Barry Icahngreen, a professor of economics at UC Berkeley, who is regarded as an international economic and financial policy scholar, said, “The US government released another $900 billion in stimulus funds to respond to the novel coronavirus infection (Corona 19), but the economy recovered as expected. It will be difficult to do.” It is expected that Americans with cash will increase savings instead of spending to prepare for a bigger recession.
In an e-mail interview with the Korea Economic Daily, Professor IcahnGreen said, “The expectation that China’s economic development will lead to more openness and democracy is gradually decreasing.” “The next Joe Biden government is a difficult task to solve.”
I didn’t hesitate to say bitter about Donald Trump’s administration, which has a two-week term left. “The foreign policy was full of errors,” he criticized. “The branding of Switzerland and Vietnam as currency manipulators is of no use to the US economy.” He advised, “As inequality in countries such as the United States and Korea is intensifying after the Corona 19 crisis, it is necessary to significantly expand investment in education and vocational training.”
▷Covid-19 vaccine is being supplied on a large scale in the US, and additional stimulus funds are being released. Expectations for an economic recovery are growing.
“Most people seem to think that the US economy will revitalize after the vaccine has been released. I have a different opinion. Less optimistic. Although the vaccine has just begun, mass immunity will have to go through a long and difficult process. It could take up to a year to finish vaccination in the United States.”
▷ Why can’t I speed up more?
“The biggest cause is that the US public health system is not uniform. It is quite dispersed, so the level varies from region to region. Countries with highly decentralized health systems like the United States are the same. Fortunately, the survey found that skepticism about the effectiveness and safety of vaccines is decreasing. President Donald Trump wasn’t very helpful in the process of dealing with the Corona 19 outbreak. If more than 70 million voters (in support of Trump) collectively refuse vaccination, the United States will never reach mass immunity. As the perception of vaccines is changing, I think we will eventually overcome it even if it takes time.”
▷ How helpful is a stimulus package that gives direct cash to Americans?
“I think there will be a clear limit. This is because even if you receive cash, it is not easy to regain your strong spending habits as in the past. A typical example is that you and I started to’preventive saving’ when the economic shock hit immediately after the pandemic (a global pandemic of the pandemic). Again, the phenomenon of stacking without spending money can be reproduced.”
▷ In Europe, where the number of corona 19 confirmed cases is increasing rapidly, the economic blockade is expanding.
“To forecast the European market, you must look at it in detail. Because the situation is different for each country. The German economy, for example, is heavily dependent on exports to China. The situation in Germany is good among European countries as the Chinese economy is on a clear recovery. The problem is Italy. It is one of the most aging societies, making it vulnerable to COVID-19. There is also a lot of debt, so recovery can be relatively slow.”
▷You are very optimistic about the Chinese economy.
“Europe is similar, but China has a centralized public health system. Vaccines can be released and distributed much more efficiently than in the United States. Moreover, unlike the United States and Europe, China first restarted its economy without enormous fiscal and monetary policies.”
▷There is an expectation that the US government will pour out hard policy on China.
“The trade conflict between the US and China is inevitable. Intellectual property rights, security, and human rights can lead to more serious conflicts than trade. Instead, the approach will change once the Biden administration is in place. Instead of dealing with China alone like Trump, we’re going to work with like-minded countries to respond. It puts pressure on China by forming a sort of united front.”
▷ Can China eventually change in that way?
“It is difficult to be sure. However, a different approach from the Trump administration is essential. We already know that China’s economic development does not lead to a more open and democratic political system. It’s a very difficult homework in America. We need to be more skeptical about China and plan a strategy. Also, I do not believe that there will be a country that will benefit from the conflict between the two sides. You shouldn’t expect reflection benefits.”
▷ How do you forecast the other emerging markets except China?
“As in Europe, it is impossible to unite emerging markets into a single framework. You have to look at each country in detail. First of all, it can be said that the outlook for China and neighboring countries is bright. Conversely, emerging economies on other continents, such as Turkey, Brazil and South Africa, are more likely to face a much more serious financial crisis.”
▷ There are many points that the global economy is showing a K-shaped polarization. What is the solution?
“In Korea as well as the United States, inequality, such as the rich and the poor, has always been a big problem. This inequality has intensified after the coronavirus outbreak. Statistics show that, for example, in the rich country of the United States, there are quite a few school ages who do not get enough nutrients. Short-term improvement measures are tax increase and income redistribution. It is to introduce public assistance programs that charge more taxes for the wealthy and more for the low-income. But it’s literally just a short-term prescription. A sustainable solution is to prepare low-income families for’post-corona’. It’s a way to give you the skills you need so you can be productive yourself. That is education and training. A much better alternative is to expand higher education opportunities such as universities and strengthen vocational training systems. Just keep in mind that it takes time to build a program like this.”
▷ The term of President Trump is almost over. Please rate your foreign policy.
“It’s so frustrating that it’s hard to find something good. Foreign policy was out of balance and there were many mistakes. Just by normalizing the Morocco-Israeli relations, which are the result of achievements. For the bilateral agreement, the United States recognized Morocco’s controversial Western Sahara sovereignty (Morocco annexed the Western Sahara in 1979 without international consent). Not only did this create a new risk of conflict in the region, but as a result, it wasn’t helpful for Israeli security. Another example is Switzerland and Vietnam designated as currency manipulators. It only hurts international cooperation and weakens the US economy. It put a great burden on the Biden government.”
▷ What policies should be intensively pursued after the Biden government takes power?
“Soon after taking office, Biden pledged to return to the Paris Climate Agreement. I will also join the World Trade Organization (WTO) and work on organizational reform. It’s re-creating a trade system based on rules. The Trump administration will not immediately give up the high retaliatory tariffs imposed on China. I believe that through more systematic and effective negotiations, access to the Chinese market will be expanded and the takeover of intellectual property rights will be prevented. Of course, in exchange for lowering some of the retaliation tariffs.”
▷ The 20 major countries (G20) took the Deferred Debt Repayment Measure (DSI) targeting 73 low-income countries that were hit hard by Corona 19. I recently wrote that there are many limits here.
“While rich countries have delayed repayment of interest to developing countries, they haven’t figured out how to attract private financial institutions. Private debt remains the same. The money owed to each government can be paid back to private companies first. In addition, we negotiated only with the poorest countries, excluding’middle-sized’ debtors such as Brazil, Turkey and South Africa.”
■ Professor Icahngreen…
Selected as one of the 100 most influential intellectuals in the world
Barry Icahngreen, professor of economics at the University of California, Berkeley (UC Berkeley), is considered a world-class monetary and financial system expert. He began teaching at UC Berkeley in 1987. Ben Bernanke is known to have had a major impact on the monetary policy of the former chairman of the US Central Bank (Fed).
After receiving his master’s and doctoral degrees in economics from Yale University, he served as the chairman of the Peterson Institute for International Economics, a research fellow at the American Economic Research Institute (NBER), and a senior policy adviser at the International Monetary Fund (IMF). Forinpolicy, a bimonthly diplomatic journal, was selected as the ‘100 most influential intellectuals in the world’ in 2011.
He is also a leading Jihan-pa economist. He is still a full-time professor at the UC Berkeley Korean Studies Institute. Co-authored The Korean Economy: From Miracle History to Sustainable Future.
△Bachelor in Economics at UC Santa Cruz △Master and Ph.D. in Economics at Yale University △Professor at UC Berkeley △Sumpeter Award, International Soumpeter Society (2010) △Chairman of the American Economic History Association
New York = Correspondent Cho Jae-gil [email protected]