Coronavirus has come along during a time of existing generational conflict: Niall Ferguson

The problems of coronavirus have normally been seen as social and economic, but generational and political divisions have become more vast as the United States remains shut down. Hoover Institution Senior Fellow Niall Ferguson joins Yahoo Finance’s Editor-in-Chief Andy Serwer, Jen Rogers and Myles Udland to break down the new social fissures that have grown amid coronavirus as part of the Yahoo Finance’s All Markets Summit Extra.

Video Transcript

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JEN ROGERS: Welcome to Yahoo Finance's All Markets Summit Extra, sponsored by Yahoo Finance Premium. Each year in the fall, we bring together some of the best minds in business, academia, politics, and a host of influencers for our All Markets Summit. This year's event is scheduled to take place on October 26 at the NASDAQ market site in New York's Times Square. And we hope that the restrictions on events will be relaxed by then and we can all be together.

The main theme of our All Markets Summit this year is generational opportunities. And we're going to be joined by incredible speakers who are building and redefining new relationships in these times that we're all living through right now, a great generational, cultural, and economic change.

As we lead up to October's event, we're going to bring you some of those influential voices. And we're delighted to have three of them with us today. In a moment, we're going to be joined by Tal Cohen, the NASDAQ's executive vice president and head of North American markets. And later, Amity Millhiser, who's PWC's vice chair and chief clients officer and an expert on workplace change. So we've got a great show for you. To kick it off with our first guest, I'm going to turn it over to our editor in chief, Andy Serwer. Andy?

ANDY SERWER: Jen, thanks so much. We're delighted to have Niall Ferguson, here who is the Milbank Family Senior Fellow at the Hoover Institution at Stanford. Also a prolific author, premier thought leader, and someone who can really help us sort through some of these issues. So Niall, great to see you. Thanks so much for coming.

NIALL FERGUSON: My pleasure, Andy. Good to join you.

ANDY SERWER: So I guess my first question pertaining to the subject of generational change and potentially generational conflict speaks to the bailout here in the United States by Washington, D, and the fact that we've spent some, say, $3 trillion on the bailout. And I'm wondering if this by definition, Niall, is unleashing the demons of generational conflict, by virtue of the fact it's going to have to get paid back, even though it may have been necessary to do that-- in other words, mortgaging the future and letting the young people having to foot the bill later.

NIALL FERGUSON: Well, this is a question I've been thinking a lot about. I wrote a piece last year for "The Atlantic" with my colleague Eyck Freymann on generation wars, arguing that increasingly, American politics is characterized by generational conflict rather than--

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--lines that really do distinguish millennials and the younger Generation Z, the college-aged generation, from baby boomers.

So the pandemic has come along at a time of existing generational conflict, and you might think, has only made it worse, as your question implies. But I think it's worth saying right away that the really striking feature of this pandemic is that unlike most pandemics in history, it is very ageist. It is much more likely to kill people over the age of around 60.

And that's worth bearing in mind, because right now, and I speak as someone who just turned 56, to be 26 is very heaven, because you really do not have the same health concerns that people in the older age groups have. So that's point number one.

Point number two is, we've done something that we've never done in previous pandemics, which is to shut down very large parts of the economy. We didn't do this in 1918-19. We didn't do it in 1957-58. And then we decided to offset this shutdown with massive fiscal and monetary stimulus that is being channeled mainly, it must be said, to bigger corporations. Everybody's getting a check through the mail pretty much, regardless of age. And that is in fact a relatively generous benefit relative to lower-paid jobs. In fact, a significant number of people are actually slightly better off than they were when they were working.

So I don't think there's any great age discrimination going on there. But as you say, ultimately, we are increasing the level of the federal debt relative to GDP above World War II levels. And that creates, unquestionably, problems for the future that will be very difficult to resolve, even if we aren't thinking about them today.

ANDY SERWER: And Niall, a quick follow-up question. Is it the case that in times of turmoil, historically, that the generational rift always comes into play. I'm thinking about, of course, most recently the 1960s. Is this typically a characteristic of periods like this?

NIALL FERGUSON: Well, in a way, this turns it on its head, because in the periods of the 20th century's greatest upheavals, it was mostly young men going to war. And the generational conflict tended to be between those younger people and the old men who were perceived to be The Man, sending kids off to war. Now it's kind of turned on its head, that the vulnerable people in the pandemic are the elderly, and the frustrated people who feel that they should be allowed to go back to work are the young.

So I think it's a very unusual generational conflict that this pandemic has created. And I'm not quite sure how it resolves itself politically, because it's creating some very notable fissures along the usual partisan lines. I mean, no surprise to find that Republicans are far less concerned about COVID-19 than the Democrats.

But what I'm looking out for is really a sign that older Americans are shifting their positions politically-- that would be very significant, because they have tended to break conservative in recent years. Very notably, older Americans were more likely to vote Republican in 2016. Anything that changes that, I think, will have profound consequences for the election on November 3.

So I think you're right to think about this as being a time of generational tension but it's very unusual. It's a very different kind of tension from the kind we saw in the late 1960s, or even the kind that we were seeing in 2016, when it felt like a conservative older electorate was pitted against a woke younger electorate.

MYLES UDLAND: And Niall, thinking about these tensions, and we see them in the system right now, I think, particularly with the role that the Fed and Treasury have played in this crisis-- I mean, as a monetary historian, do you feel like this is the beginning of a new phase of how the public understands the fiscal programs that are available to lawmakers? And is there going to be a new appreciation of what certain institutions can and cannot do as we get through this crisis period?

NIALL FERGUSON: Well, a couple of paradoxes come to mind. The first is that for people in financial markets, it sort of feels like 2008-2009 all over again, only with a bigger fiscal and monetary response. And that explains why stock markets are, in fact, in relatively good shape compared with where they were in 2009.

I think this is paradoxical, because it's not really the right way to think about the situation. You've got to look past the financial to the real economy, and recognize that we are actually in a much bigger real economic shock than we were in 2009. And so at some level, the signals we're getting from financial markets are distorted by the scale of the intervention.

We shouldn't think of it as stimulus. These are relief measures that Congress has passed and that the Fed is financing. And they can only be sustained for a relatively short period of time before problems of liquidity become problems of solvency, and small businesses just begin to throw in the towel. So that's the first paradox that comes to mind.

The second one is that we seem to be stealthily doing things that were previously considered completely radical. Universal basic income was seen as Andrew Yang's craziest idea, but it's just been enacted by Congress quietly in the CARES Act.

And as for modern monetary theory, which only Alexandria Ocasio-Cortez was willing to countenance in Congress not so long ago-- yeah, the Fed is doing that in all but name. I think one has to be a bit careful here, because what the Fed is doing is actually, as it did with quantitative easing, buying bonds by creating excess reserves, which are interest-bearing. So it's not quite modern monetary theory as it's supposed to work.

But I do think that this is in some ways masking the extent of the shock that we've administered. I'd say that in the great scheme of things, locking down the most important states in the US economy is a much bigger shock than the fiscal and monetary measures can offset.

And I think it'll gradually become clear that no matter how big the bazookas of fiscal and monetary policy, the shock to the real economy is a bigger deal, especially if it turns out that there's going to be a second wave of contagion at some point later this year. Not enough people are thinking about that on Wall Street right now, but it's highly likely that COVID-19 will be back, possibly quite soon, maybe as soon as we start to normalize the return to work. Or maybe it'll be later in the year when the weather gets cooler, as some people have suggested.

JEN ROGERS: Niall Ferguson, thank you so much for joining us on Yahoo Finance AMS here. Great to have you on.

NIALL FERGUSON: My pleasure.