We’ve experienced so much personal, social and economic disruption over the past few years. The pandemic reworked how we view some of the most fundamental and predictable aspects of our lives. How will we emerge from all of the trauma and upheaval? Our guest this week points out that part of our recovery will require us embracing the unexpected and a more high-risk world. Felix Salmon is the chief financial correspondent at Axios and hosts the Slate Money podcast. Salmon is also author of “The Phoenix Economy: Work, Life, and Money in the New Not Normal.” He joins WITHpod to discuss the potential of “phoenixes emerging from the ashes” of this moment, the interconnectedness and impact of global climate change on volatility, why he says we should acclimate to increased unpredictability and more.
Note: This is a rough transcript — please excuse any typos.
Felix Salmon: There will be another pandemic. There’s no way we’re going to go another 100 years without a pandemic. The, you know, big risk right now, of course, in the next few years is going to be that China invades Taiwan. We’ve already had Russia invade Ukraine.
And then underneath all of that is the mother, great big daddy of them all, which is climate change. And you know, global climate change is going to cause dislocations, which make COVID look like a head cold. And so, all of that is going to really profoundly increase volatility and unpredictability. And we just have to expect that.
Chris Hayes: Hello and welcome to “Why Is This Happening?” with me your host, Chris Hayes.
A few weeks ago, I got a email from a journalist and writer that I’ve known for a long time. It just said, the subject line was, this is totally my book, exclamation point. And then it had a screenshot image of some text. And the text said the following: Chris Hayes hosts an interview podcast, parentheses, “it’s mostly good, I promise”, parentheses. And his shtick is COVID and our reaction to it is underutilized and is an explanation in almost all facets of life.
Now, I thought this is a very funny comment for a bunch of reasons. It’s mostly good, comma, I promise, exclamation point in parentheses is one of my favorite reviews of our podcast. Also describing me as having a shtick about COVID, which I don’t think I quite realized until I read this person saying that my shtick is that COVID and our reaction to it is underutilized as an explanation in almost all facets of life. But that’s actually pretty accurate.
I think if you listen to this podcast, it’s something that I keep coming back to. There’s so much disruption that we’ve experienced over the last two to three years. And so much of it kind of memory hold, partly, I think, subsumed underneath kind of a collective trauma, a desire to kind of like look at the horizon and not backwards, partly because it was just so difficult.
Both, there’s personal trauma of people who have lingering health issues, who lost loved ones, who went through, you know, awful circumstances. There’s this sort of isolation and loneliness of dislocation. There’s a interrupted school and all this stuff.
And a huge part of the story in the last year or two to me is how a society begins to emerge from the worst parts of that experience, both the pandemic itself and its health effects, and then the knock-on effects socially of all the dislocation.
The author of that email is Felix Salmon, who is the Chief Financial Correspondent at Axios. He’s hosted the Slate Money podcast. And he was correct in describing what is totally his book. It’s called the “Phoenix Economy: Work, Life, and Money in the New Not Normal”.
Felix Salmon, it’s great to have you on the program.
Felix Salmon: I’m super excited. I’m glad that I found a fellow traveler in my quest to persuade the world that COVID and the pandemic was incredibly important, and the repercussions will be with us for decades.
Chris Hayes: Yeah. I mean, let’s start with where we are right now, because I’m a real macroeconomic junkie in terms of like, I look at the data. I was looking at the ISM manufacturing data today. I’m looking at the various quits levels and the job openings per seeker.
Felix Salmon: Got to love the JOLTS report. If you’re not a JOLTS junkie —
Chris Hayes: So (sp?), we love the JOLTS report.
Felix Salmon: — then really, yeah.
Chris Hayes: Exactly. And one of the things is that it is just a very weird economy. It is definitely unlike an economy that I have ever covered before. It just doesn’t look like anything before.
I mean, I, you know, started covering politics post 2001. There was a kind of housing bubble. There was, of course, the great financial crisis and the aftermath of that. There was in the sort of Trump years, you know, relatively low inflation and tight labor markets and high wage growth was the first time we sort of dug our way out of the hole of the great recession. How would you characterize the economy now?
Felix Salmon: I think what you were used to, what everyone was used to, was a world which had a direction, right? It had an arrow, and sometimes the arrow was going up and sometimes the arrow was going down. And that’s what I think of as the normal world.
Now, that’s not normal by historical standards. This idea that you can have a relatively stable economy growing nearly all quarters. You know, recessions are rare things that you try and avoid. Wars are rare things that you try and avoid. Pandemics are rare things that don’t happen for 100 years at a time.
But weirdly, and we had this incredibly unusual historical anomaly that for at least 70 years, basically ‘46 to 2015, we were in that kind of low volatility predictable world where you could have someone like Warren Buffett who just said, I am just going to make a big bet on America. And if you make a big bet on America, you can become the richest person in the world, you know? And that kind of world of low volatility and long-term strategic planning and that kind of thing where you could make these generalizations about, look, this is good and this is good, was true certainly until late 2015.
Things started going a bit haywire with the Trump vote and the Brexit vote in 2016. But then when the pandemic hits in 2020, everything breaks. The economy grinds to a halt. All of the supply chains break. And we have to just reinvent a whole new economy. We have huge amounts of trauma. As you said, we have massive unemployment. We have GDP falling off a cliff. We have individuals and businesses reinventing their lives, and how they work, and what their priorities are.
And what we have now is just much more volatile, much more unpredictable, much more heterogeneous, much less prone to generalization, and a world where we don’t really know what’s going on. And you have to just be super nimble and expect the unexpected and expect to have to change your mind much more than we ever used to.
Chris Hayes: Let’s talk about that epoch because it was striking to me that you place it at 2015 and not 2007. Because to me, the big rupture is 2007-2008, is the housing crisis, right? That we had, you know, a great financial crisis that blows up a lot of expectations. It’s global. It produces these seismic effects. I think a lot of the politics that you see, you know, represented in even Brexit and Trump and stuff like that are, in some ways, knock-on effects of that dislocation (sp?).
Why isn’t that the breaking point? Why isn’t that the place where the hinge happens?
Felix Salmon: Yeah, it’s a good question. There’s absolutely no doubt in my mind that neither Brexit nor Trump would have happened absent the financial crisis. The financial crisis was responsible for this really global loss of faith in institutions and trust in institutions that we’ve talked about —
Chris Hayes: Yeah.
Felix Salmon: — many times, that loss of faith and that loss of faith in even just basic ideas of the truth then manifested in 2016 in those electoral outcomes that were so disastrous.
My feeling is that in terms of the economy and business, what we had in 2008-2009 was basically a common or garden financial crisis. It was a large one, but it was within the realm of what we had —
Chris Hayes: It was recognizable.
Felix Salmon: Yeah, it was recognizable. We knew what the tools were to fix it.
Chris Hayes: In fact, that’s part of what’s so maddening about the —
Felix Salmon: Yeah.
Chris Hayes: — recovery is that we ignored the lessons that we had learned because it was actually a large but garden variety financial crisis.
Felix Salmon: And financial crisis, you know, to be fair, they are harder to recover from than like a big, sharp shock like a pandemic. So, on some level, you kind of expect the recovery from a financial crisis to be slower and more painful than the recovery from something like a pandemic.
But by the same token, yes, you’re right. We should have recovered much more quickly. We should have been much more aggressive. And the way we recovered on that very sort of painfully slow, but also quite straight line from sort of mid-2009 onwards to the next five years or so, was just very slow and steady and predictable, and it was not volatile at all.
Chris Hayes: Yeah, that’s true. And it was brutal and grinding for a lot of people. There was this sort of newness to the kind of gig economy and the kind of pool of cheap labor that gave rise to all sorts of stuff that I think was a little bit of an anomaly, right? It was like this thing that was called innovation that was just like, there’s a lot of excess cheap labor lying around. Because we have a huge demand gap, we’re going to call it, you know, whatever, Uber or FreshDirect or whatever thing we can.
But in the sense that, like, it didn’t feel like the day-to-day rhythms of life or work-life or the patterns of the world were radically altered, pre and post the recession, the way they feel pre and post the pandemic.
Felix Salmon: Exactly. And actually, that’s one of the huge differences. And, you know, right now, we have incredibly low unemployment. And that was something no one really expected when the pandemic hit, was this idea that we could almost immediately find ourselves in a world of, like, extreme labor shortages. You’re quite right that the huge numbers of people who lost their jobs in 2008-2009 wound up creating the preconditions for the gig economy and the precariat, and that kind of way in which labor had almost no power compared to capital.
Corporations always look for cheap labor. You know, we found it in China, then we found it domestically. But right now, it’s hard to find anywhere. And we have seen labor have much more power than at any point in my lifetime. And that has been one of the most positive effects of the pandemic.
Especially at the bottom end of the wage spectrum, there was this, you know, broad feeling pre-pandemic that there was a lot of Americans who were making minimum wage of 7 bucks an hour. And today the de facto minimum wage across most of America has basically doubled that. It’s $15 an hour. That’s a huge change.
We have polls coming out saying that never in the history of polling have people been happier at work. People took advantage of the pandemic to quit the jobs they hated. If you hated your boss and you hated your job, you just quit, and you found something you preferred to do.
Sometimes you just quit the workforce entirely, and that’s fine too, but we have this YOLO economy here. People have realized how precious this one life we have on this planet is, and they don’t want to spend it stuck in some crappy job somewhere.
Chris Hayes: I mean, what’s interesting to me is, like, the causality between that realization and just market conditions. Like labor market conditions is like, at some level, if the materialist view of this as like so much of the story that you can tell about 2009 through 2016 probably, is just a story of an economy that is below what its level of aggregate demand should be, that it still has this huge output gap.
It has weak labor markets. All that, you know, occupy Wall Street, the percolating like the sort of rejuvenation of American socialism, the sort of turn to the left of an entire cohort, again, totally explicable on materialist grounds, like things were bad, like labor had very little power. People were, you know, digging out from debt.
My question to you is, and this is a point you bring up in the book pretty early on that I think is an interesting one, is like, there’s a temptation to draw a straight line out from where we are to the future. And one of the great lessons to me as just a way of thinking about the world is how dangerous that is to do, because I remember New Year’s Eve 2019 to 2020, I remember like thinking like, what is this year going to be? I did not nail it, when I thought forward (ph) about what 2020 was going to look like.
Felix Salmon: Pretty much no one did, yeah.
Chris Hayes: I don’t think anyone nailed that. And so, even prior to the question of, okay, what does the economy look like now and what stays and what goes is this lesson about humility about the future and this lesson about volatility. And I want you to talk a little bit about your theory on that, because you seem to be saying something both about the economy, but more deeply about how much we should expect dislocation, interruption, volatility, exogenous events to knock things in a different direction.
Felix Salmon: Right. And that’s my theory is that we were living for decades under this umbrella of, you know, the United Nations, of the Bretton Woods Institutions, of people who could remember the Second World War and would dedicate their life, you know, these sort of great statesmen who would dedicate their lives to creating an interconnected global economy where that could never happen again. And you know, the European Union project is very much a project whose heart is in this idea of, like, we’re going to create a continent where we’re never going to have a war in Europe again. So is the League of Nations, and so on and so forth.
And that memory, that visceral memory of World War II faded. You know, those people died, and they don’t exist anymore. There are very few people alive today and certainly none with real power who could still remember the war.
And the first real inkling that I had that it was over, and this is why I dated largely to 2016, is those two seismic elections in 2016 where people really voted to dismantle those institutions. They were like, we don’t like these globalist institutions and we’re going to tear it down.
And even if it’s bad for us financially —
Chris Hayes: Yeah.
Felix Salmon: — that’s a price worth paying. And without those institutions, the world became much more brittle and much more prone to what you call exogenous shocks. And then we got this massive exogenous shock of the pandemic, which was magnified by the fact that U.S.-China relations were so bad. And we realized how fragile a lot of our supply chains were, which we hadn’t necessarily realized before.
And then we had to rebuild. And it turns out that we rebuilt in an astonishingly fast and surprisingly successful manner. And part of that rebuilding was this sort of rise of YOLO tendencies of I want to go out and spend a bunch of money on services at exactly the same time as everyone who’s working in those service industries is quitting their jobs because they hate them.
Chris Hayes: Right, right.
Felix Salmon: And so, you get this like massive imbalance of supply and demand and higher wages and inflation and all of these kinds of things. But you also, yeah, the big geopolitical consensus that kept the world relatively calm for so long has completely disappeared. There will be another pandemic. There’s no way we’re going to go another 100 years without a pandemic.
The, you know, big risk right now, of course, in the next few years is going to be that China invades Taiwan. We’ve already had Russia invade Ukraine. And then underneath all of that is the mother, great big daddy of them all, which is climate change. And global climate change is going to cause dislocations, which make COVID look like a head cold. And so, all of that is going to really profoundly increase volatility and unpredictability. And we just have to expect that.
Chris Hayes: So, I mean, I agree with all that. I’m obsessed with the story this week of State Farm is going to not issue homeowner policies in California. Have you seen this?
Felix Salmon: Right.
Chris Hayes: They’re just like —
Felix Salmon: Yeah.
Chris Hayes: — there’s just like the climate risk. They’ve just been taking a bath on wildfires. And so, they’re just like, we’re out.
And, you know, the insurance markets, there’s Professor Ben Keys at Wharton who testified before, I think, the Senate on this and he wrote a New York Times op-ed, but like, insurance markets are already going pretty wobbly in a lot of places on climate risk. I mean, you’re seeing this in Florida where premiums are going up crazily amounts. You know, the market enterprise that smooths volatility is insurance, like, that’s what they do. They price risk, they sell it, and then, you know, they collect little premiums, and they pay out when big disasters happen. It’s in their incentive to figure out how to price all this stuff. It’s getting harder and harder to price. And even when they’re pricing it accurately, the premiums are going up.
That seems to me like an enormous disruption that almost no one’s talking about, but it’s not even like in the future. It’s already sort of appearing.
Felix Salmon: It’s happened. And conversely, of course, if you’re in a relatively low volatility, quiet, normal world, then owning an insurance company is the best way to get rich you can possibly imagine. And that’s what Warren Buffett did.
Chris Hayes: Yes, exactly. That’s right, yes.
Felix Salmon: So yeah, so this is the point at which you start looking at, you know, Berkshire Hathaway, which is actually fine. It’s still got a Fortress balance sheet and he can withstand a bunch of big shocks. But yeah, you start thinking maybe this industry is going to start running into a lot more of these events, especially property and casualty, which is very prone to such things.
And yeah, house insurance prices are going to go up, which might, at the margin, result in house prices going down, but that’s going to take a while, you know? But what it realistically does is it just puts individual homeowners on the risk of their home falling down or burning up in a fire or drowning or something like that. And that’s the risk they can’t afford to take, but they have no choice because no one’s going to insure them against it.
Chris Hayes: Yeah. I mean, I know people right now who are scrambling to not having their mortgage canceled because they just got word that their house is not insured. Like again, this is right now. It’s not like, you know, someone’s got some, you know, fiction, sci-fi version of like the climate apocalyptic future. Like right now, like, you got a note being like, we can’t insure you anymore. And then your bank says, we can’t continue your mortgage, the terms of your mortgage, like you have to be insured. That’s a real thing happening.
And I guess the question is like, what do you do with that volatility? Like, what does that mean for workers? What does it mean for institutions? What does it mean for investors or companies, all the different players in an economy? Like, what does acclimating to a high volatility world look like?
Felix Salmon: It’s a very good question, and I try very hard to avoid making predictions in this book, because the whole point of the book is that what’s happening is unpredictable. But the part of the surprising recovery from the pandemic was our ability to physically relocate and, in fact, our desire to physically relocate.
And we had all manner of cross currents. We had a lot of older people moving out of cities. We had younger people actually moving into cities. But the rise of remote work and the degree to which people can choose where they live makes it a lot easier to basically say, well, if I can’t insure my house in Miami, because it’s going to be underwater in 20 years, I guess I’m just going to have to go somewhere else. And that is easier now than it ever has been.
So who are the winners going to be? I don’t know. Like, it’s going to be messy. And, you know, Miami is a very vibrant city, and it’s not going anywhere anytime soon, except for down. You know, we will see how that turns out.
I mean, you know, there are cities in Nigeria that are mostly underwater. I mean, cities can actually function when they’re mostly underwater. I have no idea where the Miami has the —
Chris Hayes: You mean below sea level?
Felix Salmon: Oh sorry, below — well, I mean, like with —
Chris Hayes: Those are different things.
Felix Salmon: Yeah. Yeah.
Chris Hayes: Just so — I just want to clarify, but you’re not talking about Atlantis. I mean —
Felix Salmon: Right, exactly.
Chris Hayes: — you know —
Felix Salmon: People are literally living in —
Chris Hayes: Yeah.
Felix Salmon: — cities under the sea.
Chris Hayes: Yes.
Felix Salmon: Yeah.
Chris Hayes: New Orleans sits, you know, famously below sea level.
Felix Salmon: Yeah, as does, you know, Amsterdam.
Chris Hayes: Right. But again, those are all like that’s a big part of what I think of about this sort of next period in the global economy, which is the way I think about it is like the reassertion of the physical over the virtual or like the importance of atoms over bits, that like we went through this like long period of the virtual being dominant and tech startups and the software eats the world was a famous phrase.
And I just think that the next phase is going to be a lot of like, how many hydrogen plants can you get going in photovoltaic cells can you get on roofs? And how much green manufacturing can you get up? And how much resilience can you engineer into your cities like that? Those are going to be some much more central primary parts of both policymakers and economic transactions, I think, than what we had in the sort of 30 years before. What do you think?
Felix Salmon: Yeah, no, I couldn’t agree more, that you’ve got this massive energy emergency, we need to reduce reliance on fossil fuels. We’re not realistically going to do that with nuclear for a whole bunch of reasons, which means that we’re going to be relying on renewables. And one of the things about renewables means a reliance on batteries of various descriptions. So there’s going to be this big move into battery technology.
Already, solar power is cheaper than carbon power in much of the world, most of the world, I would say. And so that transition, it requires just massive amounts of infrastructure and massive changes —
Chris Hayes: Yes.
Felix Salmon: — to the way we construct our built environment. And we’re only at the beginning of that.
Chris Hayes: So there’s two other sort of aspects here. One is a sort of nature of the global economy. And when you write about the book about the sort of Bretton Woods, the sort of post-World War II, U.S. hegemony, the world financial system, these institutions that are created, the World Bank, the IMF, the U.S. dollar reserve currency, the G7, all these things that, you know, that are created in a Cold War environment. Then after ‘89 to ‘91, ‘92, when the Iron Curtain and the Soviet Union fall, you have the kind of, you know, peak neoliberalism era, right, where this sort of globalization happens. And you also have this sort of developing world as this concept.
And that concept has just gotten way more complicated. Like, you know, I mean, you’ve got now this enormous reduction in global poverty that’s happened. You have places like China and India with, you know, hundreds of millions of people living sort of first-world lives, basically, or globally middle income lives. And less when you talk about, like, the kind of endless pool of cheap labor that was part of the engine of that period of globalization is just reaching some kind of end. And then you’ve got the sort of reassertion of kind of industrial policy and trade mercantilist politics in it all. And talk a little bit about how you see that all playing out.
Felix Salmon: So, yeah, the fact that China has become a rich country is profoundly important and has caused this massive tension in the United States between the business classes and the political classes. You know, the political classes are very worried about the United States losing its hegemony and China taking over as the most powerful country in the world.
And so, you know, we get all of this rhetoric around information technology as a national security risk and this kind of thing. There’s a lot of talk about A.I. as the new sort of nuclear arms race. You know, we’ve got to develop A.I. before the Chinese or faster than the Chinese because otherwise the Chinese will have it and we won’t. And it’s like a scene from Dr. Strangelove, you know?
Chris Hayes: Right, right.
Felix Salmon: And meanwhile, you have this very now rich country with hundreds of millions of middle-class people with lots of purchasing power, and China is the number one or number two market for all of the companies we all know and love, Apple, Tesla, Starbucks, Nike, McDonald’s, General Motors, you know, and so on and so forth, right?
And so, all of these companies, and these companies have historically been very aligned with, you know, the Senate and with bien pensant, like, political opinion, all of these companies are like, we’ve got to sell into China. We’ve got to have good relations with China. We had Elon Musk in China last week saying that China and the U.S. are like conjoined twins. We had Jamie Dimon in Shanghai. We have, you know, all of the luxury good magnates going over there.
And so, all of these businesspeople are trying to make China continue to be an embedded part of the global economy, even as the politicians are trying to sort of stymie that and say, like, no —
Chris Hayes: Yeah.
Felix Salmon: — we have a much more adversarial relationship, and we’ve got to make sure that China doesn’t become much more powerful than it already is.
Chris Hayes: Yeah. The only thing I would add to that just in the interest of fairness is that I think you can also say that Xi’s presidency has grown more nationalistic and bellicose and sort of also interested in more sort of using trade relationships as tools of geopolitical force as well, right? There’s some of that on both sides.
Felix Salmon: So yeah, I mean, I go into this in the book, which is the undercover of COVID basically.
Chris Hayes: Right.
Felix Salmon: He went in and took over Hong Kong. And —
Chris Hayes: Yeah.
Felix Salmon: — for me, like the way that Hong Kong, more or less, overnight lost all of its freedoms was more shocking and more unexpected, even than Russia invading Ukraine. I was like, whoa, he did what, that happened what? And I still can barely believe that he did it.
And the fact is that if he can do that and if all of these authoritarian tendencies, which were combined, by the way, with a big crackdown on sort of private sector billionaires, you know, you have that massive strengthening of the state apparatus and the Chinese Communist Party at the expense of private entrepreneurialism. So yeah, you have a very objectively scary geopolitical force. I’m not saying that politicians are wrong.
Chris Hayes: Right. You know, you mentioned this in the book, you talk about sort of the, you know, people have talked about the end of American hegemony and American hegemony has managed to outlast a lot of the predictions of, you know, it going away. And, in some ways, I find certain parts of the cultural hegemony of America to be shockingly robust. I mean, it’s wild the degree to which American cultural exports continue to dominate the world, you know?
And maybe that’s going to change radically. Maybe that’s the sort of vestigial, you know, one of the sort of like last things to go. But the sort of idea of a world, the lack of a story about some fundamental telos or progress towards some further state which, to me, is one of the big disruptions here, like the idea of like, you know, the sort of the post-Cold War story about kind of the triumph of liberal democracy and people talk about the end of history, I’ve had Fukuyama on the program, which gets shorthanded.
But even if you don’t talk about that, generally, the notion of some sort of like the world, poor countries are going to get richer, places are going to become more open and more free, there will be less war, like that kind of vision of sort of cooperative global development, that really seems, whether it was ever true, which I don’t think it was, as just a guiding narrative seems completely ditched by basically all parties at this point.
Felix Salmon: Correct. Yes, absolutely and at exactly the time when we need it most because of global warming and —
Chris Hayes: That’s interesting.
Felix Salmon: — immense amount of migration that that’s going to cause.
You know, large chunks of the world are going to become uninhabitable. And the people who live in those chunks of the world are perforce going to have to live somewhere else. And we just don’t have a plan for how that’s going to happen.
Chris Hayes: More of our conversation after this quick break.
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This is the thing that I think about the climate migration crisis a lot, particularly, as we see the incredible fervor of impotency of anti-immigration politics in so many places. In a weird way, it’s like an inverse version of universal cosmopolitanism, which is that everyone’s got their nativists. And everyone’s got some group, you know, some neighbor group that there are too many of, you know, in their backyard. And that’s overgeneralizing and thinking every society has people that are incredibly welcoming to immigrants and refugees and incredibly not welcoming to them and everything in between.
But there is a strain of sort of nativism that you see in all kinds of places under all sorts of conditions in rich countries and poor countries and countries where race is the prime issue and countries where race isn’t the prime issue, where there’s essentially, you know, either racial or ethnic or linguistic commonality, right? That the idea of strangers coming, others coming, people from another land coming here manages to turn a lot of politics upside down in a way that is going to be, in some ways, a central story, both socioeconomically, politically and economically, of the climate era.
Felix Salmon: So the pandemic was a dry run for this, right? You will have noticed when the pandemic hit, the first thing that basically every government in the world did was it put up massive walls around the country.
In the case of Australia, it wasn’t just the country, it was like individual states within the country, travel and international movement became incredibly constrained. And everyone did this while paying lip service to trying to, you know, deal with the pandemic. There is no evidence that it helped at all in terms of dealing with the pandemic. You know, the virus is going to virus.
Chris Hayes: That’s not quite true, right? I mean, I would say, island nations like Australia and New Zealand, like, you know, you have strict restrictions on who can come in and come out. And you —
Felix Salmon: Yeah, you could do a zero COVID policy, and Australia did it, New Zealand did it, Vietnam did it. Even China did it quite successfully for quite a long time, right? So you can keep it out for a while.
But no, what I was talking about was more —
Chris Hayes: Yeah.
Felix Salmon: — like the barriers between, say, the United States and Europe, where there already was a lot of COVID in both areas and stopping people from going back and forth between the two was not particularly helpful.
And even after the election in 2021, you get Tony Blinken coming in as Secretary of State and trying to repair some of the damage done by Trump. And he keeps Europeans out of the United States for most of 2021. I think it’s only in like November ‘21 that he starts allowing them in if they’re vaccinated and all the rest of it.
And why is that? It’s because of these nativist impulses that are not just, you know, seen in various different countries around the world. In the book, I go into how you can trace them back to traits found in monkey troops, right? Like, there are primates who display these behaviors, and they’re rational, right?
On some level, if you are a troop of monkeys and then some other monkey wants to join you, that other monkey might be diseased and wipe out —
Chris Hayes: Right.
Felix Salmon: — your whole troop. And so, you force that monkey to go through all manners of like quarantine, basically, to make sure that they’re okay to join before you allow them in.
And this is something which we see in primates. It’s something which is hardwired into us. It’s the reason why, as we get richer, one of the first things we do is we increase the amount of space that we have around us in our homes and in the way we live our lives. It’s one of the reasons why America feels richer than it actually is just because there’s so much space here around people, and space is such a luxury.
And people want space and people don’t want strange, new people invading that space, whether or not there’s space for it, whether or not there’s a moral argument for it. The more migration we see going forward with climate change and everything else, the more nativism we’re going to see. That’s absolutely certain. We need to find a way to somehow like harness or overcome that inevitability rather than just sort of preaching at people and saying that’s racist because that’s going to get you nowhere.
Chris Hayes: Yeah, I mean, I think that’s what I would say a slightly more, well, considerably more fatalistic calculation, understanding than I have. And I mean, I think that you basically, I think, have twin impulses, right? People like new people and strangers in all kinds of ways. They like new experiences. You know, they like socializing, we’re social creatures, right? These sort of definitions of what lines of in-group and out-group are amazingly malleable.
But the nativist impulse, right, the fear of the outsider is absolutely like an enduring and fatigable human trait. And a question of like, what conditions, you know, raise or lower the salience of which impulses, to me, is the really big question.
And I agree that, you know, the basic premise here, which is that times of threat and fear, like, for instance, a pandemic that’s killing people, are going to tend to raise the salience of these, the impulses we have that are the most sort of nativistic, the most sort of like, Katy bar the door, build walls, et cetera. And that, you know, the dislocation climate causes is likely to go along similar lines. And we’re going to have to find ways around that.
Felix Salmon: And, you know, as a Brit, you know, I just always think back to that Brexit vote, which was a very, you know, fundamentally xenophobic vote, right? And I’m absolutely convinced that it would never have gone the way it did, were it not for the fact that we had recently, in the European Union, allowed Romania into the E.U. And somehow, that was just, like, the straw that broke the camel, that was a bridge (ph) too far.
Like we can cope with the Poles coming. We can cope with the French, and the Italians, and the Spanish, and the Portuguese. But the Romanians, you know, the idea that they have the right to just come into the U.K. and start working, that’s too much, and we’re just going to leave the E.U. rather than put up with that.
And that was in 2016, right? That wasn’t at a time of major global —
Chris Hayes: Right.
Felix Salmon: — health crisis or anything like that.
Chris Hayes: No. One of the things I found so fascinating about Brexit was precisely on this point, you know, there were these really kind of racist arguments for Brexit and images used, particularly around Syrian refugees, which also was a high salience moment, right? There’s hundreds of —
Felix Salmon: Right.
Chris Hayes: — thousands of folks who are leaving the destruction of Syria. They’re coming into Europe. And, you know, the people pushing Brexit manipulated that.
From across the pond, I had an overly simplistic vision of this as like recognizably racist in those terms as opposed to distinctly xenophobic. And those are sort of different because you could be xenophobic if you’re English, you could be xenophobic against the Irish, right? They’re just like right next door, they’re not like racially different.
And so, one of the things that I found so fascinating post Brexit was like, yeah, how much animus there was against like the Poles or Romanians. You know, again, the concept of white is completely fabricated, but like ostensibly white fellow European folks that there was this xenophobic resentment against.
Felix Salmon: I wrote most of this book in Ireland, actually, a lovely little cottage in the Connemara. And one of the things I would do was talk to folks there about if there was a referendum tomorrow to reunify the island of Ireland, how would it go? How would people vote? And there were obviously a range of views, but everyone broadly said the same thing, which is I have no idea, it would be really, really close. That there’s really fundamental tenet of the country of Ireland since independence that, you know, it is based in the island of Ireland and the big dream is reunification.
That big dream does not really live on anymore, certainly not to the extent that it used to. And the idea that they should just embrace an effective influx of a whole bunch of Northern Irish folks who most of them don’t —
Chris Hayes: That’s so fascinating.
Felix Salmon: — particularly like very much. They’re like, yeah, maybe not.
Chris Hayes: Ah, yeah. Yes. The sort of both economic and political salience of that is going to be even larger. It’s also going to be compounded by, and you talk about this in the book, the demographics of the rich world, right, which is the fact that the richest countries are shrinking countries, population-wise, and have very obvious demographic challenges they face in terms of, you know, even the highly labor-intensive work for caring for elderly folks, which is something we talked about in last week’s podcast.
Felix Salmon: Yeah. And I mean, the problem and the solution are so intertwined. You know, the fact that migration is such an amazing panacea for so many of the problems that are facing the rich world, the fact that, you know, that these entrenched labor shortages can be fixed almost overnight just by allowing more humans into the country. At least for the time being, like, I do believe that if the United States threw open its borders tomorrow, like the amount of immigration into the country would actually be much lower than most people anticipate.
Chris Hayes: I so wonder about this. This is a thought experiment I consider all the time. Like, if you did six months of open borders, how many people would come? It’s such a fascinating question to think of, like, because it could be a million or it could be a hundred million, I don’t know.
Felix Salmon: If they knew that the borders were closed after six months, it would be more, right?
Chris Hayes: Right, yeah, fair point, right.
Felix Salmon: One of the things we saw in, like, the sixties and seventies and eighties was an effectively open border between California and Mexico, right? The people could and did move back and forth very freely in terms of living and working and precisely because they knew they could, they didn’t, right? They always had that opportunity or they would move for a while and then move back and —
Chris Hayes: Right.
Felix Salmon: — but then once the border starts going up, then you’re like, oh, I need to —
Chris Hayes: I have to immigrate, right, exactly.
Felix Salmon: — permanently place myself in the United States for fear that I won’t be allowed back in. So if you said the border was going to close in six months and a lot of people would rush to enter, but if you just opened it up, then a lot of people really like where they are.
If you look at Italy, is one of my favorite examples, you have a country with a common language. Everyone in Italy speaks Italian. And you have the north being much richer than the south with much lower unemployment than the south. And you have complete freedom of movement. And the natural thing that any economist would expect would be a bunch of people from the south moving to the north to, you know, earn more money and find employment and have a better life.
And over the past, you know, 70 years, that basically hasn’t happened. People just don’t do that. And if they don’t do that within Italy, why do we think they would do that like internationally?
Chris Hayes: Yeah, I will say as an Italian-American myself, proudly, and somebody who lived in Italy, Italians don’t like to stray too far from home. That’s a general matter. Although maybe that’s the point. Maybe that’s a universal human trait and not just an Italian one.
Felix Salmon: Yeah, I mean, obviously you see it, you know, less in Germany, but you can’t take a census in Germany because at any given point in time, 10 percent of the population is off traveling somewhere. You know —
Chris Hayes: Right, right, right.
Felix Salmon: — there’s nowhere in the world you can travel to without finding a German there, but —
Chris Hayes: Right.
Felix Salmon: — there are national differences, but there are also profoundly, deeply seated human impulses to stay where your family is, to stay where you grew up, to stay where you know the —
Chris Hayes: Yeah.
Felix Salmon: — culture and the people.
And international migration, if you look at the people who are arriving on the southern border of the United States or basically anywhere else, Syrian refugees, you just hear the most terrible stories of life that is unlivable. They have no choice but to leave, right?
Chris Hayes: Yeah, right.
Felix Salmon: People will stay where they are even as life gets worse and worse and worse. Only when it becomes completely unbearable that they finally decide that they need to become —
Chris Hayes: Yeah.
Felix Salmon: — you know, refugees.
Chris Hayes: We’ll be right back after we take this quick break.
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Chris Hayes: There’s a sort of, the end to a certain period of kind of neoliberalism, the sort of global growth patch up post pandemic, sort of migration flows that’ll be exacerbated by climate. The other big thing to me is a high interest rate, high inflation world, which we haven’t had for a very long time, and has proved to be incredibly disruptive.
And I guess my question to you is like, there’s a real question about new normal or just reaction to the disruption. And the reason I think it’s particularly interesting is because inflation was normal post World War II through basically 1980, ‘81, ‘82, when Volcker famously hikes rates, induces a recession. And then you get a period that is like the sort of great disinflation, and you have relatively low inflation. And that’s part of the sort of neoliberal globalization project. It all kind of comes together.
And I wonder if you think that era is over, like, are we experiencing something now that’s like we can expect more of or does this feel transitory to you as well?
Felix Salmon: So I think if you look historically at interest rates and inflation, they tend to be low-ish. And when I say low-ish, I mean in that kind of range between about 2 percent and 5 percent. And that’s where we are right now. We’re probably at the top of that range right now, but we’re kind of in that range.
We haven’t blown through it to a high inflation world.
Chris Hayes: Right, yeah.
Felix Salmon: The interest rates, the Federal Reserve has rates of 5 percent right now, and that is considered to be high. And market’s anticipating they might actually come down by the end of the year. So I feel like we are now in a normal range for interest rates. And the inflation is going to come back down to a normal range.
And what was an aberrant was basically the period from the financial crisis when we had to cut rates to zero to try and stimulate the economy through —
Chris Hayes: Yes.
Felix Salmon: — you know, the post-pandemic era when we did exactly the same thing. For most of that time, we had zero interest rates. And that was very odd and very weird and caused all manner of bizarre dislocations and caused a huge amount of capital flowing into speculative assets.
Chris Hayes: Yes.
Felix Salmon: It caused a massive inflow of money into Silicon Valley Bank, but then when it flowed out, caused the collapse of Silicon Valley Bank. I have a whole chapter of my book about meme stocks and NFTs and —
Chris Hayes: Yes.
Felix Salmon: — the way people try and get rich quick. And all of that was caused by ZIRP, by zero interest rate policy, by zero interest rates. And that was weird, and that was unusual.
And one of the things that people used to talk about, you know, during the period of zero interest rates was how on earth are we going to adjust to a renormalization? How are we going to go back to a world where you can have, you know, inflation at 3.5 percent, interest rates at 4 percent, that kind of thing. And that’s normal because, you know, the present value of your bond portfolio will go down so much that will all be insolvent, and our house will be —
Chris Hayes: Right, right.
Felix Salmon: — worth much less than you paid for it (sp?). And there will be this huge financial crisis and wave of insolvency and all the rest of it.
And it turns out we’ve managed to do it, like, the pandemic helped us do it.
Chris Hayes: Yes, that’s a good point. Yeah, that’s a great point. Well, no, not just the pandemic, big fiscal. It was the pandemic but with —
Felix Salmon: And big fiscal, yeah.
Chris Hayes: — but it was crucially important that $5 trillion or $6 trillion of fiscal stimulus —
Felix Salmon: Yeah.
Chris Hayes: — was poured into the economy so that you didn’t have that demand gap, so that, yes, prices went up, but the prices going up in some ways was the least bad option that also reset the capacity of central bankers and the sort of financial world to sort of do what it quote, “normally should do”.
Felix Salmon: Right. And but even in the markets, you would expect, you know, the markets, which were all about valuing the net present value of future cash flows, that, you know, if the discount rate they use to value those cash flows goes up, then you would have a massive decline in the stock market.
Chris Hayes: Right.
Felix Salmon: And just look at Nvidia, you know, like that’s not the case. We’re still valuing future cash flows at incredibly high valuations. And we have, you know, the tech stocks leading the stock market up right now. And that says to me that the scary bits of relatively normal inflation and interest rates, like somewhere in that sort of 3 to 6 percent range, whatever, like turned out not to be so scary after all.
And you’re absolutely right, it would have been much scarier had it not been for all of that fiscal stimulus, but we had the fiscal stimulus. Then again, maybe we wouldn’t have had such high inflation if we hadn’t had all that fiscal stimulus. It’s all —
Chris Hayes: Yeah.
Felix Salmon: — kind of feeds into each other.
But we’re here now. And as I mentioned earlier, you know, we are very happy in our jobs. We have great labor power. We have a relatively super low unemployment rate, a relatively high labor force participation rate.
Even after, you know, long COVID took out a large chunk of the economy, even after a million Americans died as a result of COVID, we have a healthy and happy workforce. And America is looking pretty good.
Chris Hayes: Except, you know, I generally agree with that, and also we should note, inequality has come down during this period as well.
Felix Salmon: Massively and unprecedentedly, yeah.
Chris Hayes: Yeah, unprecedentedly, and also, I mean, inequality can come down a bunch of different ways. If a bunch of people at the top get a lot poorer, that brings down inequality, but it doesn’t necessarily help people at the bottom.
But what we have seen is like actual real wage gains for people at the bottom of the labor market, considerable, even like in real terms, outpacing inflation. And yet everyone hates it is the thing.
Felix Salmon: I know, right.
Chris Hayes: This is the big paradox. This is really the big paradox, you know? But again, and I get it too, I mean, if you look at people’s disposable income in real power purchasing terms, it’s gone down. If you look at, you know, real wages for a lot of people, not everyone, but for a lot of people have gone down. So there’s lots of reasons that, you know, the inflation wipes out a lot of the things that you might otherwise think are trending up.
But, I guess the big question for you is like, you call the Phoenix economy as a sort of hopeful note, like what you’re describing sounds scary in a lot of ways, right? Like the sort of end of normalcy, the sort of acclimating to constant volatility, why isn’t that just a purely pessimistic scary story?
Felix Salmon: Oh, it is scary. And a lot of parts of it are extremely bad. And there’s like no silver lining to the fact that the amount of cigarette smoking went up during the pandemic for the first time in decades, I didn’t know (sp?). That’s never happened before.
I have a bunch of the book about how people just stopped wearing seatbelts, you know, and like a —
Chris Hayes: Yeah, yeah.
Felix Salmon: — whole bunch of —
Chris Hayes: That part is really fascinating, actually. Yes, I mean, like, a real change in people’s risk behavior.
Felix Salmon: Yeah. And these are just like unambiguously bad things that are killing especially young men at a massive rate, much higher than COVID did. And these are the most valuable economic actors in the country, some of them, just dying for really dumb reasons, like not wearing a seatbelt and speeding, drunk driving, that kind of stuff.
We are entering a scary world, a more high-risk world, and one where things can get wiped out much more readily and much more unpredictably than we have known before. That is not a world that is a comfortable one to live in.
But the way that risk works is that, if you have a lot of risk that you have the risk that you can lose everything, which is like minus 100 percent. And that’s about as bad as it can get. Then there’s the upside risk, which can be much, much higher than that.
And we’re kind of seeing a little hint of that with what’s going on in A.I. right now, is that like, if you combine a bunch of downside risks and a bunch of upside risks, just like in the venture capital industry, the big wins can wind up dwarfing even the big losses. And you can wind up with these phoenixes emerging from the ashes. And the ashes are bad, and there’s no two ways about it, but the upside can be even bigger and even better.
Chris Hayes: I hope so. I mean, I guess, I feel that way. The only thing I feel that way about right now, the only, like, truly, like, hopeful economic story to me, well, there’s a few, labor militancy and labor power is a hopeful story to me.
And the real first time in the 20 years I’ve covered the climate crisis, like rapid, almost sort of exponential uptake and investment in the physical infrastructure to build the end of fossil fuels in the green transition. Those two stories are really, really hopeful stories to me.
And also, I think I would say like sort of intellectual exhaustion of neoliberalism and the sort of, you know, the fact that no one’s sort of even really arguing for it anymore. But yeah, this idea very big upside and downside risk at the same time, I think, is a sort of useful way of thinking about it. And I guess the best you can do is just kind of like, hope the upside conquers the downside.
Felix Salmon: Yeah. And just be open to new ideas and new potential, like, there was this incredibly traumatic sort of epistemic crisis that we all went through in 2020, where we were all looking for answers to more or less the same questions, and no one had the answers. We just didn’t know how this disease spread and infected, and was treated, and could be cured, and all of this kind of stuff.
And that was disconcerting, to say the least, for most people because we —
Chris Hayes: Yeah, yeah.
Felix Salmon: — have grown up in this world where, like we just know the answers. Like, if you don’t know the answer, just ask Google or ask an expert, and you’ll get an answer. And we’ve found ourselves in this kind of epistemic void.
And I wound up changing my mind so frequently or updating my price (sp?) like learning new things, which are very important over and over again. And I think, to your point, one of the reasons why people are so convinced that we’re in a recession, and if you look at opinion polls, people have been convinced that we’re in a recession for the past two and a half years, it’s been a constant.
One of the reasons is just that we had this massive pandemic. It was genuinely bad. We were in a recession very briefly. And then we had a bunch of politicians telling us how bad things were and how we needed all of this emergency fiscal stimulus to get us out of the hole, and then we had inflation, and at some point, you just stopped trying to keep up with, you know, I need to update my opinion on where we’re at. You just kind of come —
Chris Hayes: Right, right.
Felix Salmon: — you can say, oh, things are bad, we’re in a recession.
Chris Hayes: Yes, yeah.
Felix Salmon: Things are bad, we’re in recession. And it’s very hard to persuade people that they’re wrong about that.
Chris Hayes: Yeah, yes. Felix Salmon is the Chief Financial Correspondent at Axios. He’s hosted the Slate Money podcast and his new book, “The Phoenix Economy: Work, Life, and Money in the New Not Normal” is available wherever you get books.
Felix, thank you so much.
Felix Salmon: Thanks, Chris. It’s been fun.
Chris Hayes: Once again, great thanks to Felix Salmon. A lot of ground we covered there, but that was a lot of fun. Tweet us with the hashtag #WITHpod, email WITHpod@gmail.com. Be sure to follow us on TikTok by searching for WITHpod.
Why Is This Happening is presented by MSNBC and NBC News, produced by Donnie Holloway and Brendan O’Melia, engineered by Bob Mallory and featuring music by Eddie Cooper. You can see more of our work, including links to things we mentioned here, by going to nbcnews.com/whyisthishappening.
Tweet us with the hashtag #WITHpod, email WITHpod@gmail.com. Follow us on TikTok by searching for WITHpod. “Why Is This Happening?” is presented by MSNBC and NBC News, produced by Doni Holloway and Brendan O’Melia, engineered by Bob Mallory and features music by Eddie Cooper. You can see more of our work, including links to things we mentioned here, by going to nbcnews.com/whyisthishappening.