Latest / Trumponomics / Waffle House Signals U.S. Reopening, But It Won’t Be Simple

Transcript

Waffle House Signals U.S. Reopening, But It Won’t Be Simple · Trumponomics

• 0:00
  Speaker 1: We've removed our menus. We do have the art and
• 0:02
  Speaker 1: of using paper menus. This wholeful lines the current menus
• 0:06
  Speaker 1: that we've always used because they are laminated and they're
• 0:08
  Speaker 1: very easily sanitized right after our customer uses them. And
• 0:12
  Speaker 1: also to use the digital artsis on their home, they
• 0:15
  Speaker 1: can just scan a QR code and have the menu
• 0:17
  Speaker 1: pap right up for another Hello, and welcome to Stephanomics,
• 0:24
  Speaker 1: the podcast that brings the global economy to you. And
• 0:27
  Speaker 1: this week we're in a waffle House in Brookhaven, Georgia.
• 0:32
  Speaker 1: What you just heard was company spokeswoman Neary Boss explaining
• 0:36
  Speaker 1: how they're going to make waffle eating a socially distant activity.
• 0:40
  Speaker 1: And the past week, the state governor of Georgia, Brian Kemp,
• 0:44
  Speaker 1: has given restaurants like waffle House the green light to reopen. Also,
• 0:48
  Speaker 1: tattoo parlors and Jim's. Federal health officials thought it was
• 0:53
  Speaker 1: too soon, so did the mayor of Atlanta, so did
• 0:57
  Speaker 1: President Trump. But the governor ignored all of them and
• 1:01
  Speaker 1: went ahead with the reopening. He's not the only policymaker
• 1:05
  Speaker 1: to ignore expert advice. Since the COVID crisis hit, we've
• 1:09
  Speaker 1: seen quite a lot of governments try to ban the
• 1:11
  Speaker 1: export of food or key medical supplies, for example, despite
• 1:15
  Speaker 1: official advice to keep trade flowing and borders open. In
• 1:19
  Speaker 1: a little while, i'll talk to the economist Richard Baldwin
• 1:21
  Speaker 1: about economic nationalism in a crisis and whether it ever
• 1:25
  Speaker 1: makes sense. Keep listening if you want to find out
• 1:28
  Speaker 1: the answer and how it all relates to Alexander the Great.
• 1:32
  Speaker 1: But first I want to hear more about those waffles.
• 1:36
  Speaker 1: Mike Sasso is Bloomberg Real Economy reporter based in Atlanta,
• 1:41
  Speaker 1: and he's gone to see for himself. So it turns
• 1:46
  Speaker 1: out you're at the cutting edge of the reopening of America.
• 1:50
  Speaker 1: Tell us about what's opened up in Georgia the last
• 1:53
  Speaker 1: few days and what people think about it. Sure, the
• 1:55
  Speaker 1: Governor of Georgia controversially came up with a opening plan
• 2:00
  Speaker 1: for the state of Georgia in which he allowed some
• 2:03
  Speaker 1: tattoo parlors, nail salons, gymnasiums, and barbershops to open up
• 2:09
  Speaker 1: last Friday, and then he was going to be allowed
• 2:12
  Speaker 1: for some restaurants in movie theaters actually to open up Monday. Now,
• 2:18
  Speaker 1: you went to a waffle house, which I know is
• 2:22
  Speaker 1: is pretty popular in some quarters. It's a great place
• 2:24
  Speaker 1: to go late night after a show. Tell me what
• 2:29
  Speaker 1: it was like with with the people there. Did you
• 2:31
  Speaker 1: have a waffle I I didn't. It was a there
• 2:35
  Speaker 1: were not many people there actually over there. I was
• 2:38
  Speaker 1: there for you know, perhaps about an hour Monday morning,
• 2:41
  Speaker 1: and they had they had just opened a couple hours
• 2:44
  Speaker 1: earlier than that, um and when I was there, there
• 2:47
  Speaker 1: were maybe three people who wandered in and getting take
• 2:52
  Speaker 1: out orders. There was nobody actually at the restaurants sitting
• 2:56
  Speaker 1: down and eating. Now, some of that, to be sure,
• 2:59
  Speaker 1: may have there was. It was quite a scene where
• 3:02
  Speaker 1: where it was quite a number of local and national
• 3:05
  Speaker 1: media there to document people as they wandered in. So
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  Speaker 1: it's it's possible that some people would just camera shy
• 3:12
  Speaker 1: and stayed away. I did venture out to another waffle
• 3:16
  Speaker 1: house that was not the scene of such a media frenzy,
• 3:20
  Speaker 1: and there were about two people sitting at the counter.
• 3:24
  Speaker 1: There was another man enjoying some coffee and unfurling a
• 3:27
  Speaker 1: newspaper at a booth. You know, certainly not a ton
• 3:30
  Speaker 1: of people. I did speak with one gentleman. He had
• 3:34
  Speaker 1: kind of left the kids in the suv while he
• 3:38
  Speaker 1: ran in to pick up his takeout order. He believes
• 3:41
  Speaker 1: that within a week or two he and his his
• 3:44
  Speaker 1: whole family of four kids and a wife would probably
• 3:47
  Speaker 1: venture in for dine in service. And I I think
• 3:51
  Speaker 1: that's probably what you're going to see here in Georgia,
• 3:54
  Speaker 1: as over time people are going to start getting bolder,
• 3:58
  Speaker 1: just like this gentleman was in. They'll start with perhaps
• 4:02
  Speaker 1: a takeout order than perhaps in a few days or
• 4:05
  Speaker 1: a week, I think you'll see them start to venture in.
• 4:08
  Speaker 1: And we are starting to see a surprising number of
• 4:11
  Speaker 1: restaurants like waffle House, Um out Back Steakhouse, another huge
• 4:16
  Speaker 1: American chain, is opening its units in Georgia as well.
• 4:20
  Speaker 1: And so while you've seen some opposition amongst sort of
• 4:24
  Speaker 1: prominent high end restaurants in Atlanta, some of these more
• 4:28
  Speaker 1: mainstream outlets have opened and are going full full bore. Well, Mike,
• 4:35
  Speaker 1: I hadn't thought about the added risk to your health
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  Speaker 1: and social distancing of having large numbers of reporters all
• 4:41
  Speaker 1: around you as you try and order your your waffle.
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  Speaker 1: That's a whole extra hazard for all these people. But
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  Speaker 1: I mean, we'll talk a bit about the politics of
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  Speaker 1: it in a minute, but it is I know the
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  Speaker 1: conversation you had with the representative from the waffle House,
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  Speaker 1: which is this big national chain. You know they're taking
• 4:58
  Speaker 1: it pretty seriously in terms of the steps they have
• 5:02
  Speaker 1: to take to make this safe. I guess it'd be
• 5:04
  Speaker 1: nice to hear that conversation you had with her now
• 5:07
  Speaker 1: run through the steps that you've taken again too. Okay,
• 5:12
  Speaker 1: about six weeks ago, when we were limited take out only,
• 5:14
  Speaker 1: we all and and social distancing had been recommended. We
• 5:17
  Speaker 1: took those steps to heart. We actually had locations in
• 5:22
  Speaker 1: the store on the floor, located where customers could come
• 5:25
  Speaker 1: in and stand. They were very respectful of that. When
• 5:27
  Speaker 1: they came into place, their warders wait for their food.
• 5:30
  Speaker 1: If they needed to wait outside, we had six ft
• 5:32
  Speaker 1: of distance outside, a couple of chairs outside on our
• 5:34
  Speaker 1: front porch. We also took our condiments off at that
• 5:37
  Speaker 1: time six weeks ago, off of the tables, so we've
• 5:40
  Speaker 1: kept that as well. And of course our associates are
• 5:43
  Speaker 1: wearing their masks. As a restaurant, we've always had food
• 5:46
  Speaker 1: safety protocols that we've had to follow in place. That
• 5:49
  Speaker 1: includes regular hand washing. Folks have been really respectful of that.
• 5:54
  Speaker 1: Employees are probably bound to be a little bit nervous
• 5:57
  Speaker 1: about plumbing contact where customers. How did you treat the employees?
• 6:01
  Speaker 1: Were they able to say, no, I'm not ready to
• 6:04
  Speaker 1: come in yet. How did you treat that with him?
• 6:06
  Speaker 1: Of course, we're not asking anyone to come in who
• 6:08
  Speaker 1: wasn't ready or comfortable in the covering U they weren't
• 6:11
  Speaker 1: ready to come in, We went and talked to to
• 6:13
  Speaker 1: associates who were ready and willing and able. Most of
• 6:16
  Speaker 1: these folks have been with us already. In the six weeks.
• 6:19
  Speaker 1: We tried to keep on as many associates as possible working.
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  Speaker 1: But if someone said does hey, I'm I just don't
• 6:25
  Speaker 1: feel safe or I don't feel comfortable or whatever the reason,
• 6:27
  Speaker 1: maybe maybe childcare because the daycarees are closed schools or
• 6:31
  Speaker 1: closed that they needed to stay home. So we said
• 6:34
  Speaker 1: that's fine. Could they keep their jobs or how would
• 6:36
  Speaker 1: you treat their jobs if they didn't want to come
• 6:38
  Speaker 1: in yet. Well, we furloughed several people, over a thousand
• 6:42
  Speaker 1: UH managers. We furlowed three hundred and fifty folks from
• 6:45
  Speaker 1: our support team, which includes the corporate office and those
• 6:48
  Speaker 1: who worked in the field. And so we haven't at
• 6:50
  Speaker 1: this point brought back furloughed folks yet, but these were
• 6:54
  Speaker 1: individuals either were working very few hours for us already.
• 6:59
  Speaker 1: If in the opera two, you maybe have a few
• 7:01
  Speaker 1: more hours. We're hoping that with this limited dine in
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  Speaker 1: service option that we will see the kind of response
• 7:07
  Speaker 1: from the customers that will allow us to bring more
• 7:10
  Speaker 1: associates back to work, more shifts that can be open
• 7:13
  Speaker 1: throughout the day. This doesn't seem like a lot of people.
• 7:17
  Speaker 1: I didn't see anyone in there dining in. You maybe
• 7:20
  Speaker 1: you saw a couple take out? Is that how it's
• 7:22
  Speaker 1: going so far? When I came on this morning at
• 7:24
  Speaker 1: about seven fifty this morning, there was a gentleman sitting
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  Speaker 1: at the high counter enjoying his meal. He finished and
• 7:29
  Speaker 1: he left. We had two more people come in, sit
• 7:32
  Speaker 1: down and enjoy their meals, but most of it has
• 7:34
  Speaker 1: been take out, as it has been for the past
• 7:36
  Speaker 1: six weeks. We weren't expecting that we were going to
• 7:39
  Speaker 1: be overwhelmed with customer demand. Customer demand right away. We
• 7:43
  Speaker 1: know it's gonna take some time. We're just hoping that
• 7:45
  Speaker 1: people goes, especially those who come in and they've seen
• 7:49
  Speaker 1: they've been coming in and getting take out, that maybe
• 7:51
  Speaker 1: instead of eating in their cars or taking it all
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  Speaker 1: the way back home. We're taking into their job, or
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  Speaker 1: take a few more minutes to sit down and enjoy
• 7:58
  Speaker 1: a hot meal. And just last question, and uh, take
• 8:00
  Speaker 1: me through the deliberations of all why they chose to
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  Speaker 1: reopen what well went what we're what was in the
• 8:06
  Speaker 1: decision making process. Well, like I said, we've always been open.
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  Speaker 1: We've only unfortunately had the closed seven hundred stores nationwide. Uh, temporarily,
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  Speaker 1: We hope the decision is very simple. There are two
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  Speaker 1: sides to this equation. One is the very real public
• 8:21
  Speaker 1: health crisis of the virus and how it's affected people.
• 8:24
  Speaker 1: The other half is the brewing public health crisis that
• 8:28
  Speaker 1: is coming because of people who are unable to earn
• 8:30
  Speaker 1: a living, the despair that comes from that, the inability
• 8:34
  Speaker 1: to take care of the obligations that don't stop. So
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  Speaker 1: we really want to be there for our associates to
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  Speaker 1: allow those who want work, who are able to work,
• 8:42
  Speaker 1: to come back to work. Mike, it's striking because we
• 8:51
  Speaker 1: spoke last week to Sharon chen Uh, the bureau chief
• 8:56
  Speaker 1: in Beijing, about her time in Wuhan, and it was
• 9:00
  Speaker 1: quite a different story that the businesses were opened up,
• 9:05
  Speaker 1: but really no one was going into the restaurants, and
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  Speaker 1: they didn't seem to be a great desire to go
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  Speaker 1: out and consume. I wonder if that's just the very
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  Speaker 1: different experience that Wuhan had or is it almost a
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  Speaker 1: cultural difference that people, maybe particularly in Georgia, do feel
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  Speaker 1: a bit more libertarian, a bit more determined to go
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  Speaker 1: out and exercise their freedoms. How do you think that
• 9:29
  Speaker 1: that the politics of exiting lockdown is going to work
• 9:34
  Speaker 1: in in your state? Yeah, I I do. I do.
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  Speaker 1: There's an interesting political component to all this. More libertarian
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  Speaker 1: in conservative minded folks are being a little bit more
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  Speaker 1: willing to get out and explore and get out of
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  Speaker 1: the house and frequent some of these businesses. We certainly
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  Speaker 1: saw that when I visited Cartersville, Georgia, a small town
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  Speaker 1: up or North Georgia, it tends to be more conservative.
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  Speaker 1: Those folks wondered what the fuss was all about, uh,
• 10:05
  Speaker 1: and they were eager to get out here. In Atlanta,
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  Speaker 1: which is a little bit more liberal, there is a
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  Speaker 1: sense of of more caution. So there are certain you know,
• 10:16
  Speaker 1: certainly range of opinions. I think one of the more
• 10:19
  Speaker 1: interesting things that I've found is there's an element of
• 10:23
  Speaker 1: competition here that I think will weigh on business owners
• 10:27
  Speaker 1: I did hear from. I have heard from businesses that
• 10:30
  Speaker 1: didn't want to open up this quickly, but they're seeing
• 10:34
  Speaker 1: their competing businesses open and so they're being sort of
• 10:38
  Speaker 1: forced to open. I heard that from a gym owner
• 10:43
  Speaker 1: um in Cartersville, Georgia, who wanted to wait another couple
• 10:46
  Speaker 1: of weeks. However, competing gym's were starting to open, and
• 10:51
  Speaker 1: so he had to open. And in fact, interestingly, he's
• 10:55
  Speaker 1: actually done fairly well by opening. He was shocked learned
• 11:00
  Speaker 1: that he had picked up thirteen additional fitness center customers
• 11:04
  Speaker 1: who were defecting from a gym that didn't open this
• 11:09
  Speaker 1: past Friday. So there are people who want to get
• 11:13
  Speaker 1: out in Those people may be voting with their pocketbooks
• 11:16
  Speaker 1: in some case by helping those businesses that choose to
• 11:20
  Speaker 1: to open earlier. And I do have to worry a
• 11:23
  Speaker 1: little bit about that competition. You talked about the national
• 11:26
  Speaker 1: restaurant chains maybe a little bit easier for them to
• 11:30
  Speaker 1: establish careful protocols and get hold of all of the
• 11:34
  Speaker 1: protective equipment for their employees than these small time restaurants
• 11:41
  Speaker 1: who will feel they have to open up because the
• 11:43
  Speaker 1: big guys have opened up. So you have to wonder
• 11:46
  Speaker 1: what the what the implications will be. And also I
• 11:48
  Speaker 1: guess the what's the what's the threshold at which people
• 11:53
  Speaker 1: start to change their mind if it looks like the
• 11:56
  Speaker 1: coronavirus is not under control in the state, I guess
• 12:00
  Speaker 1: there'd be two different sets of opinion on that as well.
• 12:03
  Speaker 1: Might Yeah, to to your point about a lack of
• 12:07
  Speaker 1: protective equipment. You know, one of the gym owner that
• 12:11
  Speaker 1: I mentioned in Cartersville that sort of felt forced to
• 12:15
  Speaker 1: open before he wanted to, he admitted at the end
• 12:19
  Speaker 1: of my call with him that they are already running
• 12:21
  Speaker 1: low of sanitizer and wipes to wipe down the equipment. Certainly,
• 12:27
  Speaker 1: there are a lot of people watching Georgia and a
• 12:29
  Speaker 1: lot of people who are opponents of the governor's move
• 12:33
  Speaker 1: And if it turns out that the COVID nineteen cases
• 12:37
  Speaker 1: spike here, as some people think, the governor will be
• 12:40
  Speaker 1: under tremendous pressure and this could be a a real
• 12:45
  Speaker 1: challenge for him when it comes re election time. Well,
• 12:49
  Speaker 1: and I bet the people who go to the gym
• 12:52
  Speaker 1: probably think they're already very fit and that will protect them.
• 12:54
  Speaker 1: But we know that's not necessarily the case. Okay, I
• 12:56
  Speaker 1: guess my only question, which is more frivolous, is what
• 13:00
  Speaker 1: restaurant opening would actually get you ordering some food if
• 13:03
  Speaker 1: you didn't get a waffle at the waffle house? What
• 13:06
  Speaker 1: what will you what will you want to order when
• 13:08
  Speaker 1: it opens up? What? Interestingly, Atlanta is a is a
• 13:13
  Speaker 1: very diverse community. We have in the suburb where I live.
• 13:19
  Speaker 1: It's sort of the Duluth Lawrenceville, Georgia area northeast of Atlanta.
• 13:24
  Speaker 1: They have a large Korean population, and I happen to
• 13:28
  Speaker 1: have My favorite restaurant is a Korean taco place that's
• 13:31
  Speaker 1: in Duluth, Georgia. And so if and when I've not
• 13:35
  Speaker 1: been by that restaurant, but if and when it opens
• 13:37
  Speaker 1: the dine end service, I will be frequenting the Korean
• 13:41
  Speaker 1: Taco place. And I went I saw you there, we
• 13:44
  Speaker 1: went out for a meal at the end of last year.
• 13:47
  Speaker 1: You didn't take me there next time you have? Yeah, Okay,
• 13:49
  Speaker 1: thanks very much, Mike Sassa. So I'm delighted to welcome
• 14:03
  Speaker 1: back to Stephanomics Professor Richard Baldwin, Professor of International Economics
• 14:08
  Speaker 1: at the Graduate Institute of International and Development Studies in Geneva.
• 14:13
  Speaker 1: Richards just co edited with Simon Everett a book for
• 14:17
  Speaker 1: the European think tank, the Center for Economic Policy Research,
• 14:21
  Speaker 1: which is called COVID nineteen and Trade Policy. Why turning
• 14:25
  Speaker 1: inward won't work. Richard, we have had a lot of
• 14:29
  Speaker 1: talk on this program and generally about countries turning inward
• 14:35
  Speaker 1: in response to this crisis, and maybe companies wanting to
• 14:39
  Speaker 1: be less global um and maybe be more self sufficient
• 14:44
  Speaker 1: in key ways reduced their reliance on China. But we've
• 14:48
  Speaker 1: also seen some very short term, sort of knee jerk
• 14:52
  Speaker 1: reactions by countries just in the last month or two
• 14:54
  Speaker 1: trying to safeguard their supplies of key medical equipment and food.
• 14:59
  Speaker 1: So I see. You know, Russia has tried to limit
• 15:01
  Speaker 1: its exports of grain, for example, Vietnam put limits at
• 15:06
  Speaker 1: least for a while on its export of rice. You know,
• 15:10
  Speaker 1: when we hear about these things, they it sounds selfish,
• 15:13
  Speaker 1: doesn't sound very kind of civic spirited when governments do this.
• 15:16
  Speaker 1: But I think a lot of people will instinctively have
• 15:19
  Speaker 1: more sympathy with policymakers doing that at a time of crisis.
• 15:23
  Speaker 1: When people are really worried about, for example, getting that
• 15:27
  Speaker 1: personal protective equipment. But you think it's it's just as
• 15:31
  Speaker 1: misguided in times of crisis as it is in normal times.
• 15:34
  Speaker 1: Why is that, Well, the basic problem is that we
• 15:38
  Speaker 1: live in the twenty one century where to make almost
• 15:42
  Speaker 1: anything you have to import products. So, just to take
• 15:45
  Speaker 1: an example, respirator mass use inputs from a number of countries,
• 15:51
  Speaker 1: and so blocking exports of the mask, which may trigger retaliation,
• 15:57
  Speaker 1: can come up the whole supply chain, therefore make it
• 16:01
  Speaker 1: harder for everybody to make masks anywhere. The way manufacturing
• 16:06
  Speaker 1: works today, it is globalized, and we can't change that.
• 16:09
  Speaker 1: During the COVID crisis, there are factories all around the world,
• 16:13
  Speaker 1: including in China, and blocking exports of American mass for example,
• 16:20
  Speaker 1: risk retaliation which will essentially build walls in the global factory.
• 16:26
  Speaker 1: So trying to keep more products at home to boost
• 16:31
  Speaker 1: local availability is actually hindering the world's ability to produce
• 16:36
  Speaker 1: this good. And if the retaliations go far enough, then
• 16:39
  Speaker 1: we'll have a real disaster, like where everybody's banning exports
• 16:44
  Speaker 1: and that makes it hard for anybody to make anything.
• 16:47
  Speaker 1: So that's the real danger is that this thing con
• 16:49
  Speaker 1: spire out of control. Yeah, and I natued in then
• 16:52
  Speaker 1: the forward to your your ebook of Golden Brown, the
• 16:55
  Speaker 1: former Prime Minister makes exactly that point, makes the reference
• 16:58
  Speaker 1: back to the twenties and and fears, and you make
• 17:01
  Speaker 1: the interdependence point. And I have to say I wasn't
• 17:03
  Speaker 1: aware of this. So the US is heavily dependent on
• 17:05
  Speaker 1: the imports of personal protective equipment, but also is a
• 17:09
  Speaker 1: major exporter and even an exports to China. So if
• 17:12
  Speaker 1: you're you can't you can't necessarily unpick this. I mean food.
• 17:16
  Speaker 1: You know, we've talked a bit about the medical side.
• 17:18
  Speaker 1: Food is the other thing that quite a few countries
• 17:22
  Speaker 1: have reached to try and limit exports. You know, the
• 17:25
  Speaker 1: opposite of what we often see when we see these
• 17:28
  Speaker 1: kind of competitive situations in trade, where actually you're trying
• 17:31
  Speaker 1: to maximize your exports and minimize your imports. We've had
• 17:35
  Speaker 1: the opposite here. People are trying to keep hold of
• 17:37
  Speaker 1: their imports, but stop those exports of of key of food.
• 17:41
  Speaker 1: You can see the logic of it when something like Russia,
• 17:44
  Speaker 1: somebody like Russia tries to make sure that they can
• 17:47
  Speaker 1: hold onto their grain supplies. But what's the implication in practice. Well, so,
• 17:53
  Speaker 1: just to give you a little classical reference, you may
• 17:55
  Speaker 1: enjoy Alexander the Great, right before he went off to
• 17:58
  Speaker 1: conquer the world, he forbid the exports of all food
• 18:02
  Speaker 1: from Greece exactly because he wanted to keep the food
• 18:04
  Speaker 1: prices low in grease and therefore keep the population happy.
• 18:09
  Speaker 1: Now we live in a different world than Alexander the Great.
• 18:12
  Speaker 1: The last time this happened was in two thousand and six.
• 18:16
  Speaker 1: Two thousand and seven, there was a round of export
• 18:20
  Speaker 1: restraints on food and the price of food rises. Now,
• 18:24
  Speaker 1: once the price of food rises, nations will be worried
• 18:28
  Speaker 1: about shortage of food, and so they very often start
• 18:31
  Speaker 1: buying to build up stocks at that time. So therefore
• 18:34
  Speaker 1: the prices rise more, and to protect the local markets,
• 18:38
  Speaker 1: more exporters block off the exports. And so this this
• 18:42
  Speaker 1: round can lead to very high, very rising prices, as
• 18:45
  Speaker 1: it did in two thousand and seven, And although the
• 18:48
  Speaker 1: people are blocking the exports, you can understand it. As
• 18:51
  Speaker 1: you said, it keeps the price lower than it would otherwise.
• 18:54
  Speaker 1: It's really a disaster for the developing world and poor
• 18:57
  Speaker 1: people in general. So it's a kind of a for
• 19:00
  Speaker 1: tat thing. That's triggering um behaviors which could be avoided
• 19:05
  Speaker 1: with cooperation. I like to draw an analogy with what
• 19:09
  Speaker 1: happened with toilet paper early on in this crisis. So
• 19:12
  Speaker 1: there is absolutely no shortage of toilet paper in the world,
• 19:16
  Speaker 1: but when people thought that there might be a shortage
• 19:19
  Speaker 1: of toilet paper, they all decided to stock up at home,
• 19:21
  Speaker 1: And because there is not enough toilet paper in the
• 19:24
  Speaker 1: world for everybody to have a three weeks supply at
• 19:26
  Speaker 1: home at least in the short rue, there was a
• 19:29
  Speaker 1: shortage of toilet paper, and a similar sort of thing
• 19:32
  Speaker 1: can happen with food. The f a O shows that
• 19:35
  Speaker 1: the stocks to consumption ratios are perfectly fine in the
• 19:39
  Speaker 1: major grains worldwide. There is no shortage of food right now.
• 19:43
  Speaker 1: But if every nation decides to accumulate a two months
• 19:46
  Speaker 1: supply because they're afraid the food exporters are going to ban,
• 19:50
  Speaker 1: then there will be a shortage of food, and the
• 19:52
  Speaker 1: prices will go up and more exporters will ban it.
• 19:55
  Speaker 1: So we get into this bad balance, this bad kind
• 19:59
  Speaker 1: of outcomes situation where the export bands of food go up,
• 20:03
  Speaker 1: which make people panic and want to buy more food,
• 20:07
  Speaker 1: which then makes it more expensive. Which then makes more
• 20:09
  Speaker 1: people put on the export ban. So it's really a
• 20:12
  Speaker 1: kind of lack of coordination. And we saw that last
• 20:15
  Speaker 1: in two thousand and six, two thousand and seven, right
• 20:18
  Speaker 1: before the global crisis. It was completely unrelated to the
• 20:21
  Speaker 1: global crisis. But that's the last time it happened. Finally,
• 20:28
  Speaker 1: I think it's just a couple more questions. But that
• 20:31
  Speaker 1: you described what would be, in some sense the nightmare scenario.
• 20:35
  Speaker 1: You get into that big collective action problem where a
• 20:37
  Speaker 1: few export restrictions here and there have spiraled into a
• 20:42
  Speaker 1: complete closure of global supply chains. You know, a lot
• 20:46
  Speaker 1: of governments and certainly international organizations like the International Monetary
• 20:50
  Speaker 1: Fund have been quite aware of this coming into this crisis.
• 20:53
  Speaker 1: They've seen governments, some perhaps um succumbing to this instinct
• 20:58
  Speaker 1: or risk of succumbing to the instinct. And I've seen
• 21:01
  Speaker 1: groups of countries, even in the last week or so,
• 21:04
  Speaker 1: come together to sign declarations that they're not going to
• 21:07
  Speaker 1: have these kind of export restrictions, especially on food and
• 21:11
  Speaker 1: medical supplies. So would you say, right now that we
• 21:15
  Speaker 1: have that we are really heading down that road, or
• 21:18
  Speaker 1: do you think so far we've managed to stop that
• 21:21
  Speaker 1: kind of downward spiral. No, I think we are in
• 21:24
  Speaker 1: the danger of the spiraling out of control. So, as
• 21:27
  Speaker 1: you pointed out, there are sensible people around the world
• 21:32
  Speaker 1: who understand that what goes around comes around, and when
• 21:35
  Speaker 1: you start putting on export bands, other people will retaliate.
• 21:39
  Speaker 1: So the countries that you were talking about were signing
• 21:43
  Speaker 1: led lad By New Zealand and others who agreed not
• 21:46
  Speaker 1: to restrict exports of food that did not include Russia,
• 21:51
  Speaker 1: for example, did not include the United States in a
• 21:54
  Speaker 1: in a binding way. And I think the problem is
• 21:57
  Speaker 1: is we have an American resident who has very strong
• 22:02
  Speaker 1: instincts to close off the border whenever he can. He
• 22:06
  Speaker 1: does not understand the whole point about international supply chains.
• 22:10
  Speaker 1: So I think there is a danger of its spinning
• 22:12
  Speaker 1: out of control. Moreover, two of the biggest producers of
• 22:15
  Speaker 1: the medical products and now we're talking about a medical
• 22:19
  Speaker 1: equipment and and kit it's China and the United States,
• 22:24
  Speaker 1: and they have a trade war going on and this
• 22:26
  Speaker 1: other this thing could get wrapped up in it. So
• 22:30
  Speaker 1: I think it is a real concern. Now, just just
• 22:33
  Speaker 1: to sort of reiterate with the problem there is that
• 22:36
  Speaker 1: if one country starts putting on bands and the other
• 22:40
  Speaker 1: one starts putting on bands. That can mean that the
• 22:43
  Speaker 1: availability of medical equipment starts to fall everywhere, and that
• 22:47
  Speaker 1: makes more people put on bands to keep at home
• 22:50
  Speaker 1: what makes equipment they have. So again it's one of
• 22:53
  Speaker 1: these things that tumble out of control. In the nineteen thirties,
• 22:57
  Speaker 1: people were countries were trying to shift demand of themselves
• 23:00
  Speaker 1: with tariffs, and what happened was with the retaliation is
• 23:04
  Speaker 1: they destroyed aggregate demand everywhere. What could happen here is
• 23:08
  Speaker 1: that an attempt to keep supply local with export bands,
• 23:12
  Speaker 1: everybody ends up destroying the factory uh global value chains
• 23:16
  Speaker 1: and supply chains, and they destroy supply everywhere. So there's
• 23:19
  Speaker 1: another example on the self defeating export bands that we
• 23:24
  Speaker 1: saw when India banned the export of clora quinine, which
• 23:28
  Speaker 1: if you remember a few weeks ago, so the President
• 23:30
  Speaker 1: United States and even some other people, some doctors, we're
• 23:34
  Speaker 1: saying that clora quinine might be a treatment for COVID.
• 23:38
  Speaker 1: What happened then was India, who has a lot of people,
• 23:42
  Speaker 1: said we're going to ban the export of clora quinine,
• 23:45
  Speaker 1: and that lasted for a day or two before they
• 23:47
  Speaker 1: realized that they import all the precursors for clora quinine
• 23:52
  Speaker 1: from China. So they reversed themselves because they realized an
• 23:56
  Speaker 1: export ban that led China to retaliate with an export
• 23:59
  Speaker 1: ban would actually mean that they had no chloroquinine domestically.
• 24:03
  Speaker 1: And as as what the example of trying to increase
• 24:08
  Speaker 1: the availability of a supply by building walls within your
• 24:12
  Speaker 1: own factory and it just doesn't work. It's a backfire.
• 24:15
  Speaker 1: It might have made sense in the twentieth century, but
• 24:18
  Speaker 1: it doesn't make sense in the manufacturing world. First of vision, Bobwin,
• 24:22
  Speaker 1: thank you very much, Thank you so thanks for listening
• 24:31
  Speaker 1: to Stephanomics, the podcast that takes you from waffles to
• 24:34
  Speaker 1: toilet paper via Alexander the Great and the history of
• 24:38
  Speaker 1: global trade. We'll be back next week with more on
• 24:41
  Speaker 1: how COVID nineteen is turning the world economy upside down.
• 24:44
  Speaker 1: But remember you can always find us on the Bloomberg Terminal, website,
• 24:48
  Speaker 1: app or wherever you get your podcasts, and for more
• 24:51
  Speaker 1: news and analysis from Bloomberg Economics, follow at Economics on Twitter.
• 24:56
  Speaker 1: This episode was produced by Magnus Hendrickson, with special thanks
• 24:59
  Speaker 1: to my Sasso in Atlanta and Professor Richard Baldwin in Geneva.
• 25:04
  Speaker 1: Scott Laman as the executive producer of Stephanomics and the
• 25:07
  Speaker 1: head of Bloomberg Podcasts is Francesco Levi.