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The economic impact of the COVID-19 pandemic. Trade tensions. Climate change. Austan D. Goolsbee, the Robert P. Gwinn Professor of Economics at Chicago Booth, and Dali L. Yang, William Claude Reavis Professor in the Department of Political Science at the University of Chicago, dove into these topics and more in a wide-ranging virtual discussion, Economics: East and West.

Simulcast in Chicago on February 24 and in Hong Kong on February 25, Economics: East and West kicked off the 2021 program for A Meeting of the Minds: Business and the Human, the event series cosponsored by Chicago Booth and the Stevanovich Institute on the Formation of Knowledge at the University of Chicago. Now in its third year, the series brings together scholars and professionals across a broad range of disciplines to provide a more nuanced understanding of how economics interacts with and shapes culture and society. In his opening remarks, UChicago president Robert J. Zimmer noted that the series “strives to examine fundamental issues regarding business and commerce, and how these issues can be seen not only from the perspective of business and economics, but also through the lens of culture and humanistic inquiry.”

Joshua Cooper Ramo, AB ’92, chairman and CEO of Sornay, a privately held advisory and principal investment firm, moderated the lively hour-long conversation. Watch the video below or scroll to read key takeaways from the event.

COVID-19’s Impact, East and West

Professor Goolsbee commented that COVID-19 has complicated what was already a problematic recovery from the 2008–09 financial crash in the United States. “Before COVID, one of the biggest problems we were facing was a mindset that believed that if we could just go back to 2005 when things were normal, everything would be OK. But 2005 was not normal—we were in the middle of a raging housing bubble—and if you’re waiting for that 2005 bus to take you back to Normalville, you’re going to be hitchhiking.”

COVID-19, he added, “has made that even more true because this is a business cycle unlike anything we’ve seen before. The sectors that have been the most affected—like personal services, leisure, entertainment and travel—are the ones that in the past have been considered recession proof.” The result is that economists and policymakers “need to do some soul-searching,” Goolsbee said. “People are basing their decisions on what happened in 1975 or 1995 when it’s clear that those models don’t work today.”

Professor Yang commented that the Chinese government—after an initial period of fumbling—ultimately acted decisively to contain the virus by locking down 11 million of its citizens. The reason, he added, is that many of the people in power—including president Xi Jinping—remember what the country went through in 2003 with the much smaller SARS epidemic. “In 2003 China was on the receiving end of World Health Organization travel advisories and was deeply troubled by what was going on,” Yang said. “This time, they took an extraordinarily strong stance in terms of analyzing and dealing with the virus and also took a global stance in terms of economic management.”

Trade Tensions, East and West

Regarding the trade war that has roiled the waters between the United States and China in recent years, Professor Goolsbee said he is somewhat optimistic. “I think a lot of the tensions we are experiencing right now will sort of drift away over the next 10 years,” Goolsbee said. “As China gets richer, its economy will naturally look more and more like that of other rich countries, which is to say it will be dominated by services like health care, education, and travel and entertainment. These things are pretty naturally domestic demand driven rather than exported, and I think the leadership in China knows that and is kind of wanting to move in that direction.”

Professor Yang took a more cautious stance. “I think the tensions between the Chinese model and the Western liberal democracies will continue,” he said. The reason, he added, is that China remains a country with a communist leadership and an economy dominated by state-owned enterprises. “The Chinese economy operates on a scale very different from other societies. Today, you have two generations of young people who have only seen growth and prosperity, who are incredibly patriotic and have very little toleration for people who question the system.”

Where East Meets West

One key to China’s success has been a willingness to absorb lessons from other cultures, Yang noted. “The Chinese ruling system has imported a lot of things from the West, including Marxism, and also from Hong Kong and Japan,” he said. “As a result, the system in China is really a combination of different values.”

The country is facing some headwinds in the future. These include an aging population and declining fertility rates. “The burdens of an aging population will begin to kick in around 2030 and will make it much harder for the country to sustain the level of growth it has experienced in recent years,” he said.

Climate change is one issue that could encourage cooperation between the United States and China, Goolsbee added. “Cooperation with China is going to be vital,” he said. “The US went through a phase when it was rapidly developing and there was a massive amount of urban pollution. But ultimately, the body politic decided it was willing to have less economic growth if the result was cleaner air and water. I think the same thing is starting to happen in China. They’re starting to talk about environmental regulations. And as that happens, it’s going to make our interests pretty similar.”

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