Transcript: Joe Nocera

My interview with the author of The Big Fail

With the pandemic finally in the rearview mirror, a lot of people are eager to put it behind us — and just move on. But my guest on this week’s program says it’s important that we take a look at the mistakes that were made, and understand what went wrong.

Joe Nocera is a veteran business journalist and a columnist at The Free Press. His latest book, co-authored with Vanity Fair’s Bethany McLean, is The Big Fail: What the Pandemic Revealed About Who America Protects and Who It Leaves Behind.

This is an edited transcript for paid subscribers. You can listen to the episode for free here.

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TH: Joe, welcome to Lean Out.

JN: Thank you for having me, Lean Out.

TH: It's good to have you on. I was really interested to read your book. In the introduction to The Big Fail, you write that even though “most of us desperately want it all to be over, it's important to revisit the pandemic.” But there is resistance in the public to relitigating these policy decisions. What convinced you and Vanity Fair's Bethany McLean that it was worth persevering — and doing a deep dive into what went on?

JN: Well, there's several answers to that. One of them is that nobody else is doing it, and it needs to be done. I mean, after the financial crisis, after the Challenger explosion — heck, after the 1929 market crash — there were hearings and there were commissions. There were efforts to get to the bottom of it, and find some root causes. Nobody is doing that. And so, we picked up that mantle. 

But the second reason is that it's not just a question of masks or no masks, or lockdowns or no lockdowns, or school closings or no school closings. There are also systemic issues, that go back 30 and 40 years, in the nature of how American capitalism has changed. And how certain sectors of the economy have become privatized — we're thinking particularly of hospitals and nursing homes. Those changes, which went unnoticed for so long, you wind up taking for granted. [But] it's worth reminding people that it wasn't always like this. And that maybe we should rethink some of the changes that have taken place in American society and capitalism.

TH: I'm so glad that you started there today — because this is actually where I wanted to start as well. There were these problems in America, and in Canada, before the pandemic, that shaped its response to Covid. You go as far as to say that pretending that the U.S. could have done a better job is “a dangerous fiction.” So, there are three big systemic issues that you tackle. I want to go through each briefly. Let's start with globalization. How did globalization leave America vulnerable to the pandemic?

JN: Americans love low prices. Prices are a lot lower if you can have your goods manufactured in China, or Mexico, or Vietnam, or Malaysia. You would see sector after sector moving abroad. I think a lot of the anger in America right now is actually a product of globalization. Because so many people were thrown out of work and the elites didn't seem to care. But that's a whole other book. For our book, one of the things that got outsourced was PPE. All the masks — they're made in China. All the nitro gloves, hugely important nitro gloves, are made in Malaysia and Vietnam. And China as well. When the pandemic hit, it was a real wake-up call about how our desire for low prices, and efficiency in the supply chain and so on, had left us incredibly vulnerable to any kind of true emergency.

Once the pandemic came, the Chinese were not going to send their masks to Cardinal Health Care. They were going to hold on to them for their own people. And who can blame them? We were caught flat-footed, and it showed that what was really missing in this whole exercise was any sense that we needed to have some resilience in our supply chains. Now, it started with PPE. But as you'll recall, towards the end of the pandemic, it started to move to other goods. I remember that cargo ship that got caught in a Suez canal. That was costing $10 billion a day for the time that it was there. And then, it had ship after ship that was backed up miles. Then you got to the thing where ships would be in the port of Los Angeles and they couldn't dock because there weren't enough workers on the dock to take the goods in. They would be out there for months — or at least weeks. 

And so, you had this domino effect, almost. Where it started with PPE and then suddenly it's silicon chips, and it's this and it's that. And autos. You've got this realization that something needs to be done. Now, President Biden has certainly tried to talk to companies about manufacturing in America, and there's something to be said for that. But I think it needs to be attacked on a more global scale. So that we're not just talking about one industry or one manufacturing plant, but we're talking about an entire system where you have globalization — but you also have the realization that we need to be able to make goods in our country.

TH: You also have a second theme that you touch on: An American obsession with the free market, and with profit, and with this idea that the free market can solve our problems. As you write, “The right choice for a patient, let alone a country, is not always the profitable one.” Can you unpack that for us? 

JN: Absolutely. In the U.S., which I think is unlike Canada, hospitals and doctors get paid based on the treatments, not on whether you keep somebody healthy. So, elective surgery will make you more money, electrocardiogram will make you more money. Anything like that will make you more money. And the prices keep going up and up and up, because the hospitals are publicly traded corporations that need to show Wall Street that they're more profitable every quarter and every year. 

This is great if you're an investor in a hospital company. But it's terrible if you're a patient. And so, in the U.S. we have these crazy things like “surprise billing,” where you go to the hospital and you get a treatment or a surgery, and the insurance company will only pay X amount, and you think you're fine. You've been told you can leave. You don't have to pay anything as you're walking out of the hospital. And suddenly you get a bill for $50,000, $90,000 — and you're expected to pay it. 

Private equity firms have loved this, because it adds to their profits. In fact, when Congress has attempted to get rid of surprise billing, they have fought really hard to retain it. The real issue here is that what helps the bottom line of the hospital doesn't necessarily help patient care. And there's a fundamental conflict between helping patients and making money.

TH: You've just introduced the topic of private equity, which is the third theme that you touch on. This is something we covered on the podcast recently with Sohrab Ahmari, the author of Tyranny, Inc. and with Canadian media historian Marc Edge, who looked at how private equity has damaged our media landscape. Walk us through how the rapid growth of private equity impacted America's pandemic response.

JN: In so many ways. Private equity, in the early 2000s — they're always looking around for, “What's the next thing? What's the next thing we can invest in?” They landed on nursing homes and they found ways to extract money from nursing homes. For instance, one of the first things they would do is they would sell the real estate underneath the nursing home to a real estate investment trust. The nursing home, instead of owning this land, now has to pay rent on it. Millions of dollars in rent. 

Then they start adding these various [services]. If you want to go to a pharmacy, they have an in-house one. If you need a doctor, you use theirs. And on and on and on. They're constantly finding ways to extract money from the nursing home and the nursing home patients. And part of that requires them to cut staff, and to cut necessities that the patients need.

This became widespread in the nursing home industry, even among many companies that weren't owned by private equity — but private equity kind of led the way. So, when the pandemic arrives, you've got these staffers who were way overworked and they're trying to treat these patients who are getting sick. I think it's fair to say that there's a lot of death that can be attributed to private equity-owning nursing homes. 

They also own something like 50% of the emergency room doctor practices. It's kind of rotating out of nursing homes now, and they're getting into something like autism practices. Now, you tell me what private equity can offer an autism practice. The only thing they can do is extract money. My personal view is that private equity should be severely limited. But I'm not the king.

TH: I want to touch, now, on lockdowns. Toronto had some of the longest lockdowns in the world. As you point out in the book, this was unprecedented public policy. It was not evidence-driven. And you wonder in the book if lockdowns could have happened without Zoom — which kept the laptop class, our class, working. And yet, as you note in the book, in 2020, more than 110,000 American restaurants closed. Meanwhile, the wealth of the top nine tech CEOs increased more than $360 billion. In Canada the number of billionaires increased approximately 68% during the pandemic. How did the lockdowns accelerate the economic inequality that we were already dealing with in North America?

JN: What the Zoom class never really thought about was that people were required to work so that they could lock down. The so-called essential workers. So if you're a meat packer, you're standing next to somebody cutting meat. They may be getting Covid, they may not know they have Covid yet. But the number of meat packers who wound up with Covid, and even died of Covid, is enormous. 

Then you had FedEx drivers and Amazon warehouse workers. Some of them even told us for the book, “We feel like we're being sacrificed, so that other people can remain safe.” The thing that amazed me, really, was that those of us who were lucky enough to be able to do that, who could work from home, who could use their computer, who could Zoom, who could buy our stuff and get it delivered by DoorDash or Amazon — so few of us really thought about the people who were making this possible. They thought they were doing something really virtuous for the country. And they weren't. They really weren't. Because the second aspect of it, which I think was probably going to be your next question, is the lockdowns didn't make any difference.

TH: Walk us through your argument on why the lockdowns didn't make any difference.