Why universal basic income could make the system more equal: Economist
Nomura Chief U.S. Economist Lewis Alexander joins Yahoo Finance’s Zack Guzman to discuss Nomura's latest report on how the world may change after the coronavirus.
Video Transcript
ZACK GUZMAN: Right now, let's dig into a lot of what's being made around the economy and the change that we've seen in this COVID-19 environment. A new look at that in a new report from Nomura is digging into the way that a lot of this might not go back to normal as soon as we think, and the lasting repercussions from how we've seen this trickle through not just the employment picture here in the United States, but also beyond our country's borders here across the globe, as we deal with increasing tensions between the US and China, as well as more debt concerns to discuss here. For more on all of that report, I want to bring on Nomura's chief economist, Lewis Alexander, who joins us now on the phone.
And Lewis, when we talk about this, there's a number of things to dig into in your latest report here, subtitled "The World After Furloughs, Face Masks, and Fear," but I want to start with one discussion that we're hearing a lot more of right now. That would be in the return to schooling here in the United States. And right now, we are getting updates out of Milwaukee, Wisconsin and Fort Bend County, Texas joining California's two largest school districts in Los Angeles and San Diego in announcing plans to shift to online classrooms and online teaching. What is your take, though, on how that move might impact any quality that we've already seen in terms of how stretched schools are in some of these lower income neighborhoods? What's your take on what we should expect moving forward on that front?
LEWIS ALEXANDER: Look, this is a real challenge, obviously. For people to work, they've got to deal with child care. And that's been one of the things that is sort of an obstacle to the recovery. And so on the one hand, getting kids back in school is going to be a part of, ultimately, the longer-run economic correction, but at the same time, you want to do it safely. You don't want to put the kids at risk. You don't want to have schools be one of the things that contribute to the spread of the virus. So these are tough choices.
I think one of the things I would stress is I think we have learned how to do more of these things remotely. I suspect we will be more effective at teaching remotely in the fall than we were in the spring, when it was sort of all new and, frankly, people were learning as they were going. But I don't think that's ultimately where we want to be in the long run. So this is part of a long-run adjustment, and unfortunately, this is another way in which unequal access to things like the internet and basic hardware is going to create another obstacle to us getting to a more equitable economy.
ZACK GUZMAN: Yeah, as your report noted, you have seen a more stark dropoff there in terms of online attendance from lower income households through all of this in the early shift to learning from home, before we see what happens across the country here in the fall, as a lot of people are hoping, a lot of parents out there hoping that their kids can return to school. But beyond just the schooling front, you talk a lot about economic inequality in this report.
As we've noted, we've seen a lot of the brunt of this economic impact being shouldered by communities of color, a lot of those people working in sectors hardest hit by the pandemic, when you think about hospitality and leisure. And more specifically on that front, you say that some of this that we've seen here in terms of stimulus passed to really help address that issue might be supporting the idea of universal basic income getting accepted here in the US down the line. Why might that be, and why do you think that that, being an issue that's relatively new here in the country, might actually be catching some new support here?
LEWIS ALEXANDER: Look, I think obviously there's been a focus on income inequality before COVID-19, but COVID-19 has, I think, highlighted all sorts of ways in which the system is unequal. And if you ask how can we correct that going forward, universal basic income is certainly one of the ways to do it. It's not the only way. There are other ways, in terms of subsidizing low-wage work. So essentially, a version of the earned income tax credit would be another way to go. Obviously, providing services, like ensuring that everyone has access to health care, is another way to address it.
I think what COVID-19 is going to do is take all of those issues that were in the debate before and, in some sense, give them a big push, because we've obviously seen that this is a much bigger problem than I think people had acknowledged before.
ZACK GUZMAN: And when we talk about the global picture here, that's one thing that you dive into. And when it comes to the US-China tensions, we've seen those ratcheted up here, especially when we think about how China's been handling their Hong Kong situation. We also got the security update there from the EU looking into working with Huawei and banning tech companies. Giving them about seven years to really undo any use of Huawei technology there.
But when you look at US-China tensions and the way that, whether or not President Trump gets re-elected or it's Joe Biden come November, it sounds like, either way, tensions here are continuing to rise and expected to continue to rise even after the election, whether it's Joe Biden or President Trump. What's the impact of that on the global economy as nations try to rebuild? And all this, again, a reminder, all of this happening in real time for a lot of the world's most advanced economies and emerging markets at the same time.
LEWIS ALEXANDER: So let me make two points about this. One is there's no more important bilateral economic relationship than the US-China relationship in the global economy. And so if that is off track, it's hard for the global economy to get back on track. And I would very much agree with the way you've framed it, which is the issues are broad. They are multi-dimensional.
President Trump is focused on a particular aspect of the US-China relationship, in terms of the trade balance. I think a President Biden, if that happens, would focus on other issues. For example, human rights. So it wouldn't be exactly the same, but the broad-- in broad terms, the relationship is off track. And that is going to be a challenge for whoever is the next president.
The other thing, of course, is that the global economic system that we've been living with really since the end of World War II, but in particular since the fall of the Soviet Union, has been one that's focused on globalization. The assumption for that system has always been that the primary component parts would essentially be managed in more or less the same way-- market-driven economies, private-sector entities engaging with a relatively limited goal of government.
China's growth, China's emergence with a very different model has challenged that. We have to find a way to evolve the global system in a way that maintains as much of the benefits of globalization as we can, while accommodating a much greater degree of structural difference within that system. That's going to be hard to do without strong global leadership. To be perfectly honest, I don't think we're going to get that going forward. That's the challenge.
ZACK GUZMAN: I think that we've seen a lot of the market kind of weighing the idea that we won't be getting that ahead, as we see tensions here and relations, really, with the US and China unraveling the longer this draws on. Phase two really not really on the table right now, when we think about how President Trump has been talking about that ongoing trade dispute.
But I want to end the conversation here on this point, in terms of what the world is going to look like beyond this, with kind of how you opened the report, quoting Winston Churchill and his ideas that no good crisis should go to waste here. So when we think about what good could come from how the US looks to rebuild out of this, what do you see as the biggest opportunity that shouldn't be wasted in terms of how we could rebuild and recover in a way that will actually pay dividends down the line?
LEWIS ALEXANDER: So one opportunity, obviously, is infrastructure related to climate change. There's obviously going to be a need to promote economic growth. That's going to be, you know, government spending in the form of infrastructure. That's an opportunity. I think another one is you just have to look around at how the private sector has responded to this, and they've been remarkably flexible. I think a lot of businesses have learned a lot of things.
I think we will get to a point where COVID-19 is no longer the threat that it is now, and I don't think businesses are going to unlearn those lessons. And so I think there is a chance that we will have a more flexible and productive private sector, as well as an opportunity to do some things like put more investment into infrastructure that will be more consistent with where we want to be on climate change.
ZACK GUZMAN: I think that's why this phase four deal gets ever more interesting, when we think about where Republicans and Democrats might agree, and especially as we hear President Trump in the White House stressing infrastructure spending as something that is on the table to be discussed here. Of course, in an election year, you never know what you're going to get. But Lewis Alexander, Nomura Chief US Economist, appreciate you taking the time to chat with us.
LEWIS ALEXANDER: My pleasure.
