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On Thursday, November 30, Bruce Greenwald joined Markus’ Academy for a conversation on Long Term Resilience. Bruce C. N. Greenwald is the Robert Heilbrunn Professor Emeritus of Finance and Asset Management at Columbia Business School and the academic Director of the Heilbrunn Center for Graham & Dodd Investing. Introductory remarks by Markus Brunnermeier.
Timestamps:
● [0:00] Markus’ introduction:
● [8:11] Two kinds of resilience
● [35:51] The transformation from manufacturing to services
● [50:12] The problems with policies that reject the transition
● [1:13:33] The end of the export-led development model
● [1:18:10] The bottom line
A summary in five bullets
- Type 1 resilience is about responses to shocks: how much economies fall during crises and how quickly they recover. This has been the focus of the discussions.
- Type 2 resilience however involves the ability of countries to adjust to structural changes/shifts to attain a new (and better) steady state.
- Economies that are not able to adapt will stay down after crises. A prime example of this was the Great Depression: it was about the transition from agriculture to manufacturing, but policymakers failed to promote this transition, perpetuating the crisis.
- Today we face the transition from manufacturing to services, but countries have rejected the transition by protecting manufacturing jobs, boosting exports, and keeping consumption low, which cannot be a global solution.
- In many cases a lack of Type 2 resilience is self-inflicted and due to politically-imposed transformations. Numerous examples from history show that centralized interventions will lead to the wrong path of economic stagnation.