The theme for Commonfund Forum 2021 was “Transformation.” The objective of the agenda was to deliver timely, useful content on core subjects related to nonprofit endowment and financial management and governance. Beyond this, however, the “Transformation” agenda was designed to present attendees —all of whom were virtual— with thought-provoking insights that challenge conventional thinking and expand awareness.
He is also a columnist for The Washington Post, a contributing editor for The Atlantic magazine and serves on the board of the Council on Foreign Relations. In 2020, he was awarded the International Center for Journalists Founders Award for Excellence in Journalism. At Forum, he was interviewed by Keith Luke, President and CEO of Commonfund Securities, Inc.
In this conversation, Fareed addressed a wide range of issues, calling on his exceptionally wide and deep command of history, politics, economics, international affairs and science and his rare ability to explain how they fit together and relate to the human condition. The following are selected excerpts from his comments.
Putting the pandemic into perspective
“The pandemic is probably the biggest global event we will live through in our lifetimes. What's extraordinary is that every human being on the planet has in some way been affected by it—either the pandemic directly, the public health consequences or the follow-on economic effects of lockdowns and the accompanying economic paralysis.”
The pandemic as change agent
“Very early into the pandemic, I decided I was going to spend some time trying to understand its lasting impact. And I came to the conclusion that the singular effect of this pandemic was to accelerate trends that were already in place rather than to create new ones. The saying goes, ‘there are decades where nothing happens and weeks or months when decades happen.’ Take, for example, telehealth. We reached $1 billion in telehealth visits last year. By some estimates, that was where we were going to be in 2035. So that's 15 years forward in one year.”
Living in unstable times
“We live in fairly unstable times. After the Cold War, a different world has emerged. One could say we have created a system—economic, political, financial—that is very open, very dynamic and, as a result, very unstable. You can have a system that is dynamic but closed, like China's. Or you can have a system that is open and stable and those exist. But if you try to create a system that is both open and highly dynamic, you almost always end up one with one that is crisis-prone…That is the kind of meta-question that countries, companies and individuals are going to have to think about because this highly unstable world that we are living in is not going to get very stable anytime soon.”
Pandemics and probabilities
“The way we live is an invitation to the next pandemic. We humans are crowding out the natural habitat of more and more species. We get closer and closer to animals, like bats, that happen to be hosts to a lot of viruses. When we get closer to natural habitats viruses are more likely to jump species, usually with an intermediary host, like a chicken or rabbit, before reaching human beings.”
The challenge of governing
“It would be fair to say that in the U.S. there is a very deep tradition of individual liberty, which is another way of saying a very deep and statist tradition. The state is looked upon with suspicion. Individual liberties are jealously and zealously protected. That is, in a sense, the kind of fundamental reality that has always limited government action. There is no centralized system. There are at least 2,750 public health units in the U.S. In other words, local governments throughout the country have some degree of authority over public health. That's a fundamental structural limitation. But it's important to point out how well American government has worked—the Depression-era Works Progress Administration, rural electrification, the Interstate highway system, NASA, Medicare…The Reagan-Thatcher revolution made the economy more dynamic, but did have the effect of making government seem less important. That created a reality that we are living with today, which is government agencies that are badly funded, not respected, under-staffed and lacking excess capacity. Let me give you a simple example. If you ask why local governments are unprepared for disruptive or catastrophic events it turns out preparedness involves spending money for things that don't happen every year. It's like snow removal in Texas. Nobody wants to keep spending on preparedness year after year. So, budgets get cut and cut and cut. Then, once every 10 years when something happens, we're caught unprepared.”
"The American Dream is alive and well, just not in America"
A divide grows around the world
“How do you solve for the divide between the experts and the people? This is a problem in the Western world that is very deep and very pernicious. Simply put, it is the growing divide between an urban, educated, digitally savvy overclass and a working underclass. Everybody participating in this virtual conversation is a symbolic analyst, by which I mean you manipulate numbers, words, images, concepts or code for a living. Others are physical analysts—people who use their hands, not their head, and manipulate objects for a living. They are not doing as well in this economy. The reason we haven't had inflation for 30 years is that labor has no pricing power. This divide is getting worse, leading to deep resentment. The Trump phenomenon is a reaction to that. Abroad, Brexit and the French religion movement are reactions to that. You can see it in support for Erdogan, Putin and Modi. So, when someone provides expert advice, inevitably it plays into this class divide in which people are so resentful of the elite they refuse to listen. In places where that divide is particularly dramatic, as in the U.S., even something like mask-wearing becomes highly political.”
The diminishing American dream
“In my book I said the American dream is alive and well, just not in America. I think for most people the American dream means doing better than your parents. The American dream is the idea of people coming in from other countries without a lot of opportunity and moving up. The fact that they didn't need bloodlines or connections was the genius of America. If you look at the data, what's clear is that four decades ago, the United States had the greatest social mobility of any country in the Organization for Economic Cooperation and Development (OECD). Now, the tragedy is that you find greater social mobility in Canada and most of Northern Europe…We're the only country in the OECD, other than Mexico, that spends less money on schools serving poor children. Poor kids need more help than rich kids. The $1.9 trillion COVID relief act is the first major fiscal policy in the U.S. probably since the Reagan tax cuts in which the vast majority of the benefit goes to the bottom third of the country.”
Globalization is here to stay
“We’re going to hear a lot of hot air about anti-globalization and offshoring and bringing supply chains home. In reality, much less of it is going to actually happen. By the end of 2022, we will produce $5 billion in vaccines and send them around the world. Why is this happening? Only because of globalization. The Chinese first find the virus and then they sequence the genome. Germans start working on it. Then scientists in Europe and the U.S. link up. Funding for the vaccines comes from all over the world. The U.S. government wrote the largest check, but lots of others provided funding. Then you have production, which was the nightmare of globalization that horrified everybody one year ago, specifically that 60 percent of the vaccine is being made in India. All the glass bottles are coming out of China. The process is crisscrossing borders so fast, nobody can even count how many times and how many countries are involved in the preparation of a single vaccine.”
Same story, different ending
The Federal Reserve released data on the past four recessions, including 2020 and the three previous ones. What was striking was that in the pandemic the top quartile of income earners and the bottom quartile of income earners lost jobs at about the same pace, which surprised me. It was a kind of equal opportunity job loss. But the most remarkable finding was that the top 25 percent of income earners actually gained jobs by the end of 2020. There was job loss, but also a quick recovery. The bottom quartile, however, lost jobs on the scale of the Great Depression and they haven’t returned.”
Going where the money is
“The trend toward urbanization is the most fundamental demographic shift of the last 300 years. In this span of time, we have seen: one, people move to cities from villages; and, two, have smaller families. I don't think either will change…The reason I say that urbanization is here to stay is not because of a romantic attachment to cities. It's very simple: People make more money when they work in cities.”
"The great thing about the moment we’re in is that when everything gets upended—when dislocations are everywhere—it’s the only time you see real change"
Seeing cause for optimism
“The great thing about the moment we’re in is that when everything gets upended—when dislocations are everywhere—it’s the only time you see real change. No one fixes the roof when the sun is shining. By laying bare problems, seams and tensions, the pandemic made it possible to adapt and change. Think about the $1.9 trillion in relief. The U.S. is trying something fascinating—a novel experiment—in which we simply give people money. There’s always been a taboo about that. I hope we will do a lot more of this kind of big, bold experimentation because it will allow us to move forward. That's ultimately why I'm optimistic. There’s incredible energy and dynamism in the world today and these forces have parted the cobwebs and old structures. We have the opportunity, at the very least, to make a huge difference for good.”