Framing is important, time is relative, lots to talk about every week, while we are in the midst of what I think we will look back on and say is the first hopefully, only depression of our lifetimes.
This is getting much more politicized in the United States. Because there's an election coming up, but also because politically there's almost no way to turn. On the one hand, the death toll is going to be well over 100,00, and that was the frame of reference that President Trump said it would be a good job. We see Jay Powell, head of the Fed, who I think has done a very credible job through all of this, and speaks about it very credibly, and saying going forward that he thinks the third quarter, in fact, all of this year, is going to be economically very painful.
If you can't turn towards loosening because there are too many cases and too many people dying, but you can't turn towards opening the economy for that reason, and so the economy is going so much worse, well, best not to have an election. That's not an option either. Can't push it back. No, you'd have to change the law and that requires both passing both the House and the Senate. There's no possibility of that happening. So, really what it means is, number one: got to blame someone, China. And number two: it's going to get much nastier inside the United States.
I saw some of the hearings last week. I saw Dr. Fauci attacked by some, particularly Rand Paul, the senator from Kentucky, saying that he's not the be-all-end-all. As much as I like Dr. Fauci and I appreciate that he is a voice of sanity and reason, I do accept that he's not the be-all-end-all in the sense that if we're talking the economy, the doctors and scientists can't be the whole conversation. You wouldn't want them to be because they don't have the full range of expertise. I want the doctors and scientists to be the be-all-end-all in telling us how they think we should fight this coronavirus. What kind of treatments work and don't work? Whether or not we should wear masks? What kind of social distancing is important? How we're doing on the vaccine? What kind of medical care and facilities we need? How you do and don't treat assisted living facility? Something I wish that my own governor, Cuomo, had been listening to Fauci earlier, so that we wouldn't have been sending all of these people from hospitals into these care facilities, spreading the virus so much beyond capacity.
They have enormous value. I don't like it when the politicians get involved in trying to say what is and is not an effective cure. Second guessing the doctors around that. Whether it's Bolsonaro in Brazil or Trump here in the United States or Lukashenko in Belarus, or Magufuli in Tanzania.
When you talk about opening the economy, ending the lockdowns, you're not just talking about doctors anymore. You're also talking about expertise from economists, expertise from businesspeople, people that understand what it means if you keep these economies locked down. What worries me is we've gone from the first months of the crisis where we didn't know what we were dealing with, what kind of a virus, we had no parameters around testing, how broadly it expanded, didn't understand how it was transmitted, a time when you need to hear from almost exclusively the health care folks, to now, when you want the health care folks and all the people with economic expertise, because there's a real tradeoff. A tradeoff between how much you can open the economy and how many people will be endangered in terms of their health as a consequence of that. And how much you keep the economy closed and how much people are endangered as a consequence of that, literally endangered. In terms of being able to make ends meet, what it's going to cost to take care of people.
At the end of the day, governance in the United States and around the world is always about tradeoffs. How much you want to spend on one thing as opposed to another. On health care as opposed to unemployment. On a single portion of the population as opposed to another. So much of this crisis is being borne on the shoulders of those that can't afford it. The essential workers who can't work at a distance. Can't stay at home and still get paid. The ones that are delivering takeout meals and stocking the grocery stores and ensuring that there is first responder capacity to someone dialing in a crime or committing one or to someone going to a hospital. These people are not paid as essential workers. They're paid as dispensable workers. Is that going to change in three and six months and 12 months, in three years' time? It has to, because otherwise the ability to ensure sustainable consumption models isn't going to be fit for governance. The ability to consider yourself a representative democracy isn't going to be fit for governance in this country. On the other hand, the people that are most dispensable in terms of the companies as they open again and who do they and do they not need to make sure that they can continue to be profitable, so many of the layoffs that you've seen in the past two months are going to end up being permanent because companies will go bankrupt and others can't afford to keep these people employed.
I keep thinking back to the 2008 financial crisis when there wasn't that much macro analysis politically. There was a sense that all the markets were moving up and down together. That's very macro. You wanted to understand the financial sector very deeply. You want to understand the central banks, what leverage was all about and mortgage backed securities that didn't make a lot of sense. How big the bubble actually was. You wanted that understanding. But beyond that, you know, that's what you needed to fix. You didn't necessarily need to talk to a whole bunch of people with expertise in different sectors around the economy.
Today, every person that touches an industry, every person that touches a piece of government has a piece of expertise that really matters to understanding this puzzle, because you shut down the entire global economy. And if you want to reopen it, reopen it through your leaders, reopen it through your business executives and reopen it through your workers and your consumers. Every piece of that needs to get back into place. That means everyone you talk to with a different part of expertise plays a role.
A CEO of a financial institution right now is worried about, how can they make money when so many of the small business owners are not able to pay credit card bills going forward? They're not able to make good on their leases or their mortgages, and what does that mean in an already a low interest environment, where banks have to maintain higher credit levels? How are these banks going to stay solvent in a year, in two years' time, as you see financial crises in developing markets?
When you talk to the tech firms who are making a lot of money right now, they're saying, "hey, we're running pretty well with people not being in place and we don't want to have any legal vulnerability, and if they can do the work, we can't tell these people they have to come back." So, if you're Twitter, work-from-home forever. If you're Facebook, if you're Google, at least until the end of this year and even then, it's going to be staggered, well, how much real estate do you need as a consequence? What about the people that work in physical plants and in the cafeterias, the janitors, sanitation, all of the people that make those spaces function, you won't need as many of them. You don't hire as many, what happens to those people?
I talk to people in food supply. They have a just in time supply chain, here in the United States and around the world. Suddenly that's a real problem because it's really efficient. The lines run really fast. And everyone is, these workers are all on top of each other, and well, how do you protect them? So, maybe you need to have them stagger in three different shifts over time, but are you going to pay them more if they're working in unusual shifts. Well, maybe you move towards automation. Or maybe you shut down the lines, you slow down the lines. And how do you maintain profit when that happens? What happens to these workers?
Open plan. I mean, here at Eurasia Group, space for a couple of hundred people, all open plan. That doesn't work when you're trying to keep people distant and safe from each other. You're going to have to completely rejigger the way that, you know, an accounting firm works, a consulting firm works, the big three out there. How many people are they going to need as a consequence of that? How are they going to maintain efficiency? It's not like people were just swimming on cash. Most of these profitability models, you know, were comparatively tight because it's a very competitive environment. And you see a lot of companies that go bankrupt in the best of times.
Every piece of the global economy doesn't just have to get through this shutdown, the lockdown, this incredibly challenging, unprecedented in our lifetimes disruption. A natural disaster to end all natural disasters in our lifetimes, this pandemic. But then when they come back, nothing is as it was. Nothing goes back to being the way it was. This doesn't make me existentially pessimistic. This doesn't make me feel like it's the end of society, but it does make me feel like the changes that are required are going to be much more dramatic, much more structural, and a lot more people will be displaced. So, government is going to have to play a much more interventionist and structural role, that we don't like so much in the United States. It's not efficient. Take your hands off. We don't want spiraling debt beyond where it already is. It makes me worried that the ability of big industry to be the answer, when government isn't there, doesn't have all the answers, is going to fall down on the job. They're going to have a real challenge doing it because they're going to be under a lot of pressure. And it makes me feel that the willingness of the average citizen in a lot of these democracies themselves going to feel like the system is increasingly not working for them.
Does that mean that I think the Chinese system somehow works better? Absolutely not. The Chinese are going to have much bigger problems themselves. This is the first recession that they've had since they've really started opening up. Zero growth for a year on top of the massive credit bubble that they have, not only spiraling debt that hasn't gotten productive gains in China from a sovereign perspective, but also the corporate, the staggering corporate debt that's not been linked to productive and efficient growth. The Belt and Road and defaults and the restructuring already needed in some of the poorest countries around the world. Now a lot of those economies that China has the greatest exposure to are going to collapse because they've got even bigger problems going forward. I wouldn't want to be counting my future on the sustainability of that massive credit bubble, either domestically in China or internationally.
Good news is that you have a disruption of this scale and it gives you that necessity and capacity, to change a lot of the institutions that increasingly weren't working. But let us not pretend that this is like 2008-2009, we'll spend a year or two and then things will bounce back. Because that's what happened, basically. The banks had to reform. But generally, we bounced back after 2008-2009. This is a very different scale of magnitude. And this is one we're going to have very different institutions and global order as we think about what it means to have sustainability in society going forward.
