Central banks doing a lot, need more fiscal policies | Economic Times

As its chairman and CEO, Jamie Dimon has led JPMorgan Chase through the global financial crisis a decade ago - and the Covid pandemic now. At the biggest US bank with a worldwide presence, Dimon has the pulse of the global economy and the most influential financial markets. In an interview with MC Govardhana Rangan and Saloni Shukla, Dimon gives his diagnosis of - and prescribes the remedy to - the worst collective economic slump in a century. Edited excerpts: We are witness to something unprecedented by way of the spread of infection, protracted lockdowns, and the economic impact. There are lasting behavioural changes. How do you see the future?We need to get back to the office safely and carefully. We have huge unemployment around the world. If we don't get back to where we were, this could really damage health even more. There are examples of people being depressed, taking drugs... isolation has its impact. I think governments across the world have generally taken aggressive fiscal and monetary action to lessen the impact of something we were not used to - a global pandemic. And more and more people are trying to get back to work. In Europe, even though cases are going up, they are not going back to total lockdown again. I think we need rational policies, and if we don't and the global economy gets worse, I think the outcome of that is disastrous, particularly on underprivileged people, lower paid individuals who need more support. It's just incumbent upon policymakers and businesses to rationally execute a series of policies that actually get better outcomes for all involved. There seems to be a divergent trend between the real economy and the financial markets...I don't think this is a surprise. You have had the biggest downturn the world has ever seen and there was a virtual collapse in some of the markets. Then you had these enormous fiscal and monetary stimulations around the world. When you put that much money to work in such a short period of time, it goes somewhere. When central banks put tens of trillions of dollars into the system, that gets reinvested. When rates are at zero, people are looking around for extra yield.So, markets are built on probabilities, they are not forecasting one thing, it's millions of people forecasting millions of things. We have had a very sharp recovery, but the world is still 5% below its GDP a year ago. You need to separate what the markets are telling you into pieces. There are some segments which are probably in bubble territory and some segments that aren't.There is a base case scenario out there and if that happens the markets will be fine. Using America's example, if unemployment gets to 7% this year, 6% next year, it's a nice recovery. But we are in the midst of this thing and we don't know the future yet.Have governments and central banks done enough to contain the impact of the pandemic?I think they did. The damage would have been far worse had they not done anything. You and I can criticise all these policies, but they moved so quickly - especially the central banks. These policies will be debated for years, especially the after-effects, but I think they stopped it from getting much worse.I think we need additional good and consistent policies. I think the central banks are paying a lot of attention to what needs to be done, we need more fiscal policies. There are some who would not survive, especially the small businesses. The unemployed need additional support, the government can focus on support for those who need it, the central banks and other related policies will get the economies growing slowly and healthily.A trend that has accelerated is the decoupling between the US and China. There is a conscious attempt to reduce supply-chain reliance on China. How do you see this playing out?Right now, we are in the middle of a presidential election and there is a competition over who can be tougher on China. You have to ask, are there legitimate security concerns? I am told there are, and America has a right to take unilateral action. There are legitimate issues around trade like state subsidies and unfair competition. I don't think it's decoupling. I would say it's more like restructuring. We won't do ABC with them and they won't do ABC with us, but a lot of other trade will take place. I hope cooler minds prevail on what we need to do as a world. We have to work together on climate change, anti-terrorism, anti-nuclear proliferation, hopefully anti-war and also the differences that you have with China.The world is going to put more pressure on China around fair trade. Europe has started to feel that way, India has started to feel that way and parts of Asia feels that way. America can lead the way in that. It is not going to be against China. The world was one thing years ago when the WTO was set up, it is something different today. There are legitimate concerns with the WTO. It's unfair, it's politicised, it doesn't deal with subsidies, unforced competition, it doesn't deal with markets not being opened up, it barely deals with vital investment rights. What kind of trade deal is that?India has had the worst contraction in its GDP growth. How do you see India now?It has obviously been very tough in India and you have taken a lot of bold decisions to get around this too. But it's going to be tough. And it's unfortunate because you had quick growth. India should aspire for the stars. India should aspire for 7% growth.But what needs to be done to get there? You need to have infrastructure. India has done an unbelievable job in education, but I think you need capital markets reforms, you need state-owned banks to be reformed, you need more consistent regulations and legal requirements to attract more capital.What are the two or three things you expect from the Indian government?Your Prime Minister knows these things and can bring in tough reforms to eliminate bureaucracy and red tape. The more important thing for the future of India is consistent rules and regulations, transparent capital markets, labour flexibility, fair treatment of foreign capital, infrastructure, reducing bureaucracy and red tape.India is trying to position itself as a replacement to China. Do you believe that is working?I think (you) aspire to that, but the laws have been unpredictable, tax laws have been punitive, those things stop people from investing here. China built a lot of infrastructure to accommodate a lot of stuff they had - manufacturing. You need your ports, you need your ships, India needs to do the same.You were the first big global CEO to call people back to office. What was the idea behind it when there is still a lot of risk out there? In America, 100 million people are going to work every day. It's just a select group of people who are able to work from home. We are not making anyone go back. We have said that if you can't, if you have personal issues or family issues or parental issues or children issues, we are not forcing them back. But we would like people who can to start going back.