, like Japan, Canada, and Australia.) The E.U. has had a staggeringly topsy-turvy experience. The simple way of putting it is they avoided failing in the old ways and found new ways to fail. They avoided repeating the crisis of 2010. They avoided a Eurozone sovereign debt crisis. Virtually no one in Europe became unemployed as a result of 2020, which is remarkable in comparison to the United States. But they did not escape the economic shock. They are now in a second wave of recession, led by Germany, which was one of the paragons of meeting the first wave of the crisis and is now no longer so.

Still, Europe has not failed as a vaccine producer. It has not failed as a vaccine exporter. It did fail to ensure that its citizens obtain the most rapid possible access. This had to do in part with various types of administrative hang ups. It had to do with ill fortune with regard to the choice of vaccines. It had to do with the fact that they haggled over price and didn’t take the more expensive ones in some cases. But they are not, after all, in a different world from the United States. They are a month, maybe two months behind the U.S. in terms of the vaccination rate. That turns out to be tragic if you are also dealing with a massive surge of infections. And so what on the face of it is a relatively small administrative shortcoming then becomes a very serious political disaster, which is what they’ve been dealing with. But by the summer, I think that gap will have substantially narrowed. What will then become evident is a second new way in which Europe failed: its recovery package, which was undersized and slow. Unlike the U.S., which is now seeing a very rapid economic recovery, Europe is still sliding into recession, and the gap between the U.S. and Europe threatens to widen.  

Over the past year, the economic news has felt constant, and also constantly imprecise, much of it built on speculation and guesswork. How should we be weighing the predictions that are being made now? What are we paying too much attention to, and what are we missing? 

We certainly paid far too much attention to Reddit and GameStop and all of the bizarre antics of the American stock market. In general, people pay far too much attention to the stock market. Its overall tidal flow matters for American wealth and for wealth distribution. But day by day, stories of the battles between day traders and hedge funds are more interesting from the point of view of cultural politics than economic development. The real canard was the inflation angst people managed to whip themselves up into. They’ve done this twice now, and the same was true in the summer of 2020. We saw it again at the beginning of this year, this sort of recurring fear that somehow large-scale government spending is going to lead to an outburst of persistent inflation. That seems to me utterly unrealistic. A lot of economic policy debate has been shaped by paranoia inherited from the ’70s, but we’re moving out from under the shadow of that. 

What we don’t pay enough attention to is productivity growth and the slump in productivity growth across the advanced economy. It’s become ever more pronounced since the early 2000s, and it’s fundamentally limiting the capacity to grow the size of the cake. It’s a limiting factor on social development in the broader sense of the word. People have a lot of gloomy theories about it — that we’ve exhausted all the possibilities for innovation, or our population is aging too much. There are a variety of structural reasons, but my own feeling is we just don’t spend enough on research and development. I will admit defeat on productivity when it seems as though we are actually exhausting the possibilities of research and development. We’re not even close.  

What possibilities are open to us now that weren’t a year ago? What should we be advocating for? 

We now know that the condition of possibility for continuing our lives in a reasonably normal way, in the face of the sorts of challenges that science tells us we should expect, is more science. We did not prove collectively capable of managing this crisis through social distancing and other means, but we do appear to have the capacity to meet at least some of the coming challenges by means of a truly dynamic research system. As a matter of urgency, a progressive politics should insist on more science, less fettered by commercial constraints, more generously funded, more dynamic, more open, more diverse. We need more standing capacities that don’t need to justify themselves with regard to immediate need, because you never know what can come along. We should applaud the Biden administration’s efforts to put huge amounts of money into the university system, and particularly directing it towards institutions like the historically Black colleges — but it needs to be even bigger and even more. 

A less techie version of the same point is that the case with the care economy hardly needs making anymore. The bits I like most about the Biden administration’s plans are the family plan and eldercare element of the jobs plan. We have discovered that people and people’s bodies matter. They matter sentimentally, they matter collectively as a shared value, and they matter functionally, because if we have too many sick bodies around, nobody is safe and then the entire system comes to a halt. That should surely be one of the great takeaways. We expect a tech revolution to render large numbers of people unemployed, and there’s no obvious substitute for human-to-human interaction in the care dimension. It’s evidently a highly gendered issue, given the structure of that labor market. It also has a racial dimension, which in America is internal. Everywhere else it is largely external in the sense that those labor markets are highly globalized. The care workforce of Europe is recruited to a considerable extent from other parts of the world. That’s true in the U.S. too. So it’s the basis also for a good internationalist politics. 

A third element is simply that anyone who ever says you should worry about the deficit and debt should be told to come back with a serious argument. We should simply call that bluff. You might have political reasons for wanting to raise taxes — there’s all sorts of good reasons for wanting to raise taxes — but the deficit and the debt by themselves should not be such a reason. We should want to tax because we want to equilibrate society. Let’s treat tax as the political issue that it is and the question of debt as a technical problem over which the Treasury and central bank have ultimate control.   

Those are three things we should take away from last year, and about which those with progressive politics should feel very empowered. Knowledge is crucial. Care is crucial. And money ought not to be a serious constraint at all: we are highly constrained in our capacity to do things collectively by all sorts of problems, but money should not be one of them.