Wealth

Economist Markus Brennamell: Building resilience requires an open environment

  In March 1969, Markus K. Brunnermeier was born in a family of carpenters in Landshut, Bavaria, Germany. In October of the same year, the Federal Republic of Germany ushered in its fourth chancellor, Willy Brandt. In order to promote exchanges between East and West Germany, Brandt put forward the slogan of “one nation, two countries”. His “New Oriental Policy” pursued “cooperation with the West and reconciliation with the East”, which was considered to be one of the substantive measures to promote the relaxation of the Cold War situation in Europe at that time. Brunnermeier’s childhood was spent during the detente period of the Cold War until the Soviet armed forces invaded Afghanistan in 1979.
  Before the age of 16, it was a logical choice for the son to inherit his father’s career, and one of the important driving forces for this West German teenager to grow up to be “the economist with the most nails” was his curiosity about East Germany—why the “two Germanys” Economic development so disparity? He found that market prices can convey a lot of information, but under the planned economic system, such information cannot flow smoothly, and it is difficult for society to make optimal decisions. This became the starting point for Brennamell’s research in the field of international financial markets and macroeconomics.
  Also needing information is crisis management. In March 2020, the new crown epidemic began to sweep the world. Brenner Meyer is already the Edwards Sanford Chair Professor of Economics at Princeton University and director of the Bendheim Center for Finance at Princeton University. He set out to organize the webinar “Markus’ Academy,” hoping to bridge the gap between economists, thought leaders, historians, and policymakers, encouraging them to assess the current situation from different perspectives , and come up with creative solutions. Over the past three years, the themes of the seminar have extended from the initial epidemic to investment under high inflation, central bank digital currency, the impact of sanctions on the Russian economy, Ukraine reconstruction and other international social and economic issues that have attracted much attention.
  Discussions around these issues vary widely, but Brennermeier has gradually stripped out a thread that runs through it-“resilience”. In his new book, Resilient Societies, he writes that shocks often come in pairs, and that one crisis can lead to another. These developments play out in different ways, and nothing or no one can perfectly protect us from related shocks. We need to maintain the ability to get back up after being hit hard. We need safety buffers, redundant reserves, and protected areas to fall back. “By ‘we’ here I mean everyone, every class of society, every organization, and even the entire global community,” Brennermeier stressed.
  For today’s China, resilience is particularly critical. At the end of 2022, China’s epidemic prevention policy will be adjusted and optimized. Entering 2023, the road to recovery will not be smooth. The question raised by Brennermell in the book – what will society look like after the crisis is over? Where are we headed next? — still lingers in people’s minds.
  A few days ago, “Southern People Weekly” interviewed Brunner Meier. When he answered the email, Princeton, where he lived, was in the midst of severe winter, with minus 10 degrees outside the window and a blustery wind. We discussed how major countries’ resilient response to the crisis will reshape the international political and economic landscape, the reshoring of manufacturing industries and new opportunities for globalization, how economists view this era of uncertainty, and how to view the changing China-U.S.-EU trilateralism relationship, and his advice to contemporary young people who have gone through the upheaval era of the Cold War.

  People: People Magazine Cloth: Brenner Meyer
Instead of trying to avoid risk, focus on building resilience

  People: What is the point of view you most want to convey through “Resilient Society”?
  B: We need a shift in perception. Rather than trying to avoid risk, the focus should be on building resilience, the ability to bounce back from shocks. The recent crisis has taught us that avoiding shocks is simply not possible, and even if it were possible, it will be very costly. We are supposed to take risks and trial and error, and risk exposure helps foster resilience, as long as we can pick ourselves up after setbacks.
  PE: You mention in your book that the key to a successful resilience strategy is a two-pronged approach: the first is to contain the initial shock, the scope and severity of the crisis needs to be limited; the second is to create the conditions for recovery. It is very important to go hand in hand with both. However, in some scenarios, some subjects will be obsessed with the former and ignore or pay little attention to the latter. Why?
  B: It is very important from the very beginning to focus not only on crisis containment but also on how to rebound. In the face of a crisis, people feel the need to do everything possible to minimize the immediate impact of the shock. However, this is short-sighted and could do more harm in the long run.
  People: “Resilience” is not a new topic. Compared with the past, what are the new features of this round of discussions on “resilience”?
  B: The concept of “toughness” originated from materials science. A material is ductile if it deforms under stress or impact and then returns to its original state. Psychology studies the resilience of individuals, but the resilience of societies as a whole is more challenging. This requires that in addition to society as a whole, most people have the opportunity to rebound after being hit. Resilient societies need to strive to lead all people to develop together. At the same time, we need to pay attention to the spillover effect. For example, the monetary policy of the United States has a strong spillover effect on emerging markets and developing economies. When the monetary policy of the United States is tightened, it will pose a threat to the resilience of the latter.
More suitable than “friendly shore outsourcing” is “diversified procurement”

  People: In December 2022, at the moving ceremony held at TSMC’s new fab in Arizona, founder Zhang Zhongmou said, “Free trade is almost dead.” Over the years, affected by factors such as the epidemic and geopolitics, global supply Chain and value chain are developing towards regionalization and sub-regionalization. What will global supply chains look like in five or ten years? What is worthy of our vigilance in this process of change?
  Bu: Before the epidemic, the focus of international companies was to reduce costs. Thanks to global supply chains, companies can outsource production to emerging markets and developing economies to minimize costs, which has also led to “just-in-time production” (Note: only when needed, according to the amount needed, produce the desired product). The crisis in recent years has made us realize that the just-in-time production system is not cost-effective, but makes the production and operation of enterprises more susceptible to disturbance. Currently, the new mantra is “just in case” rather than “just in case”.
  What will be interesting is the extent to which economic activities that have been outsourced to emerging market and developing economies in the past will be relocated back to developed countries, the so-called “reshoring”. The growth of automation has led some politicians to advocate “friend-shoring,” which limits supply chain networks to allied or friendly countries.

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