Welcome and Introduction:
Colin Hennessey, Executive Director of UChicago Alumni, welcomes attendees to the virtual Harper Lecture. Harper Lectures bring UChicago faculty to cities worldwide to present their research, and this is the first virtual Harper Lecture in the program’s 41-year history. Over 7,700 UChicago alumni and friends are connected, making this the largest Harper lecture in history.

Audience Participation and Technical Issues:
Participants will be muted, but questions can be asked by typing them in the Q&A box during the talk. Attendees should close any unnecessary programs to ensure audio quality. The webinar is being recorded and will be shared on the UChicago Alumni YouTube channel.

Introduction of Hal Weitzman:
Hal Weitzman, Executive Director for Intellectual Capital at the University of Chicago Booth School of Business, will introduce the faculty expert. Weitzman is also the Editor-in-Chief of Chicago Booth Review, which features COVID-19 coverage from economists, social psychologists, and operations experts. Weitzman hosts The Big Question podcast.

Immediate Crisis:
As of April 13th, 2020, the crisis is expected to worsen before improving. Projections suggest a decline in GDP of 30-40% in the second quarter, leading to high unemployment rates. Emerging markets are yet to experience the worst of the crisis.

Recovery Shape:
A V-shaped recovery is unlikely due to the challenges in managing the spread of the pandemic and implementing effective recovery measures. A U-shaped recovery is more probable, requiring extensive technological and medical advancements to ensure safety in public spaces.

Industries and Changes:
Manufacturing may be the first industry to recover due to its ability to implement adequate social distancing. High value-added services like education and financial services may adopt remote technologies, leading to permanent changes in work culture. The value of physical interactions and experiences will likely remain significant.

High Contact Services and Economic Recovery:
High contact services, such as tourism and crowded entertainment, will likely be the last to recover due to the need for a cure, vaccine, or cheap and widely available testing.

Global Economic Impact:
The pandemic has affected all parts of the world, with negative GDP growth expected in both industrial and emerging markets. Even China, with its impressive growth rates, is likely to experience negative growth this year.

Global Cooperation vs. Nationalism:
Nationalism, already strong before the pandemic, may be exacerbated by the crisis, leading to finger-pointing and a breakdown in the international order. Economic nationalism could harm global growth by disrupting supply chains and reducing exports from developing countries.

Potential Shift Towards Global Cooperation:
A change in the tenor of global leadership could lead to more focus on common problems and a search for new rules to address past issues.

Impact on Marginalized Communities:
The pandemic’s worst effects have fallen on marginalized communities, such as African-Americans, undocumented immigrants, and the prison population. Economic recessions tend to increase the wealth gap, and COVID-19 is likely to accentuate this gap.

Economic Recovery and the Wealth Gap:
The pandemic is expected to increase the wealth gap due to job losses and the economic recession. The example of India’s migrant workers highlights the disproportionate impact on vulnerable populations.

Economic Hardship and Migration:
The sudden lockdown caused a loss of income for many migrant workers, leading them to return to their villages on foot due to lack of transportation options. The African-American community in Chicago, where the University of Chicago is located, was disproportionately affected by the economic downturn.

Inequality and Technology:
The pandemic exacerbated existing inequalities, with the wealthy having better access to education, healthcare, and technology. Technology, while benefiting those with access to it, also automated jobs, harming those without the necessary skills.

Rethinking Capitalism:
The pandemic exposed the vulnerabilities of certain segments of society and the need for a more equitable society. While capitalism has been a key factor in economic growth, it requires a strong supporting structure, including government, community, and market regulations.

Policymakers’ Response:
Post the global financial crisis, policymakers focused on short-term stimulus measures. The current pandemic requires a fundamental rethinking of societal structures to address the exposed vulnerabilities.

Impact on Treasuries:
The unprecedented increase in government spending to address the pandemic has resulted in record-high budget deficits and debt levels in many countries.

Sovereign Debt and Its Consequences:
Governments are taking on unprecedented levels of debt to respond to the pandemic. While low-interest rates make higher debt levels sustainable, the added debt burden and reduced GDP raise concerns about sovereign debt defaults. The intergenerational consequences of this debt are significant, as future generations will have to pay for current spending, retirement, and healthcare.

Corporate Responsibility and Bailouts:
Companies that took on excessive debt and failed to create sufficient buffers are now struggling. Bailouts should be considered carefully, prioritizing viable companies that provide employment and contribute to the economy. Bankruptcy proceedings may be necessary for non-viable companies, but widespread bankruptcies could harm the economy.

Support for Small Businesses:
Stimulus bills have provided support to small businesses, which are often vulnerable during crises. Blanket bailouts may not be the most efficient approach, as some businesses may not need assistance. A more targeted approach, considering the viability and value of individual businesses, would be more economically sound.

Capitalism and Social Policy:
The pandemic has highlighted the importance of a social safety net. Universal basic income and other social policies may gain traction in the wake of the crisis. The pandemic’s impact on capitalism is less clear-cut compared to the global financial crisis, as it is not directly caused by business risk-taking.

Future of Capitalism:
The pandemic may lead to a more regulated and interventionist approach to capitalism, with governments playing a larger role in the economy. The crisis could also accelerate the adoption of new technologies and business models, potentially leading to increased inequality.

The Role of Governments and Communities:
The pandemic has highlighted the importance of governments and communities in buffering the economic and social effects of crises. The European approach of keeping jobs in suspended animation and paying workers not to come to work protects firms but may hinder reallocation to new industries. The U.S. system, while harder on individuals due to job losses, allows for more dynamism and reemployment as the economy recovers.

The Safety Net and Universal Programs:
The pandemic may lead to a renewed debate on expanding the safety net, including universal basic income and universal healthcare. The high debt levels resulting from the pandemic will make it challenging to fund these programs. Universal healthcare is likely to be a key issue in the upcoming American presidential election.

The Importance of Communities:
The pandemic has reinforced the importance of communities as building blocks for the new world. Globalization and market integration have led to centralization of governance, diminishing the role of communities. Communities can provide social support, economic resilience, and a sense of belonging, especially during crises.

The Need for Balance:
There is a need to balance the role of governments, markets, and communities to create a more resilient and inclusive society. Governments should focus on providing a safety net, regulating markets, and investing in public goods. Markets should be allowed to operate freely while ensuring fair competition and preventing excessive leverage. Communities should be empowered to address local needs, foster social cohesion, and promote economic development.

Introduction:
* Raghuram Rajan discusses the rise of nationalist movements as a reaction against centralization and globalization.
* He emphasizes the need to preserve the benefits of global trade and investment while addressing the concerns of communities that feel marginalized.

Re-Empowering Communities:
* Rajan highlights the importance of re-empowering communities to address gaps left by globalized markets and governments.
* He cites examples of communities supporting the elderly during the pandemic, demonstrating the value of real human connections.
* Virtual interactions can supplement but not replace the sense of community derived from physical proximity.

Emerging Markets and the Pandemic:
* Rajan discusses the limited impact of the pandemic on emerging markets thus far, but expresses concern about the potential for a severe crisis in these countries.
* He notes the lack of medical resources and the global shortage of protective equipment and ventilators.
* Rajan stresses the need for cooperation among countries to ensure that resources are directed to the areas that need them most.

Economic Nationalism and Industrial Organization:
* Rajan predicts that companies will reassess their global supply chains and seek greater resilience by diversifying and bringing more operations within a common political or geographical area.
* He anticipates that smaller firms may struggle to survive during the crisis due to their limited reserves and higher vulnerability to disruptions.
* Rajan suggests that the crisis may accelerate the adoption of 3D printing and automation technologies, but notes that the specific impact on industrial organization is uncertain.

Raghuram Rajan’s Insights on Trade-Offs:
Raghuram Rajan highlights the importance of balancing economic activity with saving lives during the pandemic. He emphasizes that a lack of social distancing measures could lead to an overload of the medical system, causing a surge in deaths and prolonged distancing requirements. Rajan stresses the need to buy time by flattening the curve to manage cases and allow for the development of a cure or vaccine. The decision to keep people shut down for extended periods becomes more difficult as financial fragility increases, potentially leading to an economic collapse. The best-case scenario involves suppressing the virus, dealing with localized outbreaks, and eventually returning to work with a cure or vaccine.

Regional Responses and Coordination:
Governor Cuomo and Governor Pritzker have criticized the need for states to compete in the open market for medical equipment. Rajan acknowledges the challenges of relying solely on market forces during a crisis. He suggests that states trying to outbid each other can lead to uneven resource allocation and unequal access to necessary supplies. Rajan advocates for some level of overall coordination, especially given the varying purchasing power across states and countries. He believes that dollar-based allocation may not accurately reflect true need and value during a pandemic.

Economic Recovery and Speculation:
Rajan expresses hope that unemployment rates will decrease and vaccine development will progress within the next year. He emphasizes the need for government action to address the financial fragility that may arise from prolonged lockdowns. Rajan encourages policymakers to consider long-term economic recovery plans, including investments in infrastructure and education, to mitigate the lasting effects of the pandemic. He acknowledges the uncertainty surrounding the duration and severity of the pandemic, making it challenging to make precise predictions about the economic outlook.

Positive Outlook for Recovery:
Raghuram Rajan anticipates a significant recovery within a year, with progress in testing, vaccines, and cures. He expects the nightmare of the pandemic to be in the past within two years, leading to improved economic conditions. While pre-pandemic unemployment levels may not be immediately achievable, Rajan believes historical norms can be reached.

Addressing Fault Lines:
Rajan highlights the need to address fault lines exposed during the pandemic. He emphasizes the importance of fixing global and national systems to create a more sustainable economy. Rajan advocates for an economy less reliant on stimulus and more resilient to crises.

Positivity and Solidarity:
Rajan draws parallels between the current pandemic and World War II, viewing it as a collective global experience. He hopes the shared experience will foster goodwill towards healthcare professionals and essential workers. Rajan emphasizes the importance of recognizing the interconnectedness of the world and facing challenges together.

Addressing Climate Change and Inequality:
Rajan urges society to take climate change and inequality more seriously, learning from the pandemic’s impact. He encourages the use of markets, technology, and human ingenuity to solve these problems. Rajan expresses optimism that solidarity within and across countries can be rediscovered through shared experiences.

Overcoming Partisanship and Nationalism:
Rajan acknowledges the challenges posed by partisanship and nationalism amid the pandemic. He remains hopeful that the good people on earth can overcome these divisions and work towards positive change.

Closing Remarks:
Hal Weitzman expressed gratitude to all participants for their questions and contributions, acknowledging the large number of questions received (594) and the limited time available to address them all. He apologized to those whose questions could not be answered during the session.

Harper Lecture’s Continuation:
Raghu Rajagopal indicated a willingness to participate in future Harper lectures, potentially addressing the remaining unanswered questions.

Appreciation for Frontline Workers:
Colin Hennessey conveyed heartfelt thanks from UChicago alumni to individuals on the front lines of the COVID-19 pandemic, including healthcare workers, first responders, grocery store workers, and essential employees, both in Chicago and worldwide.

Information on UChicago’s Response:
Participants were encouraged to visit a specified website to learn more about the University of Chicago’s response to those impacted by COVID-19 and to find out how they can contribute assistance.

Upcoming Virtual Harper Event:
The next Virtual Harper event was announced, featuring health economist and dean of the University of Chicago Harris School of Public Policy, Katherine Baker. The event was scheduled for April 27th at 6.30 p.m. Chicago time.

Closing and Well-Wishes:
Colin Hennessey concluded the Harper lecture by wishing participants good health and well-being. Participants were thanked for joining the event and were then advised that they could disconnect.