The pandemic is a chance to escape the system. We’re finally in charge of our own lives, time and freedom. We’re waving goodbye to ridiculous things. And we’re migrating to the online world because it’s faster, cheaper, smarter and healthier. It’s our first exercise in global responsibility. All in all, we’re faring quite all right, and when the crisis is over, we’ll rise again like a phoenix. A fairy tale? No, the opinion of an economist. So prophesizes Tomáš Sedláček, in conversation with Paulina Wilk.
During the past year, the philosopher and economist Tomáš Sedláček has focused on fulfilling his dreams. He learned to dive, to fly a glider and to box. For the first time, he was truly living in his home. He arranged a studio full of books, statues and paintings. That’s where he was when talking to “Przekrój”, although he stopped the conversation a couple of times in order to listen to the bells of a nearby church, repair an old alarm clock and finish vacuuming. When Sedláček talks about the economy, he uses metaphors. His thoughts are flamboyant and he often takes seemingly wild turns. Once he used to fly around the world, only equipped with hand luggage and a single white shirt. He would sleep in B&Bs, avoiding hotel chains and taxis. Now he’s even gotten rid of his car and he rides around Prague on a unicycle.
For this scientist, hailed in his youth as a visionary, who, until now, was spending most of his life aboard jet planes, staying in one place is a complete novelty. At the age of 24, Sedláček became an economic advisor to Václav Havel. Later he advised several Czech prime ministers, as well as EU commissioners. He studied in Prague and at Yale. In 2011, his book Economics of Good and Evil: The Quest for Economic Meaning from Gilgamesh to Wall Street conquered the world; ever since then, he’s been considered one of the most inspiring and influential economists around. Sedláček works as a strategic advisor for one of the Czech banks and is a lecturer at Charles University. As far as the pandemic is concerned, he is an optimist – according to Sedláček, we’re witnessing the birth of a new origin myth. After browsing the history of humankind looking for precedents, he now thinks our current situation is completely unique.
Paulina Wilk: You once compared the modern economy to manic depressive disorder, because it periodically goes from hyperactivity and excitement to depression and passivity. In which phase was the global economy when the pandemic started, and where are we now?
Tomáš Sedláček: It seems that we are having difficulty with balance. Just before the pandemic, we were in a phase of hyperactivity – in many countries, consumption indexes were high, and so was growth. What we’re seeing now is what happens to depressed people: nothing seems to make sense, we feel stifled, we can’t move, it’s like someone put a cloth on our face. The economy in the pandemic reminds me of the tale of Sleeping Beauty. It is merely asleep, not dead. Look at GDP: of course, in 2020 GDP fell, but it was only by 5 or 6%. Even though we dropped everything we could, 95% of the economy was functioning, which is actually a miracle. This is very sad for an economist. Why? Well, we’ve been told time and again that the economy always needs a boost, that it needs to be as energetic and as manic as possible. The more it can grow, the better. This is what we were taught at school. Now the economy has been artificially depressed, but it turns out it’s still going. Therefore I expect that when the pandemic is over, the economy will quite quickly go manic again.
How is that possible? So many things aren’t happening, so many businesses have been shut down. How come the economy is still going while life isn’t?
GDP means gross domestic product – and this past year it really has been domestic, home-made. 30% of people in the Czech Republic are working from home. Also, GDP is not that gross anymore – it’s rather soft and delicate. Steel or iron production doesn’t matter as much as it used to. Our economy is increasingly moving towards intangible products and services, and humanity is moving towards the abstract. The same thing happened in the Garden of Paradise when Adam and Eve realized that Eden is not enough. People have always wanted more than just reality, we crave something ‘even more real’. We’re always imagining some worlds beyond, either in arts and philosophy or in science. Now the pandemic has triggered a mass migration to a virtual world. It has swallowed everything: our souls, our families, memories, money. Today, your ID is on your smartphone. For the first time in the history of this planet, there’s actually been a global event that we’ve all experienced directly. If this had happened 100 years ago, GDP would collapse. But, because of the internet, our economies were able to go on. We’ve also found new channels for our social energy. We live in a civilization of empathy. It was obvious to us that we had to help the most vulnerable people. I expected some people would argue: “Let’s give the vaccines to people in their forties first because the economy depends on them”. But no-one said this – everybody agreed that we should start with the elderly. The economy works because our societies are strong enough to distribute help and support. There hasn’t even been a dramatic increase in global unemployment rates!
That’s what I can’t wrap my head around. Many people are out of work, whole industries are suffering, but you still think there’s no need to worry?
We have mechanisms that will help us get through this crisis, so it shouldn’t end up in calamity. Of course, if the pandemic lasts for many, many years, then the economy will have to undergo a complete change. But we have two basic tricks – if they’re done right, our current problems can be smoothed out and spread over time, which will allow us to cope with them. Like I said, they’re just tricks; they don’t really produce anything. The first one is called fiscal policy. During periods of prosperity, nations should keep their debts low so that they’re able to increase them in times of trouble. The crisis hits, and you’re able to use the energy you’ve saved up in the past or have borrowed from the future. After the crisis is over, you should quickly reduce your debt. The second trick is called monetary policy. The government has a monopoly on printing money – and therefore printing debt. So in a way, it’s the same thing. Although, if you overdo it, the currency collapses and you end up with high inflation. As far as economics is concerned, increasing debt in a period of crisis isn’t a bad thing. The trouble is that many countries have used these two tricks in times of prosperity. It’s like taking antibiotics when you don’t need them. Time passes, you get sick, but the antibiotics no longer work: the bacteria have become resistant.
You’ve also mentioned social energy and its new pathways. Has this energy decreased in the pandemic, or does our potential remain high despite various lockdowns?
It’s like when you put a lid on a boiling pot. That’s why I think once the pandemic is over, we will rise like a phoenix, because we will be able to get rid of many ridiculous things. The pandemic has made us realize how many unnecessary, stupid things we’ve been doing. Take this interview: two years ago, we’d probably have met in person, but in truth, we could have done it online. I wouldn’t have needed to book a flight, you wouldn’t have needed to organize a meeting place, etc. So why weren’t people thinking like this? It’s more comfortable, cheaper, healthier and simpler. I work for a bank that is now completely empty. All those offices, all those buildings aren’t necessary. We’re experiencing a great metamorphosis. It’s a little bit like when our ancestors moved out of the ocean millions and millions of years ago. We lost many things then, like the ability to breathe underwater and fins, but we gained new ways of growing. A similar transformation of social energy occurred when we abandoned the nomadic way of life and moved from forests to cities, when we chose artificial, man-made surroundings. Now everything seems sterile, we even avoid touching each other, because to touch someone is to hurt them. The only thing we touch – constantly and tenderly – are our touchscreens. They’ve sucked us all in, so now the zeitgeist is in the digital space. And so is the GDP. The social dynamics have fundamentally changed. Our relationships and the centre of our social gravity have moved online. When the pandemic started and my son – who is 13 – couldn’t go to school, I asked him whether a computer supervirus would be worse than the biological virus that caused the lockdown. My son said that the computer virus would be much worse because if the internet collapsed, it would completely damage the economy.
That’s what I worry about: we’ve become too reliant on technology. The digital economy seems awfully fragile.
Well, so far we haven’t had any major crisis. Of course, nobody expects the Spanish Inquisition. That’s why from the beginning of the pandemic we’ve heard experts saying: “We weren’t expecting that.” Having said that, the only thing that withstood the shock was the internet. In just one month, all schools and workplaces went online, and the internet didn’t break down. There was never any problem with bandwidth. Netflix, I think, had to decrease the quality of the stream for a couple of weeks, and that’s all. The digital world passed the test. Of course, the internet is very young, smartphones have been with us only for about a decade. But what makes the digital economy robust is that it operates outside biological limits. All it requires is energy, and there’s a lot of energy in the universe.
Does the migration to the online world mean that we’re entering a 24/7 economy? If so, what about resting, taking a break? What about a good night’s sleep?
Before the pandemic, working from home was a luxury. Only a privileged few enjoyed it. I’m talking about writers, painters, and so on. Now this privilege is given to the vast majority of people. You remember, of course, Pink Floyd singing about kids needing no education: “Hey, teacher, leave them kids alone.” Well, that wish has been granted. Now the kids no longer go to school – school comes to them. I don’t go to work – work comes to me. All those Sabbath days we did not remember and did not keep holy in the past, they have sort of been accumulated. For us, it’s like the greatest shock since World War II. Some of us feel confused. Suddenly, you have to be a cook, a teacher, you’re responsible for your own timekeeping.
Don’t you think it’s a trap? Aren’t we going to be completely stuck with our work and with virtual consumption?
If you’re looking for a good moment to escape the system, that moment has come.
Now the system is coming to our homes and it has never been as lenient as it is now. You can decide when you want to work. Since time immemorial, work has been forcing us to leave home. In the epic poem about Gilgamesh, the workers aren’t allowed to go home to their loved ones. That’s the first myth of work as enslavement. Remember Modern Times and Charlie Chaplin on the factory line? He tried to keep pace with the machine, to work non-stop. He couldn’t even scratch his head or eat something. There was another machine designed to feed him. Otherwise, he would fall behind. That’s what the imagined future used to look like. Now that vision is dead.
It’s challenging, but it also brings new opportunities. Everything is up to us now. Time to become your own capitalist. Imagine that you are the owner of yourself. You invite someone like Gordon Ramsay to the restaurant of your life so that he can help you improve it, get rid of all those ridiculous things that don’t work and aren’t necessary. Yes, working from home can be difficult. A lot of stuff is happening all at once, personal and professional problems can get entangled. Having said that, you’re finally getting your own life back. I think it’s cool to be one’s own manager.
It would also be good for the economy if we could manage ourselves from the heart, if we didn’t need external motivation. We wouldn’t need managerial structures, we wouldn’t even need offices. Look at the inefficiencies we are generating today. Before the pandemic, I was never home. I used home for sleeping, I was there for one hour in the morning and maybe two hours in the evening. During the day, the house was empty. It was absurd: I paid for all the utilities, heating, electricity, water, but nobody was using it. Such a system of work is ripping the family apart every morning and then leaves you to try to glue it back together in the evening. It’s ridiculous. Now we’re finally seeing through that and we can end it.
You think we’ll learn from our current experiences?
For sure. I’m not an epidemiologist, but I don’t think it will be the last pandemic during our lifetimes. The current experiences are a learning curve. Maybe in the future, when a similar problem arises, we’ll immediately go into lockdown for a month or three months and nip it in the bud. Perhaps it will be more efficient than waiting for herd immunity. What we’re going through now will allow us to act more bravely, not to be afraid of lockdown. Anything that can be foreseen, anything you can sort of prepare for, is no problem for the economy.
Do you think capitalism will be able to deal with the challenges of the 21st century? Or maybe we should be thinking up something new?
What Churchill said about democracy applies to capitalism. It’s far from perfect, but it happens to be the best system we’ve got. That doesn’t mean we shouldn’t constantly update it. And, actually, capitalism is very quick to adapt, very flexible. 30 years ago, we weren’t aware of the damage we’d been doing to the planet. We just didn’t know. People in Czechoslovakia were routinely washing their cars in rivers. They were heating their summer homes with oil. Can you imagine anything so crazy and awful now? Today, green standards are the norm in many businesses and in many areas of life. Countries like Denmark and Sweden are benefiting economically because they’ve switched to eco-technologies. It turns out that even the egoistical, individualistic, dog-eat-dog free market takes better care of the environment than communism with all its slogans about collectivism. Nature in Czechoslovakia, the USSR and the Polish People’s Republic experienced much more damage than nature in Western Europe. That means capitalism is able to learn and change.
How will it change in the future?
Even the very idea of capital is changing now. Marx put it like this: some people control the means of production, others do not. Today you have a smartphone in your hand. It is cheap and easily available. It is the very essence of capital. One of the most popular YouTubers in the Czech Republic is an eight-year-old kid. He makes videos that other kids watch. This is unprecedented: a child produces something and distributes it among other children without any brokerage from grown-ups. It gives new meaning to B2B: baby-to-baby. A smartphone is the major work tool and the major form of capital. You, me, an eight-year-old kid and Bill Gates are all using the same devices.
I’ve already heard this promise that technology will reach everyone and free us from rigid structures. But is that really so? Does a slum-dwelling kid have the same chance to get a smartphone and get online?
You’re right, universal access to technology and the internet is a must. But I believe it will come in time. Capital gets cheaper. 20 years ago, I made a bet with my wife that one day people will be able to get cell phones for free. She thought I was talking rubbish. But that’s exactly what happens now: I bought a tree cutter and they gave me a tablet for free. 100 years ago, only a very small percentage of people – namely, those who came from rich families – could go into business. Today, if you have a really good idea, you don’t need a penny in your pocket. The bank will give you the money. Banks seek out ideas they can invest in. We should appreciate them for democratizing entrepreneurship. All those Silicon Valley sharks didn’t have money to begin with – they had terrific ideas, and that was enough.
Aren’t you worried that those sharks now make up the top 1% of humanity that is accumulating all the wealth?
I’d be more worried if it had been the same 1% for hundreds of years, but this group is changing. Let’s focus on ordinary people. I don’t really care whether everyone has the same income. What matters is that we don’t have to use up most of our time and energy ensuring that our basic needs are met. Say you’re an older person and you can easily afford to take your grandchildren to the movies every two weeks, without having to worry that you’ll run out of money before the end of the month. If that’s the case, the economy is functioning quite well. We should support disenfranchised people, we should tax the rich, but incomes will never be distributed equally. Having said that, the situation is getting better. Globally, the Gini coefficient that measures wealth inequality is going down.
In Poland, if we want to say that something is 100% sure, we say it’s ‘like in a bank’. But since 2008, I’ve been hearing this less and less. We don’t trust financial institutions – quite the opposite, they appear to us the sum of all evils. You, however, work in a bank, so you are probably willing to defend them.
Like I said: banks democratize investments and entrepreneurship, they help you gain access to certain resources when you need them. We need money the most in our twenties. Buying a flat and a car, having young kids – all that requires cash. However, our earnings peak when we’re in our fifties. When you’re applying for credit, you’re really borrowing money from your future self. That’s why we live in apartments and use things that do not yet belong to us. Without this option, I’d still be living with my parents, because I still cannot afford a home of my own. But when I turn 50, I’ll be able to crack open a bottle of champagne and say: “Now it’s all mine.” A well-run bank lends you money you’re currently unable to earn. Managing a bank is like responsible driving. What happened in 2008 was a crash caused by irresponsibility. In my opinion, we could have avoided it if we’d been more careful and understood the system better. In economics, this kind of mistake is like a ballet dancer falling on stage: it can happen once, but only once. After the previous financial crash, banks became very anxious, risk-averse and super-careful. Therefore, they were in good shape when the pandemic hit and they’re doing all right. During the pandemic, banks became the main tool of governments. It is through them that all the necessary payments for people and businesses in need were made. This time they didn’t screw up.
So what is the difference between the current crisis and the 2008 financial crash? From an ordinary person’s perspective, both are baffling. The 2008 crash happened in a digital banking system on Wall Street. It was abstract, but it had real consequences. Many people and businesses went bankrupt, houses and jobs were lost. Conversely, the current crisis is very real, it turns our lives upside down, it has millions of victims, but it doesn’t destroy economies. It doesn’t make sense.
The fall of Lehman Brothers and the financial crash were endogenous problems – the system had become rotten. Same thing with Enron and various Ponzi schemes. Those crises are usually deeper, last longer and it’s more difficult to overcome, because they cause a loss of trust in other players and the whole financial system. The pandemic, however, is an external crisis. It shares some similarities with the oil crisis of the 1970s or with various wars. In such cases, the economy usually fares quite well and the problems are dealt with quickly. This is yet another reason I believe that once we get the virus under control, we’ll have a rapid economic rebound.
It’s been said many times that politicians do not run the world – international corporations do. They enjoy true global power. Will the pandemic shift this balance since, for example, borders are closed and governments have imposed various restrictions?
I don’t think politicians – even those with especially ugly authoritarian inclinations – want to stop the free movement of goods and people. Even radical populists want people to be able to meet their needs and to oversee free-market economies with solid GDP growth. One of the most wonderful things about the European Union is that we all live in it together despite our differences. Each state can go through a crash and become the union’s weakest link. It happened to Greece, to Portugal, even to Germany. In such a case, other states that are in better condition help out. Sometimes radical or dangerous politicians gain power in some member states. However, it is highly unlikely that all the member states will crash at once, or that they will all fall into the hands of some lunatics. The whole system is able to find balance. And politicians fear critical comments: the world is watching them, no-one is safe from their citizens’ wrath. Various restrictions, which we would associate with totalitarian states, have now been introduced in many countries, but it is an extraordinary state of affairs. Politicians gain no satisfaction from it and I don’t think they’ll want to make those measures permanent.
So we don’t have to worry about democracy as well?
The smartphone can also be the future of democracy. We’re talking about a tool that knows our needs very well. It knows whether you prefer wine or beer, whether you’re a cyclist or a car enthusiast. It can make democracy more direct, as well as more detailed and nuanced. Imagine using your phone in order to vote on whether the city you live in should build X kilometres of bike lanes. Analogue democracy is binary and always divides us into two artificial groups. It only asks us ‘yes’ or ‘no’ questions. However, a different approach is possible, one that will not only more faithfully reflect our preferences, but will also enable us to better react to global problems.
For example, take migration. Some societies are more willing to invite migrants, some are less willing. Perhaps there is a better way to make decisions about it? Although, to be honest, it doesn’t make sense to focus on particular states when talking about migrations or climate. When we’re being treated as citizens of the world, our opinions and answers are different than when we’re reduced to our nationalities. Supranational awareness is growing – and the pandemic has forced us into global thinking. We are organizing on a planetary level. We have a global internet, a global economy, science and culture. Only politics lags behind; it remains national.
Why is that?
I’d hazard a guess that it’s because of limited competition or lack of global stimulation. Let’s say I want to start a business producing wine corks – I’d have to compete with other producers from all over the world. If anyone makes better, cheaper corks, I’m out of the game. Scientists, technologists, lawyers – they all have to compete against the best rivals on the planet. But politicians do not. They only compete nationally. However strong their rivals, they all remain in their small ponds. So they don’t step up to the global plate.
Will the pandemic – our first exercise in global responsibility – bring forward an ethical change? Do you see any signs of the emergence of a new moral order?
Sure, I think it’s already happening with vaccinations. In order for vaccines to work, the whole body of global society needs to be vaccinated. Moreover, getting a vaccine or wearing a face mask is an act of mutual egoism that is beneficial to others. I do it to protect you, you do it to protect me. The pandemic is also a lesson in scientific cooperation. We now have approved vaccines produced in various parts of the globe, developed by scientists of various nationalities. You can’t win using only national tools. So we’re slowly starting to think as one planet. Of course, there’s vaccine nationalism, but even us first politics presupposes that there will come a second phase: and then them. 200 years ago, Europe would have hidden behind a wall and left all the other continents to die. Now the pandemic is seen as something for us – humankind – to solve. Also, I think a new, peculiar kind of ethics has appeared, which we can call ‘insurance ethics’. My prophecy is that more and more areas of life will be insurable. For example, entrepreneurship. We will all pay to be mutually insured against certain risks, and it’s not necessarily governments that will be entrusted with the task of managing the funds, as it is in the case of pensions or healthcare. Perhaps NGOs will be charged with this job.
Are you – and by ‘you’ I mean economists and philosophers – constantly coming up with new ideas, new scenarios for the future? Or does the pandemic harm your creativity?
I think we’re united in ignorance. Nobody knows what is going to happen and what we should do. Neither Smith, Mill, Keynes, Hayek, or any of those guys faced this kind of challenge. None of them wrote about it. It is an exciting moment; after all, we’ve been waiting for some impulse to think outside the box. But I don’t think we’re particularly creative. Fortunately, reality is. We now see that eco-solutions are feasible and financially viable. We can digitize new areas of life, give up costly infrastructures or flying; we can minimize bureaucracy. Also, we can ensure greater gender equality – it turns out that working from home and working part-time is good for pay equality between women and men. Women can now work three hours a day, for example teaching online or driving a taxi, while fathers, for the first time in history, can spend time with their children every day. The pandemic is forcing us to move in a good direction.
Parts of this interview have been edited and condensed for clarity and brevity.
Translated from the Polish by Jan Dzierzgowski
Read similar:
